Strategy & Operations » Governance » Agrarian revolution: The Rural Payments Agency’s accounts

Agrarian revolution: The Rural Payments Agency's accounts

The Rural Payments Agency's FD talks of its successful efforts to avoid another set of qualified accounts

NO FINANCE DIRECTOR wants to have qualified accounts. But when I joined the Rural Payments Agency (RPA) as finance director in 2011, as part of the new management team tasked with turning around the agency, qualified accounts were one of many issues we had to address. And this particular qualification was both all-encompassing and long standing. Not only had it been there since the 2008/09 accounts, but the auditors said they could not verify the value, existence or completeness of receivables and payables in the agency’s balance sheet.

RPA is an executive agency of the Department for Environment Food & Rural Affairs (Defra). It manages EU scheme payments to farmers and rural businesses under the Common Agricultural Policy (CAP) and handles over £2.3 billion of public funds each year, making 300,000 payments annually.

In 2005 it had made headline news due to some serious problems implementing the last major reform of CAP, which led to delays and inaccuracies in customer payments. Various management changes followed, and the agency appeared several times before the Public Accounts Committee, but the problems continued.

I knew when I joined RPA that it could have valid debts for payments made to customers. These balances would reflect adjustments to the value of payments made in previous years and could be for various reasons – for example, where a physical inspection had identified the need for changes to land data underpinning claims. But I also knew some of the balances were just inaccurate.

The grand scale of things

What I didn’t know was the scale of the problem, and how to work through which balances were correct and which were invalid. The ledgers revealed tens of thousands of small and large adjustments for both over – and under-payments, many dating back to 2005. All of them needed to be sorted.

Finance had not cleared these over the years due to resource constraints, and because of the need to ensure the next year’s payments went on time. These new payments often added to the growing backlog of adjustments sitting in the balance sheet. The ledgers reflected wider management issues in the agency’s operations, and resolving them would require an agency-wide approach.

We started by agreeing additional funding from Defra for a three year strategic improvement plan, which involved 45 projects across the agency, including some aimed at sorting the accounts qualification. This was not easy with central government budgets facing big cuts from 2011 onwards, but we got the agreement we needed. It helped that we could show that once we had improved performance and addressed the backlogs, there would be savings as process improvements led to more efficient use of resources.

Transforming the finance team was a key priority for me. The agency’s finances are complex with two sets of accounts (UK and EU), prepared on different bases, with two currencies and two different year-ends. I needed a good team in place to deliver this.

Only accepting the best

The directorate was restructured, processes documented and improved, and roles and responsibilities were clearly defined, including flexible working and job rotation. I recruited finance professionals from outside the agency, as well as finding internal talent and developing existing members of the team. I refused to compromise on finding the right team, even though this meant advertising several times before filling some key posts.

We also focused strongly on the quality and timeliness of our reporting. A new finance business partner team both challenged and supported our management, and we actively sought to increase the confidence of stakeholders in the finance team’s delivery.

In 2012 we developed a strategy for addressing the debt problem in the ledgers, with risk and value for money at the forefront of our plans for how the various categories of debt would be treated. The strategy considered how old the balances were, the costs involved for us to re-verify the cases, compared to the sums to be recovered, and the cost of writing off debts. It also considered the need to give certainty to our customers about what grant funding they were entitled to.

The plan assessed the volumes to be cleared and the resources needed, and was agreed with the executive team. It was shared with a range of stakeholders, including Defra and the Treasury, and we discussed it with our auditors so they understood the approach and how it might resolve the qualification.

Cleansing solution

We ran projects to cleanse the accounts payable and receivable ledgers using a rigorous programme management approach. We improved our existing processes and made them more efficient so debt clearance would be less resource intensive. We agreed to “borrow” case workers from operations and train them in how to process debt transactions through the ledgers. Aside from being more economic, it improved flexible working across the agency and the skills of the workforce. With a normal headcount in the customer payments team in finance of around 60, the team increased at its peak to 150 as it cleared past debts at the same time as handling the current year’s workload.

By 2012/13 we had demonstrated that our work in cleansing balances, recovering overpayments and reducing debt had improved the accuracy in the ledger such that the auditors agreed that two parts (value and existence) of the qualification could be removed. This year the final part of the qualification (completeness) was removed.

As I said at the start, no finance director wants to have qualified accounts. Removing the qualification was immensely satisfying, not least because it demonstrated the extent of the turnaround that has been achieved by the finance team and by the agency as a whole.

Anne Marie Millar is FD of the Rural Payments Agency

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