The Government embarked on its flagship Universal Credit scheme without knowing how it would work and has already been forced to write off more than £30 million in failed IT, according to the public spending watchdog.
In a damning report, the National Audit Office (NAO) said the project championed by Work and Pensions Secretary Iain Duncan Smith had been beset by "weak management, ineffective control and poor governance".
Universal Credit is due to replace a bundle of means-tested benefits by 2017, with the department estimating it will save £38 billion in administration, fraud and error costs by 2023.
The system is also designed to encourage people to take up work - by ensuring that they will always be better off through having a job.
However, pilots have been scaled back and delayed, and a former Olympics executive was drafted in earlier this year to "reset" the programme.
The NAO said the Government had not achieved "value for money" on its spending up to the end of April.
Of the £303 million spent on IT, £34 million had been written off and the systems still had "limited functionality".
"Throughout the programme the department has lacked a detailed view of how Universal Credit is meant to work," the report said.
"The department was warned repeatedly about the lack of a detailed 'blueprint', 'architecture' or 'target operating model' for Universal Credit.
Over the course of 2011 and the first half of 2012, the department made some progress but did not address these concerns as expected.
"By mid-2012, this meant that the department could not agree what security it needed to protect claimant transactions and was unclear about how Universal Credit would integrate with other programmes.
"These concerns culminated, in October 2012, in the Cabinet Office rejecting the department's proposed IT hardware and networks."
The auditors found the IT system could not identify potentially fraudulent claims, meaning manual checks were needed on claims and payments. "Such checks will not be feasible or adequate once the system is running nationally," they added.
The report added: "Delays to the roll-out will reduce the expected benefits of reform and - if the department maintains a 2017 completion date - increase risks by requiring the rapid migration of a large volume of claimants."
NAO head Amyas Morse said: "The department's plans for Universal Credit were driven by an ambitious timescale, and this led to the adoption of a systems development approach new to the department.
"The relatively high risk trajectory was not, however, matched by an appropriate management approach. Instead, the programme suffered from weak management, ineffective control and poor governance.
"Universal Credit could well go on to achieve considerable benefits if the department learns from these early setbacks and puts realistic plans and strong discipline in place for its future roll-out."
Public Accounts Committee chairwoman Margaret Hodge said: "The Department for Work and Pensions has made such a mess of setting up Universal Credit that the Major Projects Authority had to step in to rescue the programme.
"DWP seems to have embarked on this crucial project, expected to cost the taxpayer some £2.4 billion, with little idea as to how it was actually going to work.
"Confusion and poor management at the highest levels have already resulted in delays and at least £34 million wasted on developing IT.
"If the department doesn't get its act together, we could be on course for yet another catastrophic government IT failure.
"This damning indictment from the NAO gives me no confidence that we will see the £38 billion of predicted benefits between 2010-11 and 2022-23. Vulnerable benefit claimants need a secure system they can rely on."
Shadow work and pensions secretary Liam Byrne said: "Universal Credit is a titanic-sized IT disaster which Iain Duncan Smith has tried to hide with cover-up after cover-up.
"Mr Duncan Smith swore blind this benefit shake-up was fine. Now we learn he has completely lost control of his department at a potential cost of hundreds of millions of pounds."
However, Cabinet Office Minister Francis Maude said: "Universal Credit is a brilliant policy, designed to ensure that work always pays and that hard-working taxpayers see their money being spent judiciously. When I visited the pathfinder, I saw how well the concept was working and the results were already being delivered on the ground.
"I am delighted that since the new year, my Cabinet Office teams have been able to support the DWP to reset the programme and back Iain Duncan Smith's crusade to reform welfare."
A DWP spokesman pointed out that the assessment did not cover the progress that had been made since April.
"Universal Credit is a major and complex reform that will transform the welfare state and we are committed to delivering it on time by 2017 and within budget," he said.
"The report does not cover the significant developments we've made since April including the go-live in Greater Manchester, our progress on the IT challenge, the latest plans for expansion from October, or the fact that we brought in two of the country's leading project management experts to lead UC.
"Under this new leadership we are making real progress and we have a plan in place that is achievable and safe.
"The NAO itself concludes that Universal Credit can go on to achieve considerable benefits for society."
Citizens Advice chief executive Gillian Guy said: "Even as Universal Credit is being rolled out, we still do not know what support will be put in place to help people to move on to the new system.
"Implementing Universal Credit has the potential to make or break millions of families. The new benefit must be introduced slowly and correctly, not quickly and badly."
Richard Hawkes, chief executive of disability charity Scope, added: "Disabled people won't be surprised to hear such scathing criticism levelled at the Government's welfare reforms.
"The Government is right to simplify the system and make it more transparent, but it has lost sight of why disabled people need support.
"It's not because they're workshy. It's because when you're disabled you need support to do things everyone else takes for granted, and this means life costs more.
"Disabled people say they are in the dark about the plans, worry that support to manage finances isn't adequate and that legal aid cuts will make it much harder to challenge bad decisions.
"This is about the kind of country we want to live in. In 2013, disabled people should be able to pay the bills and live independently."