The National Audit Office, the spending watchdog, has described the government's welfare reforms as "overambitious" and hindered by the "limited functionality" of IT systems.
It follows Department for Work and Pensions announcing further delays to the national rollout of universal credit after a series of IT failings.
Failings identified by the watchdog include computer systems lacking the functionality to be able to identify potentially fraudulent claims, which instead require manual checks. That's despite over £300m - over 70 per cent of the budget for implementing universal credit - being spent on IT systems, £34m of which has been written off.
Amyas Morse, head of the National Audit Office, blamed problems with ICT for delaying the rollout of universal credit.
"The current IT system lacks a component to identify potentially fraudulent claims so that the department has to rely on multiple manual checks on claims and payments," he said.
"Such checks will not be feasible or adequate once the system is running nationally. Problems with the IT system have delayed national rollout of the programme."
Work and Pensions Secretary Iain Duncan Smith told the BBC that the initial problems had been ironed out, adding the project "will be delivered within budget and with timescale." He added that a pilot scheme running in Manchester "is demonstrating that the IT we put forward for this actually works".
However, Labour Shadow Minister Liam Byrne has accused Duncan Smith of losing control of his department and its new universal credit system, while deceiving the public in the process.
"This is a damning report. It shows they started work without knowing what they were doing, millions in IT spend has been written off and there are no counter-fraud measures worth their name," he said.
Speaking about the National Audit Office report, Neil Kinson, vice president EMEA of Redwood Software, said the government urgently needs to implement fully-functioning automated services.
"Revelations yesterday of further delays to the rollout of Universal Credit's benefit programme is a major setback for a scheme which hinges on having up-to-the-minute, accurate data on claimants and their applications," he said.
"While government plans to increase manual checks may seem like an effective solution to its current predicament, it dramatically increases the likelihood of inserting human errors into the system, which will fuel further delays," Kinson continued.
"Rather than creating new, short-term processes, which could hinder the success of high priority projects like Universal Credit, the public sector should make the most of the resources they already have by automating processes to increase efficiency in the long-term. They shouldn't procrastinate," he added.
Under the coalition government's plans for universal credit, six key benefits - jobseeker's allowance, employment support allowance, housing benefit, working tax credit, income support and child tax credit - are set to combined into one single benefit payment.
The government says the reform will reduce fraud and ensure that the unemployed will always find themselves better off in work rather than relying on the state.