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This department has been mentioned once in the Order of the Phoenix book, Chapter-1, when the magical minister and the muggle PM were discussing about the bridge collapse.

However, there wasn't much information about what the department does.

Is there any canonical explanation/information about what this department does, and how does it connect/sit with the remaining departments of the Ministry of Magic?

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Introduction

Office of Misinformation does what the name suggests; It spreads misinformation , if a severe magical accident or serious breach of magical secrecy occurs, to cover up the event by putting out false information in order to explain the event as per Muggle comprehension with or without Liaison and coordination of relevant Muggle authorities.

Responsibilities and Operations

As Newton Scamander notes in Fantastic Beasts and Where to Find Them:

The Office of Misinformation will become involved in only the very worst magical-Muggle collisions. Some magical catastrophes or accidents are simply too glaringly obvious to be explained away by Muggles without the help of an outside authority. The Office of Misinformation will in such a case liaise directly with the Muggle prime minister to seek a plausible non-magical explanation for the event.

This sounds like description of Muggle-Worthy Excuse Committee but the difference between the two is that Office of Misinformation only gets involved if the situation is very dire while MWE Committee deals with more minor events.

Example of one operation of the office is the Lochness monster episode. Office worked to prove that all evidence in favor of existence of such a being was false and fabricated.

The office can however act independently without notifying the Muggle authorities if situation demands it. For example according to Chapter 1 of HP & HBP the department attributed those events (Attacks by giants etc) to a Hurricane and modified memories where required. Muggle PM was notified only after the deed was done as fait accompli.

Departmental Hierarchy in the Ministry

According to Fantastic beasts and where to find them, Office of Misinformation is a section of Department for the Regulation and Control of Magical Creatures.

(Even though imo, they should be under Department of Magical Accidents and Catastrophes and Muggle Worthy Excuse Committee should be merged into office of Misinformation )

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