The National Audit Office said the department had not "fully considered" efficiency and effectiveness when evaluating where cuts should be made.
As a result, police forces which are already facing budget cuts of up to 20 per cent over four years, could bear the brunt of further cuts.
The Home Office plans to save £1.1 billion annually by 2014-15.
But auditors said that £400 million of these savings were "uncertain" and a further £100 million was classified as being "only in development".
The financial management report also warned that there were "clear risks" to the successful delivery of programmes designed to develop or to phase out certain agencies and that the Home Office needed to retain a stronger grip on costs.
These include the creation of a National Crime Agency, the closure of the National Policing Improvement Agency and the merging of the Criminal Records Bureau and the Independent Safeguarding Authority to form a new Disclosure and Barring Service.
It said the programmes lacked continuity in management, had started slowly and were initially under-resourced. The NAO said that as a result, their execution would prove "exceptionally challenging".