Use of the penalties also varies “substantially” across the country, and referral rates have changed significantly over time, according to the National Audit Office.
It accused the Department for Work and Pensions (DWP) of not doing enough to find out how sanctions affect people on benefits.
MPs said the findings showed it was “pot luck” which people were sanctioned and demanded ministers “get a grip” of the “discredited” system.
Labour’s Meg Hillier, who chairs the public accounts committee, said: “Benefit sanctions punish some of the poorest people in the country. But despite the anxiety and misery they cause, it seems to be pot luck who gets sanctioned.
“While studies suggest sanctions do encourage some people back into work, other people stop claiming but do not start working and the DWP has no record of them.
“If vulnerable people fall through the safety net, what happens to them?”
More than one million unemployed benefits claimants have to meet conditions, such as showing they are looking for work, to receive their payments. The report found the use of penalties differs across Jobcentres and employment schemes. Some Work Programme providers make more than twice as many sanction referrals as others dealing with similar groups in the same area, it said.
Liberal Democrat leader Tim Farron said: “This report is a civil service equivalent of a character assassination.
“The government are not assessing the impact of sanctions, using their own data to see what is going on and they are not even tracking the benefits. Ministers need to get a grip.”