G4S admits overcharging MoJ £24m on electronic tagging contract

Company has apologised to Ministry of Justice and issued credit notes for £23.3m incorrectly billed between 2005 and 2013

G4S said that an external review had confirmed it had been wrong to consider it was contractually entitled to bill for monitoring offenders when tags had not been fitted or after they had been removed. Photograph: Jeff Blackler/REX

Private security company G4S has admitted it has overcharged the Ministry of Justice more than £24m on its contract for the electronic monitoring of thousands of offenders in England in a practice that was going on for years.

The admission by one of the government’s largest suppliers comes just 24 hours before G4S and other outsourcing corporate giants, Serco, Atos and Capita are due to be grilled by the powerful Commons public accounts committee on Wednesday over their failings on public sector contracts.

G4S said an external review it had commissioned by the law firm Linklaters had confirmed it had been wrong to consider it was contractually entitled to bill for monitoring offenders when tags had not been fitted or after they had been removed.

G4S said it had apologised to the MoJ and issued credit notes for £23.3m that had been incorrectly billed between 2005 and May 2013.

A further credit note for £800,000 is to be issued to cover continued overcharging that has happened since June.

The security company said the Linklaters review had not identified “any evidence of dishonesty or criminal conduct by any employee of G4S in relation to the billing arrangements under the electronic monitoring contracts.”

The G4S statement added that it had “wrongly considered itself to be contractually entitled to bill for monitoring services when equipment had not been fitted or after it had been removed”.

The admission by the company comes after the Serious Fraud Office announced earlier this month that it was launching a criminal investigation into G4S and Serco for overcharging on criminal justice contracts.

The G4S statement was timed to coincide with the publication of a National Audit Office memorandum that shows that, in some instances, both contractors were charging the justice ministry for months or years after electronic monitoring activity had stopped. The charging continued even in cases where offenders had been sent back to prison or even died.

The NAO also says the firms charged the ministry over similar timescales when electronic monitoring was never undertaken and charged multiple times for the same individual if that person was subject to more than one electronic monitoring order at the same time.

Serco has also said it will refund any amount that it agrees represents overcharging.

The justice ministry has not yet agreed to any refund offers made by either firm.

In July, the justice secretary, Chris Grayling, revealed that G4S and Serco had overcharged the government by “tens of millions of pounds” on the tagging contracts. This claim was disputed at the time by G4S. Grayling also announced that accountancy firm PricewaterhouseCoopers was carrying out a forensic audit into the contracts. A G4S whistleblower working in the call centre dealing with tagging was involved in raising initial concerns about billing practices.

The NAO gives examples of the disputed overcharging practices in its memorandum prepared for Wednesday’s showdown between MPs and the outsourced companies. They include:

• The justice ministry was charged £3,000 for 612 days monitoring of an offender who had been sent to prison for two years 20 months earlier. G4S removed the tagging equipment but kept on billing because the court had not provided the relevant paperwork.

• On 28 October 2010, G4S removed tagging equipment from the address of an offender where a number of breaches of curfew had been reported. The court failed to confirm the tag was no longer required even when chased in December 2012 so billing continued until 20 May 2013. The total bill was £4,700 for 935 days without a tag being in place.

• Serco billed £15,000 for almost five years’ monitoring in a case where it was unable to install tagging equipment in July 2008 at an address where the subject was due to be arrested. In October 2010, when Serco visited the property it was told nobody had been living there for 18 months.

Ashley Almanza, the G4S Group chief executive, said the company’s announcement was an important step in setting the matter straight and restoring trust.

“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,” Almanza said.

“As part of a wider programme of corporate renewal, we have changed the leadership of our UK business and we are putting in place enhanced risk management and contract controls.

“We remain committed to working with the ministry and the UK government to resolve this matter and to provide enhanced oversight of service delivery and contract performance.”

The MoJ said it was not prepared to comment while a criminal investigation was under way.

The Cabinet Office is carrying out a government-wide review of G4S and Serco contracts but G4S said that no evidence had so far come to light that suggested that similar billing practices applied to other government contracts.

Both Serco and G4S withdrew from the tendering process for the next generation of electronic tagging. But both companies have been allowed to bid for £450m-worth of probation contracts but will not be awarded them unless they are given a clean bill of health over the tagging dispute.

Alan Travis, home affairs editor
theguardian.com, Tuesday 19 November 2013 11.58 GMT

Find this story at 19 November 2013

© 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved.

