NAO report finds G4S and rival Serco continued to charge for tagging criminals many years after removing the electronic equipment from their homes
G4S is being investigated by the Serious Fraud Office, alongside Serco, over claims they overcharged the Ministry of Justice for tagging offenders Photo: Alamy
The Ministry of Justice has refused an offer from security firm G4S to hand back £24.1m that it has now admitted it “wrongly” billed for tagging criminals.
G4S made the offer on the eve of Wednesday’s appearance by new chief executive Ashley Almanza before MPs on the Public Accounts Committee – and just as a report from the National Audit Office provided fresh details of the tagging scandal.
The public spending watchdog found that G4S and rival Serco had continued to charge the taxpayer for tagging criminals many years after removing the electronic equipment from their homes.
Chris Grayling, the Justice Minister, launched an investigation in July after discovering evidence that the taxpayer had been overcharged, in some cases for tagging prisoners who were dead or back in prison.
The situation has since escalated into a criminal probe after the Serious Fraud Office said earlier this month that it was examining the contracts.
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As the scandal erupted, G4S hired law firm Linklaters to carry out an independent review. On Tuesday it admitted the law firm had found circumstances in which G4S “wrongly considered itself to be contractually entitled to bill for monitoring services when equipment had not been fitted or after it had been removed”.
G4S said it had “apologised” and “issued credit notes totalling £23.3m for amounts incorrectly billed between 2005 and May 2013” and a further £800,000 covering “June 2013 to date.” The company has also incurred £2m of professional fees. All sums were provided for at the half-year results.
A Ministry of Justice spokesman stressed, however, that it would not accept any sum until it had finished its own audit of the contracts. “The money has not been accepted and we are working with both companies to find exactly how much the taxpayer has been overcharged,” the spokesman said.
Mr Almanza said: “The way in which this contract was managed was not consistent with our values or our approach to dealing with customers. Simply put, it was unacceptable and we have apologised to the Ministry of Justice.”
G4S accepted that “the company’s assessment of these matters and the credit notes may not agree with the Ministry’s audit findings”.
The full scale of the scandal was made clear in the NAO report, which for the first time showed:
• G4S billed the taxpayer £4,700 for monitoring an offender even though the equipment had been removed 935 days earlier.
• Serco had been unable to install equipment at a criminal’s address but carried on charging for almost five years, at a cost of £15,500.
• A criminal was handed four separate court orders for four offences, leading Serco to bill the taxpayer four times “rather than one charge for the subject”.
• G4S charged for 612 days’ tagging – at a cost of £3,000 – even though it had been informed the offender had been sent to prison and the company had removed the monitoring equipment from his home.
G4S insisted that, having “conducted an extensive search and review of emails and numerous interviews with relevant employees”, Linklaters had “not identified any evidence of dishonesty or criminal conduct by any employee of G4S”.
Spending on electronic tagging has run to £722m since G4S and Serco were handed the contracts in 2005.
G4S stressed there had been a wholesale shake-up of senior management in recent months, including the arrival of a new chief executive, finance director and head of the UK business, adding pointedly that: “The executive previously responsible for the UK businesses is no longer working at G4S.”
Richard Morris, its former head of UK and Irish operations, departed last month. He has been replaced by Eddie Aston, who was recruited in July.
The Cabinet Office is reviewing all other G4S and Serco contracts with central Government, effectively barring them for bidding for such work until the review is complete.
Mr Almanza will be joined by Serco chairman Alastair Lyons at Wednesday’s PAC hearing.
G4S shares rose 3.5 to 260.3p, while Serco was 16.5 higher at 440.2p.
Kean Marden, an analyst at Jefferies, said: “G4S has issued an apology, stresses that senior management has been changed, and notes the newly-created position of group head of risk and programme assurance.
“This mirrors Serco’s statement on 25 October and, in our view, reads like a checklist of actions that the government wanted G4S/Serco to take before normalising relations. We continue to believe that this issue is reaching an endgame.”
By Alistair Osborne and David Barrett
5:16PM GMT 19 Nov 2013
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