The troubled welfare-to-work company A4e suffered a fresh blow yesterday as the Government announced a review of all its contracts with the firm following a new fraud allegation.
Police investigating separate allegations have arrested four former A4e employees on suspicion of fraud dating back to 2010 and the company has been probed over fraud claims eight times since 2005.
The allegations led to the resignation of Emma Harrison, who founded the firm, as David Cameron's "troubled families czar" and a day later she stepped down as its chairman.
At the time, Ms Harrison stated that she "...did not want the current media environment to distract from the very important work with troubled families" that A4e undertook. The Government has confirmed that Ms Harrison was not pushed to resign.
The Department for Work and Pensions (DWP) has previously stressed that the fraud allegations related to contracts agreed with the previous government. However, the fresh accusations relate to the Mandatory Work Activity scheme, launched by the Coalition last year. In a statement, the DWP warned it was prepared to tear up all its contracts with the company if it uncovered wrongdoing.
The new allegation is understood to involve a local contract and not relate to the company's headquarters operation. It is also believed to involve a relatively small amount of money.
However, the department said: "[The] DWP has immediately commenced its own independent audit of all our commercial relationships with A4e. We have required A4e to make available all documentation which our auditors may require and provide full access to interview any A4e employees."
The DWP added: "We have made it absolutely clear to A4e that we take this matter very seriously, and that if, at any point during the audit or thereafter, we find evidence of systemic fraud in DWP's contracts with A4e, we will not hesitate to immediately terminate our commercial relationship."
The company said: "The board has made consistently clear in all previous statements that we take any allegations of fraudulent or otherwise illegal activity extremely seriously. There is absolutely no place for this type of misconduct at A4e. We obviously acknowledge the concerns raised by DWP, and we welcome and will co-operate fully with their planned investigations."
A4e has also appointed the law firm, White & Case, to carry out an independent audit of its financial controls.
Under the Mandatory Work Activity programme, jobless people are given work placements in socially useful projects in return for their Jobseekers' allowance. Anyone who drops out without good reason faces losing their benefits for three months.