Shared services schemes by five central government departments are £500 million over budget between them, according to a report from the National Audit Office.

The Department for Work and Pensions, the Ministry of Justice, the UK Research Councils (RCUK), the Department for Transport and the Department for Environment, Food and Rural Affairs have collectively spent £1.4 billion on their respective shared services schemes. The expected combined cost was £900 million.

These schemes were expected to save a total of £159 million last year. However, three departments – the MoJ, the DWP and Defra – have failed to track the benefits or costs of their implementations.

Head of the NAO, Amyas Morse, said that the Cabinet Office has acknowledged the failings of the projects, and that the only way the services would successfully deliver cost savings was if the government learned from its past mistakes.

"The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary and tailored services to meet the differing needs of individual departments," Morse said. "The result was over complexity, reduced flexibility and a failure to cut costs."

The NAO report noted that the Cabinet Office was taking steps to rectify the situation and had recently gained approval for a new strategy and business case, saying the approach is "ambitious and has challenging timescales".

The departments have been pursuing shared services since the Gershon Review of efficiency in the public sector recommended the approach in 2004, with the aim of making cost savings in human resources, finance, procurement and payroll. The NAO said it has been up to individual departments to establish their own arrangements, with eight centres emerging between 2004 and 2011.