The Department for the Environment, Food and Rural Affairs (Defra) and the Ministry of Defence (MoD) have again had their accounts qualified by the public spending watchdog.
The National Audit Office (NAO), which scrutinises departmental spending, cast its verdicts on the accounts of both organisations this month.
NAO head Amyas Morse took a detailed look at Defra’s compliance with the European Union’s Common Agricultural Policy (CAP), which provides subsidies to British farmers — and found that it had continued to struggle to reduce penalties for late payments.
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Morse found that Defra had received funding of some £2.3 billion from the European Commission in 2015-16 in order to deliver the CAP and other initiatives — but had also racked up £65.8 million in disallowance penalties from the Commission over that period.
The CAP grants more than 100,000 subsidies to farmers in Britain every year, and the department, alongside its executive agency the Rural Payments Agency, has aimed to overhaul the system used to distribute those payments in a bid to reduce delivery costs, improve the customer experience, and reduce exposure to fines.
But it has had high-profile problems with the digital revamp of its services for the Basic Payment Scheme element of CAP, and farmers were forced to wait longer-than-expected for their 2015 payments after the RPA shelved an online application system in favour of a paper-based, digital-assisted scheme last year.
Morse’s latest assessment of Defra’s accounts finds that it has made some progress on turning the situation around, having met its first two targets for paying those farmers on time. It ensure that the majority (more than 50%) of payments were made in a timely manner by the end of December last year. And it also hit its target of having more than 75% of payments made by January 31 2016.
However, the NAO found that the department did not meet its target of having “almost all” (92-95%) of the 2015 payments made by the end of March.
Morse said today: “The Department continues to struggle with managing the complex CAP scheme in a way that ensures accurate, timely payments to farmers. As a result, it has incurred EU penalties of £65.8 million related to the CAP scheme in 2015-16, and estimates that it owes 13,000 farmers a total of at least £25.3 million.”
Because the CAP plays such a big part in UK agricultural policy Defra is likely to be one of the government departments heavily affected by the UK’s decision to quit the EU. Last week, key Brexit campaigner Andrea Leadsom was appointed as the department’s new secretary of state.
But Morse said the UK’s planned departure from the bloc “does not reduce the need to tackle these challenges”.
He added: “Exit from the European Union will not, in the short term, reduce these penalties. The Department therefore needs to ensure its strategy for tackling these challenges is effective.”
Defra is currently awaiting ministerial sign-off on a new disallowance strategy, which aims to analyse the causes of disallowance penalties and improve the processes, systems and data at its disposal.
MoD
Meanwhile, at the MoD, Morse issued his seventh qualification in as many years, because the defence ministry had not complied with accounting requirements under the International Financial Reporting Standards (IFRS). Specifically, Morse said, the MoD was “likely to have omitted a material value of leased assets and associated liabilities from its Statement of Financial Position”.
The NAO head added: “The MoD has previously confirmed that compliance with the standard is possible for existing contracts — but in practice this would create significant challenges. There would be a need for changes in business systems and processes, as well as for wider interaction by the department with its supplier base to obtain the necessary asset and liability information.”
The comptroller and auditor general noted that the MoD had efforts to improve compliance with international standards on new, single contracts — with put pilots in place from 2016-17 to allow the ministry “to develop further understanding of the challenges and resources required to improve compliance”.
He added: “The Department intends to review the progress and results of this exercise during 2016-17 including consideration of whether it can be expanded further.”