BBC chiefs were accused of presiding over a "cocktail of overspending and budget mismanagement" yesterday after it emerged that the website bbc.co.uk went almost £36m over budget in a single year.
A review of the site, published by the BBC Trust, showed that the BBC's UK web operations cost £110m - about 48% above the £74m budgeted.
The BBC Trust, the corporation's governance and regulatory body, branded the incident a "serious breach" of bbc.co.uk's service licence.
The review also revealed that if the BBC's management, led by director general Mark Thompson, is given the green light by the trust later this year for a further £39m investment in its online services, the real cost of bbc.co.uk will have nearly doubled to almost £150m within two years.
Yesterday the BBC Trust said it would not sign off the extra £39m unless executives showed by November that they had "improved management controls" of bbc.co.uk's finances.
The report said the reason for the 48% rise in costs last year was "the current management structure of bbc.co.uk" after restructuring of the BBC's online operations gave divisions such as sport and news more control of their web activities. This meant that £29.4m in costs, such as staff wages, was "misallocated" to other budgets within the BBC, rather than to bbc.co.uk.
Don Foster, the Lib Dem spokesman on culture, media and sport, said: "This report is a damning indictment of the management of bbc.co.uk. A cocktail of overspending and budget mismanagement has led to this huge increase. Not only has the BBC lost track of a phenomenal sum of money, but this mismanagement will now directly impact on the future development of this popular service."
Patricia Hodgson, a BBC trustee, blamed the "arcane nature" of the corporation's internal financial reporting and said it was "clearly not acceptable".
The trust said the incident was a "serious breach" of bbc.co.uk's service licence, which it issues as a remit for each of the corporation's TV, radio and online outlets.
The trustees acknowledged that the fast-changing nature of the internet made it difficult for bbc.co.uk to be financially accountable. But they said: "We believe this problem should have been identified sooner and appropriate action taken."
The report pointed out that as recently as January, BBC executives had predicted that bbc.co.uk would be only about 5% over budget for the financial year 2007-08.
In fact, the trust had discovered last December that the website's budget had been blown by 48%. "Our review has found that financial oversight has not been sufficiently effective, such that the true level of spending on the service has only become known as a result of this review," the trust said.
Hodgson admitted that the overspend by bbc.co.uk would affect other BBC divisions, saying: "Overall budgets will be adjusted in other departments."
The trust's head of performance, Mark Wakefield, said six months of consultation had revealed that overall, bbc.co.uk's 16.5 million monthly users were happy with the service. He said the website should not take on online rivals such as Google and become an external search engine.
Hodgson also said that despite submissions from commercial rivals, the trust was not recommending closing parts of the BBC's online network.
Mark Wood, ITN's chief executive, said that while the trust had "expressed good intentions, we cannot see how these can practically translate into action."
He said: "We are alarmed at the extent of the BBC's website funding and its ambition in the dotcom world. This is a massive distortion of the marketplace and a real threat to British innovation in the web world. Commercial vendors cannot hope to compete at this level of funding ... there is also a real threat to plurality in the media landscape."
A BBC management spokesman said: "We accept the trust's conclusions that our processes and management controls were not adequate for a pan-BBC service straddling multiple cost centres.
"This is regrettable and we recognise the need to address this."
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