MPs will today be told that the Royal Mint faces a "challenging and painful" period of restructuring if it is to halt growing losses.

The National Audit Office reveals that the Royal Mint posted a £6.5 million loss over the last financial year - the second year in succession.

In a report published today, the watchdog sets out the reasons for the Royal Mint's declining financial performance over recent years and warns that it will face tough decisions.

A £12 million restructuring programme was announced by the Royal Mint in March 2002, which will involve around 200 redundancies from amongst the 1,200 strong workforce at the Mint's plant in Llantrisant, South Wales.

Earlier this year, the Deputy Master of the Mint was alerted to allegations that the organisation had been involved in making improper payments.

His report was submitted to the Serious Fraud Office, which is currently carrying out an investigation in conjunction with Ministry of Defence Police.

Today's report will also detail the circumstances surrounding the theft of over £25,000 in £20 notes from the Royal Mint during 2001.

It emerges that security was so poor that someone was able to walk in from the street and seize the cash.

Sir John Bourn, the head of the National Audit Office, says today: "The Royal Mint's declining financial performance in recent years is largely a consequence of the external pressures of a highly competitive global market.

"The Mint now faces a challenging and painful period of restructuring as it seeks to return to overall profitability."