Company’s auditors raised questions over one in four ‘welfare-to-work’ placements

By David Hencke | 22 May 2012

Auditors for a troubled company running government welfare-to-work programmes discovered that more than a quarter of its placements was potentially fraudulent, irregular or unverifiable.

The company, A4e, placed one job-seeker at a Liverpool lap-dance club.

A4e is one of the five main contractors on the government’s £5 billion work programme, but is already facing a police investigation over fraud allegations relating to its centre in Slough.

It has contracts worth £200 million with the Department for Work and Pensions (DWP) to provide jobs, each of at least 16 hours a week for 13 weeks.

The A4e audit and risk department compiled a report after examining in July 2009 a sample of 224 of the company’s job placements.

The highly sensitive report, a copy of which has been obtained by Exaro, shows that the auditors regarded 69 of the placements – more than 30 per cent of them – as questionable.

Of the placements surveyed, auditors found that nine were cases of “potentially fraudulent and irregular activity”. Of those, three were in Norwich, two in Rotherham, and one each in Bridlington, Slough, Newcastle and Woolwich.

The internal audit report suggests that problems with A4e’s back-to-work schemes have been UK-wide and more widespread than so far reported. Last month, Exaro revealed that A4e, despite the furore surrounding the company, was being lined up for a big new government contract.

The audit examined “a sample of job outcomes claimed by the top 20 recruiters across the A4e Work division of A4e Ltd.”

The leaked report says: “The audit has highlighted that potential fraudulent/irregular activity is not confined to one particular geographical area of the division, and shows a potential systematic failure to mitigate the risk towards this behaviour at both an office and regional level.”

The auditors reported that recruiters had submitted claims for putting people into jobs that either did not exist or did not qualify for payment, and that they had fabricated paperwork.

They found seven cases that put A4e at “reputational risk”. Three of these were in Nottingham, and one each in Bridlington, Edinburgh, Newcastle and Woolwich.

And they found another 21 cases where there had been a breakdown in the management of placements “leading to other areas of risk.”

These included the “job outcome” section of the DWP claim-forms being completed by someone other than the employer. Four such cases were in Manchester, three each in Great Yarmouth, Nottingham, St Helens and Slough; two each in Bootle and Milton Keynes; and one in Newcastle.

The report says: “We noted during our audit that management information in relation to the effectiveness of existing controls is minimal.”

The auditors were unable to verify another 32 cases because they could not find the appropriate person to contact or the companies had gone bust. They found three cases where A4e had under claimed.

Last week, the DWP announced that it was stripping A4e of one welfare-to-work contracts after identifying “significant weaknesses” in internal controls. But it was retaining 16 other contracts.

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

An A4e spokeswoman told Exaro: “This draft document relates to an internal audit undertaken in early 2009. As part of a fundamental review into our internal systems and controls, the audit looked into a number of cases of potential risks.

“As a result, we made significant enhancements to all our systems including the appointment of external auditors.”

“While this investigation uncovered a number of areas where procedures may have been lacking, the final audit and further investigation determined that five claims were irregular and related to one former employee.

“This was reported to the DWP Risk Assurance Division, which confirmed that the action taken by A4e fully met its own audit requirements, and that it considered the matter satisfactorily resolved. A4e repaid the value of these five claims in full, which totalled less than £5,000.”

She added: “A4e has appointed international law firm, White & Case LLP, to lead an independent and thorough review of A4e’s controls and procedures.”

The detail of the audit report reveals practices that could “cause reputational damage to A4e”. The principle of “placing a person into any job available to enable the organisation to claim an outcome” is “fundamentally sound”, it says.

But one questionable example was arranging a placement at a lap-dancing club.

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