Welfare to work ‘fraud scandal’

The welfare to work firm owned by David Cameron’s former families tsar is involved in a “multi-billion-pound scandal” in which public money has been systematically misused, a whistleblower has said.

Written evidence submitted to Parliament by a former chief auditor at A4e shows how an “unethical culture” led to “systemic fraud” at the company, which holds major government contracts. When concerns were raised about wrongdoing with senior managers, little was done to address the widespread abuse of taxpayers’ money, the whistleblower alleged.

A document put to MPs also described serious problems at another welfare to work provider, Working Links, which runs three major contracts on the Coalition’s £5 billion jobs scheme and is part-owned by the Government.

The evidence was submitted by Eddie Hutchinson, the former head of audit at A4e, who attended a meeting of the Commons public accounts committee on Tuesday from which the public was excluded.

The Daily Telegraph has seen a copy of the documents submitted.

Mr Hutchinson made the allegations a week after the Government said it had seen no evidence of fraud in contracts held by A4e.

A4e and Working Links work on government contracts that pay them up to £2,000 for placing an unemployed person into a long-term job. A4E is majority-owned by Emma Harrison, who stepped down in February as an unpaid adviser on family issues to the Government. The company, which holds government contracts worth hundreds of millions of pounds, has faced several allegations about its conduct in recent months.

Eight of its employees have been arrested by police investigating allegations of fraud. The Department for Work and Pensions last week ended one of its contracts as “too great a risk”.

Both companies on Wednesday night denied any wrongdoing. The auditor’s evidence will leave the Government facing political questions over its employment programmes, since Mr Hutchinson suggests that many of the jobs the companies claim to have created are fictitious.

In his evidence, Mr Hutchinson claimed that the leaders of both companies oversaw a “disgraceful misuse of government and taxpayer funding”, characterised by unethical behaviour, mismanagement, inadequate corporate governance and risk management and excessive payments in salaries.

An auditor with 30 years’ experience, Mr Hutchinson’s statement discloses that despite his discovery of an “ever-increasing volume of frauds”, with two or three new allegations arising on some days, the company failed to act. It cultivated a culture that discouraged employees from revealing improper practices, the document states.

“I encountered unethical behaviour or wrongdoing that fell way below standards that should be expected of organisations funded by significant sums from the public purse,” he wrote.

The repeated incidents of malpractice in the sector have led to a “multi-billion pound scandal”, he claimed in his statement. In his evidence, Mr Hutchinson, who worked at A4e from October 2010 until May last year, alleges:

A bonus scheme for employers “drove inappropriate behaviour” by staff willing to commit fraud.

Staff acted in the belief that if their irregularity was discovered, they could resign in the knowledge no further action would be taken.

Two years on from a 2009 audit report warning fraud was not confined to one part of the country, fraud was still “systemic”.

In his evidence, Mr Hutchinson described workers faking documents supposed to confirm successful placements of the unemployed. In one case, Mr Hutchinson said, an investigation into fraud at the Newcastle office of A4e in October 2010 revealed staff had used a stamp from an employer to wrongly show that people had been given jobs.

Emma Harrison quit her executive role at the company in February after the launch of a police inquiry into some of its work. She also quit her role of families tsar for the Government.

Two other whistleblowers have also submitted evidence. After protests from Conservative members, the select committee discussed the evidence in private. The committee said on Wednesday: “We will insist that the allegations are fully investigated and results of the investigation published.”

A4e rejected Mr Hutchinson’s evidence, saying: “None of these allegations stand up.” It added: “A4e has adhered to established procedure by ensuring relevant issues are referred to the relevant funder authority. None of the issues raised here prove there is systemic fraud at A4e and all of them relate to historic contracts.”

Working Links said: “We firmly reject any assertion of widespread fraud within our business.”

The company said it has “a zero-tolerance” approach to fraud and has rigorous processes in place to handle any suspected incidents of fraud or other misconduct. The incidents described by Mr Hutchinson were “thoroughly investigated by the head of internal audit and resolved”.

A DWP spokesman said: “We have changed the way we run our welfare to work programmes to safeguard taxpayers’ money. We only pay by results and under the Work Programme claims are verified against benefit and employment records to make sure fraudulent claims are not processed. No one should mistake unproven allegations about past welfare-to-work schemes with strong controls we have in place on current programmes. We have audited our current contracts with A4e and found no evidence of fraud.”

Paul Champion

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Twitter: @blogapprentice
Skype: paulchampion31

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