Some farmers have still not been paid as a result of problems with implementing the European single payments scheme, a study has found.

The National Audit Office said on Wednesday that some of the farmers who were underpaid by £19.3m in 2005 were yet to receive their money from the Rural Payments Agency (RPA), the body responsible for administering the scheme.

It also found that the agency had failed to recover all of the £6.8m made in overpayments, including from six farmers who received a surplus of more than £100,000.

The spending watchdog said "significant" progress had been made since the first year of the scheme, and some 61 per cent of farmers said they were satisfied with the RPA's performance, up from 39 per cent in 2006.

Warning that the agency "still has more to do" to improve its handling of the scheme if it is to avoid more penalties from the European Commission, it said the Department for Environment, Food and Rural Affairs had set aside £292m to cover possible fines.

The NAO estimated that farmers paid up to £22.5m in interest fees and bank loans due to delays in receiving their subsidies, as well as suffering from stress and anxiety as a result.

According to the report, new management gave the RPA "a clearer sense of direction and drive", but it will not deal with overpayments and underpayments from 2005 until next year.

Head of the National Audit Office Sir John Bourn said: "Since my report over a year ago on the implementation of the single payment scheme, the Rural Payments Agency has made encouraging progress in remedying the problems I highlighted, as demonstrated by an increase in farmers' satisfaction with the handling of their claims.

"But until the agency is in the position consistently to meet the June deadline each year and can process payments within an acceptable tolerance of error, the risk is that farmers' confidence in the scheme will wane and the European Commission will levy financial penalties."

Edward Leigh, chairman of the Commons public accounts committee, said the "first-class cock-up" had caused "widespread worry and distress".

"Future improvement depends on changing its business processes and establishing computer systems that work," he said.

"If it fails to put in place processes and systems that ensure the June deadline is met every year and that error levels in payments are low, then farmers' disenchantment will be complete. And the taxpayer will not be in a forgiving mood if the EU smacks the government with a huge fine."