Welfare-to-work firm A4e 'knew of fraud risk in 2009'

Leaked report suggests alarm was raised years ago over possible malpractice at Government contractor

The Government's controversial welfare-to-work provider A4e knew of potential fraud and failures by management to control it for three years, a leaked document suggests.

A confidential 2009 internal audit of work by A4e's top recruiters, obtained by the BBC's Newsnight programme, found examples of staff claiming for putting people into jobs that did not exist, or did not qualify for payment and fabricating paperwork to back up claims.

The Department for Work and Pensions (DWP), which was passed a copy of the leaked document yesterday, said it was aware of the audit at the time. It said the department had "received assurances" from A4e that it had not uncovered "any major issues".

Earlier this month, the DWP launched an investigation into A4e's work, saying the department was made aware of an allegation of attempted fraud in relation to a contract with the firm. The company has denied wrongdoing, saying at the time that it took any allegations of fraudulent or illegal activity extremely seriously.

A4e said yesterday that the leaked document was just a draft and that as a result of the internal audit "significant enhancements" had been introduced. It also said only five irregular claims had been made.

Emma Harrison was the head of A4e until February when she stepped down and gave up her role as the Government's "family champion". She paid herself an £8.6m dividend last year.

According to the document, A4e's own audit and risk department examined the work of its top 20 recruiters, looking at 20 per cent of their work or 224 client files. Auditors concluded that 4 per cent of the claims they examined were "potentially fraudulent" or included "irregular activity" and another 12 per cent were classified as containing "reputational" or other risks. They said they could only be sure that A4e was entitled to the money the company claimed in 70 per cent of the cases.

The jobs A4e was arranging were supposed to last at least 13 weeks and employers needed to sign a form confirming the job was real and the employee working a minimum of 16 hours a week. The auditors discovered that some of A4e's best recruiters were claiming for putting people into jobs that did not exist or did not qualify for a job outcome payment, and fabricating paperwork to back up their claims.

They found that A4e staff thought there was "nothing wrong" with filling in forms that should have been completed by the employer to be valid. The report concluded that "potential fraudulent or irregular activity is not confined to one particular geographical area... and shows a potential systematic failure to mitigate the risk at both an office and regional level".

Earlier this week, Employment minister Chris Grayling said A4e's contracts would be terminated "if there is evidence of systemic failure".