Taxpayers are to be landed with a £622 million bill for bungled payments made to farmers after reform of the Common Agriculture Policy four years ago, according to the National Audit Office .

The scale of chaos and administrative failures at the Rural Payments Agency, which distributes £1.6 billion a year to English farmers, and lack of oversight by ministers is outlined today in one of the most damning audits produced by the public spending watchdog.

It stops short of calling for heads to roll but raises serious questions over the future of the agency and the scrutiny of its operations by the Department for Environment, Food and Rural Affairs (Defra).

In a highly critical assessment, the National Audit Office (NAO) accused the agency of showing “scant regard to protecting public money” and failing to provide value for money to taxpayers.

What has exasperated officials at the watchdog is that this is the third time it has found failings in the payment system.

The inefficiencies are starkly illustrated by the estimated £1,743 cost to process each farmer’s claim for cash, a rise of 20 per cent in four years. This is six times the £285 cost for administering payments in Scotland.

The average amount paid to about 107,000 English farmers is £15,300 a year. However, the watchdog found that there were substantial overpayments — totalling between £55 million and £90 million — but the data was so unreliable that the auditors were unable to find out the precise sum. Some claims were validated 11 times by different officials and still the payments were wrong.

Many of the problems are due to the complicated payment system chosen by Margaret Beckett, the former Rural Affairs Secretary, which rewards farmers for the amount of land that they keep in good stewardship. The devolved regions opted for a simpler system based on the historic payments made to farmers.

Ministers at Defra pressed ahead with their hybrid scheme because officials were optimistic that the agency and its computer system could handle it.

The latest study found that officials may again be keeping ministers in the dark over the true state of the payment process and the mistakes that are embedded in the expensive computer system.

Extra staff costs have already cost £304 million. About £280 million has been set aside to pay Brussels penalties for administrative errors and late payments to farmers. Costs for the IT services are already above forecasts. A contract with Accenture has cost £84 million for the past two years, yet the agency told MPs that it expected to spend £36 million in that period.

The NAO has found that some 100 Accenture staff are working full time for the agency with a salary of some £200,000 per person in the financial year 2008 to 2009.

Philip Kibby, a director at the NAO, was scathing. “The agency has considerable problems, there is quite a turnover of staff and a lack of managerial oversight. This is about the proper use of public funds and Defra as a department needs to take responsibility for this,” he said.

One option is to scrap the agency and to contract the farm payment system to to a private company.

Another may be to free the agency of other responsibilities. For example, it makes payment for agri-environment schemes monitored by Natural England, the Government’s landscape advisers.

Hilary Benn, the Rural Affairs Secretary, has ordered a review into the agency by March next year, but the NAO suggests greater urgency is needed and that it should be completed within three months.

The payments process is condemned as “a masterclass in misadministration” by Edward Leigh, the Conservative chairman of the Commons Public Accounts Committee.

He criticised “the clunky patched together IT system”, accused the agency of “shoddy book-keeping” and poor communication with farmers.

“Errors are still being made and farmers have little idea when and how much they will be paid. It [the agency] sends letters completely out of the blue demanding back large sums it has overpaid, causing considerable distress, and in some cases, it has transpired the farmers actually owes nothing at all.”

Defra in a statement acknowledged that further work was required to ensure that the agency could deliver a reliable and cost-effective service to the farming industry in the years ahead.

Nick Herbert, Conservative Rural Affairs spokesman, called for a fundamental overhaul of the agency to “get a grip” on farm payments.

“Vast sums of taxpayers’ money has been wasted on excessive administration costs and fines to the EU, yet typically ministers who should be held accountable for this dismal state of affairs still refuse to accept their responsibility.”

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