This report examines contracted employment programmes and focuses in particular on the prevention of fraud, the treatment of subcontractors, and ensuring fair treatment of customers. The Committee found that levels of detected fraud in contracted employment programmes are low, but feels that there is no room for complacency; the frauds uncovered to date have highlighted the existence of weaknesses in the system which could be exploited. Processes for the detection of fraud must be rigorous and robust. In addition, the financial penalties for providers who have fraud in their organisation are not severe enough. The report calls for customer rights to be given a much higher priority, and for a universal, monitored, and enforceable customer charter to be introduced. It also calls on the Department to carry out a "Customer Survey" of customers of contracted employment programmes to enable standards of customer service to be compared between providers and with Jobcentre Plus. The quality of provision to vulnerable groups, particularly those with disabilities, is another area of concern as providers are having to work with customers with more severe barriers than they had anticipated. The Report examines several examples of potential mistreatment of sub-contractors including allegations of the operation of a cartel, and notes that while it does not know how widespread unfair treatment of subcontractors is, neither does the Department.

The introduction of the Work Programme in June 2011 largely addressed the main weaknesses in previous programmes which had led to a risk that fraud by providers was being understated. Some risks still remain because not every control applies to every programme, particularly to smaller ones. This report finds in particular that the assessment of the risk of fraud at A4e missed vital evidence. The Department does not currently obtain all relevant copies of providers' internal audit reports and did not receive the paper sent to the Chair of the Public Accounts Committee which highlighted a possible systematic failure to mitigate the risk of fraudulent and irregular activity. More than half of fraud allegations since 2006, valued at £773,000, have been in respect of New Deal programmes which ended in 2011. Schemes such as the Flexible New Deal and the Work Programme that replaced the New Deal have been designed with measurable and verifiable outcomes to minimize the risk of fraud. For example, the DWP now checks the records of HM Revenue and Customs to test whether claimants are actually working. But, notably, in the case of the £8 million programme providing mandatory work activity, there are still no independent checks with employers that unemployed people said to have been placed with them have been. Recommendations include that the Department make the most of the fraud risk knowledge it possesses and share it more effectively; and that users' complaints be used to assess the quality of service providers.

The Work Programme will be implemented nationwide from June 2011, and will replace the range of existing programmes to help benefit claimants find jobs. It will be delivered on a regional basis by a framework of prime contractors, the majority of which will come from the private sector. These prime contractors will be paid by the Government based on their results in achieving sustainable employment for jobseekers. Prime contractors are expected to subcontract service provision to specialist local organisations, including voluntary sector providers. There is a risk that, even under the payment-by-results model, Work Programme providers might focus on the clients they assess as being easier to help. The Committee recommends that the Government keeps the payment model under review and assesses the outcomes for all participants. The Work Programme creates a significant financial challenge for prime contractors. This might lead to some clients receiving lower quality support and to significant costs to the Government in responding to service failures. The Government should put contingency arrangements in place to ensure the continuity of provision for clients. The Department for Work and Pensions (DWP) should remind prime contractors that a key aspect of their role is to bear financial risk, rather than passing it on to subcontractors disproportionately. Contracting arrangements need to ensure that subcontractors are fairly managed and that prime contractors are able to hold subcontractors to account for poor performance. The DWP must establish robust and independent arbitration and sanctioning arrangements.