The Telegraph reports that the National Audit Office (NAO) has identified that the UK has paid £0.4BN in fines to the EU, and that there is a further £0.6BN that has been set aside for future fines.

These fines are the cost to the taxpayer of implementing EU schemes in the UK. It seems that when the EU decides that the financial management of a scheme is inadequate it withholds future funds (a form of fine), the shortfall for which the UK government is forced to make up from its own (ie taxpayers') funds.

Whether or not the UK should really be "fined" in this manner is open to question, given that the EU is hardly an example of financial probity, honesty or financial transparency and budgetary control.

Only when the EU receives an unqualified audit report, and implements effective and proactive financial controls that prevent the ongoing and widely documented financial abuse by member states and MEPs, can it be in a position to dictate to the UK what constitutes effective financial control.

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£850BN Justified

The National Audit Office (NAO) report that the cost of bailing out the banks has so far cost us £850BN. However, the final true cost will not be known for many years.

The NAO state that the bailout was "justified", as there have been no "disorderly failures". However, the NAO then goes on to qualify the report by noting that:

"There is no single measure of success, but a range of indicators have since stabilised and improved."

So that's alright then!

Meanwhile, kudos to Barclays Capital for showing how ridiculous any government cap on bonuses will be. Barclays Capital intend to award certain staff a backdated payrise of up to 150%, thus mopping up the bonus pool.

Labour governments never seem to learn how powerless and impotent they are, when it comes to trying to impose pay policies.

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How Embarrassing

In a supreme twist of irony, the Office of Fair Trading (OFT), the government body set up to warn consumers against unfair trading practices and fraud, has itself become victim to a £250K internal accounting fraud.

£97K went awol in 2007/08, whilst the remaining £153K went missing in 2008/09.

It seems, according to the OFT accounts, the fraud was made possible "by a control weakness in the Accounts Payable process".

The case is now subject to legal proceedings.

As an experienced forensic investigator, and internal auditor, it never ceases to amaze me how many times the purchasing function is overlooked when it come to the risk of fraud.

Kick backs from suppliers, and inflated purchase invoices are one of the many myriad of ways in which a fraudster can skim the system.

I am surprised that the internal audit department of the OFT (assuming there is one) had not identified the systems weakness.

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Treasury Accounts Shambles

The Treasury's accounts are in such a shambles that the National Audit Office (NAO) won't sign them off.

The NAO are less that happy with the government's handling of the nationalisation of Northern Rock, and have had a major row with Alistair Darling over it. The NAO is concerned about the way that the bank is being treated on the Treasury's books.

Therefore the Treasury's annual report has been published with the financial accounts removed.

Aside from the humiliation of having their accounts refused, the Treasury also faces falling staff morale and institutional chaos.

Dying governments cause chaos, there are two more years left for institutional meltdown with the Treasury.

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HMRC's Staggering Incompetence II

It seems that our Prime Minister and Chancellor are not only guilty of setting up and running an incompetent organisation, but are also guilty of trying to blame a junior for the worse breach in security ever when in fact it was senior civil servants who were responsible.

Any government with such a cavalier attitude to security and the truth most certainly should not be entrusted with running the country.

The full story from The Independent is reproduced below:

The head of the National Audit Office, Sir John Bourn, locked horns with Her Majesty's Revenue and Customs and the Chancellor last night when he said the decision to post two computer discs containing the bank details of 7 million families was taken by senior HMRC officials and not, as Alistair Darling claimed, by a junior employee.

A public row broke out between the HMRC and the NAO over who was to blame for the blunder after Sir John launched a scathing attack on the former, saying high-ranking civil servants at the HMRC ordered the data – which the NAO had not requested – to be sent to his department. His comments contradicted Mr Darling's explanation to MPs on Tuesday.

The entire child benefit database was sent via internal mail by a junior official from HMRC in Washington, Tyne and Wear, to the NAO in London via courier TNT on 18 October.

Mr Darling said the civil servant broke the rules by downloading the data to computer disc and sending it by unrecorded delivery.

Edward Leigh, the Tory chairman of the Commons public accounts committee, said the NAO had asked only for basic details about child benefit recipients, without information on personal bank accounts, but was told by "high level" at the HMRC that it would be "too burdensome" to separate this data. He said he had been given a copy of a briefing note written by Sir John for the Chancellor, which suggested that senior HMRC officials authorised the release of the sensitive information.

The note says that the NAO requested data on child benefit claimants in a "desensitised" form, with bank accounts and other personal data removed, in March but an email from a senior business manager at HMRC stated that the data would not be desensitised.

Mr Leigh said the reason given for turning down the NAO's request was that desensitising information would require an extra payment to the HMRC data services provider EDS.

The disclosures will add weight to Tory claims that systemic failures at HMRC led to the worst loss of data in British history and cast doubts on the assurances by both Mr Darling and the Prime Minister that government bodies can be trusted to keep records safe.

