EU set to ask Ukip group to repay almost £150,000 in 'misspent funds'

Ukip is likely to be asked to repay tens of thousands of euros by European parliament finance chiefs who have accused the party of misspending EU funds on party workers and Nigel Farage’s failed bid to win a seat in Westminster.

The Alliance for Direct Democracy in Europe (ADDE), a Ukip-dominated political vehicle, will be asked to repay €173,000 (£148,000) in misspent funds and denied a further €501,000 in EU grants for breaking European rules that ban spending EU money on national election campaigns and referendums.

According to a European parliament audit report seen by the Guardian, Ukip spent EU funds on polling and analysis in constituencies where they hoped to win a seat in the 2015 general election, including the South Thanet seat that party leader Farage contested. The party also funded polls to gauge the public mood on leaving the EU, months before the official campaign kicked off in April 2016.

“These services were not in the interest of the European party, which could neither be involved in the national elections nor in the referendum on national level,” concluded the parliament’s finance watchdog.

“The constituencies selected for many of the polls underline that the polling was conducted in the interest of Ukip. Most of the constituencies can be identified as being essential for reaching a significant representation in the House of Commons from the 2015 general election or for a positive result for the leave campaign,” the report continued.

The ADDE also used EU funds for polling before the Scottish and Welsh elections in 2016, the report said. “The administration discovered a substantial number of activities for which financing ought to be considered as non-eligible expenditure,” the watchdog said.

Farage, the party’s interim leader, rejected the claims as victimisation. “We’ve been expecting this for years,” he told Sky News. “We are in an environment where rules are wilfully interpreted as suits. I’ve understood absolutely the rules. This is pure victimisation. I am the most investigated MEP in history. Look at what the pro-EU groups were spending.”The ADDE has been contacted for comment.

The report suggests the ADDE would go bankrupt without these funds, a further problem for the cash-strapped Eurosceptic group. European parties are only entitled to EU grants if they can prove they have other sources of income, such as membership dues and donations.

If the report is approved by European parliament leaders on Monday, the ADDE will be asked “to propose measures for financial improvement” within a month.

The ADDE is a pan-European political party dominated by Ukip, but includes MEPs from Germany’s hard-right Alternative für Deutschland and one former member of France’s Front National. The pan-European party has a far lower profile than the Europe of Freedom and Direct Democracy, another Ukip-dominated group that manages the daily business of Farage’s party and his allies in the European parliament. Both have become significant sources of funding for Ukip.

Of the ADDE’s 35 members, 15 are Ukip MEPs, including Farage, as well as the frontrunner to replace him, Paul Nuttall. Steven Woolfe is listed as a member on the ADDE website, although he quit Ukip last month after a public altercation with a fellow MEP that left him in hospital.

The report names three Ukip party workers who were given contracts to run Ukip opinion polls said to be funded by EU money.

The report says Christopher Lowe, better known as Chris Bruni-Lowe, Sam Gould and Daryll Pitcher were found to have done consultancy work for Ukip while being active party workers – a breach of EU rules.

Lowe received €87,000 over six months in 2015 from Ukip, while he was the party’s campaign director, according to the report. Gould, Ukip campaign manager for the Welsh elections and a parliamentary candidate, was given €25,000 between June and September 2015. Pitcher, another Ukip parliamentary candidate, benefited from contracts worth €21,000 over the same period.

The report does not suggest the three men were aware they could be receiving unauthorised funds but it was “obvious that the principal objective and the core activity of Ukip concerned the EU referendum,” the watchdog said. The analysis from the polls “was indisputably useful for Ukip” and “the financing of these polls and the thereto linked activities shall be considered as non-eligible.

“The expenditure related to them is found non-eligible as the consultants were paid for an activity that was predominantly or even purely in the interest of the national party Ukip and therefore are considered as prohibited.”

The report covers 2015, so does not include the period of the EU referendum campaign in June. The ADDE is still entitled to €820,000 in EU funds for 2015.

The report will be presented to the European parliament’s most senior MEPs at a closed session on Monday night in Strasbourg. The committee, chaired by European parliament president, Martin Schulz, is expected to approve the request for repayment.

The total €500,000 in denied expenses includes €23,000 that will be refused to Belgium’s People’s party, another ADDE member accused of misspending.

Parliamentary auditors are also seeking €34,000 from the Institute for Direct Democracy in Europe, a Ukip-affiliated pan-European thinktank. In this case, a Dutch political party is accused of misspending EU funds on a referendum in the Netherlands. Dutch voters rejected closer ties with Ukraine in April, in a vote seen as a victory for Eurosceptics months before the Brexit decision.

The report was drawn up as part of the annual checks on EU party finance. Other pan-European parties were given a clean bill of health earlier this year, but parliamentary authorities opened an investigation into Ukip after independent auditors refused to sign off the accounts.

The EU has been funding pan-European political parties since 2004 in an attempt to boost interest in European parliament elections. Parties are entitled to grants for conferences and European elections, but not national elections or referendums. Consultants are also meant to be independent from the parties they are working for.

Ukip spokesman Gawain Towler rejected the report’s central claim that the party and the ADDE group had failed to comply with EU rules. “We have been scrupulously careful and we have abided by the rules at all times.” Asked about the named individuals, he repeated: “We have abided by the rules at all times.”

He questioned the timing of the report, which he said neither Ukip nor the ADDE group had seen. “I do think it seems odd ... You received this before we did and [the ADDE] did.”

Joe Jenkins, an ADDE spokesman, accused the European parliament of trying to shut down the pan-European party and said the group would contest the claims in the European court of justice.

“The parliament administration has for months taken an aggressive and hostile attitude over the audit, amounting to nothing short of deliberate harassment,” he said in a statement.

“We have responded to their queries with a mass of information and explanation justifying our activities and expenditure. They have simply ignored our submissions and, in several cases, these submissions having been made repeatedly on their request.

“They have broadened the definition of ‘expenditure supporting a political party’ so widely as to deny us the right to undertake any activity which might be remotely interesting to ADDE members.”