The Rural Payments Agency’s annual report and accounts for 2013-14 were laid before parliament on 8 July – and for the first time in five years, the accounts were unqualified.
The National Audit Office noted the progress the agency had made in ‘identifying, quantifying and rectifying past overpayments and underpayments made to farmers and other claimants since the Single Payment Scheme began’.
‘This progress,’ the NAO added, ‘alongside a significant and sustained improvement in payment accuracy during the last three years, has allowed the Comptroller and Auditor General to remove his previous qualification of the completeness of Single Payment Scheme trade payables and receivables.’
This marked the final landmark on a journey that has taken three years and entailed profound transformation in the agency’s performance and practice. To understand how far the RPA has travelled in a relatively short time, it’s important to know a little about its history.
An executive agency of the Department for the Environment, Food and Rural Affairs, the RPA was set up in 2001 to manage the vast majority of payments to farmers, landowners and other rural businesses in England under the European Union’s Common Agricultural Policy. Today it handles more than £2.3bn of public funds a year.
In 2005, the RPA made headlines when the Single Payment Scheme (SPS) replaced a number of historic schemes. The implementation and IT systems for these reforms were far from successful, with inaccuracies in, and delays to, customer payments. The agency’s reputation was damaged, and a period of rapid turnover at the top of the organisation began.
It was during this period of instability that the agency’s accounts for 2008/09 were qualified for the first time. It meant Defra’s 2008/099 accounts were also qualified, as the agency’s accounts were consolidated within those of the department. As a consequence Defra instigated an independent review of the agency.
Published in the summer of 2010, the report examined the RPA’s financial management and highlighted ‘gaps in financial controls, management information and governance, that were well below the acceptable minimum standard for a public organisation and especially one handling £2.3bn of public money.’
The agency’s change journey began in January 2011, when its current chief executive officer, Mark Grimshaw, was recruited to lead the turnround. He swiftly built a new leadership team including long-serving RPA people as well as new faces. The finance team was transformed by the recruitment of professionals from outside the agency as well as developing existing team members. A deputy finance director post was created in recognition of the complexities of the agency’s finances and the scale of the challenge.
A key focus for the finance team was the accounts qualification and how it might be eliminated. A finance transformation programme began in 2011, focusing on both the structures and skills required to transform the agency’s financial management. All job specifications within the finance department were rewritten, with a stress on flexibility and potential job rotation, and it set out to strengthen the team’s technical skills as well as its managerial and coaching competencies.
One of the first acts was to simplify the agency’s finance processes, document and train people to use them. We discovered that many team members were carrying out tasks without clearly understanding how they added value to the operation.
Eliminating unnecessary procedures freed up people’s time and allowed us to reallocate resources to where they were needed most, and to put more focus into planning ahead.
Although the early focus was on improving performance rather than reducing costs, by removing or simplifying inefficient activities the programme did achieve net cost reductions.
Another important development was the introduction of finance business partnering which helped the agency to actively manage its finances, and anticipate and ensure the early resolution of issues. This turned finance into an outward-facing team, which helped drive the business agenda, rather than just reacting to what was happening elsewhere in the organisation.
The finance department receives instructions to pay the agency’s customers under various EU schemes, together with any subsequent adjustments to be paid or recovered. Some 300,000 payments are made each year.
The agency experienced severe problems in implementing reformed CAP schemes in 2005, including issues with the accuracy of balances recorded in the ledgers. It had spent a number of years wrestling with the problems, attempting to correct data and calculation errors. This tended to be reactive, and aimed at releasing the latest round of annual payments.
When the NAO issued a qualified audit opinion in 2008/09, it was because it had been unable to obtain sufficient evidence to support the existence, valuation or completeness of the Single Payment Scheme receivables and payables recorded in the accounts. This led to appearances before the Commons Public Accounts Committee and provided further public evidence of the uncertainty over accuracy of amounts owed to or from customers.
In 2012 the agency developed a debt and credit strategy that set the direction for dealing with these cases. It put risk and value for money considerations at the forefront in driving decision-making. This was shared with a range of stakeholders, including the agency’s board and auditors, and was adopted as the driving principle behind debt clearance work going forward.
The finance team also put forward project proposals as part of the wider strategic improvement plan, which was launched in 2012 with the aim of stabilising the agency. These proposals included an accounts payable/accounts receivable ledger cleanse and process improvements.
Rigorous project management principles have been at the heart of the RPA’s turnround. The finance team has played an active role in both its own projects and those of other directorates, helping define and scope cases to be fixed and to get board agreement to restrict other activity. This way of working has provided the agency with a clear and consistent direction, as well as providing certainty about its true financial position.
Working with data analysts to understand and quantify the impact of corrections made, has enabled the agency to provide quantitative evidence of risk in the rest of the population outside the scope of the fix.
In 2012-13, the second year of the finance transformation programme, the agency was able to demonstrate to the NAO that its work in cleansing customer balances, recovering overpayments and speeding up the processing of payments had resulted in a dramatic drop in the level of debt owed to it, the number of customer payments placed on hold and the level of balances considered to be at risk of mis-statement.
The remaining payables and receivables were proven to be sufficiently accurate as a result of the cleansing activity. As a result, the NAO dropped the first two of the three qualifications on the agency’s accounts. This year, we completed the set by assuring the NAO that we deserved a clear audit opinion.
This has been achieved through a combination of building technical capacity, forward planning, taking a rigorously methodical approach, and proactively working with the business and the agency’s wider stakeholders. Many of the team have changed roles and developed new skills.
The key was a two-fold approach; looking hard at what we did, but also what our stakeholders wanted from us. It was about getting a better understanding of what we did, how we approached it and how the work of different areas fitted together, then making it simpler. We talked to our stakeholders and worked on making our outputs more relevant.
We also set a realistic timeframe for improvements, recognising we couldn’t do it all at once. In year one, we ensured we met our reporting deadlines to a reliable quality.
In year two, we delivered it more efficiently, focused on adding value to stakeholders and proved the accuracy of our existing receivables and payables, and so on. Most importantly, we took our people on the journey with us. We consistently articulated the vision and the offer of an opportunity for development and enhancement.
Recognition has been given to those showing flexibility and the agency has encouraged ideas for improvement. It has been really satisfying to see people asking to study for exams, to take on new work, or gaining promotion thanks to new skills learned. In many ways the team is unrecognisable from that of three years ago.
Above all, it is very satisfying to see the clean audit opinion at long last. The RPA now has clean ledgers and an excellent, transformed finance team in place. Its next task will be to support the agency as it faces the challenge of implementing the new CAP next year.
This feature was first published in the September edition of Public Finance magazine
