The report, Housing benefit: learning from inspection, says 75% of councils take
more than five weeks to deal with claims, and the situation is worse in London where the process often takes more than 14 weeks.
A statement from the commission said: 'Local authorities pay over£10bn a year in housing benefit on behalf of the government. But administration has been tarnished by error, waste and fraud estimated to cost hundreds of millions of pounds a year.'
Commission controller Sir Andrew Foster said: 'Poor organisation and management is not a good enough reason for long delays in administering claims.'
The Local Government Association's acting head of housing Gwyneth Taylor said problems arise because housing benefit is difficult to implement.
She added: 'Once problems develop it's difficult for local authorities to get out of trouble. The financial structure is complicated and councils can find they are subject to fierce penalties.'
Lambeth LBC fell foul of complex rules governing housing benefit when it misunderstood a letter from the Department
for Work and Pensions demanding£30m be repaid over 10 years and did not realise the government had already been withdrawing the money in instalments for three years.
The Department for Work and Pensions, along with the Improvement & Development Agency, has set up a task force to improve housing benefit performance.
Audit Commission senior manager Patrick Clackett said: 'This report is about learning from inspection, and we are looking at a second phase which includes partnering and outsourcing.'
The report said weak leadership and poor performance management cause many of the problems in housing benefit. Internal relationships and those between councils and external agencies need to be re-evaluated. Housing benefit complaints made up the bulk of those dealt with by the local government ombudsman last year.