Audit slams Boris Johnson over £469m agency that hit Ken Livingstone at polls

The Mayor's economic regeneration body was criticised for its poor financial reporting, accounting errors and cost over-runs.

A letter sent by the Audit Commission raised serious concerns about whether the LDA, which has a £469 million budget, was fit for purpose.

It added: "The Agency has failed to meet the minimum requirements to manage its finances to deliver value for money."

The findings are embarrassing for Mr Johnson who was elected on a pledge to improve the running of the LDA.

He had even set up a forensic audit panel to examine the LDA's finances after revelations about apparent financial irregularities.

The letter was sent in January, around the same time as the departure of LDA finance director Andrew Travers.

City Hall sources suggested this was directly linked to the body's poor performance, something the Agency has denied.

Critics leapt on the auditor's report as proof the Mayor and his team had failed to get a grip on the LDA during his first full financial year in charge.

Labour's leader at City Hall Len Duvall said: "This is a verdict on the LDA after Boris Johnson's team was in place, after his forensic review', and with concerns expressed as recent as this January.

"For all his claims and promises we are now two years in and Boris Johnson is running out of people to blame. This makes for pretty damning reading."

Green Assembly member Jenny Jones added: "It is frustrating that the body charged with helping London through the recession is delivering so poorly for the taxpayers who fund it.

"The LDA is an unwieldy body which has been dysfunctional from the start and needs root and branch reform.

"However, the new Mayor has not given it firm direction, or made good on his promise of greater transparency and clarity. The reforms he has made seem to have added another layer of confusion."

The LDA has been riven with problems since its formation ten years ago and the district auditor, Les Kidner, acknowledged that Mr Johnson's team had made some improvements.

However, he added: "Further issues have come to light over the last year which show that more still needs to be done to ensure that the Agency's governance arrangements are robust and fit for purpose."

He singled out a £160 million overspend on the Olympics land budget and the poor quality of the LDA's accounts as being of particular concern.

The draft financial statements were "still poor" and contained "a large number of errors" while supporting papers required "considerable improvement", according to the 2008/09 report.

LDA chairman Harvey McGrath admitted there was an "urgent need" to strengthen financial capability across the body and added that the Olympic land budget problems were "disappointing".

However, he pointed to changes including a new finance director and the decision to appoint external financial consultants.

The auditor acknowledged the LDA had made some improvements over the course of the year.

But he added: "The scale of failings identified has had a significant impact on the Agency's funding of future programmes and on its reputation."

A spokesman for the LDA said: "We welcomed the Audit Commission's continued scrutiny and recommendations to improve our corporate performance. 

"The Audit Commission recognised that the LDA's new leadership had made significant improvements and we both acknowledge that there were further changes to be made.

"The LDA is committed to continuing to improve its performance and is stepping up the  pace by introducing further measures to deliver greater impact and value for money and has put in place an increased focus on the management of the Agency's finances."