The European commissioner has suspended funding to five regional development agencies (RDAs) in the UK after they were found to be in breach of the regulations.
The UK Government has confirmed that the EU's commissioner for regional policy, Danuta Hübner, has been withholding funds since March. The suspension, which affects the funding of tourism, is set to continue for three months, after concerns were raised about the lack of proper payment controls.
The RDAs involved are North-east England, North-west England, Yorkshire and Humberside, the West Midlands and London.
The commission said it had audited nine authorities and suspended funds to five, although three regions were "almost OK".
A spokeswoman for the commission's regional policy said the decision was a precautionary measure, after audits of the RDAs' financial system had discovered inadequacies before and after the payments were made.
She said: "There were deficencies in the control systems, and we need insurance that the controls are in line with our regulations.
"We are in contact with the English authorities and are working constructively together and are sure we will receive all the assurances and information needed to remove the suspension within the three-month time limit," she added.
Robert Evans, Labour MEP for London, said: "The money is safe and it will reach the RDAs soon. It has just been suspended on a technicality while the EU makes sure all the I's are dotted and T's are crossed. With all the criticism about the way EU money is spent, we should welcome this scrutiny as a sign that the fund is being properly managed."
The funding will be reinstated when the concerns are addressed.
By Emily Manson