Mr. Seamus McCarthy:

The appropriation account for Vote 30 - the Department of Agriculture, Food and the Marine records gross expenditure of €1.26 billion in 2015. The Department was also the accredited paying agency for additional EU payments amounting to just under €1.2 billion for 2015. EU payments directly to farmers are accounted for separately from the Vote, but a summary is disclosed in note 6.1 of the account.

The Vote expenditure in 2015 was spread across four major expenditure programmes: €387 million, or 31% of the total, was spent on agrifood policy, development and trade; €196 million, or 15%, was spent on food safety, animal health and welfare, and plant health; €355 million, or 28%, was spent on rural economy, environment and structural changes, and €326 million, or 26%, was spent on direct payments to farmers.

The Department provides substantial funding each year for a number of public bodies that operate under its aegis. These include Teagasc, An Bord Bia, the Marine Institute, Bord Iascaigh Mhara, Horse Racing Ireland and Bord na gCon. The Department is also directly responsible for management of the six fishery harbour centres, for which separate accounts are also prepared.

A net Supplementary Estimate of €104 million was approved by Dáil Éireann in December 2015. This was required to provide funding of €68 million to finalise European Commission disallowances related to the period 2008 to 2014 and a further €39 million due to an unanticipated delay in receipt of EU funding for rural development in 2015. In addition, the supplementary process reallocated savings on certain subheads of the Vote to fund additional expenditure for fishery harbours, the areas of natural constraint scheme, the World Food Programme and a top-up to the EU market volatility payment.

At year end, net expenditure under the Vote was approximately €69 million less than provided for, including in the Supplementary Estimate. With the agreement of the Minister for Public Expenditure and Reform, €12 million in unspent allocations - mainly under the rural economy, environment and structural changes programme - was carried over for spending in 2016. The remainder of the surplus for the year, totalling €56.6 million, was liable for surrender to the Exchequer.

Chapter 7 of the report on the accounts of the public services 2015 examines two substantial and unusual transactions between the Department and the EU in 2015. The first transaction was the refund by Ireland to the EU of €68 million for non-compliance with regulations governing the European Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development. In look-back reviews of a sample of land parcel-based payments funded by the EU made in the period 2009 to 2012, the European Commission identified concerns that could have resulted in substantial amounts being disallowed. The Department contested the Commission's findings and conducted a further review of more than 900,000 land parcels on its system using newly acquired, higher resolution imagery. It found that there had been an element of overclaiming in respect of 180,000 of the land parcels, or 19% of the total.

Arising from that finding, the Commission in May 2014 proposed a flat rate disallowance of 2% of funding in the period, equivalent to €182 million. The Department entered a conciliation process to negotiate the disallowance and, in July 2015, agreed with a Commission proposal for a disallowance of €64.1 million for the period 2008 to 2012. A lower rate of disallowance of €3.6 million was agreed for 2013 and 2014, reflecting improved controls. The Department also incurred costs of €3.2 million during the review and negotiation stages, principally for new imagery and software, internal staff costs and external contractor costs. The final agreed rate of disallowance for Ireland for the period 2008 to 2015 was equivalent to 0.8% of the funding provided. This compares favourably with the average of 2.4% disallowance across all EU member states.

The second transaction examined in the report was the handling of milk producers' liability of €71 million to the EU because they exceeded their milk quotas after they increased production in advance of the end of the quota regime on 31 March 2015. Due to a fall in milk prices in 2015, the EU approved an optional scheme allowing member states to pay the liability and then recover it from milk producers over a maximum of three years. Ireland was one of seven EU countries to introduce the scheme.

The Department required milk producers, before they could avail of the deferral scheme, to sign a legally binding agreement to repay their liability. Approximately a quarter of the total liability was paid up front by milk producers who chose not to avail of the scheme. The remaining liability is being recovered in instalments. At August 2016, the Department had recovered over 99% of the amount due to be repaid at that time in line with the instalment agreements.