The National Audit Office (NAO) has slammed a government agency set up to administer payments to farmers under the EU Common Agricultural Policy as a " masterclass of misadministration" in one of its most damning reports ever.

The Rural Payments Agency has been beset by problems administering the Single Payment Scheme since 2005.

The NAO has already looked at the scheme twice and officials now feel so frustrated with progress that they have qualified the agency's accounts.

Amyas Morse, head of the National Audit Office, said: "There has been a serious lack of attention to the protection of taxpayers' interests over the administration of the scheme. There has been a lack of senior management ownership of the scheme in the agency and Defra, even though the risks were previously highlighted by the Committee of Public Accounts."

Although farmers are now being paid on time, they are still being paid inaccurately. And the cost of the scheme is high and increasing – the average claim costs £1,743 to process, six times as much as it costs in Scotland.

The agency has incurred £680m worth of unforeseen additional costs since 2005, and faces further fines from the EU if its system fails.

Philip Gibby, NAO director of value for money for Defra, said the IT system has been a major part of the problem for the agency.

"They had to rush in far too complex a system in too tight a timeframe," he said.

The IT systems for the scheme alone have cost £350m and the main contractor Accenture has been paid £84m in the past two years, more than twice as much as the £36m originally forecast.

Many of the agency's IT contracts are due to end this year, though Accenture's will expire next year.

Because the system is so bespoke and complex, sticking with the current IT system would most likely mean sticking with those contractors.

But the NAO is recommending that the agency looks seriously at scrapping the system and implementing a new one, as costs of processing claims continue to spiral.

"They have to cost a new system," said Gibby.