How can they say it's not so bad?

Yet remarkably, despite finding widespread mismanagement, a report by Government watchdogs yesterday concluded that the crisis "is not the result of any misappropriation of cash or a major breakdown of systems of financial control".

However, the commission conceded that it found "a culture of unbridled growth" within the force where financial warnings had gone unheeded.

And despite financial mismanagement, massive cuts in overtime and a freeze on recruitment, it blamed the media for "considerably exaggerating" the situation.

Auditors found "unusually high" levels of overtime in a culture where senior officers felt they could not challenge overtime budgets. The overtime average wage for each officer hit £1,700 a year.

Rising staffing targets for the whole of the service were labelled "arbitrary", and car allowances were given without due reason.

The probe, which was launched earlier this year after the cash crisis erupted, found that "too little regard for good financial management had developed within the Police Service."

The report went on to say: "Until last year, this culture had been largely unchallenged by the Police Authority." The report stated:

Overtime was institutionalised and requests by officers were rarely challenged by supervisors;

£4.3m of the deficit was the result of financial management weaknesses, £2m to usual financial pressures common to all forces, and £1m related to growth;

Of 113 workers who received essential car user allowance, 100 did not meet the criteria;

61 posts were approved in 2003/4 without funding being identified, at a full-year cost of £1.5m;

Some officers appeared on two budgets - the core budget and the Basic Command Unit special funds budget.

The commission stated: "Most of the ongoing financial pressures were foreseeable but had not been properly taken into account because of weaknesses in financial management.

"Some police authorities built up reserves to mitigate the impact of such pressures.

"The director of finance and commissioning (Stephen Preval) gave a presentation to members five years ago warning that 2004/2005 would be a difficult year and there would be 'inadequate resources even to stand still'."

But it was only when a new chief executive was appointed in May last year, along with the appointment of new Chief Constable Sean Price and a new Deputy Chief Constable, that the financial woes were finally recognised.

Arrangements were then put in place to deal with the cash crises.

"The way in which police officer numbers have increased year-on-year illustrates a culture of unbridled growth," said the report.

This culture had prevailed, even when senior officers had raised reservations.

The report concluded by saying the police authority and the police service management team were now working together to take the appropriate recovery action.

Yesterday, ousted chairman of Cleveland Police Authority, Ken Walker, said he would continue to chair the authority until the annual meeting in July and will preside over the formal debate on the report next Friday.

He said: "Clearly, there are important lessons to be learned, especially I believe over how approval is given to the creation of new posts and how the force operates its budget monitoring arrangements.

"It is abundantly clear from the report that in the past year over 60 posts were approved within the force without any funding being identified and that the system of regular performance reviews within the force was also not operating satisfactorily.

"I believe that members will want to know why that happened and what action the force is intending to put in place to deal with the issues raised in the report."

Yesterday, neither Cleveland Police nor the Cleveland Police Federation would comment until the report had been discussed formally.

Middlesbrough Mayor Ray Mallon also declined to comment. Mr. Preval could not be contacted.

Middlesbrough South and East Cleveland MP Ashok Kumar said: "It is clear, that the so-called financial black hole had nothing whatsoever to do with our new Chief Constable, but was an issue that arose from the actions - or perhaps more appropriately the inaction - of the then senior police management and chair of the police authority, Councillor Ken Walker."

Peter Mandelson, Labour MP for Hartlepool, said: "I'm glad there has been no misappropriation of cash or major breakdown of systems

"But, nonetheless, lessons clearly need to be learned by all the members of the police authority and I hope and assume they will exercise full authority in the future."