Whitehall departments responsible for overseeing a £2.6bn cash pot in to support of local economic growth are struggling to allocate spend money as quickly as they need to, spending watchdogs have reported.

A National Audit Office progress report into the Coalition's Regional Growth Fund issued today finds both the DCLG and Department for Business, Innovation and Skills, have improved governance and recruited more skilled economists to help speed up the process of making final offers to bidders.

The fund was established in June 2010 to boost private sector economic growth, with a focus in areas of the country overly-reliant on public sector jobs.

An earlier NAO report on local growth found subsequent to the Coalition's dissolution of the Regional Development Agencies, Whitehall spend on local economic growth plummeted from £1.46bn in 2010/11 to a mere £273m in 2012/13.  However, it is set to increase to £1.7bn by 2014/15.

However, next year's £1.4bn RGF allocation is nearly three times the size of the £529m budget in 2013/14.

The auditors claimed value for money is distributing the cash is dependent on DCLG and BIS further tightening the cost-benefit ration on the number of jobs and other outcomes claimed by applicants.

Following concerns raised by the influential Public Accounts Committee, the departments have raised the cost-benefits ratio to a minimum of 2:1 before final letters can be signed.

The NAO also found that the average cost per job has increased by 13% from £33,000 in the first two RGF rounds to £37,400 now.

In addition, most of the £2.6bn fund allocation remains unspent, the NAO reported.  Only £492m out of £917m bid for has so far reached pro-growth projects, with £425m held by intermediaries.

So far the RGF has led to the creation of 44,400 jobs, but  nearly half (46%) of the jobs were safeguarded or related to just five out of a total of 296 operational schemes., according to the study.