Security firm G4S ‘charged for tagging the dead’

Cost: Scandal-hit security firm G4S facing claims it charged the Government for tagged people who were either dead or back in prison

Security firms faced a criminal probe today over claims it charged the taxpayer to tag offenders who were dead or back in prison.

Justice Secretary Chris Grayling called in the Serious Fraud Office to consider investigating G4S Care and Justice Services, part of the company disgraced last year for failing to supply enough Olympic security staff.

Another firm, Serco Monitoring, was also believed to have charged wrongly. Mr Grayling told MPs that the sums involved ran to “tens of millions” of pounds.

The bombshell allegations sent the two companies’ shares on the FTSE 100 falling sharply.

In a statement to the Commons, Mr Grayling said officials spotted “what appeared to be a significant anomaly in the billing practices” while preparing new contracts for electronic tagging.

“It appeared that we were being charged in ways not justified by the contracts and for people who were not in fact being monitored,” he said.

To the astonishment and fury of MPs, he added: “It included charges for people who were back in prison and had had their tags removed, people who had left the country, and those who had never been tagged in the first place.

“There are a small number of cases where charging continued for a period when the subject was known to have died.

“In some instances, charging continued for a period of many months and indeed years after active monitoring had ceased.”

Mr Grayling added: “The House will share my astonishment that two of the Government’s biggest suppliers would seek to charge in this way. The House will also be surprised and disappointed to learn that staff in the Ministry of Justice were aware of a potential problem and yet did not take adequate steps to address it.”

Serco had agreed to co-operate fully with a sweeping forensic audit, and said its senior managers were not aware. “They do not believe anything dishonest has taken place,” said Mr Grayling.

However, G4S had refused to take part in an additional forensic audit, leaving him no option but to call in the SFO.

“I should state that I have no information to confirm that dishonesty has taken place on the part of either supplier,” he added.

“But given the nature of the findings of the audit work that has taken place so far, and the very clear legal advice that I have received, I am today asking the Serious Fraud Office to consider whether an investigation is appropriate into what happened in G4S.”

But G4S sources stressed no evidence of dishonesty had been discovered by either the MoJ review or its own inquiry carried out with the assistance of external experts.

They said the firm had co-operated fully with the MoJ and was given the choice of another audit by management consultants or a referral to the SFO.

G4S had preferred calling in the SFO, they added, to investigate any claims of dishonesty.

They insisted that they had found “absolutely no indication” that it had not complied with the terms of its contract.

But shadow justice secretary Sadiq Khan was stunned by the allegations.

“To the public this appears a straightforward fraud – obtaining property by deception,” he said.

Keith Vaz, Labour chairman of the Commons home affairs committee, added: “G4S should never have got another Government contract after the shambles of the Olympics.”

Cabinet Office minister Francis Maude announced a government-wide review of contracts held by G4S and Serco.

Serco Group, which runs the Boris Bike scheme, said it would repay any amount agreed to be due and that given the investigation, it had decided to withdraw from the re-tendering process for the electronic monitoring service.

The company’s chief executive Christopher Hyman said: “We will not tolerate poor practice and behaviour and wherever it is found we will put it right.”

Joe Murphy, Political Editor
Nicholas Cecil
Published: 11 July 2013
Updated: 08:03, 12 July 2013

Find this story at 12 July 2013

© Evening Standard Limited

The ‘phantom’ electronic tags that cost us millions: Firms charged taxpayers for criminals who were dead or in jail

Taxpayers were charged tens of millions of pounds for ‘phantom’ electronic tags on criminals who were either dead, in jail or had left the country.

Two private firms, G4S and Serco, are accused of wrongly billing for tens of thousands of tags which had either been removed or simply never fitted.

Estimates suggest up to one in six of the 18,000 tags the Ministry of Justice was billed for every day were not real.

Taxpayers could have overpaid two private companies for their work tagging criminals

Last night ministers asked fraud investigators to look at G4S, after the company refused to allow forensic auditors access to its books and emails between senior executives.

Justice Secretary Chris Grayling took the dramatic step after pledging to recover ‘every last penny’ owed to the public purse.

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He told MPs the scandal could date back as far as 1999, when tagging of criminals began in England and Wales. Since then the taxpayer has spent £1billion on tagging and monitoring offenders. The current contracts began in 2005.

