Ministers face huge fines for payments to farmers fiasco
● Auditors warn of significant risks and costs the system still poses
The Scottish Government could still face fines of up to £60 million over the troubled IT system set up to deliver European Union (EU) farming payments.
A new report from auditors has warned ministers of the “significant risks and costs” the system still poses, including the possibility of incurring financial penalties from the European Commission (EC) for not meeting regulations covering common agricultural policy (CAP) payments.
The report also raised concerns the government has not carried out a detailed analysis of the risk “to help prioritise future investment”.
Fines can be charged by the EC if it identifies weaknesses in the administration of payments, such as failing to make them within set timescales.
Scotland’s £178 million system, which closed at the end of March, has been beset by delays and increasing costs, with some payments from 2015 still outstanding last month.
Previously, Audit Scotland had suggested the penalties could be as high as £125 million. “There are a number of uncertainties but our updated assessment suggests penalties of up to £60 million are possible,” the fresh assessment concluded.
While the application process has improved, the report found previous difficulties “continue to have an impact on payments” while loan schemes for farmers brought in by the government had introduced more risk to the government’s budget.
“The system is not yet working as efficiently as planned and will require significant additional investment,” it said.
“To date, the programme has not delivered value for money.”
The report said significant changes in leadership had been brought in to try to stabilise the programme but it had not delivered the planned benefits for applicants.
A fully developed or tested plan for recovering the systems in the event of a breakdown was not yet in place, while transferring knowledge from contractors to staff posed a “significant challenge”, it said.
Auditors concluded it was likely the system would not be functioning as anticipated until the 2018 payment cycle “at the earliest”.
Caroline Gardner, Auditor General for Scotland, said: “It’s crucial that knowledge is effectively transferred to staff so the system can be maintained and payments made on time for 2017.
“The Scottish Government also urgently needs to fully understand the financial risk it faces, so that it can target funding at ensuring the system is compliant and secure.”
Opposition parties said the report was a “damning” indictment of the government’s handling of the payments.
Scottish Conservative MSP Peter Chapman said: “Farmers across Scotland have had to bear the brunt of SNP incompetence for too long.”
Scottish Labour’s Rhoda Grant MSP said: “Farmers and crofters had this system forced on them by the SNP - and now know it won’t be resolved until 2018 at the earliest. This simply isn’t good enough.”
The Scottish Government’s much maligned farm support IT system will come in for further fierce criticism today with the release of the latest Audit Scotland report which states that the programme has failed to deliver value for money – or the planned benefits for farmers and crofters.
And while the initial phase of the £180 million CAP Futures programme might have ended, the report states that significant issues remain – highlighting the fact that not only is a further £33m likely to be required to develop the system but EU fines of up to £60m could also still result from the system’s poor performance.
Caroline Gardner, Auditor General for Scotland, said that the challenges of the system meant the Scottish Government had been left juggling multiple demands on its time and resources, which had impacted on its progress over the past year.
She said that it was crucial that a full understanding of the system was handed over by the contractors to the staff in order for the system to be maintained and payments made on time for 2017.
“The Scottish Government also urgently needs to fully understand the financial risk it faces, so that it can target funding at ensuring the system is compliant and secure,” said Gardner.
While some improvements were noted in the farmers’ application process, both the system’s inability to pay out support measures on time and its lack of any tested disaster recovery plan drew considerable criticism in the report and from farming organisations.
NFU Scotland president Andrew Mccornick said that farmers were already acutely aware of the failings highlighted in the damning report.
“Regrettably, we are no further forward in building the necessary trust and confidence in this system,” he said, adding that the apparent lack of a contingency plan for recovery in the event of complete breakdown in the system was a major issue.
“This report clearly shows that the system still requires much work and cost to get it up to the standard that we want and expect. I have no doubt that all the people now involved in the IT system are committed to getting it right. But how much longer will we have to wait?”
Union chief executive Scott Walker said that regardless of the current approach involving loans and part payments, the “fact of the matter” was that no-one had yet received their full basic payment or greening payment.
“Despite talks of 80 per cent loans and 90 per cent part payments, what some claimants have actually received is nowhere near this amount,” said Walker.
While admitting that further work remained necessary, cabinet secretary Fergus Ewing said that the report recognised improvements had been made – but he termed the disallowance risk “speculative”.
“All member states carry disallowance risks and are subject to financial penalty – Scotland is no different in that respect,” he said.