Chaos at the heart of Britain's nuclear clean-up industry has been laid bare by an internal government audit after embarrassing cost overruns and bureaucratic bungling.

The Department for Business admits there are "inherent risks" associated with the financial affairs of the Nuclear Decommissioning Authority (NDA) that forced the department to find £400m from other budgets to balance the books.

It also admits that budgetary problems were exacerbated by misunderstandings, unminuted meetings and lack of sufficiently trained staff.

In response to a critical report by MPs about its handling of the NDA, the department (BERR) reveals that 42% of its budget is already being pumped into the NDA, which admitted last week its total future clean-up cost estimates were now £10bn higher than 12 months ago at £73bn.

The job of overseeing the NDA has been moved from BERR's energy group to its shareholder executive in an attempt to tighten up accounting while the NDA has sent its finance staff for retraining at the National School of Government run by the civil service, the report reveals.

The operational failures of the Thorp and Mox fuel recycling plants at Sellafield in Cumbria are known to be largely responsible for wiping millions of pounds of expected income off the NDA's budget, leaving it to seek more cash from government.

"The fact that the funding gap anticipated was met in part by using all of BERR's end year flexibility illustrates the extent to which the department is vulnerable to movements in the NDA's budget caused in large part by the reliance on volatile commercial income," says BERR in its report - "NDA budgeting shortfall 2007-8 lessons learned" - which was quietly slipped out through a parliamentary website this week.

The document, a response to a business and enterprise committee inquiry, reveals that the NDA and the Treasury were at cross-purposes over some aspects of the clean-up agency's budget and decisions taken at a vital meeting as far back as February 2006 were misunderstood. These problems were exacerbated by the lack of proper procedures at those talks.

"There is no formal record of that meeting, nor was there subsequently any correspondence that confirmed what those present believed to have been agreed," the BERR report says. "To minimise the risk of misunderstandings in the future, all parties have acknowledged the importance of a written record of all material decisions and future actions."

The report also says that the government is looking at whether changes are needed to help the NDA manage its budget more effectively. It admits the "commercial income [from Thorp and Mox] is volatile and over time will decline as sites progressively close and move into the decommissioning phase".

Greenpeace was scathing about the latest revelations. "Just when you thought things couldn't get any worse we find out that the people in charge of dealing with Britain's radioactive waste have adopted chaos theory as a business model," said Ben Ayliffe, senior nuclear campaigner at Greenpeace UK.

"The NDA's failure is as much a failure of government, who set up the authority knowing it would have to rely for half of its income on failing nuclear plants. The same government that brought us this shambolic funding system is now telling us it can deliver new nuclear without subsidy. No one can take this claim seriously on the basis of this latest nuclear farce we're witnessing."

The government has switched money meant for low-carbon and renewable technologies to clean up the waste from nuclear power stations. Figures released by BERR in February showed that at least £15m that was meant to be used on "sustainable energy capital grants" had been switched to the NDA. Ministers also plundered the defence budget as well as cash that should have been used for "regional selective assistance" to bolster the NDA.

BERR said some money had been switched in the spring supplementary estimates for 2007-08 but insisted this was a technical matter to balance the books on paper.

The NDA's budget problems have also caused conflict with the Environment Agency, which argued that insufficient funds had been made available by ministers for the clean-up of certain sites.

The NDA was accused of making things worse by deciding to concentrate on especially toxic waste at sites such as Sellafield.This prioritisation will delay clean-up elsewhere, the Environment Agency argued.