Vast fraud alleged at welfare-to-work firm

A welfare-to-work company owned by David Cameron's former families tsar has been accused of being involved in a vast fraud scandal in which there was "systemic" misuse of public money.

In written evidence submitted to Parliament by a former chief auditor at A4e he claims that an "unethical culture" led to fraud by employees at the company, which holds major government contracts.

But the whistleblower said that when concerns were raised about wrongdoing little was done to address the widespread abuse of taxpayers' money. The evidence, detailed by The Daily Telegraph, was submitted by Eddie Hutchinson, the former head of audit at A4e, to a meeting of the Commons Public Accounts Committee on Tuesday.

However, the meeting was held in private after objections from Conservative members of the committee who said they had been given no advance warning of the whistleblower's evidence.

A4e last night strongly denied any wrongdoing. It said: "None of these allegations stand up. None of the issues raised here prove there is systemic fraud at A4e and all of them relate to historic contracts."

In his statement to the committee, Mr Hutchinson claimed that the leaders of the company oversaw a "disgraceful misuse of government and taxpayer funding", characterised by unethical behaviour, mismanagement and inadequate risk management.

He said the company had a culture that discouraged employees from revealing improper practices. "I encountered unethical behaviour or wrongdoing that fell way below standards that should be expected of organisations funded by significant sums from the public purse," he wrote.

Mr Hutchinson, who worked at A4e from October 2010 until May last year, alleged:

* A bonus scheme for employers "drove inappropriate behaviour" by staff willing to commit fraud.

* Staff acted in the belief that if their irregularity was discovered, they could resign in the knowledge no further action would be taken.

* Two years on from a 2009 audit report warning that fraud was not confined to one part of the country, fraud was still "systemic".

Mr Hutchinson made the allegations a week after the Government said it had seen no evidence of fraud in contracts held by A4e.

A spokesperson for the Department for Work and Pensions said: "These allegations all relate to programmes run by the previous Government. We have audited current contracts with A4e and found no evidence of fraud.

"We have changed the way we run new welfare-to-work programmes to safeguard taxpayers' money. We only pay by results and under the Work Programme, claims are verified against benefit and employment records to make sure fraudulent claims are not processed.

"No one should mistake unproven allegations about past welfare-to-work schemes with strong controls we have in place on current programmes."