Examination of Witnesses (Questions 1-19)
MR JOHNSTON
MCNEILL,
MR HUGH
MACKINNON
AND MR
ALEX KERR
TUESDAY 28 JANUARY 2003
Chairman
1. Welcome to you all, Mr McNeill, the Chief
Executive, Mr Kerr, the Finance Director and Mr MacKinnon, the
Operations Director. Thank you very much for coming. We would
like to use the next couple of hours to chat with you about how
the organisation is going, a new organisation with a mission statement
which puts customers right at the beginning. Your mission statement
is to be a customer focussed organisation which pays valid CAP
claims accurately on time. How are you dealing with those two
distinct parts?
(Mr McNeill) It is important that farmers
do complete the forms in the proper manner and follow the procedures
that are required. We are scrutinised by the Commission and others
who take a dim view if we do not deal with poor applications in
the proper manner and can disallow us and cost the Treasury substantial
penalties if that is the case. We say that we require valid forms
in that we do our best to keep our customer base informed of what
is required. We spend a lot of time on our guidance notes which
are issued with the claim forms. On our part we undertake to process
those forms as accurately and as quickly as possible.
2. Who are your customers? Is it the people
who are claiming? Is the Commission a customer in a way?
(Mr McNeill) We have spent some time as a new organisation
giving this careful thought. We have defined customers in our
customer relationship management strategy as individuals, organisations
or intermediaries outside of central government who submit forms
to RPA in relation to CAP (Common Agricultural Policy) schemes
and we distinguish that from our stakeholders who we identify
as those organisations or individuals indirectly affected by or
interested in ensuring that RPA delivers efficient and effective
services/benefits to its customers. We have tried not to take
the view that all parties are customers and focussed on those
that actually receive payments from the Rural Payments Agency.
3. You have one NFU member on your board. Are
you about to appoint another or have you just appointed another?
(Mr McNeill) Yes. The NFU have recommended another
appointment which has now been made.
4. You have a variety of consumer groups, forums,
that you talk to.
(Mr McNeill) Yes. We think we have worked very hard
to get involved with the thinking of the NFU and other stakeholders
in the organisation. We have the Industry Forum which has now
been established, which meets quarterly. As you say, we have external
representation on the Board plus officials from the National Farmers'
Union and others. And also from the meat industry and other interested
bodies. We have a number of special groups which assist us in
the development of briefing and instructions for farmers and other
customers in terms of the various schemes; we work closely with
them. We think we have spent quite a lot of time and effort trying
to get close to our customers. In the summer we undertook a customer
satisfaction survey, the first for the Rural Payments Agency.
It was undertaken for us by an independent body and followed best
practice. There was an RPA satisfaction index of 71.7%. That might
sound quite good, but in actual fact it is not very good. Our
understanding is that that would place the Rural Payments Agency
in the bottom 17% of companies and public sector organisations.
We have work to do. One of our performance targets in our corporate
plan is to improve customer satisfaction by 5%. We intend to work
towards that. We will be undertaking another customer satisfaction
survey this year to monitor the progress.
Mr Breed
5. I am not very happy about that at all, to
be honest. I think your mission statement at the present time
is nothing like what you have written there. It is more to do
with: We are an EU Treasury based focussed organisation that attempts
to pay our customers if they manage to dot every "i"
and cross every "t" on the most complicated form we
can devise, at some time in the future according to our timetable
and not theirs. That is what the reality is. If you get back to
that we might be able to have some sort of sensible discussion
on that. To talk about increasing by 5%, that means it is going
to be something in the region of about ten or fifteen years to
get something like reasonable customer satisfaction. I think you
are extremely complacent in what we have heard so far, bearing
in mind the extraordinary amount of correspondence I get from
some of my farmers and I know you get from an awful lot of other
MP's as well.
(Mr McNeill) I can understand why a number of our
customers would have that perspective. We do take a robust line
in terms of accurate information being supplied; it is a requirement
of the schemes.
6. There are several schemes that I have written
about and have taken them up in Europe and they have said that
is a false interpretation.
(Mr McNeill) I can only say that we work very closely
with the Commission and the various auditors that we have visiting
us on a regular basis. The advice that they give us is that the
approach we are taking is the correct one.
7. The last time I wrote I had a letter back
which consisted of two sentences. The last sentence said that
if I did not like it go and complain to the Commission. Having
gone to the Commission we are now waiting for their recommendation.
I think that is an abdication of your responsibilities.
(Mr McNeill) All I can say is that we have, on a number
of instances, had the case where someone has approached a member
of Parliament or someone has approached the Commission, been give
some—usually off the record—advice, but when we look
at the audit reports that we receive we are advised that the actions
we are taking are appropriate and correct and are what is required
to avoid significant disallowance. That is obviously, as you say,
an interest of this organisation. I do not think the Treasury
or anyone else would be very pleased if we incurred what could
be a very substantial disallowance.
8. You are an EU and Treasury based focussed
organisation.
(Mr McNeill) They are significant stakeholders in
the organisation.
9. So the mission statement is totally wrong
then.
(Mr McNeill) No. We are customer focussed.
10. But your customers are the Treasury and
the EU.
(Mr McNeill) As I said earlier, we define those as
stakeholders as opposed to customers.
11. So when you talk about customers you really
mean stakeholders, and as far as the stakeholders are concerned
that includes the EU and the Treasury.
(Mr McNeill) No. We define the EU and the Treasury
as stakeholders as opposed to customers. Our customers are those
to whom we make payments; we do not make payments to the Treasury.
