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Report of the Comptroller and Auditor General on the Department for Environment, Food and Rural Affairs 2009-2010 resource accounts

Amyas Morse, the Comptroller and Auditor General, has today qualified the respective accounts of the Department for Environment, Food and Rural Affairs and of the Rural Payments Agency. Defra’s accounts have been qualified on the grounds of regularity, because of penalties totalling £160 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 2009-10, the European Commission confirmed disallowance penalties of £160 million because EU regulations have not been applied correctly in the processing of EU schemes. The disallowance includes penalties of £132 million in respect of the administration of the Single Payment Scheme in England in 2005, 2006 and 2007. Defra’s accounts also include provision for a further £220 million of disallowance penalties, including £171 million for the Single Payment Scheme in England in 2007, 2008 and 2009.

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.

"This is the second time we have qualified the accounts of the Department for Environment, Food and Rural Affairs on regularity grounds. Material sums have been used for purposes not intended by Parliament, in this case paying penalties for maladministration to the European Commission. Qualifying the accounts of the Department on this basis indicates that the values concerned are very considerable, meaning that there has been significant loss to the taxpayer."

Amyas Morse, head of the National Audit Office

Notes for Editors

  • During 2009-10 the European Commission confirmed disallowance penalties of £160 million. This includes penalties of £132 million in respect of the administration of the Single Payment Scheme. The residual penalties confirmed during 2009-10 relate to cross compliance penalties (£14 million) and the administration of the Rural Development Programme for England in 2006 (£3 million). In addition, the European Commission has confirmed a disallowance of £11 million in respect of the administration of the Single Payment Scheme in Northern Ireland.
  • 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 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.

PN: 54/10