Auditors asked to identify financial discrepancies at two of Britain’s biggest welfare-to-work firms will tell parliament they found evidence of widespread fraud but their concerns were ignored.

The investigators employed by Working Links and A4e, which hold government contracts worth more than £100m, will tell MPs they requested formal inquiries into possible abuses of public money but their requests were not followed through.

The claims will form part of a session of the public accounts committee, which is hearing evidence from witnesses involved in the welfare-to-work sector. Committee members say they have received hundreds of claims of fraudulent activity within the sector that pays private contractors to put millions of people back to work.

One witness, the head of a forensic services department in an accountancy firm, alleges that he was asked in 2008 by Working Links to investigate allegations by whistleblowers and employees who were concerned about fraud.

He claims that, following his inquiries, he asked senior Working Links executives to ask police to launch a criminal inquiry into some allegations. This, he claims, was not followed through by the company.

A spokesman for Working Links said the company took allegations of impropriety seriously and would examine them as a matter of urgency once they had appeared before the committee.

Another witness, a senior figure in A4e’s risk and audit department in 2011, claims there was evidence of fraudulent activity in many of the firm’s offices.

He says that, in two of A4e’s offices, staff were caught with company stamps that could be used on paperwork to claim public money for placing people in jobs. Despite a formal investigation, A4e took no action, the witness claims.

A4e denies any fraudulent activity. It says that the stamps were only used with the employers’ full knowledge and consent, and that a stamp alone could not be used to validate claims.

A4e has responded by criticising the committee for failing to call it to give evidence to the meeting.

Working Links and A4e are two of 18 main providers, including Serco, and Ingeus Deloitte, commissioned to deliver 40 contracts to get the long-term unemployed into work at a cost of up to £5bn.

Working Links was founded in 2000 as a public-private partnership. In 2010, its turnover was £123m. A Department for Work and Pensions (DWP) investigation into A4e this year found no evidence of fraud and said there were only problems with one of the 12 contracts with A4e. But there is an ongoing police inquiry involving employees of the company.

Chris Grayling, minister for employment, announced that the department had cancelled a £1m work contract with A4e.

Emma Harrison, the head of the company, quit her role as David Cameron’s “family champion” this year after one of the investigations was launched, a move that was highly embarrassing for the prime minister.

In a report published last week, the National Audit Office said the DWP did “not do enough” to stem hundreds of thousands of pounds worth of fraud among private companies administering back-to-work schemes, even though it knew of the risks.

More than half of all documented fraudulent activity had occurred under Labour’s New Deal programmes, which ended in June 2011, according to the report. The newer flagship scheme called the Work Programme had “largely addressed the main weaknesses” in previous programmes, the report said.

But it warned that “risks still remain” for smaller current programmes such as Mandatory Work Activity because it had no means for “systematic independent checks”.

An A4e spokeswoman criticised the committee for failing to allow the company to respond to witnesses who will give evidence on Tuesday and denied allegations of fraudulent activity.

“The committee has called witnesses to give evidence against A4e at the last minute, without calling a representative of A4e, or allowing us the opportunity to respond directly to any concerns or evidence they have relating to our delivery of welfare-to-work,” she said.

“Wherever we have been given facts to support any previous allegations, we have looked into them and we have not found a single allegation of fraud that stands up.

“All allegations which have been made to us are related to historic, paper-based contracts, where an unsubstantiated claim can be the result of any number of things in a vast, paper-based system and certainly not evidence of fraud.

Paul Champion

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Twitter: @blogapprentice
Skype: paulchampion31

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