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.”