European parliament audit finds The Alliance for Direct Democracy in Europe breached EU rules by spending funds on referendum and UK election

A Ukip-dominated group in the European parliament has been found to have misspent more than half a million euros (£427,000) of taxpayers’ money following an investigation by European parliament officials.

The Alliance for Direct Democracy in Europe, a Ukip-controlled group, was asked to return €172,655 by a committee of senior MEPs on Monday night, after officials found the party had breached EU rules by pouring money into the UK 2015 general election and the EU referendum.

The group will also be denied €248,345 in grants it could have secured if it had followed the rules, a damaging blow to the cash-strapped party. Once misspending by Dutch and Belgian parties was taken into account, the ADDE and an affiliated foundation were found to have misused €500,615 of EU grants.



Senior MEPs endorsed the report of the parliament’s finance team, a document seen by the Guardian last week, which concluded the ADDE had funnelled cash into Nigel Farage’s failed attempt to win a seat at Thanet South, as well as opinion polls to test the public mood in the run-up the EU referendum campaign.



EU rules ban parties from spending European grants on national elections or referendums.



“The activities of the ADDE were found to breach the rules for European party financing,” a European parliament statement said, citing opinion polls funded by the ADDE in British constituencies before of the 2015 general election, as well as public opinion surveys before June’s referendum.

Meeting in Strasbourg on Monday night, a European parliament management committee led by its president, Martin Schulz, approved a report that had been drawn by finance officials, which had found “a substantial number of activities” of “non-eligible expenditure”.

No one from the ADDE or Ukip was immediately available for comment, but the party has vowed to fight the claims in the European court of justice. Ukip MEP Roger Helmer last week accused the parliament of “revenge for Brexit”, although officials counter they are just following the standard audit procedure.

One European parliament vice president said Ukip had clearly broken the rules. Ulrike Lunacek, a German Green MEP, said: “Ukip has spent years accusing the EU of being corrupt and of wasting taxpayers’ money. The hypocrisy is breath-taking.”

The parliament launched an investigation into the finances of Ukip’s European party and an allied foundation, the Institute for Direct Democracy in Europe, after auditors at EY (formerly Ernst & Young) refused to sign off the accounts. The auditors reached a “qualified opinion” on the ADDE’s accounts, as part of their annual audit of European political parties and foundations for 2015.



Auditors raised the alarm partly because Ukip’s pan-European group lacked other sources of funding such as membership fees and donations, a condition of obtaining EU grants.

Officials at the European parliament concluded that the ADDE was almost bankrupt and are expected to call for “financial improvement” within a month.

The decision to endorse the report’s findings came just hours after the dramatic exit of former leader Diane James. Ukip has been in turmoil since she stood down after only 18 days in charge, with Farage called in as interim leader to steady the ship. Adding to the sense of chaos, French prosecutors are investigating an altercation between MEPs Steven Woolfe and Mike Hookem that landed Woolfe in hospital for three nights last month.

The EU has been funding pan-European political parties since 2004, as part of an attempt to boost interest in European elections. Ukip banded together with fellow Eurosceptics in 2014 in the hope of obtaining a European cheque totalling €1.5m. The British Eurosceptics went on to find allies with Germany’s hard-right Alternative für Deutschland and a former member of the French National Front, but remained dominant in the group.



The decision to create a pan-European group was controversial within Ukip and six of the party’s MEPs declined to join. But Ukip’s top leaders, including Farage and the man most likely to succeed him, Paul Nuttall, are listed as members.



The ADDE was awarded a €1.2m grant for 2015, with 80% of the money paid in advance in line with the parliament’s standard procedure. The remaining 20% was due to be paid in 2016 after the accounts were signed off. This money has now been lost, but the ADDE retains EU funding worth €820,725 for 2015.

The grant for 2016, covering the EU referendum and official campaign, is due to be audited next year.

Ukip also benefits from EU funds through a separate group that manages the day-to-day business of Farage and his allies in the European parliament, known as the Europe of Freedom and Direct Democracy.