It is possible that 181,000 migrants who should have left the UK since December 2008 could still be living here, according to estimates by the UK Border Agency.
The agency “does not do enough” to check people have left once their visas expire, the National Audit Office said.
The NAO said the agency should set national targets on finding and dealing with those who overstay their visas.
Immigration Minister Damian Green said radical reforms were being brought in and abuses would be clamped down on.
The UK Border Agency is responsible for running the points-based immigration system for non-EU workers. Since it was introduced in 2008, 182,000 migrants from outside the European Economic Area have been allowed to enter the UK for work. A further 179,000 already in the UK have been granted permission to remain.
Whitehall’s spending watchdog, The National Audit Office, said while the system was largely well designed and helped meet immigration aims, it was not yet providing full value for money due to inefficient systems and customer service.
It said the agency had to rely on employers to police the points-based system but did not have an “adequate grip” on what they were doing.
While the agency claimed most employers were “compliant” – it could not reveal how many it had visited to check this, the report claimed.
Only 15% of the 22,000 employers were visited before they were granted a licence to employ migrant workers and visits were not well managed because of conflicting demands on officers, plus confusion about their role.
According to the NAO report, “The agency has not taken enough systematic action to ensure, where it can, that migrants leave the UK when they are no longer entitled to remain.”
People already in the UK who saw their applications for a visa extension rejected, were not routinely chased up to ch