DWP says its investigation into company found no evidence of fraud, but 'significant weaknesses in internal controls'
The Department of Work and Pensions has terminated a contract with a back-to-work company some of whose employees are under police investigation for fraud.
In a statement on Tuesday afternoon, the DWP said that after its own investigation into the company, A4e, it had found no evidence of fraud but felt that it was "too risky" to allow the contract for organising mandatory work placements in the south-east region to continue.
A4e says it still operates 16 other contracts for several back-to-work schemes and that these will remain in place.
In a written statement to the House of Commons, the department found that in an investigation of A4e's Windsor office – which is at the centre of a Thames Valley police investigation – 97% of payments to the company under the mandatory work activity (MWA) programme were correctly billed for and logged. "In the remaining 3% of cases," the statement said, "DWP investigators were nevertheless satisfied that the anomalies were attributable to inadequate procedures rather than fraud.
"The audits for the work programme, the new enterprise allowance programme and mandatory work activity are now complete. They have found no evidence of fraud in any of these contracts.
"However, while the team found no evidence of fraud, it identified significant weaknesses in A4e's internal controls on the mandatory work activity contract in the south-east."
The DWP's most severe criticism was about A4e's supporting paperwork, which it described as "seriously inadequate", and in a small number of cases it said claims were "erroneous".
The most recent figures show that across the country 24,010 jobseekers have been referred by jobcentres to do MWA, which means they must work for four weeks unpaid for 30 hours a week. When the scheme was set up last year, numerous private companies and charities bid to organise the placements on behalf of Jobcentre Plus. Companies are paid an upfront fee for each month-long placement in a charity or business that they organise.
The DWP added that the company, some of whose employees are under investigation for fraud relating to its other back-to-work contracts, was also not compliant with its own internal guidance.
"The process established prior to March fell significantly short of our expectations. As a result, the department has concluded that continuing with this contract presents too great a risk and we have terminated the mandatory work activity contract with A4e for the south-east," it said.
The DWP said contingency plans were in place to keep placements going.
In its own statement the company, whose former chair Emma Harrison recently resigned, said it welcomed the "positive findings" of the investigation and dismissed the MWA contract as "small".
"A4e today welcomed the positive findings of the audits undertaken by the Department for Work and Pensions (DWP) and the Skills Funding Agency (SFA) into allegations of fraudulent activity. Both confirmed they identified no evidence of fraud, systemic, attempted or otherwise in relation to any audit completed of the contracts they hold with A4e," the company said.
"Along with reviews by the Welsh and Northern Ireland assembly governments, this means that the majority of A4e's business has been fully examined by external auditors – ensuring our customers and government funders can have full confidence in our organisation."
A4e added that just five staff members were employed on the £1m contract and it made up just 0.5% of the company's total revenues.
The chief executive, Andrew Dutton, said: "These findings demonstrate what I have always maintained to be true – that there is no place for fraud at A4e and make it clear that A4e has strong controls around its flagship contract, the work programme. Our immediate task is to further enhance our controls to cement our position as a trusted provider of frontline public services.
"As a company, I recognise that we haven't got it right all of the time, but we are committed to taking responsibility for our mistakes and remedying them.
"No other provider has undergone such a thorough and forensic review of its contracts, and the positive outcome speaks for itself – this is huge reassurance for taxpayers and our customers."
The company added: "Our administrative processes fell short of our own standards and those required by DWP, and to this end we have accepted that the MWA contract will be terminated."
