People with criminal records and other disqualifying factors have access to explosives because the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (search) is failing to do adequate background checks, posing a significant risk to public safety, the Justice Department's internal watchdog said Monday.

At least 655 people can continue to work for companies licensed to handle explosives even though they have criminal records or fall into one of six other prohibited categories, Justice Inspector General Glenn A. Fine (search) said. ATF continues to classify their applications as pending; until the clearance process is complete, applicants can continue to handle explosives.

The agency did not even request an FBI (search)background check on an estimated 3,420 of the 38,000 people who have sought government clearance to work with explosives, Fine said.

"This represents a significant risk to public safety," Fine said in a 132-page report on ATF's use of new powers to regulate the manufacture, purchase and use of explosives, part of homeland security legislation enacted in 2002.

Everyone who handles explosives will have to get a permit from ATF by next year.

ATF Director Carl Truscott, in response to the report, ascribed many of the problems Fine identified to the short six-month period to implement what Truscott called "the most significant changes to federal explosives laws in over 30 years."

More than 5.5 billion pounds of explosives are used each year by a range of industries, most of it in coal mining. Car makers need explosives for inflatable air bags, ski resorts use them to control avalanches and law enforcement employs exploding dye capsules to try to foil bank holdups.

Federal law has long banned felons and people under indictment, fugitives, drug addicts and people who have spent time in mental institutions from working with explosives. Following the Sept. 11, 2001 terror attacks, Congress added to the list most non-U.S. citizens, veterans who were dishonorably discharged from the military and people who have renounced their U.S. citizenship.

ATF continues to evaluate the application of four people who have been arrested multiple times, including one person serving a 33-month prison sentence in Arizona for theft, Fine said.

Those applications have since been denied, Truscott said.