Flaws in contracts to provide the Government's flagship welfare-to-work scheme means tens of millions of pounds of taxpayers' cash faces being paid out in bonuses to even the worst performing firms, according to the Whitehall spending watchdog.
Incentive payments were supposed to reward high performance in the Work Programme, where providers are paid to help get the unemployed into long-term work.
But the National Audit Office (NAO) said the performance measure chosen by the Department for Work and Pensions (DWP) meant all 40 main contractors involved in the scheme were expected to qualify for them.
The NAO report stated: "Flawed contractual performance measures mean the Department will have to make incentive payments to even the worst performing contractors."
The cost to the public is likely to be around £31m in 2014-15, while using a more accurate measure of performance would mean just £6m being paid out.
Overall, the DWP faces paying out £61m in the period to 2017-18, while the NAO said it should have cost around £17m.
The NAO has also said the way the contracts were drawn up also made it more expensive to sack poor-performing providers.
And despite claims by ministers that the Work Programme would be an improvement on previous schemes, the NAO said that the actual performance levels were very similar.
Figures for the most recent group to have gone through the scheme showed just 32% of the participants found jobs - still below the DWP's minimum performance level of 33% and well below its original forecast of 39% and the 42% predicted by the contractors themselves.
Performance for the harder-to-help groups was also below expectations, with only 11% of claimants of employment and support allowance (ESA) - paid to those with disability or long-term illness - finding work compared to a forecast of 22%.
Margaret Hodge, the chair of the Commons' Public Accounts Committee, which oversees the work of the NAO, said she was "angry" at the failure of the DWP to help those who needed it the most.
But the Employment Related Services Association (ERSA), representing Work Programme providers, insisted the scheme was working well.
"It's quite an achievement that performance is the same level as predecessor programmes despite there being less cash in the scheme and a more challenging economic backdrop," said ERSA chief executive Kirsty McHugh .
Unusually, the report was not signed off by the DWP prior to publication on the grounds that it did not reflect its view of "the relevant facts".
The department said that no incentive payments had been made so far, and that any future payments would be included in ongoing contract negotiations.
A DWP spokesman said: "Even starting in the recession, the Work Programme performed as well as previous schemes, and with performance improving rapidly it's on track to deliver significantly more jobs than previous schemes."
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