Ministers have been urged to suspend welfare-to-work contracts with a company at the centre of allegations of fraud.
Thames Valley Police visited the offices of A4e in Slough, Berkshire, over the claims on Friday.
The company said they concerned a "very small" number of former employees whose activities had been referred to police by A4e.
But Labour MP Margaret Hodge, chairwoman of the Public Accounts Committee, said the Government should consider suspending its Work Programme contracts with A4e until the matter was resolved.
"I think the Government should certainly consider suspending them. It is of great concern that any such investigation is necessary," she told The Daily Mail. Ms Hodge has recently attacked A4e's performance record as "abysmal".
The company is chaired by Emma Harrison, who was appointed by Prime Minister David Cameron in 2010 to help get troubled families into work. Its five shareholders were paid £11 million in dividends last year, of which Ms Harrison received 87%.
In a statement, the company said: "Thames Valley Police visited our offices on Friday for a mutually agreed meeting in relation to an allegation of fraud that was identified by A4e's internal processes and was reported to the authorities by the company.
"The allegation concerns a very small number of former employees and dates back to 2010. As the investigation is ongoing, we cannot comment further."
It was reported that the allegations centred around taxpayers' cash being taken for getting the unemployed into work for just one day.
Employment Minister Chris Grayling said that would not be possible under the coalition's Work Programme because private providers were not paid until after six months. He said he had only heard about the police inquiry on Saturday night and it dated back to welfare-to-work programmes under the former Labour government.