Rural payments system 'on a knife-edge' after IT troubles

The troubled Rural Payments Agency is still “on a knife-edge” and has yet to deal with millions of pounds overpaid and underpaid, following its failed IT project to implement the Single Payments Scheme for farmers, a report by the National Audit Office has revealed.

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The troubled Rural Payments Agency is still “on a knife-edge” and has yet to deal with millions of pounds overpaid and underpaid, following its failed IT project to implement the Single Payments Scheme for farmers, a report by the National Audit Office has revealed.

The RPA’s huge 2005 IT project to implement the SPS – which consolidates 11 separate EU subsidies – descended into chaos, leaving farmers out of pocket by a total of up to £22.5m and the Department for Environment, Food and Rural Affairs (Defra) facing costs of hundreds of millions of pounds. In the wake of the fiasco, MPs called for the cabinet minister and senior civil servant in charge of the to resign or be sacked.

A new report by the NAO says the RPA improved its handling of farmers’ payments in 2006 – the second year of the scheme – by processing 98% of payments by value by the June 2007 deadline.

But the auditors’ report also reveals that millions of pounds were either underpaid or overpaid. The NAO estimates that overpayments in 2005 could be as high as £6.8m, with underpayments of £19.3m.

The RPA has not yet recovered the overpayments nor made up the difference to farmers who were underpaid in 2005, the report says, adding that these errors “would have been largely repeated in the second year” of the scheme.

This means the EU could slap a huge penalty on the government, and Defra had been forced to increase the amount put aside to pay fines from £139m in 2005-06 to £292m in 2006-07, the NAO said.

The true level of wrongly calculated payments is still not known, as the RPA has not yet completed its review of 34,500 cases thought to be “at risk” of error.

“A separate review was undertaken of one computer run in August 2006, which is known to have resulted in substantial errors,” the report says. “In this computer run of 672 claims, duplicated payments amounted to £4.4m, including six farmers who were overpaid by over £100,000 each.”

The RPA is in the middle of a recovery plan aimed at stabilising its computer systems by next year. “The cost for the implementation of the recovery plan is estimated to be £40m between 2007-08 and 2009-10,” the NAO report notes. By end of May 2006 the RPA had already spent £258m on the SPS and the change programme, it adds.

Work is continuing to streamline the claim process, cleanse data, improve the quality of management information, and support whole-case working “through a series of major IT releases, together with minor system and process enhancements”, the report says.

But while the RPA’s annual report, published in September, said systems would be stabilised by 2008, the NAO report reveals that the recovery project includes “stages planned at the end of 2008 and during 2009”.

Edward Leigh, chair of the Commons public accounts committee, described the 2005 SPS implementation as “a first-class cock-up”, although the second year had been handled “noticeably better”.

“But the Agency is still operating on a knife-edge,” he warned. “Future improvement depends on changing its business processes and establishing computer systems that work. If it fails to put in place processes and systems that ensure the June deadline is met every year and that error levels in payments are low, then farmers’ disenchantment will be complete.”

Taxpayers would “not be in a forgiving mood if the EU smacks the government with a huge fine”, he added.

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