A multimillion-pound government project to give greater protection to the public by managing offenders more closely is threatened with collapse because of financial problems, The Times has learnt.

Ministers have halted all further development work on the project while officials conduct an emergency review of the costings and capabilities of the ?244 million programme. The crisis is the latest setback to an IT system that underpins the whole of the Government?s strategy to manage offenders from conviction and during their prison sentences to supervision in the community by the Probation Service.

About ?155 million has already been spent on the project but this year it was revealed that there was a ?33 million shortfall on capital funding.

It is understood that it has now been discovered that the initial costings did not include VAT and that cancelling the project will cost the Ministry of Justice ?50 million in fees to EDS, the private contractor in charge of developing the system.

A leaked letter from Roger Hill, the Director of the Probation Service, discloses the scale of the problem.

?Many of you will be aware that, in light of subsequent developments, the original costing for the C-NOMIS programme has proved to be optimistic. We have advised ministers that we will need to undertake a fundamental review of the work, to return to an affordable programme,? the letter said.

The emergency review is to be completed by next month, but Mr Hill admitted that the ambitions of the original project would be scaled back. ?We expect that the revised programme will inevitably involve a reduction in the planned functionality and scope of the sysem.? Mr Hill?s letter also discloses that David Hanson, the Prisons Minister, has demanded a full audit trail of the programme since it was set up by the National Offender Management Service, which oversees both prisons and probation. His letter added: ?Whilst we are reviewing the programme we had instituted a moratorium on further development work.?

Under the project more than 200 disparate Prison and Probation Service databases would consolidate into a single, accurate profile of an offender.

More than 80,000 users within the criminal justice system, including courts, Prison and Probation services, police forces and other partner organisations, would share up-to-the-minute information on an offender such as his or her conviction records, addresses and problems.

It would allow prison and probation staff to know that a particular offender needed help with housing, or tackling drug or alcohol abuse, on leaving jail. The aim was to help to reduce their risk of reoffending by tracking them through the system and providing what ministers describe as ?end-to-end offender management?.

But the project being introduced by the National Offender Management Service (NOMS) has faced growing delays and mounting financial costs. It has been introduced as a pilot in three jails in the Isle of Wight and a planned introduction to a further 30 prisons has been frozen.

The Isle of Wight trials were delayed by six months and the date of a full implementation slipped from the end of next year to 2009 as problems grew. There is now doubt if it will ever be available to any of the 43 local probation services in England and Wales, which have become increasingly frustrated at the delays in implementation.

The Ministry of Justice insisted that it remained committed to an ?affordable programme?, which would allow probation officers access to the records of all offenders in custody and the community so that they could help to track and manage offenders from conviction, through sentence and on release.

Harry Fletcher, the assistant general secretary of the National Association of Probation Officers, said: ?The whole project appears to have been badly managed since its inception. The Ministry of Justice must come clean and tell the public how much money has been spent on this sytem and what the consequences are for assessment of offenders and public protection of any decision to go forward with a system with a reduced capacity.?

Charles Bushell, the general secretary of the Prison Governors? Association, said: ?This news is bitterly disappointing. Many of us who have been critical of the extravagant expenditure of the National Offender Management Service had seen C-NOMIS as the one real benefit on the otherwise bloated National Offender Management Service agenda. If C-NOMIS is now threatened we see no good reason to perservere with the conspicuous expenditure which NOMS represents.?

Mr Hanson said in a statement: ?I have requested a rapid review of the C-NOMIS programme to be carried out with immediate effect. This review will consider the affordability of the overall programme and will report in the autumn with recommendations for a revised programme.?

Systems down

• Cost of Libra IT system for magistrates? courts rises from ?146m in 1998 for 10-year contract to ?232m for 8-year contract
• ?118 million Integris computer system for Probation Service completed late and ?22 million over budget
• IT system aimed at speeding up asylum applications abandoned in 2001 after ?77 million contract with Siemens fails to deliver
• IT system at Passport Agency unable to cope, leading to backlog of passport applications in 1999
• In 1999, ?1 billion IT project involving Post Office, Benefits Agency and ICL to create swipe card for benefits collection collapses