OneOne Hundred Blog

The National Audit Office (NAO) has slammed DEFRA, its Rural Payments Agency and the EU farm subsidies system in England. Edward Leigh, the head of the Commons Public Accounts Committee, described the situation at Defra as a "masterclass of misadministration".

The NAO report condemns the costs to taxpayers and attributes the fiasco to the Agency’s £350m IT Systems, in use for only four years.

But why were Ministers given misleading progress reports, green lights? The report suggests that the Agency’s internal risk systems were flashing red. The systems to date have cost more than four times the original budget. NAO chief Amyas Morse said: “DEFRA should urgently address the risks to ongoing IT system support and the inaccuracy of the scheme's data, explore alternative payment systems and resolve ongoing management issues."

So what is the system that the NAO are criticising - it is used to process the claims and make payments to a total of 116,000 farmers, it is not a benefits system making payments to millions of claimants. In the latest report, the NAO states:

"In the absence of reliable records we estimate that the IT costs for the scheme, which includes recovery work, maintenance costs, upgrades in response to policy and other changes, as well as overheads, amounted to £130 million between April 2007 and March 2009. The Agency considers that the high cost reflects the complexity of the scheme in England, but when estimated earlier spending on scheme IT of £220 million is taken into account, we consider the scheme’s IT to be very expensive."

So the capital expenditure on the IT systems alone now amount to over £3000 per farmer, whilst this might be acceptable for a stable, efficient, highly automated solution, paying out large sums in accountable fashion, as the NAO report makes clear this is not the case. On examination of the RPA systems, the NAO found:

"Heavy customisation of the IT systems has resulted in very complex software which is expensive to modify and maintain, and has increased the risk of obsolescence. For example, any further upgrades in response to policy initiatives from the European Commission will be expensive to implement" and

"around a third of the changes made to the finance system have been ‘invasive’, requiring changes to the source code, although the Agency did not keep an accurate record of all the changes made"

So it is clear that the operational system is far from the stable, well documented and easily supported IT solution that the taxpayer could reasonably expect for this level of expenditure. The fact that Defra is employing 100 Accenture contractors at a cost of £20m has not resolve the issues. NAO warns that the complexity of the Oracle-based systems may see Defra locked into the systems - and more importantly Accenture - for some time to come.

The NAO also stated the current cost of processing a claim is £1,743, this is 6 times more than the £285 it costs to process a claim in Scotland where the system is simpler. Ironically, that is higher than the value of individual claims. NAO found that some £680m in additional costs are directly attributable to the IT systems, their ongoing support and staffing costs but the NAO said it is unclear if the Agency can claim redress from any of the IT suppliers, “in view of the heavy customisation of the systems”.

The position regarding the continuing support of the system is by no means satisfactory. The NAO found that when 29 of 54 support contracts expire at the end of 2009, there is no certainty the systems will be supported and no clarity on ongoing costs. If the systems crash and farmers don’t get their subsidies, the government faces a potential £1.6bn fine from the EU. And is not as though processing problems have not occurred in the past! Delays to farmers' payments in 2006 were blamed on IT failures at the agency at a cost millions of pounds.

So are the farmers happy with the current system, it would appear not. There is clearly further trouble brewing, the RPA is currently updating its Rural Land Register (RLR) - effectively the definitive map of who is farming what in England. This map doesn't record land ownership, only the farmed land that qualifies for single payment scheme money and who claims it. The RPA is required to update its maps to meet a challenge from the EU Commission.

So against the background of a complex bespoke system, whose support is in doubt beyond the end of 2009, how has the RPA reacted to this challenge. It launched a new project which only had a narrow window in which to complete the update. Work began in June with the first maps being sent out to farmers. The RPA has to complete the project by December so it can use the updated RLR mapping information to pre-populate next year's Single Farm Payment claim forms. It comes as no surprise that this project is not progressing smoothly, having already been beset by processing problems with the first batch of 17,000 farm maps and by an RPA policy of including disputed or unclear boundaries on the maps, which is thought to affect a further 20,000 farms. As if the process was not already complicated enough, the RPA requires the farmers to check and return the maps within 28 days at a time when many arable farmers were busy with harvesting and planting for next year.

Clearly the NAO are likely to be very unhappy again next year!

Had the RPA applied the 100 day test advocated for all projects many of these issues might have been highlighted and resolved somewhat sooner.  In any event at any stage running the projects against our unique software tools would have demonstrated where the issues lay and highlighted areas for urgent action – or indeed where projects might be better cancelled – all for less than £500 per project per year. Perhaps that might have cut the Accenture bill down to a more palatable size in the current economic climate.