Conclusions and recommendations
1. The Department has not exercised sufficient
oversight of its contractors to identify potential fraud and improper
practice. A number of
allegations of fraud have come to light of which the Department
was not previously aware and which it has not investigated. Some
of these would have been made known to the Department if it had
asked the right questions of providers as part of its oversight
and inspection arrangements. The Department has also acknowledged
that the controls in place during the transitional period in implementing
the Work Programme need to be updated. The Department should review
its oversight arrangements for all its contracted employment programmes
to ensure that they are fit for purpose. The arrangements should
include:
- reassessing the role, qualifications
and expertise of the Department's provider assurance team, which
visits providers to examine governance arrangements, service delivery,
financial procedures and data security;
- obtaining copies of all providers' relevant internal
audit reports;
- the Department instigating unannounced visits
to providers and undertaking sample checks with both clients,
training providers and employers, and
- early publication of data so that varied practices
between contractors become obvious.
2. The Department's recent investigation into
A4e did not establish whether the company was a 'fit and proper'
contractor. The investigation
focussed on particular allegations of fraud and looked at A4e's
controls over specific transactions streams. But the Department
did not examine other relevant issues such as how A4e's ownership
and governance structures impact on business controls, the adequacy
of corporate controls such as the role of the audit committee
and internal audit, the objectives set for staff working in the
organisation and the extent of company training in ethical behaviour.
The Department also lacks a clear definition of 'systemic fraud'.
The Department should define transparent criteria for assessing
whether providers are 'fit and proper' companies and what would
constitute 'systemic fraud' and assess providers against these
criteria, paying particular attention to those which have a majority
of their business with public bodies or have atypical ownership
or governance arrangements. Given the number and size of public
contracts for service delivery we believe the Cabinet Office should
look at whether there is appropriate guidance for departments.
3. The Department's controls against financial
fraud in the Work Programme are stronger than those in previous
schemes, but some risks still remain, for example, where individuals
find employment without their help. The
Department has sharpened the definitions and checks that trigger
payments to contractors, reducing the scope for abuse. These controls
are a welcome improvement on those in past schemes, but some risks
still remain in the design of the Work Programme, such as the
possibility of paying providers for individuals who have found
work without their help. The Department should review and strengthen
its controls where necessary to ensure contractors are only paid
for results that they have achieved.
4. There is currently no obvious route through
which clients, contractors' employees, MPs or the public can raise
issues of concern relating to fraud and poor service with the
Department. The whistleblowing mechanisms
in place are managed by individual, or groups of, providers. There
is no facility for MPs to report high volumes of complaints to
the Department. Furthermore, the Department relies on providers
to disclose details of complaints they have received, as it does
not have any mechanism to collect this information to identify
trends and learn lessons from customer feedback. The Department
should:
- publicise its arrangements
to enable whistleblowers to make complaints; and
- capture and analyse information about complaints
made about providers.
5. There is no mechanism to raise service
standards set at the start of the Work Programme over time. We
recognise that the payment structures are designed to achieve
more than one aim and we will return to the issue of the work
programme after it has been in operation for long enough to consider
whether the questions we raised about variations between different
providers have either successfully stimulated innovation, or have
created unacceptable variations between providers. The
Department needs to improve public confidence in providers by
increasing transparency. It is clear from the allegations that
the Committee received, and from the response in the media to
the Committee's examination of the Work Programme, that there
is a substantial lack of public confidence and trust in some employment
programme providers. The Department should take steps to satisfy
public confidence in providers by publishing relevant information
on its website about its main providers, including corporate governance,
ownership structures, performance information, levels of fraud
detected and complaints received and how they have been resolved.
6. The Department must publish validated data
on the outcomes achieved by the Work Programme.
Much concern could be allayed if the results of the Work Programme
were placed in the public domain. Partial data released by the
employment providers' trade association, ERSA, the media or ministers
serve merely to heighten suspicion and proper transparency would
allay concerns. The providers' contracts require them to achieve
a certain level of performance by the end of year one. Given
that contracts started in June 2011 the Department should know
now whether these targets have been met and should publish that
data immediately.
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