Preventing fraud in contracted employment programmes - Public Accounts Committee Contents

Conclusions and recommendations

1.  The Department has not exercised sufficient oversight of its contractors to identify potential fraud and improper practice. A number of allegations of fraud have come to light of which the Department was not previously aware and which it has not investigated. Some of these would have been made known to the Department if it had asked the right questions of providers as part of its oversight and inspection arrangements. The Department has also acknowledged that the controls in place during the transitional period in implementing the Work Programme need to be updated. The Department should review its oversight arrangements for all its contracted employment programmes to ensure that they are fit for purpose. The arrangements should include:

  • reassessing the role, qualifications and expertise of the Department's provider assurance team, which visits providers to examine governance arrangements, service delivery, financial procedures and data security;
  • obtaining copies of all providers' relevant internal audit reports;
  • the Department instigating unannounced visits to providers and undertaking sample checks with both clients, training providers and employers, and
  • early publication of data so that varied practices between contractors become obvious.

2.  The Department's recent investigation into A4e did not establish whether the company was a 'fit and proper' contractor. The investigation focussed on particular allegations of fraud and looked at A4e's controls over specific transactions streams. But the Department did not examine other relevant issues such as how A4e's ownership and governance structures impact on business controls, the adequacy of corporate controls such as the role of the audit committee and internal audit, the objectives set for staff working in the organisation and the extent of company training in ethical behaviour. The Department also lacks a clear definition of 'systemic fraud'. The Department should define transparent criteria for assessing whether providers are 'fit and proper' companies and what would constitute 'systemic fraud' and assess providers against these criteria, paying particular attention to those which have a majority of their business with public bodies or have atypical ownership or governance arrangements. Given the number and size of public contracts for service delivery we believe the Cabinet Office should look at whether there is appropriate guidance for departments.

3.  The Department's controls against financial fraud in the Work Programme are stronger than those in previous schemes, but some risks still remain, for example, where individuals find employment without their help. The Department has sharpened the definitions and checks that trigger payments to contractors, reducing the scope for abuse. These controls are a welcome improvement on those in past schemes, but some risks still remain in the design of the Work Programme, such as the possibility of paying providers for individuals who have found work without their help. The Department should review and strengthen its controls where necessary to ensure contractors are only paid for results that they have achieved.

4.  There is currently no obvious route through which clients, contractors' employees, MPs or the public can raise issues of concern relating to fraud and poor service with the Department. The whistleblowing mechanisms in place are managed by individual, or groups of, providers. There is no facility for MPs to report high volumes of complaints to the Department. Furthermore, the Department relies on providers to disclose details of complaints they have received, as it does not have any mechanism to collect this information to identify trends and learn lessons from customer feedback. The Department should:

  • publicise its arrangements to enable whistleblowers to make complaints; and
  • capture and analyse information about complaints made about providers.

5.  There is no mechanism to raise service standards set at the start of the Work Programme over time. We recognise that the payment structures are designed to achieve more than one aim and we will return to the issue of the work programme after it has been in operation for long enough to consider whether the questions we raised about variations between different providers have either successfully stimulated innovation, or have created unacceptable variations between providers. The Department needs to improve public confidence in providers by increasing transparency. It is clear from the allegations that the Committee received, and from the response in the media to the Committee's examination of the Work Programme, that there is a substantial lack of public confidence and trust in some employment programme providers. The Department should take steps to satisfy public confidence in providers by publishing relevant information on its website about its main providers, including corporate governance, ownership structures, performance information, levels of fraud detected and complaints received and how they have been resolved.

6.  The Department must publish validated data on the outcomes achieved by the Work Programme. Much concern could be allayed if the results of the Work Programme were placed in the public domain. Partial data released by the employment providers' trade association, ERSA, the media or ministers serve merely to heighten suspicion and proper transparency would allay concerns. The providers' contracts require them to achieve a certain level of performance by the end of year one. Given that contracts started in June 2011 the Department should know now whether these targets have been met and should publish that data immediately.

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© Parliamentary copyright 2012
Prepared 28 September 2012