Three quarters of government departments are failing to properly monitor how cash destined for public services is being spent, according to a new National Audit Office report.

The study released on Friday found that government departments have got better at resource management but need to do more to ensure money meant for public services is actually getting to the frontline.

The spending watchdog said that recent changes in resource management have allowed departments to make improved use of money, assets and other resources.

But it warns that they can still do more to better manage what they have so that they can deliver high quality public services

Changes which have delivered savings include three year budgets, greater flexibility to carry forward unspent funds into future years, resources linked to targets and the introduction of commercial style accounting and budgeting.

But the report warns that a "stepwise change" in departmental behaviour is necessary if significant productivity boosts are to be achieved.

Whilst one in four department are "making good use" of the new regime the remaining departments have "made limited progress".

"While over a third of departments have made use of the new flexibility to carry forward unspent resources, there is still a bias towards potentially wasteful spending surges in the last two months of the year," the NAO noted.

One in three department still uses cash-based management information - which means they lack awareness about how much it really costs to deliver services.

The NAO said departments should:

• Provide a clearer lead, particularly at board level, in demonstrating the importance of better resource management and the use of improved information and flexibilities, and in ensuring greater alignment of the targets and resource allocation of key organisations involved in delivering specific services.

• Engage regularly with the chain of public, private and voluntary organisations who increasingly deliver frontline services to ensure they have the appropriate capabilities and skills, and where these are deficient seek to strengthen them.

• Allow appropriate flexibility to encourage innovation and sensible and well managed risk taking when allocating resources both internally and to partner organisations.

• Use the new management information now available to make better use of resources and improve efficiency.

NAO chief Sir John Bourn said: "Good resource management is vital if departments are to meet their ambitious objectives and targets for service improvement.

"They need to review their resource management practices and make best use of the new information on service costs and the consumption of resources.

"Given the huge amounts of resources involved in governmental programmes even a relatively small improvement in efficiency could release significant resources for frontline public services."