Hundreds of thousands of customs records have been deleted from the Home Office's struggling e-borders system, which equates to three quarters of all data-leads on potential drug and tobacco smuggling cases.
A report by John Vine, the independent chief inspector of borders and immigration, also found that the e-borders system is relying on the original pilot Semaphore technology, which was initially developed in 2004 by IBM.
E-Borders will enable the government to track almost all non-European Union nationals arriving in the UK and check passengers against security watch-lists.
The government is currently locked into a binding arbitration process with Raytheon, which was contracted to develop upon IBM's pilot, after the Home Office cancelled the £750 million deal in 2010.
Up until being removed from the e-borders contract, Raytheon had been paid £188 million out of its £742 million contract.
Vine's report notes: "The failure to meet key programme milestones resulted in the contract with the IT supplier being terminated in July 2010.
"This meant that e-borders continued to rely on the original pilot Semaphore IT platform, although enhancements had been made over time to ensure continuity of service."
However, today's report also outlines how poor quality data on some of the watch lists used by the e-borders system created inefficiencies in the National Border Targeting Centre (NTBC). Out of date and irrelevant entries on the watch lists resulted in a greater volume of work for NTBC staff, who were unable to manage.
This, coupled with the view that prioritised immigration work over customs work, resulted in the deletion of over 649,000 records from the pilot Semaphore system relating to potential drug and tobacco smuggling, over a ten month period.
The report states: "This amounted to three quarters of all the customs work generated in NBTC and impacted on the ability of e-borders to deliver anticipated benefits in relation to the seizure of prohibited and restricted goods."
Vine notes that the government expects to appoint a new supplier to the programme towards the end of this year.
He said: "The e-border programme has yet to deliver many of the anticipated benefits originally set out in 2007.
"The Home Office should now define clearly what the aims of the e-borders programme are ahead of the new procurement exercise, and be transparent about what e-borders will deliver and by when."
Last year the Home Affairs Committee branded the e-borders programme a "huge disappointment" and said that it had resulted in the loss of millions of pounds of taxpayers' money.