The government’s financial watchdog has refused to sign off DEFRA’s annual accounts for the fourth year in a row.

The National Audit Office (NAO) said the respective accounts of DEFRA and the Rural Payments Agency (RPA) were being qualified on the grounds of regularity.

Penalties totalling £46m were imposed by the European Commission during 2011-12 because EU regulations were not applied correctly in the processing of EU schemes, it said.

The accounts were also qualified on the grounds that the RPA could not accurately assess the value of overpayments and underpayments made to farmers under the Single Payment Scheme.

DEFRA’s accounts also include provision for a further £125m of estimated penalties, including £95m for the Single Payment Scheme in England for 2010 and 2011.

Penalties were incurred as a direct result of weaknesses in the management and administration of the RPA, said the NAO, particularly during the early years of the Single Payment Scheme.

“While I welcome the progress made by the Agency in the last financial year, there continues to be a significant loss to the taxpayer because of weaknesses in the administration of the Single Payment Scheme by the Rural Payments Agency.”
Amyas Morse, head of National Audit Office

The NAO said the Rural Payments Agency continued to experience considerable difficulties in quantifying the value of overpayments and underpayments made to farmers under the scheme.

But the report recognises that progress has been made over the last financial year.

It highlights the agency’s five-year plan – which incorporates a strategic improvement plan to remedy the problems – and a programme to prepare for Common Agricultural Policy reform.

Amyas Morse, head of the National Audit Office, said: “I have again had to qualify the accounts of the Department for Environment, Food and Rural Affairs.

“This is because the Department has had to pay penalties to the European Commission for non-compliance with regulations over a number of years up to 2009 which led to incorrect payments to farmers and others.”

“While I welcome the progress made by the Agency in the last financial year, there continues to be a significant loss to the taxpayer because of weaknesses in the administration of the Single Payment Scheme by the Rural Payments Agency.”

A spokesman for DEFRA said: “The financial penalties recognised in DEFRA’s accounts relate to historic problems with the administration of CAP schemes, including payments to Fruit and Vegetable Producer Organisations.

“These penalties have been anticipated and planned for well in advance and potential future penalties related to the Single Payment Scheme have also  been provided for.

“DEFRA has taken steps to minimise the possibility of further penalties, including the publication of a five-year plan by the Rural Payments Agency to improve performance and prepare for future CAP reform.

“The NAO has welcomed the progress that has been made in the last financial year.”