Mr Grayling condemned the overcharging as ‘wholly indefensible and unacceptable’. In some cases, bills were paid for months or years after tags were taken off, he said.
G4S’S ROLL OF SHAME

OLYMPIC SECURITY

Just two weeks before the start of the 2012 Olympic Games, G4S admitted it was unable to supply more than 10,000 security guards it had promised.
Army and police personnel were drafted in to fill the gap (pictured above), with the company eventually picking up the £88million bill.

PROSTHETIC TAG
In 2011, two G4S workers placed an electronic tag on an offender’s false leg, meaning he could simply take it off.
Christopher Lowcock wrapped his prosthetic limb in a bandage to fool staff who set up the device in his home.

PRISONER DIES
Angolan prisoner Jimmy Mubenga died in 2010 after being restrained by G4S guards on his deportation flight. Three G4S staff were arrested on suspicion of manslaughter but charges were not brought because of a lack of evidence.

BIRMINGHAM KEYS
In 2011, a set of keys went missing at Birmingham Prison, a jail managed by G4S. Inmates were locked in their cells for an entire day, and new locks had to be fitted at a cost of £250,000.

He also launched a disciplinary investigation into former officials in the department after discovering contract managers were aware of billing issues in 2008, but ‘nothing substantive was done’.

Details of a ‘significant anomaly in billing practices’ within the deals emerged during a routine review as ministers prepared to negotiate contracts for satellite tags.

It found ‘charges for people who were back in prison and had their tags removed, people who had left the country and those who had never been tagged in the first place’, Mr Grayling said.

Charges were also made in a ‘small number of cases when the subject was known to have died’.

He added: ‘In some instances, charging continued for a period of many months and indeed years after active monitoring had ceased.’

The bill to taxpayers is put in the ‘low tens of millions’.

Tags are put on criminals after their early release from prison or as part of their community service.

Most involve a 12-hour curfew from 7pm to 7am, allowing the criminal, in theory, to work. A box in the offender’s home sounds an alert if the tag goes out of range or stops working.

Audits have also been launched into all other contracts between the Government and the two firms, both major suppliers to Whitehall. G4S received £1billion in revenue from UK Government contracts last year, while Serco made £2billion.

Serco has withdrawn its bid from the current tendering process for new satellite tags, while G4S is expected to be excluded after refusing to pull out.

Serco agreed to co-operate with a new audit but has said it does not believe ‘anything dishonest has taken place’.

G4S rejected the new audit and last night a spokesman insisted it has ‘always complied totally with the terms of the contract’.

The Serious Fraud Office will consider whether an investigation is appropriate into what happened at G4S, Mr Grayling said.

Indefensible: Justice Secretary Chris Grayling said G4S had rejected a demand for a new forensic audit

The firm’s reputation was shredded last year by its failure to fulfil the security contract for the Olympics. Thousands of armed forces and police personnel were called in to fill the gap and the company was forced to pick up the tab.

In May, G4S chief executive Nick Buckles quit with a £1.2million payoff. Several senior managers were sacked in the wake of the Olympic fiasco.

The price of shares in both firms plunged yesterday following the announcement, wiping £176.4million from G4S’s value and £269.6million from Serco.

G4S group chief executive Ashley Almanza said: ‘We place the highest premium on customer service and integrity and therefore take very seriously the concerns expressed by the Ministry of Justice.’

Serco group chief executive Christopher Hyman said: ‘Serco is a business led by our values and built on the strength of our reputation for integrity. We are deeply concerned if we fall short of the standards expected.’

By Jack Doyle and Peter Campbell
PUBLISHED: 11:52 GMT, 11 July 2013 | UPDATED: 08:19 GMT, 12 July 2013

Find this story at 11 July 2013

© Associated Newspapers Ltd

G4S and Serco face £50 million fraud inquiry

Serious Fraud Office investigates G4S claim of over-charging for government contracts

Whitehall contracts running into billions of pounds are being urgently reviewed after the Government disclosed that two major firms had charged the taxpayer to monitor non-existent electronic tags, some of which had been assigned to dead offenders.

In an announcement that throws the Coalition’s privatisation drive into disarray, the Serious Fraud Office was called in to investigate G4S, the world’s largest security company, over contracts dating back over a decade.

Serco, one of Britain’s largest companies, also faces an inquiry by auditors over its charges for operating tagging schemes.

The firms supply an array of services to the public sector from running courts, prisons and immigration removal centres to managing welfare-to-work schemes and the Atomic Weapons Establishment.