It also raises suspicions that an office junior at the HMRC is being made a scapegoat for failures by more senior managers. That worker, who remains unnamed, was in hiding last night as the police search for the missing discs continued and the HMRC confirmed he was facing the sack. The man, who is understood to work in the IT department of the Child Benefit Agency, has been put up in a hotel with a minder to protect his identity as the clamour for his name to be published intensifies.

A spokeswoman for HMRC said: "His future is part of the investigation that is taking place. When that is completed disciplinary proceedings will follow. One of the outcomes of those proceedings is dismissal."

Senior civil servants are concerned that there should be no repeat of the public scrutiny and humiliation faced by Dr David Kelly, the government scientist who took his own life after he was exposed as a BBC journalist's source in the row over the "dodgy dossier" produced in the run-up to the Iraq war.

Mr Leigh's committee is launching an investigation into the lax data handling systems at the HMRC. It will summon Paul Gray, the department's former chairman who quit over the scandal on Tuesday, to answer MPs' questions.

Scotland Yard said officers from its specialist economic crime unit were helping to co-ordinate the investigation on Tyneside.A spokesman said: "Our inquiries will continue for the rest of the week."

It emerged yesterday that an almost identical breach rules governing the transfer of sensitive data took place in March. The NAO received discs from the Child Benefit Agency containing its full set of data on three occasions – yet none of its officials queried the decision to send out the data in an unfiltered form.

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HMRC's Staggering Incompetence

The HMRC and Treasury finds itself further in the mire today, as more details emerge about the colossal failures of security in respect of the loss of child benefit data.

Yesterday I wrote that 15 million people were affected, in fact the figure is a mind numbing 25 million.

The discs seemingly were only password protected, they should in fact have been encrypted. This means that the data will be very easy to access, and it is reasonable to assume that the underworld is now looking for these discs.

Security experts have lambasted HMRC for its incompetence.

Tom de Jongh, product manager at SafeBoot, said:

"Basic policies were ignored. It appears that the fundamental policies upon which the National Audit Office and HMRC operate are flawed and it is no wonder that this breach has occurred.

The Chancellor freely admits that NAO and HMRC broke clear procedures, but that will not reassure the millions of families that are praying their financial details don’t get into the wrong hands."

Brian Spector, general manager for content protection group at Workshare, said:

"It is staggering that an organisation responsible for the data of over 25 million child benefit claimants is still copying data onto CDs and not ensuring its full protection through encryption techniques.

It has never been acceptable for businesses or government departments to lose data, but in today’s information society, the flagrant disregard for the protection and security of this type of data is not acceptable.

The money invested in IT by the UK government must now be prioritised on security to ensure that the data of those the government serve – the public - is secure and protected."

Jamie Cowper, director of European marketing at PGP Corporation, said:

"These discs should never have been transported in the first place – information of this type should only be transmitted using the strongest security protocols available such as encrypted batch transfer – but more to the point, these details should not have been stored in this medium.

Discs are easy to lose, but difficult to protect. This type of information should only be stored on formats where the data can be encrypted transparently, so that it remains protected wherever it resides, and whether at rest or in motion."

An ex member of the HMRC spoke anonymously to the BBC:

"I wasn't surprised in the least when I heard the news. The problems with Child Benefit are only the tip of the iceberg.

Morale is non-existent. Mistakes happen continuously. Rooms full of unopened post are not uncommon.

Arbitrary individual hourly targets meant that people cut corners. It doesn't matter if you make mistakes because you won't be held accountable.

There is no trust between management and staff.

You are like a number. It is utterly demoralising.

I've spoken to some of my former colleagues about the Child Benefit blunder, and they are utterly apathetic. It's just one thing on top of another.

People hate it, but after 20 years or whatever they feel they can't get a job in the private sector.

Something like this was going to happen sooner or later."

The above is not only a damning indictment of HMRC but also an indictment that applies equally well to all other bodies in the public sector, and exposes the consequences of ten years of Brown's rule at the Treasury.

The damage he will do to the country as Prime Minister, were he to remain in office for that long, is mind boggling.

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FSA Lacks Co-ordination

The Financial Services Authority (FSA) has been rapped on the knuckles by the National Audit Office which, in a report published today, says that the FSA needs to coordinate its work better with other international bodies so that it can better oversee how multinational financial institutions operate.

In other words, it doesn't have a clear insight into the working of international organisations.

Needless to say Treasury Minister Ed Balls ignored the conclusion and plastered over the findings, by using the well worn phrase of all politicians who didn't want to have a review in the first place:

"I welcome today's NAO report."

How I loath the insincerity of that expression.

Balls went on to say:

"The report shows that the FSA is working well and is a world leader in a number of areas, which can only be good for the competitiveness of the U.K. financial-services sector."

Amazing how politicians can distort the message!

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