G4S and Serco ‘overcharged by tens of millions of pounds’ on electronic tagging contracts, audit concludes

The Ministry of Justice (MoJ) is in dispute with G4S and Serco over the amount the government may have been overcharged for electronic tagging services, a forensic audit of the contracts has concluded.

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The Ministry of Justice (MoJ) is in dispute with G4S and Serco over the amount the government may have been overcharged for electronic tagging services, a forensic audit of the contracts has concluded.

However, the audit also revealed that the government doesn't have its own, independent data to prove where they have been overcharged.

G4S and Serco are currently being investigated by the Serious Fraud Office (SFO) over their handling of the electronic tagging contract.

The MoJ believes that the security firms charged for work that had not taken place, and the audit, carried out by PricewaterhouseCoopers (PwC) for the National Audit Office (NAO), estimates that the potential overcharge by both suppliers in total “may amount to tens of millions of pounds”. This is based on the analysis of data of thousands of cases.

Disputed billing practices

The NAO memorandum published today provided some examples of disputed billing practices. For example, both contractors charged the MoJ for monitoring fees for months or years after electronic monitoring activity had finished, or had never even occured.

They also charged multiple times for the same individual if the person was subject to more than one electronic tagging order at the same time. For instance, one person had four separate orders for four separate alleged offences. Serco installed equipment on 1 May 2012 to cover all for orders, and then charged for monitoring on 2 May 2012 for each order.

In another case, Serco was unable to install monitoring equipment in a property in July 2008. The company lodged requests with the court for verification of bail status of the person at the property in 2009 and 2012, and has not received a response from the court. Despite not carrying out monitoring services at the address, it still billed the government for almost five years for about £15,500.

Although Serco and G4S used different management information systems, the auditors said that it is understood that both systems required an end date for an order to be entered, so that the systems could function properly.

As bail orders do not typically have specified end dates, the company set arbitrary end dates on all orders, on the basis that otherwise the orders risked being shut down too early.

“In the case of G4S this was set as being the year 2020, and in the case of Serco, the year 3000. This meant that charges on individual cases could have continued until an end date was formally notified by an appropriate authority.”

Both contractors argued that the charging practices were in line with the terms of the contract. However, G4S has since said that the interpretation was inappropriate and said it intends to offer the government £23.3 million in credit notes.

Serco, meanwhile, said it will refund any amount that it agrees represents overcharging. The MoJ has not agreed to any refund offers made so far.

Government failings

However, the NAO report highlighted failings in the government’s processes, which has led to the dispute over overcharging amounts.

“The Ministry does not have, and has not had, an independent source of data to compare with data from the providers. The Ministry does not collate summarised data on the number of requests for electronic monitoring from HM Courts & Tribunals Service or individual prisons, and has been reliant on providers’ data,” the NAO said.

The Home Office had originally intended to gain remote access to G4S’s and Serco’s databases to verify the performance data independently.

“However, technical difficulties relating to the secure transfer of data over the Government Secure Intranet meant this project ceased in 2006,” the NAO said.

The lack of data, combined with the practice of billing by orders, rather than by people, means that the government has provided inaccurate responses to parliamentary questions, the auditors found.

Today’s NAO memorandum covers only one aspect of PwC’s audit of the MoJ electronic tagging contract. The NAO has also asked the auditors to review Serco’s internal emails to ascertain whether there is any suggestion of dishonesty in the charging practices, and to carry out a wider review of the other 23 contracts the MoJ holds with G4S and Serco. The results of these will be published at another date.