UKIP has misspent almost half a million euros of EU funding on its own electioneering and to help boost their Brexit campaign, according to a leaked audit seen by Sky News
The party splurged taxpayers' cash, breaking European Union spending rules, on polling in key UKIP target constituencies ahead of the General Election and also ahead of the EU referendum.
The money was provided to the European political grouping, the Alliance for Direct Democracy in Europe (ADDE), which is dominated by Nigel Farage's party.
The ADDE was created by Mr Farage two years ago and is made up of populist right wing and Eurosceptic MEPs, around half of whom are from UKIP.
A senior party source has told Sky News that there have been rumours for some time about the misuse of EU money during the election and that the sums being discussed, if true, are "deeply troubling".
The audit says ADDE financed polling in the UK between February and December last year, which has been judged as "indirect financing of a national political party" and "a referendum campaign" - both of which are prohibited by European Parliament rules.
The report concluded: "The constituencies selected for many of the polls underline that polling were (sic) 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'."
And on the EU referendum the auditors said: "Several polling can be considered as financing of a referendum campaign which violates 8(4) ... prohibiting the financing of referenda campaigns."
The funding could now be investigated by the Electoral Commission, which says it had been made aware of the allegations by the EU weeks ago.
The audit, drawn up for the European Parliament Bureau, puts the total misspend at over €500,615.55 (£430,486.82) by ADDE, which includes other parties in Europe, but a EU spokesperson said the "lion's share" was by UKIP, amounting to over €450,000 (£386,961).
The money, according to the audit, was used to fund polling in Great Grimsby and Thurrock, Rochester and Strood and Cardiff South and Penarth, all UKIP target seats at the last election.
Polling was also paid for ahead of the General Election in Thanet South, where Nigel Farage unsuccessfully ran to become an MP.
And it continued after the election, to fund several EU referendum attitude polls across the UK
A final decision by the European Parliament Bureau will be made on Monday.
If the bureau agrees with the conclusion of the external audit, UKIP could be forced to pay back more than €170,000 (£146,185) while not being able to claim hundreds of thousands more.
This comes at a bad time for the embattled party, whose finances are in a poor state, a situation not helped by major party donor Arron Banks threatening to stop funding UKIP.
A spokesman for ADDE said they would be taking the matter to court and that the definition of "expenditure supporting a political party" had been changed.
He said: "The parliament administration has for months taken an aggressive and hostile attitude over the audit, amounting to nothing short of deliberate harassment.
"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 have been made repeatedly on their request."
Labour MP Stephen Kinnock said it was a "disgrace".
He told Sky News: "The irony of this cannot be lost on anybody."
Green MEP for the South West, Molly Scott Cato said: "UKIP have spent years accusing the EU of being run by corrupt elites wasting taxpayer's money.
"They have now been caught out engaging in the very behaviour they have spent years denouncing.
"Worst of all, they used this money to effectively manipulate the British public, spending large quantities of it on polling designed specifically to support their anti-EU stance, with disastrous effects for the UK and the rest of the EU."
