Defra and MoD accounts qualified

15 Jul 16

The Department for Environment, Food and Rural Affairs and the Ministry of Defence have both had their 2015-16 accounts qualified by the auditor general.

In Defra’s case, the National Audit Office found that £65.8m of penalties were imposed by the European Commission over failure to properly administer Common Agricultural Policy payments. Of these penalties, most (£38.6m) related to the Single Payment Scheme, with £13.3m from Rural Development, £9.9m in cross compliance penalties and £4.0m from other schemes.

One particular problem the department has is ensuring the details submitted by farmers are kept up-to-date. Where there is a mismatch in information, Defra withholds a proportion of the payment. More than £25m in outstanding payments is estimated to be owing.

Auditor general Amyas Morse said: “The department continues to struggle with managing the complex CAP scheme in a way that ensures accurate, timely payments to farmers. As a result, it has incurred EU penalties of £65.8m related to the CAP scheme in 2015-16, and estimates that it owes 13,000 farmers a total of at least £25.3m.

“Exit from the European Union will not, in the short term, reduce these penalties. The department therefore needs to ensure its strategy for tackling these challenges is effective.”

A Defra spokeswoman said: “We are taking action to tackle the causes of disallowance and are making a significant investment in our mapping data. This will be used to better administer CAP payments.”

On the Ministry of Defence, Morse qualified his opinion for the seventh year running because of a failure to comply with the International Financial Reporting Standard on whether a contract contains a lease – IAS 17.

While the MoD has said it can theoretically comply with this standard for its existing contracts, in practice there would need to be changes to business systems and processes as well as wider interaction with the supplier base to obtain the necessary asset and liability information.

In 2015-16, the MoD decided to improve compliance with IAS 17 for new single contracts impacting a single site from the current financial year. This is intended to act as a pilot to allow it to develop understanding of what is needed to improve compliance.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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