The Government has launched an investigation into an allegation of attempted fraud against welfare to work company A4e, it was announced today.
The Department for Work and Pensions said it had been made aware of an allegation of attempted fraud in relation to a Mandatory Work Activity contract with the firm, which is already facing a police investigation in relation to previous allegations.
A statement said: "As a result of this new allegation, 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. This is separate from the independent review of internal controls which A4e has previously announced.
"The chief executive of A4e was informed of this at a meeting with a senior DWP official earlier today.
"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."
A4e 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 more than 3,500 staff and operates out of 200 offices in the UK. From December 2005 to date, nine cases relating to A4e have been referred to the Department of Work and Pensions to review claims submissions.
"Of these nine referrals, one, dating back to May 2008, resulted in the prosecution of an individual member of A4e staff, which was widely reported at the time.
"Another is the case now being handled by Thames Valley Police. In each of the remaining, closed cases, the DWP's view was that these were not incidences of malpractice.
"The board has asked White & Case LLP to lead an independent and thorough review of A4e's controls and procedures. That process will be carried out concurrently, and all findings will be provided to DWP."
A4e also announced that a former senior civil servant had been appointed chairman following the resignation last month of Emma Harrison, who also quit her role as the Government's "family champion". At the time she denied any financial impropriety or that she improperly benefited from the receipt of taxpayers' money.
Sir Robin Young, who has been on A4e's board since 2007, was permanent secretary at the Department of Culture, Media and Sport from 1998 to 2001, while from 2001 until 2005 he was permanent secretary at the Department of Trade and Industry (now the Department of Business, Innovation and Skills).
More than 24,000 people have been through the Mandatory Work Activity programme since it was launched last year, involving a four-week placement including maintenance work on houses, renovating furniture or supporting charities.
A number of organisations from the private and voluntary sectors are involved in delivering the scheme, which the Government said was aimed at getting people into a working routine if they needed an additional "push" to find a job.
Anyone failing to complete a placement without good cause lose their Jobseeker's Allowance for at least three months.
Mark Serwotka, general secretary of the Public and Commercial Services union, which represents staff in job centres and private employment contractors, said: "We welcome the Government's response to these fresh allegations of fraud which, if founded, should not only spell the end of A4e's involvement but also surely cast serious doubt on the role of the private sector in welfare schemes.
"We believe it is fundamentally wrong for private companies to be making a profit from delivering such vital public services, and instead of seeking to blame and punish people for being out of work, ministers should be helping to create jobs to get our economy moving again."