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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