Report of the Comptroller and Auditor General on the Rural Payments Agency 2010-2011 financial statements

Amyas Morse, the Comptroller and Auditor General, has today qualified the respective accounts of the Department for Environment, Food and Rural Affairs and the Rural Payments Agency.

Defra’s accounts have been qualified on the grounds of regularity, because of penalties totalling £175 million from the European Commission.

Both the Rural Payments Agency’s and Defra’s accounts have also been qualified on the grounds that the Agency has not been able to make an accurate assessment of the value of overpayments and underpayments which have been made to farmers since the Single Payment Scheme began.

During 2010-11, Defra has recognised disallowance penalties imposed by the European Commission because EU regulations have not been applied correctly in the processing of EU schemes. The disallowance includes penalties of £145 million in respect of the administration of the Single Payment Scheme in England in 2007, 2008 and 2009. The remaining penalties relate to the Fruit and Vegetables Scheme (£24 million); and the Rural Development Programme for England 2007 and 2008 (£6 million). Defra’s accounts also include provision for a further £84 million of estimated disallowance penalties, including £53 million for the Single Payment Scheme in England for 2010.

Disallowance penalties have been incurred as a direct result of weaknesses in the management and administration of the Rural Payments Agency, particularly for the early years of the Single Payment Scheme. The Agency continues to experience considerable difficulties in quantifying the value of overpayments and underpayments made to farmers under the Single Payment Scheme. However, the report on the Rural Payments Agency notes some improvements, including in core financial controls and the appointment of a new senior leadership team.

Publication date: 20 July 2011

"Yet again I have qualified the accounts of the Department for Environment, Food and Rural Affairs because of material disallowance penalties following incorrect payments to farmers. "There continues to be a significant loss to the taxpayer because of weaknesses in the administration of the Single Payment Scheme by the Rural Payments Agency. I welcome the appointment of a new senior leadership team at the Agency which should now urgently address the issues which have led to my qualifications."

Amyas Morse, head of the National Audit Office, 20 July 2011

Notes for Editors

  • 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.

  • The NAO has published three Value for Money reports on the Single Payment Scheme: The delays in administering the 2005 Single Payment Scheme in England (HC 1631, 2005-06), A progress update in resolving the difficulties in administering the Single Payment Scheme in England (HC 10, 2007-08), and A second progress update on the administration of the Single Payment Scheme by the Rural Payments Agency (HC 880, 2008-09).

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

  • 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.

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