The Federal Government is standing by its $18 million cashless welfare card trial, despite a report finding the evidence about its effectiveness is unreliable.

Key points: Audit office found major flaws in data collection used to evaluate cashless welfare trial

Audit office found major flaws in data collection used to evaluate cashless welfare trial "Difficult to conclude" whether social harm including alcoholism and violence were reduced

"Difficult to conclude" whether social harm including alcoholism and violence were reduced Audit office conducted its own analysis and came up with different figures on ambulance call-outs and school attendance

The Australian National Audit Office (ANAO) said although the trial was well implemented, there were major flaws in the data collection used to evaluate the scheme.

In 2016, welfare recipients in Western Australia's East Kimberly region and Ceduna in South Australia were given cashless debit cards in an attempt to reduce alcohol, gambling and drug misuse.

Under the scheme, 80 per cent of a person's Centrelink allowance is placed on the card, which can only be used for essential items.

The report said it was "difficult to conclude" whether there had been a reduction in social harm, such as alcoholism and violence, because there was a "lack of robustness in data collection".

It pointed to missing data as part of the problem, such as hospital admission figures for Kununurra and Wyndham.

The audit office also conducted some of its own analysis and came up with different figures to what the Social Services Minister was told.

For example, the minister was advised that there were fewer ambulance call-outs in September 2016 compared to the previous year.

However, when ANAO took seasonality into account and analysed the data over a longer period, it found a 17 per cent increase in call-outs between April and October 2016 compared to the previous year.

It was a similar story with school attendance. The minister was told there was an increase, but ANAO analysis found it dropped for Indigenous students after the implementation of the trial.

Government maintains scheme is 'making a real difference'

Despite the inconsistencies, Social Services Minister Dan Tehan is standing by the scheme.

"The cashless debit card is making a real difference in the communities where it operates," he said in a statement.

"[It] is an important element of the Government's work to reduce welfare-funded social harm, and to help Australians escape welfare dependency.

"Independent evaluation by Orima Research found gambling, alcohol and drug consumption were reduced in Ceduna and East Kimberley."

Social Services Minister Dan Tehan says his department is working to address the concerns raised. ( ABC News: Mark Moore )

But Linda Burney, Acting Shadow Social Services Minister, said there were now questions to answer about whether the card does help people.

"We simply don't know. We have testimony from communities that are part of the trial sites and there is a variety of views in the community about the value of the card," she told AM.

She said the card should not be rolled out to other communities until there is proof that it works.

"There has to be a proper evaluation to demonstrate whether this card is a valuable tool in reducing violence in those communities," she said.

"But obviously if the community desires to have the card, then Labor believes it is not our role to stand in the way of that community undertaking that trial."

Audit office recommends new data monitoring strategy

Taxpayers paid $1.6 million to Orima to carry out the evaluation, more than double the initial amount agreed to.

The company justified the increase in cost by pointing to the complexity of collecting data and the level of stakeholder involvement.

ANAO made six recommendations, including a new data monitoring strategy and improved risk management and procurement practices, all of which have been accepted by the Department of Social Services.

A second independent evaluation of the trial is already underway, which the Minister is confident will "satisfy the ANAO recommendations".

The 12-month trial in both the East Kimberly and Ceduna is ongoing, while a new trial site in the West Australian Goldfields was set up this year.