Between them the two companies receive around £1.5bn a year from the taxpayer, but their contracts are worth billions of pounds because the vast majority run for several years.

They were also hoping to cash in on moves by the Ministry of Justice (MoJ) to hand them further large contracts to operate prisons and supervise offenders in the community.

The process of awarding all contracts was put on hold last night as the inquiries got underway.

The MoJ began investigating all its agreements with the two firms, including the running of major prisons, while the Cabinet Office started scrutinising all other Government contracts with G4S and Serco.

Shares in both companies fell sharply after the announcement by Chris Grayling, the Justice Secretary.

Shares in G4S – which suffered torrid publicity over its mishandling of the last year’s London Olympics security contract – finished the day 12.6p down at 213p. Serco tumbled by 54p to 626.5p.

Each of the companies relies heavily on Britain both for income and burnishing its international reputation. The move by the Government is unlikely to result in the wholesale loss of contracts, as the firms have few competitors of the same size but is a blow to their standing worldwide.

Mr Grayling’s announcement came after an audit discovered G4S and Serco had overcharged taxpayers by up to £50m, billing them for offenders who were dead, back in custody or had left the country. According to one MoJ source, the companies charged for 18,000 offenders when the actual number was around 15,000.

Mr Grayling said latest estimates suggested taxpayers had been overcharged by the companies to the tune of “low tens of millions” since the electronic monitoring contracts were signed in 2005. He also disclosed that ministry staff could have known about the practice for five years and face possible disciplinary action.

He said in a Commons statement: “The House will share my astonishment that two of the Government’s biggest suppliers would seek to charge in this way.

”The House will also be surprised and disappointed to learn that staff in the Ministry of Justice were aware of the potential problem and yet did not take adequate steps to address it.“

Mr Grayling said he was asking the Serious Fraud Office to investigate the G4S contracts as the company had refused to co-operate with a further audit to rule out wrongdoing.

An investigation by PriceWaterhouseCoopers found that overcharging could have dated back as far back as 1999 when earlier contracts were signed.

Serco has agreed to withdraw from the current tender process for an electronic monitoring contract worth up to £1m, while Mr Grayling plans moves to exclude G4S as it is still attempting to bid.

Serco had also been the leading bidder for prison contracts in Yorkshire, but Mr Grayling will delay their award until the fresh audit is complete.

An urgent review of contract management across the Ministry of Justice’s major contracts has also been launched and will report by autumn, he said.

G4S and Serco were also among companies preparing to bid for a range of payment-by-results contracts to supervise low to medium-level offenders across England and Wales.

Ian Lawrence, general secretary of the National Association of Probation Officers union, said: ”We’ve long maintained that these companies are unfit for purpose when it comes to holding important public contracts. The outcome of the initial investigation into G4S and Serco suggests a good deal of malpractice has been discovered.“

Ashley Almanza, the G4S group chief executive, said: ”We place the highest premium on customer service and integrity and therefore take very seriously the concerns expressed by the Ministry of Justice. We are determined to deal with these issues in a prompt and appropriate manner.“

Serco Group’s chief executive, Christopher Hyman, said: ”Serco is a business led by our values and built on the strength of our reputation for integrity.

“These values lie at the heart of the many thousands of our people who are endeavouring to deliver the highest standard of service to our customers around the world. We are deeply concerned if we fall short of the standards expected of all of us.”

Sadiq Khan, the shadow Justice Secretary, said: “Given the scale of the allegations, the Government must immediately call in the police and the Serious Fraud Office to investigate both companies as fraud has potentially taken place.”

Security breach: Other G4S fiascos

* G4S faced fierce criticism last year following the botched handling of its Olympics security contract. It failed to deliver the numbers of security staff it had promised and the Government was forced to bring in additional armed forces personnel. The firm will take a £70m hit over the bungled contract with Games organisers, Locog.

* Earlier this week an inquest jury ruled an Angolan man who died after being restrained by three G4S guards as he was being deported from the UK was unlawfully killed. Jimmy Mubenga, 46, died on a plane bound for Angola in October 2010. The Crown Prosecution Service said it would reconsider its decision not to bring criminal charges in the wake of the verdict.

* In January, multimillion-pound plans by three police forces to outsource services to G4S collapsed. Hertfordshire Police and Crime Commissioner, David Lloyd, said the Bedfordshire, Cambridgeshire and Hertfordshire Strategic Alliance had discontinued negotiations with the firm.

