The DCLG will need to invest in greater financial expertise to manage a significant hike in the department's use of innovative commercial models, amid ever-tighter budgetary pressures, spending watchdogs have warned.
A report issued by the National Audit Office (NAO) detailing the DCLG's performance in 2012/13 notes the department's share of spending on new funding models is set to vastly increase from 9% in 2012/13 to 71% by 2015/16.
These financial instruments include the £10bn debt guarantee for new housing. This is comprised of a £3.5bn maximum guarantee for the Affordable Homes Guarantee programme - which officials have forecast could deliver up to 30,000 extra affordable homes and a £6.5bn facility for private rented housing.
‘The department acknowledges that it needs to acquire additional commercial skills to manage the significant increase in its use of financial instruments,' the auditors note.
Elsewhere the report outlines the efforts the DCLG has made to trim running cots by £231m over the current spending review period.
Cost-cutting measures include reducing it's headcount by 37%, co-locating with the Home Office to save £9m annually and potentially £220m by 2025 and cutting or merging the number of arm's length bodies from 26 to 9.
However, the auditors cited the annual Civil Service People Survey which showed despite an improvement on the previous year, the DCLG still remains below the Whitehall average across a range of issues including leadership, managing change and understanding the department's objectives.
Giving evidence to the Communities and Local Government Select Committee on Monday, senior Eland House officials confirmed a recent ‘pulse survey' of staff asking similar questions showed a 5% on staff engagement.
At the same evidence session, DCLG permanent secretary, Sir Bob Kerslake told MPs the department was confident there would not be a widespread financial failure among local authorities.
The DCLG did not have a 'dashboard ' signalling the relative financial strength of each individual authority, but made use of shared intelligence, the permanent secretary explained.
