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| The Committee of Public Accounts has agreed to the following report:
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| MINISTRY OF AGRICULTURE, FISHERIES AND FOOD:TACKLING COMMON AGRICULTURAL POLICY IRREGULARITIES
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| INTRODUCTION AND SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
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| C&AG's Report (HC 268 of 1996-97), para 1
| 1. The Ministry of Agriculture, Fisheries and Food administers in England Common Agricultural Policy schemes which provide direct support to farmers. In 1995-96 these schemes cost some £1.6 billion. This expenditure is met initially from money voted by Parliament and is then reimbursed in whole or in part from the European Union budget. Reimbursement is conditional upon the Ministry applying the checks and controls built into the schemes to prevent and detect irregularities and on taking action to recover overpayments.
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| 2. On the basis of a report by the Comptroller and Auditor General the previous Committee took evidence from the Ministry of Agriculture, Fisheries and Food on the steps taken to combat irregularity and fraud. On the basis of this evidence our main conclusions and recommendations are as follows:
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| On European Union issues
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| (i) We are concerned to note that the United Kingdom reported to the European Commission 80 irregularities in direct payments to farmers, and that this represented 18 per cent of the European total by number and 9 per cent by value. We share the previous Committee's view that fraud against European Union funds should be treated as seriously as fraud against the United Kingdom (paragraph 10).
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| (ii) We recognise that it is difficult to draw comparisons between Member States of the European Union, since individual irregularities below some £3,000 are not reported to the European Commission and the likelihood of irregular payments above this threshold is lower in countries with smaller farms than those in the United Kingdom (paragraph 11).
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| (iii) We look to the Ministry to discuss with the Commission and with other Member States ways in which reports of irregularities could be supplemented to enable comparisons to be made between the level of irregularities discovered and ways in which States can learn from each other's procedures and results (paragraph 12).
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| (iv) We are concerned that, at the time of our predecessors' examination of the Department in March 1997, the UK's accounts for 1993 and 1994 had not been cleared by the European Commission; and that expenditure amounting to some £6.6 million was subsequently disallowed for 1993. Such delays make for uncertainty in the management and financing of European Commission-funded schemes, and we are pleased to learn that the Commission are now employing more staff on these activities and that clearance is expected to be more rapid in future (paragraph 13).
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| On countering irregularity and fraud
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| (v) We note that, in 1995, in-office checks uncovered 6,150 irregularities out of 245,300 claims examined; and that the cost of such checks, together with the processing of claims, was £13 million in 1995-96. We note the Ministry's evidence that the cost- effectiveness of its control activities is difficult to measure because their deterrent effect cannot be quantified. In our view, an analysis of the reasons why claims are reduced or rejected would help the Ministry to assess the effectiveness of its procedures in detecting irregularities; we are pleased to note that the Ministry is to collate the results of supervisory and managerial checks (paragraph 33).
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| (vi) We agree with the Ministry that field inspections provide an important source of evidence as to the validity of claims since there is no substitute for verification on the spot. We are pleased to note that the Ministry has adopted a new risk analysis model, on the lines recommended by the National Audit Office, as a basis for selecting claims for field examination (paragraph 34).
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| (vii) We note that, compared to a field inspection, the cost of satellite imagery is expensive. We are therefore encouraged that its cost fell from £434 a case in 1992 to £334 in 1996. We note the Ministry's view of its deterrent effects, and we endorse the Ministry's practice of following up all apparent irregularities revealed by the satellite imagery (paragraph 35).
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| (viii) We are concerned that the National Audit Office found a number of shortcomings in the Ministry's scheme control plans. We note that the Ministry has made a number of changes to them in the light of the National Audit Office's recommendations. We also note that the Ministry is to inform its staff about the types of fraud uncovered by control activities; and that it is taking steps to raise staff awareness in this area (paragraph 36).
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| On action in the event of irregularities
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| (ix) We appreciate that administrative penalties can be more severe than those imposed by the courts. Nevertheless, as prosecution has a deterrent effect in that those found guilty acquire a criminal record, we look to the Ministry to pursue appropriate cases of irregularity through the courts to demonstrate the gravity with which the Ministry views fraud (paragraph 46).
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| (x) We encourage the Ministry to extend the publicity given to its enforcement activities and to the action taken to penalise those making irregular claims, in order to deter others from submitting false claims (paragraph 47).
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