IT outsourcer CSL's failure to run the financial department of the Public Health Laboratory Service (PHLS) properly put taxpayers' money at risk of fraud or loss, a National Audit Office (NAO) report says.
Described by Sir John Bourn, the head of the NAO, as an "unacceptable breakdown in fundamental internal financial controls", the problems with CSL's IT service meant a total of £100,000 was wrongly credited to PHLS customer accounts.
The PHLS is partly responsible for managing the outbreak of communicable diseases such as e-coli.
The NAO report says a lack of proper records about debtors led to there being more than £2m of unmatched receipts at one point.
Although the CSL contract began on 1 April 1998, delays in debt chasing resulted in £1.77m of debt that was outstanding on 31 March 1998 remaining outstanding a year later.
PHLS eventually employed staff to pursue the outstanding debt.
However, PHLS and CSL worked together to try and resolve the problems and Bourn found that the failures had not resulted in material mis-statement within the 1998-99 accounts. As a result he did not qualify his opinion of the accounts.
But Bourn pointed out three key points where the contract broke down:
As a result of the failures, CSL's fees were reduced by £116,623 compared to total contract payments of £615,453.
Paul Vaughan, general manager of CSL's Reading site, from where the PHLS contract was run, said, "In any implementation of an accounting system you're working to a tight timescale with new software and with a new client and so difficulties can arise.
"This won't be the first or the last time that a system implementation takes longer than expected."
Diana Walford, director of the PHLS, added, "There has been no overall loss to the public purse because the cost of the contract with CSL offered significant savings over the provision of an in-house service."