Eight arrests so far, as MPs examine government’s welfare-to-work programme

By Hui Shan Khoo and David Hencke | 23 May 2012

Detectives investigating welfare-to-work company A4e have arrested eight people as part of a fraud investigation.

The eighth person was arrested on Monday last week. The company, owned by Emma Harrison, the UK government’s former ‘family champion’, says that the alleged fraud was uncovered by its own internal investigation.

Exaro revealed yesterday morning that more than one in four of the company’s placements was potentially fraudulent, irregular or unverifiable, according to A4e’s own auditors.

“Last month, Exaro revealed that A4e, despite the furore surrounding the company, was being lined up for a big new government contract”

Robert Devereux, permanent secretary at the Department for Work and Pensions (DWP), was questioned yesterday afternoon by MPs on the House of Commons public accounts committee (PAC) about that startling finding in the wake Exaro’s revelations about the audit report.

The committee grilled Devereux for two hours, with some of the questions referring directly to the audit report. Earlier, MPs went into closed session to spend two hours hearing evidence from auditors who examined the government’s welfare-to-work schemes.

As Exaro reveals today, A4e auditors found an array of other problems with the company’s work placements, which included sending job-seekers with unspent criminal convictions to an employer that had insisted on staff with clean records. A4e was last week stripped of one of its DWP contracts – to find work for up to 1,000 jobless people in the south-east of England – after ministers decided that it was “too great a risk”.

The announcement was made as the National Audit Office (NAO) published a heavily critical report on the DWP’s fraud-detection systems. It concluded that the department had “missed vital evidence” when assessing the risk of fraud at A4e.

The NAO criticised the department for failing to obtain copies of providers’ internal audit reports – such as the A4e document published in full by Exaro today – and other records.

The DWP had been auditing its commercial relationships with A4e after receiving an allegation against the company earlier this year.

But Chris Grayling, employment minister, told Parliament that his department had found “no evidence of fraud” in A4e contracts.

The original allegation against the company suggested that A4e employees in Slough may have claimed payments for ‘mandatory work activity’ claimants who had not been placed in work.

A4e welcomed the finding that the DWP had identified no fraud.

Margaret Hodge, Labour MP and PAC chairwoman, has attacked A4e’s performance record as “abysmal” and urged the government to consider suspending the company’s work-programme contracts, which provide services through job centres.

Last month, Exaro revealed that A4e, despite the furore surrounding the company, was being lined up for a big new government contract.

In February, Harrison reportedly paid herself a dividend of £8.6 million for last year, despite the company’s failing to meet government targets of helping unemployed people find jobs.

A4e has defended Harrison, saying that she had risked millions of her own money during the 21 years during which she had built the company.

Fiona Mactaggart, Labour MP for Slough and a PAC member, told the Parliament that A4e had won DWP contracts worth £224 million since May 2010.

David Cameron, prime minister, initially hailed Harrison as an inspiration, and made her his “families tsar” in December 2010 to help his drive to encourage unemployed people back to work.

Harrison quit as both chairwoman of the company and her role as a government adviser in February. There is no suggestion of any wrongdoing by Harrison, and she has not been interviewed by police.

The company has repeatedly said that it has “zero tolerance” towards fraud.

A4e, which stands for Action for Employment, was established in Sheffield in 1991 to provide redundant steelworkers with training to help them find jobs in other industries.

The company expanded across the UK, and then into Germany, Poland and Australia.

It manages government contracts for welfare-to-work schemes, earning payments for finding jobs for unemployed people. Half of its work is sub-contracted to charities, generating millions in management fees.

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