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Fraud levels in contracted employment programmes are low, says NAO

New report finds that DWP’s past assessment of the risk of fraud at A4e missed vital evidence.

Fraud levels in contracted employment programmes are relatively low compared with the benefits system and the losses from staff fraud and irregularities, according to a report by the National Audit Office (NAO) that examined arrangements at the Department for Work and Pensions (DWP) for detecting and preventing fraud and improper practices in employment programmes.

However, the report finds that some risk still remains because not every control applies to every programme, particularly to smaller ones.

The DWP spends around £900m a year on employment and support programmes that assist unemployed people to find and keep work.

In 2011 alone, government spending on employment programmes was £829m. Over half of reported fraud in employment programmes since 2006 relates to the New Deal programmes that ended in 2011.

The current Work Programme, which started in June 2011, will cost £3bn to £5bn over the next five years depending on performance.

In particular, the report finds that the department’s past assessment of the risk of fraud at A4e missed vital evidence. The department does not currently obtain all relevant copies of providers’ internal audit reports and did not receive the paper sent to the chair of the Public Accounts Committee. This included evidence of nine possible cases of fraud and seven of improper practice by A4e’s staff and highlighted a possible systematic failure to mitigate the risk of fraudulent and irregular activity at both an office and regional level.

There have been 126 reported cases of potential fraud investigated by the DWP since 2006-07. According to the report, the total value of cases of reported fraud investigated since 2006 is £773,000. More than half of fraud allegations since 2006 have been in respect of New Deal programmes which ended in 2011. The department knew of the fraud risks inherent in such programmes but did not do enough to quantify and address them. Compensating controls, for example, checks at employers to verify claims that people had actually been placed in work, were not introduced.

In its report, NAO said that the department did not do enough to quantify and address the fraud risks in the design of New Deal and other legacy programmes. However, NAO said that the Department has now significantly improved the controls.

Schemes such as the Flexible New Deal and the Work Programme that replaced the New Deal have been designed with measurable and verifiable outcomes to minimize the risk of fraud. For example, the DWP now checks the records of HM Revenue and Customs to test whether claimants are actually working. But, notably, in the case of the £8m programme providing mandatory work activity, there are still no independent checks with employers that unemployed people said to have been placed with them for work activity have been.

The NAO recommends that the department should make the most of the fraud risk knowledge it possesses and share it more effectively; and that users’ complaints be used to assess the quality of service providers.

Amyas Morse, head of the NAO, said:

The department has improved its range of controls on the Work Programme, in particular, compared with previous schemes. However, it missed a number of opportunities to detect potential problems at A4e and it needs to tighten controls on its smaller programmes.