Auditors say the EU should stop paying the salaries of Palestinian civil servants in the Gaza Strip who are not going to work.
They were examining about 1 billion euros of EU spending in Gaza between 2008 and 2012.
Under a programme known as Pegase, the EU pays about one-fifth of the salaries of the PA's 170,000 civil servants, both in the West Bank and Gaza.
The BBC reports the auditors said many Gaza civil servants had not worked since Hamas came to power in 2007.
''The payment of civil servants who do not work does not meet one of (the EU's) main objectives to provide public services to the Palestinian people,'' said Hans Gustaf Wessberg of the European Court of Auditors.
When Hamas took control of Gaza, President Abbas decided to keep paying the salaries of the estimated 61,000 civil servants and members of the security forces who stopped reporting for the jobs, so long as they stayed home and did not work for the other administration.
The BBC reports European auditors did not have overall figures for the number of civil servants in Gaza who were currently not working, but in one office they found that 90 out of the 125 staff were absent.