Welfare-to-work fraud detection inadequate, say MPs

Margaret Hodge: 'You don't pay a company if they have not done the work.'

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The government failed to be rigorous enough in detecting fraud among its welfare-to-work providers, a committee of MPs has said.

The public accounts committee said the Department for Work and Pensions (DWP) had missed "vital evidence" of possible fraud, particularly at the firm A4e.

Committee chair Margaret Hodge said the DWP had "not been proactive in setting in place systems which root out fraud".

A4e said a recent audit of the firm had found no evidence of fraud.

MPs accepted that financial checks on welfare-to-work schemes had been improved under the current government.

'So weak'

But Labour MP Ms Hodge said that "risks remain, especially to value for taxpayers' money", with the Work Programme, which launched in 2011.

Start Quote

The department failed, for example, to obtain from A4e damning internal audit reports produced in 2009 which pointed to instances of potential fraud and malpractice across the country.”

End Quote Margaret Hodge Labour MP and public accounts committee chair

She explained: "The design of the programme still allows for the possibility of providers being paid for finding work for people who found the jobs on their own."

She told the BBC's Daily Politics that her "real concern" was whether A4e was a "fit and proper company" for the DWP to do business with.

According to the report, the DWP spends about £900m each year on programmes designed to help unemployed people find, and keep, jobs, with both private companies and charities securing contracts.

But A4e - the government's largest provider - is currently the subject of a police investigation into allegations of fraud relating to its multi-million-pound welfare-to-work activities.

In February, entrepreneur Emma Harrison stepped down as the head of A4e and quit her role as the government's "family champion".

The DWP launched its own investigation in March, following a new allegation of attempted fraud in connection with A4e's provision of services for the government's Mandatory Work Activity scheme.

Ms Hodge said: "Where the government chooses to use private companies to deliver public services it is essential that proper arrangements are in place to prevent and detect fraud and malpractice.

"In this instance, the DWP's arrangements for overseeing and inspecting its contractors were so weak that vital evidence on potential fraud and improper practice was not picked up.

"The department failed, for example, to obtain from A4e damning internal audit reports produced in 2009 which pointed to instances of potential fraud and malpractice across the country."

'Fit and proper'

The MPs also said the DWP had not been specific enough with its terminology, including failing to define the standards a provider had to meet to be a "fit and proper organisation".

A4e's history

  • A4e, which stands for Action for Employment, was established in Sheffield in 1991
  • It was set up to provide redundant steelworkers with the training they required to get jobs in other industries
  • The company then steadily expanded across the UK, before entering Poland in 2008, Germany in 2009 and Australia in 2010

The DWP "has said on the public record that it would terminate its commercial relationship with a provider if there was evidence of systemic fraud in either current or past contracts", Ms Hodge added.

"However, it has not yet provided a clear definition of what it means by 'systemic'."

A clearer understanding of these terms would help government departments decide which firms to do business with, the committee suggested.

Further, the DWP must put in place better systems to help whistleblowers bring any abuse of taxpayers' money to light, it said.

There was also an urgent need for the government to publish detailed data on how public money was being spent on welfare-to-work programmes and what exactly they were achieving, the MPs said.

'Outrageous and untrue'
A4e website detail A4e is a contractor for the government's welfare-to-work schemes

A DWP spokesman said many of the allegations in the report "relate to previous government schemes", dating back to 2009 when Labour was in power.

"We have ... put in place the toughest anti-fraud measures ever included in a government back-to-work scheme," he added.

In a statement, Work and Pensions Secretary Iain Duncan Smith said he had asked senior Labour figures - including Ms Hodge - to reveal advice they received about fraud during their time in office.

"No such permission has been granted; indeed, some have not replied at all," he said.

In May, Ms Hodge insisted any suggestion she had "deliberately withheld information" on the matter was "outrageous and untrue".

Commenting on Friday's report, Andrew Dutton, chief executive of A4e, said he was "confident" the firm was "a fit and proper company".

"We have gone back and strengthened our controls and ... we are now openly calling on MPs, business leaders and employers to come and see for themselves the work that we are doing."

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