Preventing fraud in contracted employment programmes - Public Accounts Committee Contents

2 Controls and Standards

10. The Department has taken steps to improve controls in its employment programmes, particularly those in its largest programme, the Work Programme. It has reduced the number of contracts it oversees. Under the New Deal there were 1,300 contracts and 600 contractors compared to the Work Programme's 18 contractors and 40 contracts. This enables a greater focus on the controls of each provider. In designing the Work Programme, the Department has also introduced a clearer definition of outcomes and checks to ensure that those outcomes are achieved before payment is made.[21] The Department now undertakes 100% checks that individuals for whom companies claim have been off-benefit. The Department also checks a sample of cases against HMRC records to ensure the individual is in work. If these tests fail, the Department will recover any overpayment and, where the data is based on a sample, will extrapolate the amount to be recovered on the basis that the sample was representative of the whole.[22] This computer system went live at the end of March 2012 and outcomes before that time are being checked retrospectively.[23]

11. Some of the controls that relate to the Work Programme do not, however, apply to some of the smaller programmes.[24] For example, the Mandatory Work Activity scheme does not have the same payment controls embedded into it and there are no systematic, independent checks with employers before payment is made. Without checks with employers the Department is dependent on information held by the provider and the risk of fraud remains.[25]

12. In addition, while the Department's controls against financial fraud in the Work Programme are stronger than in previous schemes, risks still remain. The Department has created new incentives which may increase the risk of fraud in other areas. Under the Work Programme it is possible for a provider to be paid for outcomes that it did not generate such as claiming a payment for someone starting on self-employment without any support from the provider.[26] The Department does not have a clear process to assess whether the contractor has helped the employee or not and in evidence the Department felt they should not be concerned about this.[27]

13. Complaints serve an important function in highlighting poor service quality or potential improper practice.[28] But the Department does not systematically collect claimant feedback and complaints, and there is no independent whistleblowing line to the Department and no clear process by which the concerns of MPs can properly be addressed by the Department, particularly if their concerns relate to more than one provider.[29] The Department considers that individuals should approach the provider if they have a complaint or approach their jobcentre, and if this doesn't work they can approach the independent case examiner.[30] This is an absurdly complicated process for the average claimant. Work Programme clients may also find it difficult to formulate a complaint because the service levels the Department expects are sometimes expressed in a vague way and are not clearly set out.[31] The Department has deliberately left it to the individual contractors in the Work Programme to specify the minimum standards they would use with these being considered by the Department to be contractually binding.[32] As a result, the minimum standards vary significantly between contractors and some are particularly vague, such as to "keep in touch with clients".[33] The agreed minimum standards are fixed for the duration of the contract with no contractual mechanism for encouraging improvements.[34] Moreover, the actual performance levels the Department is looking to enforce are not limited to the minimum performance standards but others that are also set out, in a variety of contractual terms.[35]

14. The Department regards a failure to comply with the minimum standards specified by contractors as a breach of contract. However, there is no clear mechanism which enables clients or employers to complain if standards are breached. The Department does not publish details on whether or not providers are complying with these minimum standards or with the wider performance standards it requires.[36] This is one example of a lack of transparency in the way the employment programmes operate. The Department has not published its internal audit reports into allegations of fraud in its providers, and in particular, A4e.[37] Many of these allegations have attracted public interest and the significant number of allegations received by the Chair and other members of the Committee and subsequent coverage in the press are evidence of a lack of public confidence in some providers.[38] Lack of transparency risks undermining the bona fides of the whole Work Programme and reducing confidence in providers and the Department's scrutiny arrangements.[39]

15. The level of transparency of some companies providing welfare to work does not compare well with publicly quoted shareholder-owned companies where there are shareholders' meetings and a higher level of transparency.[40] An important factor in governance is the ownership structure of the company. Providers are contractually obliged to inform the Department of a change of ownership, but when specifically asked about the ownership of A4e, the Department was unable to tell us whether the Chair of the company was also a shareholder.[41]

16. Much concern about the Work Programme exists because the Department has not published data which would enable informed judgements on the performance of contractors to be made. Lack of transparency merely serves to heighten lack of confidence in the programme and the providers working in it. ERSA (the employment providers' trade association), the press and Government ministers have quoted outcome data on the Work Programme without it being complete or comparable with any targets which would enable any assessment of whether the Programme was delivering as expected.[42]

17. The Department maintains that reliable data on job outcomes is not yet available as most claimants have to be in a job for six months before providers receive an outcome payment.[43] This position is, however, at odds with the fact that the Department has set outcome performance targets in the Work Programme contracts, operational from June 2011 which have to be achieved by the end of the first year of the contract and which will have to be monitored using the information available now.[44] For example, one of the performance requirements in the Work Programme contracts is that providers should achieve, by the end of the first year of the contract, outcomes for certain groups set at 10 per cent above the 'non intervention rate' (the percentage of people who would have found work without the help of the programme).[45] The non intervention rate has been set by the Department at 5 per cent.[46]

21   Q 55 Back

22   Qq 59-60 Back

23   C&AG's Report, para 2.3 Back

24   Q 38 Back

25   C&AG's Report Para 2.13 Back

26   Qq 71, 90 Back

27   Q 72 Back

28   C&AG's Report Para 4.12 Back

29   Qq 38, 95 Back

30   Qq 95, 98 Back

31   Q 99; C&AG's Report Para 4.2 Back

32   Q 64 Back

33   Qq 65, 140 Back

34   Q 144 Back

35   Q 64 Back

36   Q 79 Back

37   Q 29 Back

38   Q 31 Back

39   Q 33 Back

40   Q 37 Back

41   Qq 122-124, 127 Back

42   ERSA press release 21 February 2012, Daily Telegraph 29 June 2012, DWP press release 9 July 2012 Back

43   Department's press release 9 July 2012 Back

44   Work Programme contract Clause 2.12, Back

45   Work Programme contract Appendix 2 Part A, Back

46   Work Programme Invitation to Tender - Specification and supporting information Para 3.14,


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Prepared 28 September 2012