Chairman Michael Grade has commissioned one of the big accountancy firms to carry out a review of the BBC's financial controls.  This from The Guardian:

by Matt Wells
Friday August 13, 2004

Questions were raised about the strength of the BBC's finances last night when it was revealed that Michael Grade, the corporation's chairman, had called in an independent firm of accountants to conduct a review of its "financial controls".

Mr Grade said he wanted to be sure that the corporation was properly handling the £3bn it spends every year, most of it raised by the licence fee.

The BBC insisted last night that it did not expect the review, by Ernst & Young, to uncover any serious financial problems. But Mr Grade admitted in a newspaper interview that there had been "general and specific" criticisms about the BBC's financial control systems.

"It's not about efficiency," he said. "It's about financial controls. It only needs one rogue in any organisation to bring the place into disrepute."

The BBC is currently more than £100m in the red. It has always insisted this is "planned borrowing", saying the corporation would break even by the time its royal charter expires in 2006.

But Mark Thompson, the director general, announced an efficiency review in June that is expected to lead to significant cost-cutting measures. He pointed to the pension scheme deficit, which is currently £400m, and said there would be tough times ahead.

Mr Thompson's efficiency review, combined with the separate review of financial controls revealed by Mr Grade last night, suggest that the BBC's financial position is not as secure as it has tried to claim in the past. They also suggest that the reputation of Mr Thompson's predecessor, Greg Dyke, as a cost-cutter is due for revision.

A spokeswoman for Mr Grade said last night that his decision to call in Ernst & Young was part of a policy by the board of governors to take advice independent of the BBC's management. Another accountancy firm, KPMG, audits the BBC's accounts. The spokeswoman said it was normal practice to call in a separate firm to conduct such reviews.

She said: "The board of governors is ultimately responsible for the £3bn of public money the BBC receives each year. The governors must therefore be confident in the way that the BBC handles this public money.

"This week on behalf of the governors the chairman has commissioned Ernst & Young to undertake a review of the BBC's system of financial controls to establish independently of management that the BBC's systems are fit for purpose." She said the review was being carried out with the support of Mr Thompson and the chief operating officer, John Smith.

Mr Grade told the Independent: "I want some outside comfort that our systems are fit for their purpose. I've heard criticism." He did not go into detail, other than to say the criticism had been both general and specific.