The Courts Service has failed to collect more than £1.3bn of fines and other penalties, according to a report from the National Audit Office (NAO) published this week.

The report on the financial management of the Ministry of Justice, which oversees HMCS, shows the amount of outstanding fines, confiscation orders, compensation orders and legal costs increased from £920m in 2005/06 to £1,330m in 2008/09.

During that period the amount of unpaid fines and compensation orders rose by 54% from £569m to £875m.

The Magistrates’ Association said the failure to secure such a large amount of potential income at a time of financial constraint, when 103 magistrates’ courts face closure, bordered on negligence.

Chairman John Thornhill said: ‘Magistrates were criticised recently for not imposing more fines to provide funding to service the justice system. They will now be rightly angry that the sentences they impose appear not to be adequately managed.’

The NAO criticised the financial management of the MoJ, which in 2008/09 was responsible for a £10bn budget and now, in common with other departments, is faced with major budget cuts.

The report said the department’s financial management ‘fell short’ of best practice in the consistency of its financial management approach, its understanding of costs and the integration of financial management systems and processes.

It found that the ministry does not have a detailed enough understanding of the cost of its activities within the prison system, the probation service and the courts, and that its finance directorate lacks ‘sufficient visibility’ of the costs of its policy proposals.

The spending watchdog called on the MoJ to produce an action plan for improvement over the next four months.

NAO head Amyas Morse said: ‘The financial management of the MoJ, both at its headquarters and its arms-length bodies, has improved, but it falls short of established best practice in three significant areas.

‘Without improvements in these areas the ministry will not be able to make informed decisions on relative operational performance, affecting its ability to deliver the sustainable efficiencies that are needed in the constrained spending environment.’

Justice minister Jonathan Djanogly said the report relates to the department’s financial performance under the previous administration.

However, he added: ‘The new coalition government is considering the problem of unpaid financial penalties and will want to study the report and respond in due course.’