Civil Service catering group lost pounds 400,000: MPs expected to condemn lack of control over pounds 30m a year business

TREASURY officials will be lambasted by a cross-party committee of MPs this week for their management of the Civil Service's pounds 30m a year catering operation.

The Commons Public Accounts Committee is believed to stop short of accusing officials of cooking the books but is likely to express disbelief that the catering group, called Forward, lost pounds 400,000 in two years, did not have properly audited accounts and was not tightly monitored.

Government ministers are expected to take some of the sting out of the PAC's tail by pointing out that Reginald Wheeler, Forward's chief executive, will be retiring early and that the agency is to be privatised. A firm of City consultants, KPMG Peat Marwick, is to handle the sell-off.

Sources close to the committee said its report into Forward will contain marked similarities to last week's hard-hitting study of the Welsh Development Agency. Lack of management control and conflicts of interest, with officials secretly exploring ways of privatising their own agency, are again expected to be central themes.

Forward - which has 1,100 staff - supplies food and drink to 70 per cent of the Civil Service, in 170 canteens, restaurants and bars across the country. In 1991 it was converted to a commercial funding agency, remaining accountable to the Treasury.

The MPs' report will highlight what Robert Sheldon, the PAC chairman, referred to at a hearing in March as 'a real shambles'. At some Forward centres, fictitious names were entered on the casual employee pay- roll, records were destroyed, staff were paid in cash and contracts with suppliers were not put out to tender.

At GCHQ in Cheltenham, catering records from 1990 to March 1992 were shredded in June 1992. At the Home Office in Queen Anne's Gate, the records were destroyed when oven cleaner accidentally leaked on to them. And at the Department of the Environment headquarters, till rolls went missing just before the start of an internal audit in December 1991.

Of particular concern to the MPs was the apparent failure of the Treasury to put its own house in order once the problems had been discovered. Losses of pounds 400,000 and a potential Inland Revenue bill of between pounds 300,000 and pounds 450,000 were compounded by the hiring of an outside firm of consultants, Ernst & Young, at a further cost of pounds 150,000, to investigate what had gone wrong. The Ernst & Young document referred to poor control, ineffective supervision by some regional directors and weak management at the agency's Basing stoke headquarters - all matters MPs believe the Treasury could have discovered for itself if it was doing its own monitoring job effectively.

Mr Wheeler was suspended last July following the discovery that he had secretly formed a company with his wife called Forward Services Limited. Three suppliers - Booker Fitch, Gibson Chemicals and FMS (Perth) - were approached to see if they would consider backing a management buy-out of the Civil Service agency. Mr Wheeler was also accused of breaking competitive tendering rules. He has since been reinstated but will be retiring early.

A Treasury spokeswoman said that in the last 18 months, 19 cases of possible breaches of discipline at Forward had been investigated. Twelve had been resolved and seven were still being examined. Some cases had been handed over to the police but after consultations with the Crown Prosecution Service, which felt there was insufficient evidence for a prosecution, they had been returned to be dealt with internally.