In a report into the financial management of the Department for Culture, Media and Sport (DCMS), the independent spending watchdog said the department had decisions about the future of arm-length bodies with "insufficient financial information and analysis".
Last year, the scrapping of the UK Film Council hit the headlines after directors and actors, including Clint Eastwood, became involved in the campaign to save the organisation, which has an annual budget of £15m to invest in British films.
At the time, culture secretary Jeremy Hunt said support for film industry would continue, but that the changes would address "structural challenges" and "focus resources on supporting frontline film-makers, rather than expensive bureaucracy".
The NAO said the DCMS needed to stop applying standard flat-rate cuts to budgets and make awards to arm’s-length bodies that took account of their "differing cost bases" and the "differing impact that cuts may have on frontline delivery".
In its review, the NAO found that decisions, such as merging UK Sport and Sport England, amounted to "top slicing" and were made without speaking to the arm’s length bodies about what effect the cuts would make.
The NAO also recommended that the DCMS use a full analysis of costs, future savings, and pay-back periods when making decisions to merge or close arm’s-length bodies and to cancel projects.
In fact, the audit office found that in its most recent cuts, the DCMS did not make any assumptions on the cost and cost benefit of any closures or mergers and so, therefore, had no figures for the NAO to audit.
Amyas Morse, head of the NAO, said: "Some decisions have been made based on insufficient financial information and analysis. This can leave organisations exposed and unprepared for the future, and lead to high overall costs or the displacement of costs elsewhere."
Overall, the NAO said it had not been able to conclude that the department was achieving value for money, as gaps in the information reported prevented the board from fully examining the department’s financial position.
In response to the NAO’s findings, a DCMS spokeswoman said: "Closing a body always results in savings in the long term and similarly, merging a body, if done in a structured way, almost inevitably results in efficiencies and savings.
"We have been actively managing the closures and mergers to achieve value for money since these decisions were taken, and have both driven down costs and maximised efficiencies. We don’t feel this has been recognised by the NAO."