Police have arrested three men over suspected fraud and forgery at Luis Michael Training, a Government contractor that was paid to offer thousands of apprenticeships at clubs like Sheffield Wednesday and Nottingham Forest.
It comes just days after the Coalition was accused of a "spreading shambles" over allegations of fraud and poor risk controls at A4e, another welfare-to-work provider.
The accusations against Luis Michael Training, which was run by former Welsh football international Mark Aizlewood, and funded by the Skills Funding Agency, relate to their work between 2009 and 2011.
The Serious Fraud Office has now revealed it suspects the company, which collapsed last year, of claiming payments from the taxpayer for apprentices that did not exist.
It is accused of producing "false documentation" such as fake progress reviews and coaching examination certificates to pretend it had placed young people in work at football clubs.
The three men linked to Luis Michael Training who were arrested were last night released without charge.
Margaret Hodge, the chairman of the Public Accounts Committee, last night called on ministers to conduct their own investigation into what happened, saying they "cannot pass the buck" over responsibility for public money.
"Clearly we will want to look at this if there is an allegation of fraud," she said. "We will want to see if this is a rogue incident or more systemic difficulties with apprenticeships. It is becoming increasingly clear that the more money the Government puts into the hands of private providers, the greater the risk of a waste of public money. This is why the Public Accounts Committee bangs on and on about accountability."
The Skills Funding Agency financed the apprenticeships through higher education colleges, which have been asked to pay the money back. The colleges' contracts with Luis Michael were worth more than £6 million.
Last night, the Skills Funding Agency denied any responsibility for the contracts, even though it was meant to subject its biggest sub-contractors to due diligence.
"The Chief Executive of Skills Funding does not have, and has never had, a direct contractual relationship with Luis Michael Training (LMT)," a spokesman said.
"They are a subcontractor of an agency's lead provider. Where providers choose to subcontract the delivery of education and training funded by the agency, they are responsible for ensuring that all subcontracting arrangements meet the agency's requirements and have sufficient capacity, capability, quality and business standing to deliver the provision that is being sub-contracted."
The spokesman insisted the agency has "robust procedures" to prevent fraud.