12. I do not want to labour the point, but I
think you get the drift.
(Mr McNeill) I understand your concern and I can assure
you we are not complacent. I see all the MP's correspondence,
the minister's correspondence relating to concerns about payments.
I take a personal interest in checking through the responses that
we are making and have challenged a number in asking if we really
have to take such a robust line. Audit advice from the Commission
and others is that we have to take that approach. We do hope to
improve the situation. We are trying to make the process much
more user friendly to our customers. We are trying to enable them
to make application by using e-technology, on-line, where intelligent
systems will inform them if they are putting the correct information
into the forms. We do hope by that, by a customer service centre
and by other means to improve the service that we offer. That
is our intention.
Mr Drew
13. To what extent is there a real—or
is it a perceived—problem with fraud?
(Mr McNeill) You will be aware from recent attendances
at the Public Accounts Committee in regard to the Bowden case
that instances of fraud do occur despite our best efforts and
the amount of checking that we put in place. We have some four
hundred inspectors who undertake inspections on farms and on traders'
premises. We have a counter-fraud compliance unit which is heavily
involved in checking out concerns regarding applications and potential
fraud. We have a significant number of staff involved in checking,
again following the best practice and the advice we receive from
the Commission, the European Court of Auditors and others, who
feel that that is the appropriate action to take. We know the
committee—certainly the Public Accounts Committee—was
very concerned if we were doing enough to check applications for
the CAP payments.
14. When will your new annual report be out?
We have the report for the year before last.
(Mr McNeill) Our financial year ends on 31 March.
As soon as we have our accounts cleared we would hope to publish.
(Mr Kerr) The expectation is that we will have the
new report for 2002-03 by September next year, which is in advance
of the normal departmental timescale.
15. In that report is it possible for you to
put a figure on how much fraud there has been? Clearly here there
are no figures.
(Mr McNeill) We can certainly identify the number
of successful interventions that we have made in terms of checks,
inspections, legal cases taken and the results of that. We could
certainly provide some information on that if the Committee felt
it would be appropriate. In terms of the amount of fraud that
takes place, obviously we do not necessarily know where we have
instances of fraud; we can only do our best using our significant
investment in terms of inspections and the use of counter-fraud
compliance unit staff to investigate every area of concern. It
could well be that we still have instances of fraud that we are
not aware of.
16. Other parts of government and government
agencies are able to put a figure on the level of fraud , particularly
Housing Benefit, the issue of the benefits migration at the Post
Office. They may be notional figures, but they actually put a
figure to it. One of the problems with the Common Agricultural
Policy is that we deal with such colossal numbers that when we
hear about the fraud it sounds in its own way to be huge. I would
like to have a feel for the degree to which it is a problem in
this country by some numerical calculation, but also how that
compares to our other sister states and what sort of measure by
which we are actually more successful or as successful or less
successful. Is that going to be possible?
(Mr Kerr) It is possible. Each year we present a report
on fraud to Treasury and there is no doubt that we could extract
information from that in some form which would inform you about
the level of fraud. Information is available, it is a question
of presenting it in a way that is digestible.
17. Did you get those figures from this? Could
you give me some idea of what level of fraud we are talking about?
(Mr Kerr) We have not analysed fraud as such. Last
year, for example, the report that we put up was nil return to
Treasury on specific fraud. That does not mean to say that there
is not a case load of suspected or potential fraud underway. The
Bowden case was one case in particular where there is a specific
example of that. I do not have information readily to hand that
could get you an interpretation—
18. I think it would be very useful if you could
write to the Committee so that we get some feel about the level
of the problem. Presumably that is one of the things the Public
Accounts Committee picked up, that you have to be more definitive
in exactly what the level of fraud was, and obviously that involves
doing something of a calculation on it to know the level to which
you have to chase people.
(Mr McNeill) I think it is best if we were to write
to you with the information we have. We have taken on board one
of the other recommendations of the Public Accounts Committee
and that is to discuss with colleagues in the Benefits Agency
their reaction to fraud and how they deal with that. We should
try to learn from the best practice that they use.
Chairman: Earlier on we had a fairly robust
exchange about relationships with stakeholders. Mr McNeill you
mentioned disallowance. Could we now move on to the area of disallowance.
Mrs Shephard
19. The Rural Payments Agency did not meet the
EC targets on some of the bovine schemes and the Arable Area Payments
Scheme—as you know—during 2001 and 2002. Have the
EC yet proposed a disallowance amount related to the Arable Area
Payment Scheme for 2001 and is there any comparison between the
potential disallowance between 2001-02 compared to previous years?
Could you answer that first, then I am going to ask what you are
doing about it.
(Mr McNeill) If I could just touch on the issue of
disallowance and then I will ask my colleague Hugh, who is the
Operations Director, to touch on the specific issues of the Bovine
schemes. We have put in place now a comprehensive disallowance
risk register where we have logged all of the areas which we believe
may result in potential disallowance. We have identified how that
has come about and what action we are taking. I am very happy
to make that available to the Committee for your perusal. We think
that is quite a major step forward for the Agency compared to
the previous Intervention Board and the Regional Service Centres.
Hugh, could you move on to the Bovine schemes?
(Mr MacKinnon) For the year 2000, which was the year
in which the cattle tracing system database at the British Cattle
Movement Service was not fully populated, we could not cross-check
the bovine claims in that year with the cattle tracing system.
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