Amyas Morse, the Comptroller and Auditor General (C&AG), has qualified his opinion on the 2015-16 accounts of the Department for Environment, Food and Rural Affairs (Defra).
Today’s report from the National Audit Office finds that £65.8 million of penalties were imposed by the European Commission on Defra in 2015-16 (in 2014-15, it was £90 million). These penalties are imposed by the European Commission when it believes member states have not complied with its requirements to control and administer payments properly under the CAP (Common Agricultural Policy).
Of the £65.8 million, the majority (£38.6 million) related to Single Payment Scheme payments, with smaller amounts (£13.3 million) from Rural Development, (£9.9 million) Cross Compliance penalties and the remaining (£4.0 million) other schemes.
The total value of disallowance penalties from the CAP 2007-13 scheme is now £661 million. Almost all payments in relation to the CAP 2007-13 schemes have been made but the Commission’s reviews have not yet been finalised.
European Commision audits of CAP 2014 – 2020 schemes are likely to result in further disallowance penalties, some of which will be applied after the UK has left the EU.
Disallowance penalties are expected to increase in future years as a result of more complex CAP schemes, changes to the method the European Commission applies to calculate penalties, and problems encountered implementing new systems under the CAP Delivery Programme.
The Department has experienced difficulties paying farmers accurately and is reviewing 13,000 payments made to farmers (15% of all claimants). Where there are differences between farmers’ claims and the information held on the Department’s systems, only the amount of the claim that matches the Department’s information was paid out. The Department deducted penalties from farmers, which were calculated on the assumption that all differences were due to errors made by farmers. The most common discrepancy is where the Department has not updated its systems to include all the information from the farmer. Although this reduces the risk of disallowance penalties, it also delays full payments being made to farmers. The Department estimates that farmers were due a further £25.3 million in relation to claims initially paid before 31 March 2016.
Farmers are also owed a further £16.9 million from Defra relating to Financial Discipline Mechanism (FDM) refunds.