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Eric Pickles' department has been fined for having an unauthorised bank overdraft, it has emerged.

Just two days ago, he was praised by Chancellor George Osborne as "a model of lean government".

The Department for Communities and Local Government ended the financial year £217m overdrawn and was fined £20,000 by the Treasury.

Margaret Hodge, chairman of the Public Accounts Committee, said it was "a shocking example of incompetence".

Mr Osborne hailed Communities Secretary Mr Pickles for his work in cutting costs at the department, which has agreed to a 10% budget-cut in 2015-16.

In particular, Mr Pickles was praised for reducing the size of the department by 60% and abolishing 12 quangos.

But the National Audit Office is concerned that the DCLG - which is responsible for controlling spending by local councils - has not been keeping a proper eye on its own books.

The department went over its cash spending limits towards the end of the financial year and took out an unauthorised bank overdraft, the National Audit Office has revealed.

Despite this, Downing Street said Prime Minister David Cameron still shared Mr Osborne's favourable opinion of Mr Pickles.

"I think the prime minister agrees with the chancellor's assessment," a No 10 spokesman said.

The department said its accounts showed that it stayed "well within" the Treasury's overall spending limits.

"The department has taken immediate action to address the issues raised," a spokesman said.

"Internal audit reports were commissioned and the findings are now being implemented before the next supplementary estimate. This will avoid any recurrence."

But Margaret Hodge said the £217m overdraft was "a shocking example of incompetence - no-one was keeping an eye on the cash position".

She said she was "staggered that the department has been so blase with its resources and so poor at staying within some of its budgets.

"If local authorities, for whom the department is responsible, acted in this way, the department would be down on them like a ton of bricks."

The department also went over its capital limit for local government spending.

Two quangos - the Valuation Tribunal Service, which handles ratepayer appeals against council tax in England, and the local government ombudsman in England - spent a total of £1.2m, against a limit of £80,000.

A DCLG spokesman said: "The annual report and accounts for 2012-13 show the department has an excellent record for saving money and has stayed well within the Treasury's overall spending limits.

"An administrative error by officials meant the department went overdrawn for one banking night at the end of the financial year, but immediate action was taken to correct it and avoid any recurrence.

"This government has stopped excessive and wasteful spending in the department, delivering the largest savings in Whitehall, with administration spending down by more than 40% and the move to Marsham Street next year saving the taxpayer £9m per year."

For Labour, shadow communities secretary Hilary Benn said Mr Pickles needed to "get a grip" of his department.

"Eric Pickles wastes no opportunity to grandstand and lecture local authorities on properly managing their finances so this public rebuke over his own shocking failure to do the same in his department is hugely embarrassing for him and David Cameron," he said.

"Eric Pickles must act urgently to get a grip of his department, stop wasting public money and focus on getting his own house in order before he preaches to councils again."