The Rural Payments Agency's troubled system for paying farmers their subsidies has now cost £350 million, is unnecessarily complex, and demonstrates a "scant regard" for taxpayers in a recession.

That is the verdict of the National Audit Office (NAO), the government’s public spending watchdog, in a damning report published today.

Delivering its verdict on the system built by Accenture, the NAO said it was frustrated at having to produce its third report on the subject, with "significant issues" still to be resolved.

In its “Progress Update”, the NAO criticised the system for not meeting the demands in England of the European Union's Single Payment Scheme, which is responsible for agricultural subsidies for farmers.

The agency has gone through extensive IT upgrades and "heavy customisation" of the system, the NAO said. It calculated that upgrading would be cheaper and more effective than choosing a new system.

It found that the cost of processing claims was "very high" and continuing to rise. The costs of handling a claim in England was £1,743 per instance, compared to only £285 under the Scottish system. Problems with the system mean up to £90 million has been overpaid to farmers to date.

The NAO warned that the software was "complex" and that the agency was now "reliant" on contractors to maintain it. This meant that with many support contracts ending in 2009, "there is an increased risk of obsolescence".

The Accenture contract was renegotiated in 2007 so that from September 2007 to 2009, the company will receive a managed service fee of £14 million in total, with risks being better spread between the agency and the supplier.

The NAO noted that the agency's relationship with Accenture had "improved" and that payments were being delivered to farmers more quickly.

Amyas Morse, head of the NAO, said: “This is the third time we have looked at the Single Payment Scheme and there are still significant issues to be resolved. There has been a serious lack of attention to the protection of taxpayers’ interests over the administration of the scheme."

He added that the agency "should urgently address the risks to ongoing IT system support" as well as considering if alternative systems would work better.

The Department for Environment, Food and Rural Affairs, said the report recognised the "substantial improvements" in payment times made by the agency.

“Equally, we acknowledge that further work is required to ensure that the Rural Payments Agency can deliver an improved, reliable and cost effective service to the farming industry in the years ahead."

Accenture was not able to comment immediately.

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