The failure of the scheme will mean that thousands of people will miss out on the opportunity to update their IT skills and better their employment prospects.
The full scale of the fraud has yet to be made public but all the signs are that unscrupulous salespeople have persuaded enormous numbers of workers to spend government grants worth up to £150 on poor quality or non-existent IT courses.
The scheme's suspension will also mean that valuable IT training programmes in some of the most deprived areas in the UK will be closed.
The Everton Development Trust is one example. Despite steering 150 unemployed people from Liverpool through the European Computer Driving Licence, it faces closure next month.
The ILA was a good idea badly implemented. The scheme has inspired many small companies to invest in training their staff in IT skills. But, with few controls on the quality of training providers, the system was ripe for fraud.
Sadly, all of this could have been easily avoided. The Institute of IT Training has been running an accreditation scheme that separates the genuine training providers from the cowboys for years. But until last week no one in the Department for Education and Skills thought to ask about it.
The Government is planning to relaunch the ILAs after consulting employers. When it does, accreditation of training providers should be at the top of its agenda.