The demand came from the Public Accounts Committee in a report, which warned there was no present means to obtain direct assurance over payments totalling £1.3bn at the point they are made.
The committee said the Inland Revenue had to carry out some checks ‘but these have not been sufficient to provide the necessary assurance that tax credits are properly paid’.
They complained the Revenue ‘has not found it practicable to reconcile the total amount of tax credit paid by each employer with the amount the department had authorised’.
The PAC added: ‘These problems highlight the inappropriateness of expecting the C&AG, in auditing the department’s arrangements for the administration of tax credits, to rely exclusively on the department’s own checks on employers’ records, without any facility to validate those checks by inspections of his own.’
The report said improvements in Revenue checks wold enable the C&AG to gain more assurance from them, but he would still need the National Audit Office to do sufficient work to ascertain the Revenue’s controls were effective.
The MPs claimed selective inspections ‘should not add significantly’ to the burdens on business of administering the scheme and would be within the competence of accountants.
And they called for new tax credit schemes operating from next April to provide for direct reconciliation of totals paid by employers with amounts authorised by the Revenue.
Revenue records showed that of the 49,000 cases relating to individuals referred to the Revenue’s Compliance Co-ordination unit, 22,500 were not followed up through lack of evidence or because they were not sufficiently high risk and 3,600 were closed without work being completed because of staff shortages.
In 226 cases overpayments worth £114,000 were not properly reported to the Revenue’s Debt recovery Team and not recovered.
The Revenue prosecuted just two employers for colluding with employees and claimed not to have found evidence of large scale frauds by employers.
The previous Department of Social Security schemes were riddled with inaccuracies, over and under payments and frauds.
Public Accounts Committee chairman Edward Leigh said: ‘Tax Credits are a formof payment authorised by the Inland Revenue and the audit arrangements for them should be no less rigorous than for any other payment.
‘The Department should act swiftly to rectify this anomaly, particularly asthey have been unable to reconcile the payments made.
‘As they stand these arrangements leave a significant gap in the system ofcontrol over public funds.’
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