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The RPA's annual report reveals that it will take the agency until 2008 to stabilise its IT and business systems, and that problems may continue until "deep-rooted underlying issues" are resolved.
The Single Payment Scheme was set up in 2005 to consolidate 11 EU subsidies, but problems with the agency's IT systems have left farmers millions of pounds out of pocket.
Writing in the Rural Payments Agency's annual report, chief executive Tony Cooper, acknowledges that problems with Single Payment Scheme resulted in a "turbulent year."
"Our customers have the right to expect a consistent level of service from the Rural Payments Agency. We did not achieve this in the first year of the Single Payment Scheme," he said.
The agency was forced to make additional payments of £63m, after it failed to meet the EC payments deadline, the report reveals. The agency also paid out £986,782 in interest payments to farmers for late payment.
Despite successful attempts to attempts to reduce the backlog of payments "a significant residue of corrective activity will be carried over into the 2007 scheme."
"We have not yet achieved stability in our IT systems or business processes. This represents a significant challenge for the Agency," said Cooper in the report.
The Department for Environment, Food and Rural Affairs has agreed to provide £21.9m in extra funds for IT and business support to tackle the problems.
The Rural Payments Agency has hired substantial numbers of contractors and temporary staff to deal with the problem, but it has had to battle with issues including staff knowledge, training and familiarity with agency systems, the report reveals.