The £273m ILA programme was designed to offer financial incentives to encourage the unemployed and those with few qualifications to take short courses in IT and other work-related areas with private training firms. It collapsed in 2001 after revelations of widespread abuse and fraud.
The PAC examined the DfES ’ management of risk in designing and implementing the ILA scheme, its relationship with contractor Capita and actions taken to limit the scale of fraud and abuse which could amount to £97m.
It found the programme was poorly thought out and put in place too quickly.
The government watchdog also criticised the DfES for the poor security of its online systems, which was a prime cause of the difficulties suffered by the ILA programme.
Structured mechanisms and procedures were not put in place to identify patterns of fraud, there were no procedures to check that security provision in the system was adequate, and no procedures to archive log files to identify misuse of the ILA online system, according to a study by Cap Gemini Ernst & Young.
In addition, the PAC said the department did not give enough weight to advice received on the risks of fraud and abuse and the quality of training. It also said checks on learners were not vigorous enough and that the contractual arrangements with Capita were weak.
Edward Leigh MP, chairman of the PAC, said, "It is likely that half of the budget for Individual Learning Accounts was siphoned off in fraud and abuse. This reflects the number of shortcuts taken by the department.
“ The scheme was poorly thought through, put in place too quickly, and the risk assessment and risk management was wholly inadequate. To match innovations designed to reduce bureaucracy for new learners and new providers, the department should have built counter-fraud measures into the design of the scheme and put in place robust monitoring."
The PAC ’ s criticism mirrored the findings of the National Audit Office, which last year said the ILA scheme was flawed from the start, with no proper business plan, an imperfect contract and insecure IT systems.