However, last month it was revealed Lincolnshire’s police force now spends the lowest amount per head of population on policing in England and Wales after it handed over the bulk of its back-office functions to G4S.

Nigel Morris
Friday 12 July 2013

Find this story at 12 July 2013

© independent.co.uk

G4S faces fraud investigation over tagging contracts

Justice secretary tells MPs he has called in Serious Fraud Office to investigate private security firm for overcharging

The overcharging included billing for tracking the movements of people who had died. Photograph: David Davies/PA

The Serious Fraud Office has been called in by the justice secretary to investigate the private security company G4S for overcharging tens of millions of pounds on electronic tagging contracts for offenders.

Chris Grayling told MPs the overcharging included billing for tracking the movements of people who had moved abroad, those who had returned to prison and had their tags removed, and even people who had died.

He said he had made the decision after G4S refused on Wednesday to co-operate with a voluntary forensic audit of its billing practices and to withdraw as a potential bidder for the next generation of tagging contracts worth up to £3bn.

“At this time I do not have evidence of dishonesty by G4S but I have invited the Serious Fraud Office to investigate that,” he said.

Whitehall sources say that a new forensic audit will look at a central allegation that the justice ministry was being billed for the tagging of 18,000 offenders a day when only 15,000 were actually being monitored – raising the prospect of being charged for 3,000 “phantom” offenders or one in six of all those on tags.

Grayling told MPs that G4S and a second major supplier, Serco, had been overcharging on the existing £700m contract, with the Ministry of Justice being billed for non-existent services that dated back to at least 2005 and possibly as long ago as 1999.

Grayling added that it included charging for monitoring people who were back in prison and had had their tags removed, people who had left the country, and those who had never been tagged in the first place.

“There are a small number of cases where charging continued for a period when the subject was known to have died,” he told the Commons.

“In some instances, charging continued for a period of many months and indeed years after active monitoring ceased. This is a wholly indefensible and unacceptable state of affairs. The house will share my astonishment that two of the government’s biggest suppliers would seek to charge in this way.”

Shares in Serco fell about 8% and for G4S almost 6% by the close on Thursday.

The decision to call in the SFO follows an audit by PricewaterhouseCoopers commissioned by Grayling in May after billing discrepancies were discovered during a re-tendering process. Under the contracts the movements of more than 20,000 offenders are monitored using electronic ankle tags at any one time.

“The audit team is at present confirming its calculations but the current estimate is that the sums involved are significant, and run into the low tens of millions in total, for both companies, since the contracts commenced in 2005,” Grayling said.

Serco, which is one of the government’s biggest and most important suppliers, agreed on Wednesday to fully co-operate with a forensic audit to establish whether any dishonesty took place on its part. It has also agreed to withdraw from bidding for the £3bn next-generation tagging contract.

“They have said they take the issue extremely seriously and assure me that senior management were not aware of it. They do not believe anything dishonest has taken place, but we have agreed that if the audit does show dishonest action, we will jointly call in the authorities to address it,” Grayling said.

Serco was the leading bidder to take over the management of a prison in South Yorkshire. Grayling said that decision had now been delayed until the voluntary forensic audit was completed.

The Cabinet Office is to review all G4S and Serco contracts held across government as a result of the tagging scandal. The Cabinet Office minister, Francis Maude, had already started preparations for a register of companies holding public sector contracts to detail their track record in the wake of G4S’s failure last year to fulfil its contract to provide security guards for the London Olympics.

Grayling, who had the attorney general, Dominic Grieve QC, next to him when he made his Commons statement, said he had taken the decision to call in the SFO “given the nature of the findings of the audit work that had taken place so far, and the very clear legal advice that I have received”.

He said the SFO was being asked to consider whether an investigation was appropriate, and to confirm “whether any of the actions of anyone in that company represent more than a contractual breach”.

The justice secretary has started a formal process to determine whether to exclude G4S from the next 10-year tagging contract which is due to start shortly. He has also taken action within the justice ministry after disclosing that his own officials became aware in a limited way of some of the problems in 2008 but failed to take adequate steps to address them.

He said an entirely new contract management team had been put in place. “The permanent secretary is also instituting disciplinary investigations to consider whether failings on the part of individual members of staff constitute misconduct”, he said.

The shadow justice secretary, Sadiq Khan, said the disclosures were “truly shocking” and the police should be called in immediately to investigate Serco as well as G4S. “There can be no cosy relationship with either company if we are to truly get to the bottom of these very serious allegations,” he said.

