WIREDGOV

The Rural Payments Agency and DEFRA have shown scant regard to protecting public money in their administration and management of the EU’s Single Payment Scheme in England, according to the National Audit Office. The IT system does not meet the scheme’s needs, the cost of processing claims, already very high, has continued to increase and the administration of the scheme is not value for money.

The Department and Agency have brought forward the payments to farmers, but they have not adequately addressed the concerns over value for money previously raised by the National Audit Office and the Committee of Public Accounts. Farmers were paid earlier under the 2008 scheme, with over 96 per cent paid by mid May 2009, compared to 80 per cent by the same month for the 2006 scheme. However, the cost of the scheme is high and increasing: we calculate that the average cost per claim is £1,743 and this is an increase of 22 per cent on the 2005 scheme. It compares to a cost of £285 per claim under the simpler Scottish system.

Since April 2005 the Agency has incurred additional administration costs of £304 million as a result of needing more staff than anticipated in the 2005 business case for the scheme, the Department has had to set aside £280 million for disallowance and penalties, and the Agency anticipates that a further £43 million of overpayments will be irrecoverable. The IT upgrades and maintenance since 2007, costing £130 million, have resulted in heavy customisation of an IT system that has now cost £350 million in total, with complex software that is expensive and reliant on contractors to maintain. With many of the Agency’s contracts for ongoing support due to end in 2009, there is an increased risk of obsolescence.

The NAO has calculated that the cost of correcting earlier mistakes in processing claims has amounted to £119 million. Progress in recovering overpayments has been slow and the Agency does not have a clear picture of the extent of overpayments, which the NAO estimates is likely to be between £55 million and £90 million.

Mr Amyas Morse, head of the National Audit Office, said today:

“This is the third time we have looked at the Single Payment Scheme and there are still significant issues to be resolved. There has been a serious lack of attention to the protection of taxpayers’ interests over the administration of the scheme. There has been a lack of senior management ownership of the scheme in the Agency and DEFRA, even though the risks were previously highlighted by the Committee of Public Accounts.

“Previous assurances on overall progress in recovering overpayments from farmers proved optimistic and reflect a lack of reliable information on actual progress. DEFRA should urgently address the risks to ongoing IT system support and the inaccuracy of the scheme’s data, explore alternative payment systems and resolve the ongoing management issues.”



Notes for Editors

1. This is the NAO’s third report on the Rural Payments Agency’s administration of the Single Payment Scheme in England (the NAO previously reported in October 2006 and December 2007).



2. The Single Payment Scheme was introduced by the Member States of the European Union as part of the Common Agricultural Policy reforms which replaces 11 separate crop and livestock based production subsidies with a single payment based on land area. The scheme is administered by the Rural Payments Agency and overseen by DEFRA.



3. DEFRA chose to introduce a ‘dynamic hybrid’ system, which means that payments are based partly on historical data and partly on a flat rate per hectare. This was the most complex model available and only England, Germany and Finland have adopted it, although Germany and Finland are introducing the ‘dynamic’ element in 2010 and 2011 respectively.



4. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.



5. The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.



Press Notice 48/09

All enquiries to Sarah Farndale, NAO Press Office: Tel: 020 7798 5350

Mobile: 07985 274 421