An English region could be fined heavily by the European Commission over its handling of £500m worth of European Union regeneration funding.
British contributions help fund the EU's regeneration budget
Six English regions were scrutinised over concerns over 'poor standards' of monitoring the spending of grants.
An investigation by BBC Radio 4's File On 4 understands the North West could be fined tens of millions of pounds.
The Department of Communities and Local Government said the department had taken robust action in response.
Eva Kaluzynska, spokeswoman for Regional Policy with the EC, said in 2005 the European Court of Auditors found weaknesses in a number of English regions' management and control systems for £4bn worth of regeneration funding received since 2001.
When the UK Government failed to put its house in order, Brussels decided to freeze further payments to the six English regions concerned.
Sources in Brussels have indicated that two of the six regions investigated have now met EU standards - the East and North East - and their funding freeze will be lifted.
Meanwhile a further three; London, the West Midlands, Yorkshire and the Humber are expected to reach the standards in due course.
North West MEP Arlene McCarthy, fears her region may be forced to repay part of the funding.
"I have been personally talking to the EC because I wish to ensure there is no fraud or irregularities and that my region can continue to receive funding," the Labour MEP told the BBC.
"I have to say we are being penalised for going for a more localised system...inevitably this leads to more paperwork and the audit trails are difficult."
She added: "If there is any evidence of mismanagement or fraud or gaps in the audit trail there will have to be repayment."
Mr Graham Meadows, former Director General of Regional Policy, for the EC, said there were some parts of UK such as Wales and the South West of England which had a good auditing record.
"It's just a question of organisation, it's not difficult; there are auditors, accountants aplenty in the United Kingdom who could do all this kind of stuff," he said.
Mr Meadows, who retired in the past year, said the worst problem the EC encountered was in the North West.
"They were doing something which was difficult, innovative and they didn't take care to make sure that the plumbing was in place," Mr Meadows added.
Shadow Europe minister Alistair Burt told the BBC if the EU fined the UK, taxpayers would be paying twice for the error as the Britain is a contributor to the budget it receives funding from.
"We should be a country not needing to pay fines to the EU because of basic accountancy problems," he added
No government minister was available for interview but a statement released by the Department for Communities and Local Government said: "The EC has begun lifting their suspension of this funding programme as a result of the robust action this department has taken."
It added: "Each affected area is being assessed individually by the Commission. The Commission has indicated that further work should be carried out in Manchester before a final decision is taken, which we are now carrying out."
To learn more about this story listen to File On 4, BBC Radio 4, 2000 BST Tuesday 16 October 2007, repeated Sunday 21 October 1700 BST.