Book sale lost #32m

A lack of proper financial controls and accountancy procedures in theon. pre-privatisation restructuring of Her Majesty’s Stationery Office cost the government millions of pounds, the National Audit Office has revealed.

A failure to ensure compatible accounting systems for HMSO’s 14 business units left reporting accountants Binder Hamlyn, who recommended the units’ restructuring, unable to reconcile imbalances. It also created a crash in HMSO’s sale price.

HMSO was sold to National Publishing Group for #54m in September 1995 – #120.2m below the highest valuation of #174.2m and #17.7m below the lowest. It was also #32m below the original #86m bid by NPG which cut its offer due to ‘financial and management control weaknesses and the poor quality of information available.’

The NAO is highly critical of the way 14 business units were created from the three that existed previously, requiring the devolution of accounting systems to the new units.

Its report concludes: ‘We consider the restructuring programme was badly executed, resulting in a progressive loss of management and financial control, and severe difficulties in the reconciliation of inter-business unit accounts.’

HMSO gave the new unit considerable discretion in the design and operation of accounting practices over the sale and purchase of goods and services between business units for processes including the transfer and reallocation of cash between units.

In November 1995, the NAO commissioned an Ernst & Young report, which highlighted inadequacies in the existing systems, including the lack of a framework guiding directors to set up a proper system of financial control.

Binder Hamlyn could not reconcile all inter-business accounts despite the warning given by E&Y in August 1996, or produce complete and accurate consolidated accounts in September 1996 when HMSO was sold.

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