The permanent secretaries of the Department for Communities and Local Government and the Department of Health have strongly objected to a National Audit Office report that prompted the better care fund planning process to be branded a “shambles”.

Sir Bob Kerslake and Una O’Brien have written to the spending watchdog to complain about its report, Planning for the Better Care Fund, which was published this week.

They have also refused to follow a civil service procedure in which permanent secretaries approve the NAO’s use of information, HSJ’s sister title Local Government Chronicle understands. This is believed to be the first time in his career as a permanent secretary that Sir Bob has ever refused to sign off an NAO report.

The NAO report found that only £55m of “credible” savings were put forward in the first round of local better care fund plans because saving assumptions of £1bn were not written into official guidance. Assumptions in the 2013 spending round were that the programme would save £1bn over the course of 2015-16.

Bob Kerslake

This is believed to be the first time Sir Bob Keslake has refused to sign off an NAO report

The report criticised the government for setting up the fund with “no central programme team, no programme director and limited risk management”. It also raised concerns about the current assumption, under revised plans, that the fund would save the NHS more than £300m next year.

LGC understands the permanent secretaries believe the NAO report fails to understand what they see as the “localist” intentions behind the policy, in which councils and the NHS share budgets to join up health and social care services.

They have written to the NAO to say the report indicates the spending watchdog fails to understand the culture required to encourage local freedoms and flexibilities.

“We were establishing a new approach working across government departments and non-governmental departments with an emphasis on local innovation and delivery… This is still the case,” the letter is understood to say.

“Simply because the early [better care fund] plans needed strengthening doesn’t mean the process was fundamentally flawed.”

A DCLG source said: “If you’re going to allow local areas to innovate and come up with local solutions, you can’t impose a one size fits all model from the centre. That’s different from how the NAO looks at it, which is to account for every penny of public spending.

“We were trying to break free and do something innovative and different, so there wasn’t much overarching central control for that reason.

“You’re never going to move towards localism if at every stage national auditors want to account for every penny in terms of whether it fits a national policy prescription.”

An earlier draft of the NAO report, circulated last month, is understood to have described the early better care fund planning process as “a case study in how not to manage a major cross departmental programme”.

When the NAO report was published yesterday, Margaret Hodge, chair of the Commons public accounts committee, said: “I am dismayed that planning for the better care fund has been such a shambles.”

She accused government departments of “incompetence”, adding that this was “unacceptable at a time when the number of people most likely to need care is rising, and overall funding is falling”.