Some of the overpayment is because providers have failed to report students who have completed, or prematurely ended their training, according to a report from the Wales Audit Office, the public spending watchdog.

It says a new database has improved ELWa’s management of contracts with its 121 work-based training providers. But the agency needs to do more to ensure the data about trainees and the courses they complete is accurate.

Auditor general Jeremy Colman said: “I am pleased that ELWa’s new database has improved its administration of the work-based learning programme.

“But the council must strengthen controls to stop data errors leading to wrong payments being given to training providers.”

It is not the first time that ElWA’s financial controls have been criticised. In 2003 the then auditor general issued two critical reports.

ELWa spends around pound;84m on work-based learning - 15 per cent of its annual budget. The quality of training was slated earlier this year by chief inspector Susan Lewis in her annual report.

ELWa chairwoman Sheila Drury last week defended the sector to Assembly members, at the presentation of an improvement plan for the sector (see page 4).

The Audit Office report is the latest controversial episode in ELWa’s short but chequered history since its inception in 2001.

Next month ELWa - and its database - will be absorbed into the Assembly government as part of First Minister Rhodri Morgan’s “bonfire of the quangos”.

Mrs Drury said: “We welcome the auditor general’s comments about improving the system and are already tackling this issue.”