Report of the Comptroller and Auditor General on the Rural Payments Agency 2009-2010 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 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, 28 July 2010