A second progress update on the administration of the Single Payment Scheme by the Rural Payments Agency - Public Accounts Committee Contents

2  Leadership capability and oversight within the Department and the Agency

13.  There have been serious shortcomings in senior management oversight of the scheme within the Agency: the objectives of the Recovery Campaign were not adequately defined; there was no effective strategic plan setting out how the Agency would determine the extent of overpayments or monitor the recovery of sums owed; and there was an absence of decisive action by the Management Board. Despite these shortcomings the Chief Executive of the Agency received a performance bonus of around £11,000 in 2008-09.[21]

14.  According to the 2008-09 financial accounts of the Agency,[22] the salaries and bonuses of senior managers in the organisation amounted to £845,000-£890,000 in 2008-09, compared with £757,000-£792,000 in 2007-08. The high costs partly reflect the two changes in Chief Operating Officer in 2008 as well as changes in Finance Director and Human Resources Director. A further change is expected when the contract for the current Chief Operating Officer expires in March 2010.[23]

15.  The Accounting Officer for the Agency has been in post since May 2006 but he has found it difficult to recruit and retain experienced managers. The recruitment difficulties may be due in part to the reputation of the Agency, but we do not understand why the Department could not have sought to recruit individuals who specialise in turning around organisations in difficulty.[24]

16.  The Departmental Accounting Officer confirmed the validity of the National Audit Office's calculation of £1,743 for the average administrative cost of processing each claim and yet offered an alternative cost of £700 per claim. The Department was unconvincing in its explanation of why its interpretation was more reliable than that provided by the National Audit Office. The Department's refusal to acknowledge the full extent of the costs involved in administering claims was disappointing and did not instil a sense of confidence that it would take decisive action to reduce costs in future. Similarly, the Department failed to grasp the significance and seriousness of the Comptroller and Auditor General's qualification of his opinion on their 2008-09 financial accounts, regarding it as simply a technical issue, whereas the £92 million disallowance by the European Commission confirmed that this expenditure had not complied with the scheme rules and thus Parliamentary intention.[25]

17.  Previous assurances by the Department and the Agency proved over-optimistic and earlier confidence that matters were being addressed were clearly misplaced. For example, the assurances previously given to this Committee on resolving the data inaccuracies were evidently made without a proper understanding of the work still outstanding.[26] This misplaced confidence was apparent again at our hearing in October 2009. It is understandable that the Accounting Officers for the Department and the Agency want to focus on the positive progress made, but their explanation that efficiency gains are being realised and that payments are being made much quicker is not adequately borne out by the facts.[27]

18.  There were further assurances that the appointment of Deloitte would resolve the uncertainties over data inaccuracies so that remedial action could be taken within three months of the hearing, and that further efficiency gains are being made through staff reductions at the Agency's offices in Reading. In view of the past record of misplaced confidence in resolving the problems with this scheme, the Committee insisted and the Departmental Accounting Officer agreed to report back on the progress made before the end of January 2010.[28]

19.  Considerable responsibility must lie at the Department's door, as it failed to spot ongoing problems despite running two oversight boards. The Department has used Ministerial targets and management information to scrutinise Agency performance but has not engaged adequately with the issues raised previously by this Committee. The different working groups established to negotiate potential disallowance costs with the European Commission will help to mitigate previous mistakes but they also indicate a tendency by the Department not to focus adequately on resolving the ongoing problems. After three and a half years the Department commissioned another review of the Agency in September 2009 to determine what is actually going on. This review is due to be completed by March 2010 and is a late response to longstanding issues.[29]

21   Qq 81-84; C&AG's Report, paras 2.9, 3.7 and 4.2 Back

22   Rural Payments Agency Annual Report 2008­09, page 27 Back

23   Qq 24-25, 92, 95-98 and 101-102; C&AG's Report, para 3.12 Back

24   Qq 18-21, 77-79, 85-91, 93-94, 98-100 and 103-104 Back

25   Qq 2-6, 9-10, 39, 50, 111, 116-119 and 142; C&AG's Report, para 2.13 Back

26   Q 37; Committee of Public Accounts, A progress update in resolving the difficulties in administering the Single Payment Scheme in England Back

27   Qq 1-2, 9, 11-12, 70-73 and 75-76; C&AG's Report, para 17 Back

28   Qq 9 and 160 Back

29   Qq 144-148; C&AG's Report, paras 16, and 4.7-4.9 Back

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Prepared 16 December 2009