Scottish Government faces European Commission fines following rural payments IT debacle

SUMMARY:

Scotland’s just delivered its own version of Defra’s rural payments debacle. With Brexit looming, UK government needs to get to grips with this mess.

Last year, the UK government’s Rural Payments IT programme came under fire from the Public Accounts Committee, in part a victim of a turf war between the Government Digital Service (GDS) and the Department for Environment, Food and Rural Affairs (Defra).

It’s cold comfort to those in Westminister of course, but it seems that things aren’t much better north of the border where the Scottish government’s equivalent project has earned a scathing critque from Audit Scotland.

The Scottish Government’s Common Agricultural Policy (CAP) Futures programme started in 2012 as a five-year business change and IT programme to deliver CAP reform. It ran into significant difficulties and last year Audit Scotland made a series of recommendations to try to mitigate growing risks.

As of the close of the programme at the end of March this year, there are still issues with the £178 million project, including:

  • Parts of the IT system continue to be developed by the Agriculture and Rural Economy (ARE) directorate.
  • An independent technical assurance review finds that the Scottish Government will need to incur additional costs to improve and stabilise the system.
  • Two contracts with existing suppliers, worth a forecast £33 million, have had to be extended to further develop the rural payments system and maintain existing systems.
  • A disaster recovery solution covering all IT systems has not yet been fully developed and tested.

Then there’s the question of external financial penalities. The IT system is intended to manage the payment of subsidies to farmers and crofters. If this is not done correctly and on time, then the European Commission can impose fines for non-compliance with regulations. At present, the Scottish Government estimates it will incur penalties of around £5 million for missing payment deadlines in 2016, but that could get a lot worse, warns Audit Scotland:

The Scottish Government has not completed a detailed analysis of the risk of these penalties to help prioritise future investment in the system. There are a number of uncertainties, but our updated assessment suggests penalties of up to £60 million are possible. To date, the programme has not delivered value for money.

Penalties and benefits

From a supplier perspecitve, CGI was hired in 2013 on a four year contract with an option for a two year extension at the end of it. That option was taken up in September last year at an estimated cost of £29 million. Audit Scotland notes:

The Scottish Government has withheld £100,000 from CGI since 1 November 2016. CGI did not meet agreed timescales for delivering the functionality required to start making payments to farmers in January 2017 for 2016 SAF applications.

Meanwhile the Scottish Government has had to downgrade its expectations for cost-savings:

The anticipated financial benefit from reducing the level of spending on existing IT systems and contracts was reduced. £2.9 million of expected benefits in 2016/17 and £3.4 million in 2017/18 were reassessed as not being achievable due to the contracts for legacy systems being extended. Over the course of the benefits realisation plan, up to 2022, the ARE directorate now only expects to achieve an overall saving of £16 million for this benefit, reduced from £22 million.

Against this backdrop, Audit Scotland has updated its action points:

  • Complete a detailed assessment of the risk of financial penalties to inform decisions on the prioritisation of further work to improve and add functionality to the system.
  • Prioritise time for the transfer of knowledge and expertise from programme staff to staff in the business.
  • Develop and test a disaster recovery solution covering the whole IT system taking account of the level of risk that the Scottish Government is prepared to accept.
  • Develop and keep under review processes for monitoring and testing quality.
  • Develop a framework to prioritise future investment in the system; this should balance budget availability, customer expectations, EC regulations and audit findings and IT system requirements.
  • Develop a benefit realisation plan to record and monitor all potential benefits and value that the system can provide.
  • Communicate clearly the payment timescales and processes to farmers, crofters and rural businesses.
  • Communicate clearly with staff about the values and new ways of working of the directorate.
    Ensure leadership operates strategically across the directorate.

Auditor general for Scotland, Caroline Gardner, 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.

For the Scottish Government, Agriculture Minister Fergus Ewing said:

Clearly there is more for us to do and I recognise that we are not there yet, but I welcome that this updated report from Audit Scotland recognises a range of improvements that have been made and reinforces the actions we have taken since last May.

We will consider the findings carefully in the context of the significant improvement activity already under way. However, it is disappointing that overall the key points do not fully reflect all the progress made. In particular, some of the conclusions reached bear further scrutiny. For example, the loan schemes we established have been a prudent measure and have offered positive benefits for farmers.

Meanwhile Andew McCornick, President of the National Farmers Union, summed up the whole mess succinctly:

If this IT system had been a tractor that I had bought, then it would have been returned to the dealer years ago with demands for a full refund.

My take

The usual ‘lessons have been learned’ saga, this time with a Scottish accent. It’s disturbing that rural payments systems up and down the country have clearly struggled. As we heard from Defra’s permanent secretary Clare Moriarty late last year at Think Digital Government, rural payments and policy will be among the big challenges/opportunities to follow Brexit. That being so, everyone involved seriously needs to get their act together over the next two years.

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