The Rural Payment Agency’s handling of the Single Payment Scheme has been slammed by a government finance watchdog.

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The National Audit Office reckoned the RPA had wasted £680m of public money on unforeseen administration costs since the scheme’s launch in 2005 and it accused the RPA and DEFRA of having “scant regard” for the protection of public money.

More than £300m was spent on additional staffing by the agency, £280m was set aside to pay EU Commission fines for failing to meet targets and an estimated £38m lost through irrecoverable overpayments to farmers.

But this figure could be significantly higher as the agency failed to keep accurate records of overpayments.

The overspends have increased the cost of administering payments to £1743 per applicant, an increase of 22% over the 2005 scheme – almost £1500 more than the Scottish system, which costs just £285 per claim.

NAO’s Phil Gibby described his frustration at the lack of progress made since the office’s last report on the RPA in 2006.

“There are still significant issues to be resolved and they’ve shown scant regard for the protection of public funds,” he said.

“I am frustrated that we’ve had to come back a third time and it has got to the stage where we have had to audit accounts – it is an agency with serious problems.”

Mr Gibby blamed the unstable management team and an “over-complicated” IT system for the agency’s failings. “There has been a high turnover of senior staff and I am keen to see the organisational structure put right.”

But optimistic reporting by the RPA and insufficient scrutiny from DEFRA had compounded the problem, he added. “It is the RPA’s responsibility to produce accurate reports but DEFRA as a department needs to take responsibility.”

Despite spending £130m on system upgrades since 2007 and £350m in total, the “over-complicated” IT system was still in danger of obsolescence, he added. Maintenance contracts were coming to an end and they may still need to invest in a new system, he said.

Edward Leigh, MP and chairman of the Committee of public accounts described the RPA’s attempts to administer EU grants to farmers as a “master class of maladministration” and despite significant spending the IT system remained “clunky and patched together”.

Shadow Agriculture Minister, Jim Paice said: “Ministerial decisions lie at the heart of this abject failure to protect taxpayers’ interests but no-one in Government has ever accepted responsibility. Ministers have come and gone since 2005 but none have been capable of holding down costs and delivering value for money. It is not only a root and branch review of the RPA that is necessary but a real system of accountability for failure. Taxpayers and farmers alike will continue to suffer until the Government gets a grip of this mess.”

RPA over-spend

Additional staff costs

£304m

Penalties

£280m

Overpayment charges

5m

Anticipated irrecoverable overpayments

£38m

Additional costs reported by farmers

£53m

Total unforeseen costs

£680m