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It is the secretive heart of government information security, dispensing advice and setting standards throughout officialdom, but GCHQ's "cavalier" in-house policies have come under fire in a report revealing it lost 35 laptops.

Three of the missing machines were certified to hold Top Secret material, according to the annual report of the Intelligence and Security Committee (ISC).

The losses date back to before 2005, and GCHQ said it now believes the resulting risk is low and it has no evidence that secret material was compromised. Seven out of 35 have since been recovered.

The losses are nevertheless likely to be viewed as very embarrassing at the intelligence agency's Cheltenham HQ. The ISC, a cross-party group of senior MPs that reports to the Prime Minister rather than Parliament, said processes for logging the allocation and location of laptops had been "haphazard" and "not sufficiently robust".

Iain Lobban, director of GCHQ since July 2008, admitted to the ISC that agency laptop policies were lax.

"Historically, we just checked them in and checked them out and updated the records when they went through our... laptop control process," he said.

"I think perhaps some people perhaps took slightly hasty decisions without due process."

Lobban said an internal review had resulted in new procedures that not only allocate laptops, but also annually audit their location.

"Not only do we need to check them when they are moving in and out of the building, but at a particular point in the year we are going to check to say we know exactly where every single one is," he said.

The Committee responded: "This formerly cavalier attitude towards valuable and sensitive assets was unacceptable. Now that proper processes have been introduced, we trust that this problem will not arise again."

The report covers an eight-month period up to July 2009, and reveals GCHQ's struggles to recruit internet security staff.

"Work to tackle the threat of electronic attack is about a third below the level planned," it said.

"We have been told that the shortfall is because of the difficulties GCHQ has had in recruiting and retaining skilled internet specialists in sufficient numbers – although specialist recruitment campaigns have been set up to try and address this problem."

The agency is currently undergoing a massive rewiring to allow it to intercept and analyse more intelligence from internet communications. This includes the Mastering the Internet programme, revealed by The Register last year.

The ISC reported the "critical weaknesses" GCHQ admitted to in its approach to contract management had been addressed. Mastering the Internet, the cost of which is understood to run into hundreds of millions of pounds, involves contractors including Detica, HP and Lockheed-Martin.

"It is also essential that the work is effectively overseen," the Committee warned.

Elsewhere its report revealed that MI5, the Security Service, plans to build four new data halls at its data centre by 2011. ®

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