If a project being the subject of one National Audit Office (NAO) report is a misfortune, and of two careless, what does it mean when it reaches a third?

It was “a display of scant regard for protecting public money,” according to the NAO, whose normally clipped language was noticeably absent from a scathing report last week on the Rural Payments Agency (RPA).

The agency has provided a masterclass in government IT mismanagement. Set up to administer payments to farmers under the Common Agricultural Policy in 2005, the RPA has had three different chief operating officers overseeing the scheme. The agency has incurred £680m of unforeseen costs since 2005, and faces further fines from the EU if its system fails. It costs six times as much to administer payments through RPA as it does in Scotland – ­ £1,700 per claim.

The IT systems for the scheme cost £350m and the main contractor Accenture has been paid £84m in the last two years, more than double the original £36m forecast. So what went wrong?

When the system was introduced it was rushed in an overly tight time frame –­ putting pressure on systems and staff.

It was also task based –­ different people worked on different parts of a case. The idea was to generate efficiency savings, but this failed because of communication issues. As part of a review in 2007, this was changed to a case-based approach, but problems persist.

Subsequent changes to the software were invasive ­ – around a third involved changing the source code. And mistakes in data are embedded and difficult to root out, according to Philip Gibby, director of Defra value for money studies at the NAO.

“Each year the same inaccurate data is processed again and each year mistakes in payments come through,” he said.

The number of overpayments is uncertain, but the NAO estimates they total between £55m and £90m.

In 2007, analyst Gartner recommended an overhaul of the system, but changes made since then have not been recorded properly. “Records haven’t been made of changes to the systems, so nobody knows what’s been done,” said Gibby.

These changes going unrecorded risks tying the agency into support contracts with suppliers, because the system is so bespoke that others would not be able to take over its operation. “It will be difficult to move away from those contractors,” said Gibby.

The NAO recommends the agency look at scrapping the IT system completely, but this is difficult because under EU law the RPA must continue to process payments while purchasing a new system ­ – raising the possibility of having two systems on the books at once.

Even though the project was triggering alarms inside the RPA in 2008, 13 out of 15 reports sent to the Department for Environment, Food and Rural Affairs (Defra) were “green lights”.

Defra is conducting a review of the scheme and officials will be hauled before the Public Accounts Committee later this month.

But action is needed soon. If the current creaking system did stop working –­ a situation the NAO does not rule out ­ – and payments were not made, the department would face EU fines as high as £6bn.

A tale of delays, mispayments and spiralling costs
In 2005, the single payments scheme was introduced as part of reforms to the EU Common Agricultural Policy to pay subsidies to farmers based on land area. The Rural Payments Agency (RPA) was set up to deliver the payments.

A year later, the agency experienced difficulty in processing payments on time and was fined by the EU. The problems generated a backlog of work that it struggled to clear.

In 2007, payments were being made on time, but of the wrong amounts. The RPA has set aside £290m in anticipation of further EU fines for these mistakes. A review by Gartner recommended a new system but the agency decided to upgrade instead. It has since spent £130m on IT upgrades, but payments are still inaccurate and expensive to process, according to the NAO.