The government's relationship with services outfit Capita has come under fierce criticism in the official enquiry into the Individual Learning Accounts (ILA) fiasco.
The ILA scheme was launched in September 2000 to encourage adults to develop IT and professional skills.
But the project collapsed just two months later after it was discovered that some training companies were defrauding the system.
A National Audit Office report released Friday put a large part of the blame at the government's door, accusing the Department for Education and Skills of failing to manage the relationship with Capita properly.
The report says that the department took on board the entire risk of the project, leaving Capita out in the cold in what should have been a partnership.
Capita was not involved in the project board and simply implemented the system.
The report states that: "The department should have monitored more closely the information supplied by Capita and the escalating demand for accounts, especially given the innovative nature of the scheme and increasing number of complaints".
Capita was not required to undertake any checks on the eligibility of applicants for places on the scheme, meaning fraudulent companies were able to register bogus students and claim the money to train them.
This lack of reporting meant that the government failed to spot that 13 training providers had registered over 10,000 accounts and 20 had received payments in excess of £1.5m.
The full scale of the fraud is still unknown.