NAO's Home Office rebuke delivers blow to Gieve

Sir John Gieve, a deputy governor of the Bank of England, faced embarrassment last night after spending watchdogs delivered a devastating rebuke to the financial controls at the government department where he was the most senior civil servant.

In an unprecedented move, the National Audit Office (NAO) refused to approve the Home Office's accounts because they were riddled with inconsistencies and were handed in 10 weeks late. The NAO concluded the department had failed to keep proper accounts over its £13bn budget in 2004-5.

As permanent secretary Sir John Gieve was the department's top civil servant during the period in question and, as such, its accounting officer. Last month he moved to the Bank of England and became a member of the Monetary Policy Committee, which decides interest rates. The Bank declined to comment on the NAO move last night.

Before the Home Office, Sir John had been at the Treasury and had been a leading candidate to become its permanent secretary last year. The job went instead to Nicholas Macpherson.

The NAO said the introduction of a new computing system at the Home Office last year plunged the department into chaos, with managers unable to make its books balance. At one point the Home Office was forced to mount an urgent investigation after more than £3m went "missing". Officials decided to write it off, although there was no sign that fraud was to blame.

The Home Office also had to make an adjustment of £946m to "reconcile its cash position".

Sir John Bourn, the head of the NAO, said the Home Office had not completed "one of the most fundamental of all accounting controls" because IT problems meant they could not tally its bank statements with records of cash payments and receipts.

Edward Leigh, the chairman of the Commons Public Accounts Committee, challenged the Home Secretary Charles Clarke to ensure such errors were never repeated. He said: "It is extraordinary that one of the principal departments of state should fail so spectacularly to meet its accounting obligations to Parliament. This report is a serious criticism of the department's internal financial administration and of the leadership of its senior management."

Alistair Carmichael, the Liberal Democrat home affairs spokesman, said: "The Home Secretary is asking us to fork out billions for an ID Cards scheme, when the department in charge can't even keep track of its incomings and outgoings."

A Home Office spokeswoman said "a great deal of work" had taken place to tackle problems uncovered by the NAO.