The home secretary, John Reid, came under fresh fire today after a powerful Commons committee found his department guilty of "basic failures of financial stewardship", which led to a ?3m discrepancy in its accounts.

The public accounts committee also criticised the Home Office for failing to "get a grip" on the foreign nationals fiasco, in a report published today. The rebuke comes just two days after Mr Reid unveiled plans to get the Home Office's house in order.

The MPs' report said: "The department failed to reconcile its in-house cash records with its bank statements and wrote off a difference of ?3m as administration costs without further investigation. "These are basic failures of financial stewardship and control which, for example, ignore the risk that net differences may mask larger gross discrepancies The committee chairman, Conservative MP Edward Leigh, said "even the smallest corner shop" understood the need to reconcile cash records with bank statements.

"The Home Office has a substantial back catalogue of examples of poor management and stumbling projects, but it has crowned it with two astonishing failures", he said.

"It has failed in its obligation to present to parliament properly audited financial accounts. And, secondly, it has failed in its duty to protect the public - by releasing from prison a large number of foreign nationals, many imprisoned for ghastly offences, without giving any consideration to whether they should be deported.

"The significance of these failures can hardly be overstated. Together they constitute a severe indictment of the way in which the Home Office has been run and demonstrate the inability of its leadership to act in a unified and coordinated way on its fundamental responsibilities - and perhaps even to understand them properly."

The MPs said the evidence given to the committee by the Home Office on foreign nationals released from prison, was full of "errors, omissions and inconsistencies".

Mr Reid pre-empted some of the criticism levelled in today's report by announcing plans earlier this week to "radically overhaul" the home office, including clearing up the backlog of failed asylum seekers in "five years or less".

In a separate announcement yesterday, Mr Reid announced a 24-point criminal justice system to "get tough" on criminals to increase public protection and rebalance the system in the interest of victims.

Responding to today's report, the immigration minister, Liam Byrne, said the MPs' findings had been superseded by an extensive plan of action to ensure the department was "fit for the 21st century".

"Since the public accounts committee held its evidence sessions, the Home Office has set out an extensive plan of action to reduce old-fashioned ways of working", he said. "As an immediate step we now have an imminent release team in IND [the Immigration and Nationality Directorate], working with HM Prison Service to ensure that foreign national prisoners who meet the existing criteria are not being released from prison without being considered for deportation."

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