Poor planning and a lack of testing of IT systems have been blamed for delays in the payment of £1.5bn of vital EU subsidies to thousands of UK farmers.
The Rural Payments Agency (RPA) is responsible for administering the Single Payment Scheme (SPS), introduced following a 2003 reform of the way EU Common Agricultural Policy subsidies are handed out.
The UK government developed a complex system for administering the scheme, which maps farmers' land to a database, but problems with it meant just 15 percent of the £1.5bn subsidies available were paid out to farmers by the end of the 2005/06 financial year.
A report into the fiasco by Whitehall spending watchdog the Public Accounts Committee (PAC) has found implementation of the project started before the final specification and regulations for the subsidy scheme were agreed by the European Commission.
This meant the RPA had to make 23 substantial changes to the computer system to take account of the final policy and regulatory revisions.
Testing on the IT systems also didn't fully simulate the real-world environment. That led to problems later on as the agency underestimated the work involved in populating the database with the mapping data for farms in England and Wales.
The PAC report said: "Failure to test computer systems completely and adequately is a problem we have often seen with government IT projects. Time should be built in to test the IT systems as a whole, as well as the individual components within, to obtain adequate assurance that components are fully compatible and deliver the required business process."
Work on the SPS implementation also carried on despite receiving three "red" warnings from government procurement body the Office of Government Commerce in its gateway reviews.
The PAC report said: "Development work on the computer system nevertheless continued and no contingency plan was invoked, despite limited confidence that the system would be ready on time. If 'red' reviews are to be taken seriously, departments need to be explicit about the circumstances in which they would lead to fundamental review or termination of a project."
The latest cost of the project to implement the SPS is £122m — £46.5m more than estimated, with further increases likely due to requirements for elements such as the software needed to extract management information from the system.
Edward Leigh MP, chairman of the PAC, blamed the failures on bad decision-making, poor planning, incomplete testing of IT systems, confused lines of responsibility and a failure by the management team to face up to the unfolding crisis.
Leigh said in the report: "The story of the inept handling of the scheme... should make a richly rewarding study for senior civil servants across the whole of government for some time to come."
The RPA met its target of making 96 percent of payments for the last financial year but said in its annual report that it does not expect the subsidy system to be fully stable until next year.