The Rural Payments Agency has been told it must learn from a highly flawed and "rushed" £350 million farmer subsidies system implementation.

An independent review, commissioned by the government and published yesterday, found that the RPA "needs radical improvement".

Its heavily customised IT system, built by Accenture and based around Oracle systems, was so troubled that 124 pages of the report are dedicated exclusively to it. The RPA was led by IT rather than being enabled by it, the report said.

Severe problems with the systems led to vastly incorrect payments being made. Each payment claim costs £1,700 to process, over six times the cost of a similar scheme in Scotland, it has previously been disclosed.

The chief executive and other senior managers were nevertheless awarded substantial annual bonuses.

In December, the Committee of Public Accounts said money was being poured into the RPA's IT systems at a rate that demonstrated "negligible attention" to taxpayers' interests. The systems were "cumbersome, overly complex and at risk of becoming obsolete" as some of the technology warranty agreements ran out, the PAC noted. They were also full of errors.

The agency needs to develop a system in time for the new Common Agricultural Policy, due to be introduced in 2013, today's review noted. This needed to be done in a way that demonstrates "learning from the rushed implementation" five years ago.

The review also said the agency's finance functions and controls need strengthening, alongside improvements in operational processes and customer service.

There were major problems on the interface between RITA, the main system for claims processing, run by Accenture, and the Oregon finance system for making payments, run by Steria, even though both systems run around the same base of Oracle software.

Part of the problem was the rushed "re-customisation" of RITA in 2005, leading to a system that is fragmented, "does not conform to sound architectural principles" and is hard to upgrade.

Defra and the RPA were heavily criticised for having created an unrealistic plan in 2005 and for their "inability" to turn policy into working reality.

Poor supplier management was a major hindrance, even though the RPA spends £1 managing suppliers for every £4 it spends on their work.