The Public Accounts Committee (PAC) found there was a lack of accountability in the ‘city deals’ struck with areas including the Leeds and Sheffield city regions.
City deals represented the last Government’s initial effort to give places more responsibility in areas such as transport and skills.
The committee found there was no clear accountability for programmes backed with Government cash but administered locally through city deals.
In a report published today, it also expresses concern over the lack of a mechanism to assess the impact of city deals.
The report is published as the Government pushes ahead with a series of more ambitious devolution deals with areas which agree to have elected mayors.
Greater Manchester, the Sheffield City Region and the North-East have already agreed deals with the Chancellor to take more control over their own affairs.
Meg Hillier, who chairs the PAC, said: “Wider devolution deals, such as that agreed with Manchester, will see cities and regions take on increasing responsibility for providing public services.
“There is considerable scope for tension between local government, required to deliver and maintain services within a devolved budget, and central government which provides funding.
“When things go wrong, it must be clear who will be held to account. Taxpayers must understand who is spending their money, how that money is allocated, and where responsibility lies if the system fails to deliver good value.”
A Department for Communities and Local Government spokesman said: “This ‘One Nation Government’ is determined to rebalance our economy and ensure power and resources are devolved from Whitehall to local people who know best what is needed for their area.
“Ministers have been repeatedly clear that devolution of greater powers requires clear accountability, including through directly-elected mayors responsible to local taxpayers.
“The committee is right to recognise that City Deals were the start of a revolutionary new way of working – putting an end to decades of centralisation – and we will ensure lessons learned can inform future devolution deals.”