G4S said the justice ministry was an important customer and it was committed to resolving its concerns. It said it was conducting its own review and would reimburse any overbilling it identified. It said it was not aware of any indications of dishonesty or misconduct.

Ashley Almanza, the G4S chief executive, said: “We are committed to having close and open relationships with our customers and we strive to work in partnership for the mutual benefit of our organisations.

“We place the highest premium on customer service and integrity and therefore take very seriously the concerns expressed by the Ministry of Justice. We are determined to deal with these issues in a prompt and appropriate manner.”

Serco Group’s chief executive, Christopher Hyman, said: “Serco is a business led by our values and built on the strength of our reputation for integrity. These values lie at the heart of the many thousands of our people who are endeavouring to deliver the highest standard of service to our customers around the world. We are deeply concerned if we fall short of the standards expected of all of us.”

Alan Travis, home affairs editor
The Guardian, Friday 12 July 2013

Find this story at 12 July 2013

© 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved.

G4S and Serco: Taxpayers overcharged by tens of millions over electronic tagging

Chris Grayling, the Justice Secretary, has asked the Serious Fraud Office to investigate security firm G4S after a review found the Government had been overcharged by tens of millions of pounds in its electronic tagging contract.

A review has found G4S and rival security company Serco both over-billed the taxpayer for running the tagging schemes, in what the minister said was a “wholly indefensible and unacceptable state of affairs”.

It included charging the government for tagging offenders who had died, been returned to prison, left the country or who had never been put on the tagging scheme in the first place, Mr Grayling told the House of Commons.

Ministry of Justice sources said although they typically had 15,000 offenders on a tag at any one time G4S and Serco had been charging them for 18,000 – meaning one in six was spurious.

It also emerged civil servants first became aware of some of the problems in 2008 but failed to take appropriate action – and Mr Grayling said some may now face disciplinary action.

“I am angry at what has happened and am determined to put it right,” said Mr Grayling.
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“This has included instances where our suppliers were not in fact providing electronic monitoring.

“It included charges for people who were back in prison and had had their tags removed, people who had left the country, and those who had never been tagged in the first place but who had instead been returned to court.

“There are a small number of cases where charging continued for a period when the subject was known to have died.

“In some instances, charging continued for a period of many months and indeed years after active monitoring had ceased.

“The House will share my view that this is a wholly indefensible and unacceptable state of affairs.

Mr Grayling said he expected MPs would share his “astonishment” that two of the government’s two biggest contractors would behave in such a way.

He added: “The audit team is at present confirming its calculations but the current estimate is that the sums involved are significant, and run into the low tens of millions in total, for both companies, since the contracts commenced in 2005.

“It may date back as far as the previous contracts let in 1999.”

Serco has agreed with a Ministry of Justice proposal for a further investigation, and allow inspection of its internal emails.

But G4S, which was widely criticised for its failure to fulfil security requirements at last year’s Olympics, has rejected that proposal, said Mr Grayling.

“I should state that I have no information to confirm that dishonesty has taken place on the part of either supplier,” he told MPs.

“But given the nature of the findings of the audit work that has taken place so far, and the very clear legal advice that I have received, I am today asking the Serious Fraud Office to consider whether an investigation is appropriate into what happened in G4S, and to confirm to me whether any of the actions of anyone in that company represent more than a contractual breach.”

Mr Grayling first launched an investigation into G4S and Serco in May after an internal audit uncovered a “significant anomaly” in the billing process.

The Ministry of Justice brought in external auditors to find out how much the two companies have incorrectly claimed from the taxpayer, which uncovered the remarkable details announced by Mr Grayling to the Commons.

He said: “I am making changes in my department because it is quite clear that the management of these contracts has been wholly inadequate.

“Enough knowledge came into the department to find out about these issues some years ago but it was not acted upon.

“Proceedings are likely to include, or may well include, disciplinary proceedings to establish precisely what did go wrong.”

Spending on electronic tagging has run to £700 million since G4S and Serco were handed the contracts.

Mr Grayling said no-one had been put in danger and the problem was purely to do with the billing arrangements. The contracts were awarded by the Labour government in 2004 and are ministers are currently going through a process to re-allocate the work.

Serco has pulled out of the bidding process but Mr Grayling said he was “disappointed that G4S still feel it appropriate to participate”.
By David Barrett, Home Affairs Correspondent
12:40PM BST 11 Jul 2013

Find this story at 11 July 2013

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