A report by the Public Accounts Committee found that the department had 'a limited understanding of how the funding it provides for early education is spent'.
More than a third of local authorities stated that they had limited knowledge of the costs associated with delivery and one in ten admitted they did not pay sufficient amounts.
Committee chair Margaret Hodge said that while early years provision had 'expanded significantly', with more than 800,000 threeand four-year-olds accessing the free entitlement, the department had done little to understand the costs and outcomes in different local authorities.
Around £1.9 billion was spent on funding the three and four-year-olds offer in 2011-12.
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