Massive illegal overspending by Government agencies -- including the Police and Prison Service -- totalled millions of dollars last year, a report by independent Auditor Larry Dennis has revealed.

And shifting a total of $3.5 million from underspent building projects to overspent ones was also ruled out of bounds.

The prisons and Police topped the league table of agencies which spent over-budget without approval by the House of Assembly, notching up more than $3 million each.

Mr. Dennis insisted: "Unless such over-expenditures are pre-approved by the House of Assembly in the form of Supplementary Estimates, they are illegal expenditures.'' And he said: "To ensure compliance with legislated expenditure controls, the Ministry of Finance should establish procedures to prevent Ministries and Departments spending money in excess of amounts authorised by the House of Assembly.'' But Acting Finance Minister Terry Lister pointed out the latest Auditor's report covered up to March last year -- when the PLP had been just five months in power -- and that changes were underway to ensure proper accounting.

Mr. Lister said: "Some of the problems he is describing are really structural and it will take some time to clean up.

"But we have come in with an attitude that accountability is the order of the day. People have the right to know where these dollars are going -- that's our commitment to the community.'' Mr. Lister added that the Progressive Labour Party Government was suffering a backlash from a problem highlighted over the years by the party while in Opposition.

He said: "The history is we would go to Parliament in say 1996, and the Finance Minister would give his Budget speech with a balanced Budget and all these wonderful reports.

"Then we would in the summer get a Supplementary Estimate from 1993-94 and later we'd get a Supplementary Estimate from 1995-96. That's the history of it.'' A Ministry of Finance reply to the overspend criticism said the extra cash was needed to cover unanticipated Civil Service holiday entitlement build-up logged by the Accountant General's office at the end of the financial year.

It added that the Ministry started a "Budget oversight review'' in the current financial year to help control individual departmental budgets and greater use of computers to automate controls was being considered.

And individual departments added that other "unanticipated, desirable or necessary expenditures'' contributed to the extra spending.

Mr. Dennis said he acknowledged that the Accountant General's year-end adjustments may have been unexpected and that some departments disagreed with the figures.

But he added: "Nevertheless, departments are responsible for maintaining records of their staff leave entitlement liabilities and anticipating the effect of those liabilities on their annual expenditure appropriations.'' And he said that, elsewhere in his report, he had slammed the Accountant General's office which had difficulty keeping track of leave entitlement and that improvements were needed.

Mr. Dennis added: "With respect to `desirable or necessary' expenditures, `desirable or necessary' does not make unauthorised expenditures legal.

"The Ministry of Finance has a Contingencies Fund to cover `urgent or unforeseen' expenditures.

"If unapproved expenditures do not fall within this classification, the correct procedure, as explained above, is to obtain Supplementary Estimates before incurring these expenditures.'' Mr. Dennis said the practice of transferring money, known as virements, for capital -- bricks and mortar -- projects was used to reduce a 1999 overspend of $10.5 million to $7 million before Finance Minister Eugene Cox had given his approval.

He added: "In my view, viring in this manner is contrary to the requirements of the Appropriations Act. It is definitely contrary to the requirements of the Financial Instructions.

"When viring occurs after the fact, it provides ineffective control over the expenditure of the funds.

"It also creates difficulties for Members of the House of Assembly when they are approving the following year's capital project appropriations. Because they are unaware of the virements, they are also unaware that their previously approved project budget amounts have been changed.'' A reply from the Ministry said the rules did not specify prior approval of overspending -- but that Mr. Dennis' recommendation had been taken on board for the financial year set to end in April.