Cameron and CleggA flagship coalition scheme to boost the economy has been spending as much as £200,000 to generate one job, according to auditors.

The Regional Growth Fund was launched nearly two years ago to support enterprise and promote business in areas that have traditionally been reliant on the state.

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David Cameron and his Liberal Democrat deputy Nick Clegg praised the initiative when they visited Essex technology firm e2v, one of the beneficiaries, earlier this week.

A report by the National Audit Office (NAO) on the first £1.4 billion of awards to businesses found the fund was being targeted at parts of the country that were most in need. It estimated that 41,000 extra jobs could be created in the economy over the next seven years as a result of the scheme's operation.

But the NAO suggested that the taxpayer would have received much better value for money if bids had been more closely scrutinised. "Over 90% of the net additional jobs could have been delivered for 75% of the cost, with the cost of each job then being £26,000," the report said. "The cost per net additional job supported by the Fund varies from under £4,000 to over £200,000."

The auditors indicated that the fund was not performing any better than previous equivalents under Labour.

"If the Fund delivers in line with expectations, the average cost to the Fund of each net additional job would be £33,000," they said. "It is difficult to benchmark this cost against the cost per net additional job of similar previous programmes because evaluations do not contain strictly comparable information. However, based on the information available, a cost of £33,000 per net additional job is similar to the cost per net additional job achieved by programmes with comparable objectives."

The NAO stated: "Value for money was not optimised because a significant proportion of the Fund was allocated to projects that offered relatively few jobs for the public money invested. Applying tighter controls over the value for money offered by individual bids would improve the Fund's overall cost-effectiveness. Officials' time freed up from post-appraisal checks on projects where public money is providing fewer jobs could be spent on getting other projects up and running more quickly.

"Such an approach provides the prospect of better value for money and faster delivery from the further £1 billion allocated to the Fund in the Chancellor's November 2011 Autumn Statement."

Business Secretary Vince Cable said: "The NAO's report recognises that the Regional Growth Fund is working. It shows that the RGF is set to create and protect 328,000 jobs for people in communities that need the most support and help companies grow. It shows that our processes are robust, competitive and unbiased. It shows that we chose to support the highest quality bids offering best value for money. We have already put in place some of the NAO's recommendations such as making more administrative resources available, which means projects are being processed even faster. Round three will create thousands more jobs, and businesses have until June 13 to submit their bids."

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