Government-funded bodies which fail to file annual accounts were warned by Finance Minister last night that they risk losing their grants.

The Deputy Premier, in a vociferous response in the House of Assembly to Opposition criticism about the failure of many Government departments and quangos to submit accounts for auditing each year, said: "It's important that organisations which receive grant funding from Government have their financial records up to date and those organisations that do not respond in a timely manner, they will be at risk.

"We know what that means: at risk of having their financing withheld until their financial records are current. If they don't measure up there are sanctions."

Ms Cox was reacting to questions raised by UBP MPs and during a two-hour debate on this year's budget for the independent Office of the Auditor General.

The department, which promotes improvement in financial administration in Government, is set to receive $2.9 million - an increase from the previous year of $542,000 or 23 percent. Junior Minister Michael Scott told MPs that the extra funds were needed to assist with the auditing of outstanding accounts from Government entities.

"The Government both understands the importance and considers it essential that all government entities prepare financial statements on a timely basis," he said.

"It is the expectation of the Government that relevant government entities are now mandated to play their part to rectify this problem by bringing all outstanding accounts up to date."

Mr. Scott said $181,809 would be spent on two temporary staff to deal with the auditing backlog.

Shadow Finance Minister Mrs. said that extra cash ? and the rest of the $1.85 million spent on salaries in the Auditor General's office ? would be wasted if departments and other bodies didn't produce accounts to be audited.

"It's important that the Government puts the fire behind the departments that are delinquent," she said, citing a long list of bodies, including Bermuda College, parish councils and the trustees of the public golf courses, who were behind in filing accounts.

Former Opposition Leader said the Auditor General's office was not to blame for any backlog but rather "the government departments and quangos which are not producing auditable statements in a timely way".

He added: "When financial statements aren't produced...it produces an environment where fraud can thrive."

He and Mrs. Gordon-Pamplin also criticised the decision of Works Minister David Burch to move the Office of the Auditor General to smaller premises last year ? a change which has saved Government $60,000 in this year's budget but which met with widespread criticism at the time.

Mrs. Gordon-Pamplin said the new office was cramped and lacked the space to store confidential files. "The facility is too small. They almost have to go outside to change their mind because there is not enough space in the building."

She said the move was an embarrassment to Bermuda on an international stage. "We were the laughing stocks of the Caribbean," she said.

Dr. Gibbons said: "I think most of us understand that (move) was a punishment." He claimed that it had set the department back some two months, costing it between $200,000 and $400,000.

But Government backbencherscoffed at the allegation, saying he refused to believe that Auditor General Larry Dennis and his staff could not quickly adapt to the change. "That statement is a joke and we should not allow it to be said."

The debate heard that the Auditor General's office will host the Triennial Conference of Commonwealth Auditors General in July 2008.

An intensive recruitment drive for new staff for the department has been launched as four staff have indicated an intention to leave this year. The office currently has 14 of 17 full-time positions filled.