Work Programme at risk of fraud and under-delivery, say NAO

The government’s Work Programme is being exposed to fraud and will help significantly less people than expected to secure a job, a new report has revealed.

The National Audit Office (NAO) says the scheme will put just over a quarter of claimants who are on Jobseekers Allowance and aged over 25 into employment, compared to government estimates of 40 per cent.

The NAO say the Department for Work Pensions’ (DWP) “over-optimistic” assumptions, used to set the prices and performance incentives for providers, will make it difficult for providers to meet minimum performance targets.

“If these estimates are too high, prices will have been set too low and providers will find it difficult to meet minimum performance targets and struggle financially,”  the report states.

The NAO fear the lack of accountability and difficult performance targets will encourage prime contractors to focus on claimants who are easier to employ.

“If the assumptions underpinning our calculation are correct, the performance requirements the Department has set are going to be considerably more challenging for providers to meet,” the report states.

“This increases the risk that they might seek to protect profits through activities such as overlooking harder-to-help claimants.”

Amyas Morse, head of the NAO, added: “The Department has set providers stretching performance targets and it needs to ensure that they do not cut corners to stay in profit, such as targeting easy to reach people, reducing service levels or treating sub-contractors unfairly.”

The Work Programme, introduced by government to try and tackle rising unemployment in June 2011, is currently operating without the IT systems needed to prevent fraud and administrative errors, the report added.

The NAO say this was a consequence of the government trying to introduce the scheme quickly.

there is an increased risk of fraud and error.”

“The pace at which the Department introduced IT for the Programme was out of step with the introduction of the rest of the Programme,” the report states.

“The Department decided not to have all of the IT in place for the Programme’s start because it considered that waiting would have negated the benefits of the Programme’s early adoption.”

The Rt Hon Margaret Hodge MP, chair of the Committee of Public Accounts, added: “The rush to get the programme up and running was so great that the supporting IT is still not in place, even though the programme was launched eight months ago.”

“This has led to an increased risk of fraud and error.”

The missing IT systems mean the DWP is unable to carry out the automatic checks needed to determine whether people have entered employment, stopped claiming benefits and reached a point where providers should be paid.

The NAO says the DWP will therefore make payments of roughly £60 million to prime contractors based on manual submissions.

The NAO report, titled “The introduction of the Work Programme”, says at the earliest it won’t be until March 2012, 16 months since the programme launched, before the supporting IT will be functioning properly.

The report states: “In the period from March to May 2012 there will be a full reconciliation of payments made and providers will have to pay back any claimed inappropriately.

“In the meantime there is an increased risk of fraud and error. “

The report adds that the risk of fraud will continue to increase if the DWP delays the implementation of the IT systems in March.

The NAO has also criticised DWP for making important decisions about the Work Programme before finishing the associated business case.

The final version of the business case was approved in April 2011, a week after the prime contractors had already been announced.

The case failed to consider any alternative approaches to the Work Programme, assess the costs of implementing the Universal Credit system and a contingency for replacing failed prime contractors, as well as estimating the cost of terminating the scheme.

The NAO say the DWP is also facing significant costs as it continues to terminate existing welfare to work contracts, leftover from previous schemes.

The report reveals DWP settlements totalling £63 million, with a final deal for two remaining providers still ongoing.

The Department estimates the Work Programme will cost between £3 billion and £5 billion over the next five years, helping up to 3.3 million people.

Claimants form one of nine groups based on the type of benefit(s) they are receiving from government.

Providers are then paid by the DWP for taking a claimant on to the Work Programme, for putting them into employment for a sustained period of time and meeting performance levels set by the government.

Claimants who are thought to be ‘harder-to-help’ have a higher amount of total funding available to providers.