A report by the Communities and Local Government Committee highlighted several concerns about Universal Credit, which will be implemented nationally from October and replaces a string of benefits such as housing benefit and child tax credits.
The committee highlighted concerns raised during an inquiry into the changes that the IT system under Universal Credit will have trouble distinguishing between genuine and fraudulent claims.
One council told the committee its understanding was that the system would not work from local authority property databases so it would not be able to detect automatically, as local systems did now, when several people made a housing benefit claim for the same property.
A new fraud detection service, called Iris, is being built into Universal Credit which the committee was told does have a similar database to that used by local authorities for detecting housing benefit fraud. But the committee's report said it is "worrying that the system still seems to be at the development stage".
The committee said the Government must make sure that local authorities have the admin funding they need to manage the transition to Universal Credit and stop staff leaving prematurely. Universal Credit is being introduced in gradual stages over several years, with the national rollout following several "pathfinder" pilot projects taking place from this month.
Clive Betts, chairman of the Communities and Local Government Committee, said evidence heard by the committee that systems for fraud detection were still in their early stages was "extremely concerning given the advanced state of implementation".
A Department for Work and Pensions (DWP) spokesman said: "Universal Credit will cut benefit fraud by £200 million a year and we are confident that our IT systems will be strong enough to protect us from the threat of fraud.
"We have been running pilot projects with local authorities to ensure that those people who can't manage with monthly or direct payments get the support they need."