A blow-by-blow account of the sacking of the director of the National Heritage Memorial Fund following the discovery that money had been awarded to a software company run by her boyfriend was published yesterday at the insistence of the National Audit Office.
Georgina Nayler was removed from the directorship of the grant-giving body during the summer after it was found that the money had been awarded without her declaring a possible conflict of interest.
Yesterday, the government comptroller and auditor general pointed out in a two-page account of the incident in the memorial fund's annual report the need for all officials dealing with giving out lottery money, as an arm of the fund now does, to stick scrupulously to government rules.
Lord Rothschild, chairman of the memorial fund, said: "I would just like to reaffirm what was said at the time; that at no point was there any question of dishonesty or lack of integrity on her part, and that the trustees and myself were satisfied there had been no risk to public funds.
"The parting with Ms Nayler was a very sad one for the memorial fund as she made a remarkable contribution to its success."
The report of the comptroller and auditor general in the annual report is more severe. It says: "The trustees and director were well aware of the implications of becoming a lottery distributor ... During their audit, the National Audit Office observed evidence of a conflict of interest in the letting of contracts to a company run by the partner of the former director of the fund, Ms Georgina Nayler."
The report says there was no evidence of illegal or dishonest behaviour, but concludes: "The events at the fund have served to emphasise more generally how important it is that accounting officers are fully conversant with all aspects of their responsibilities and demonstrate a complete understanding and awareness of public sector accountabilities and responsibilities."
It adds that because of the massively increased responsibilities that being a lottery distributor involves, the salary level of the director's post is being significantly increased. The new director is Anthea Case, currently a deputy director at the Treasury in the Budget and Public Finance Directorate.
Launching the annual report yesterday, Lord Rothschild said that the fund was now financially stretched. Government grant over the past year was pounds 8.8m, and the fund had spent pounds 10.4m, using income from its capital fund.
Lord Rothschild said: "We live in hope that the Government will restore our grant to the previous levels. In the meantime, we will have to be very selective when awarding grants over the next few years."
The largest grant awarded over the last year was pounds 3m to the Victoria and Albert Museum and the National Galleries of Scotland for the purchase of The Three Graces.