Justice Minister Chris Grayling reveals serious mis-charging by Serco and G4S over electronic monitoring of offenders. G4S, which has refused to allow an in-depth audit, may face an SFO investigation.

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In a statement to the House of Commons, Mr Grayling revealed that the two companies had charged for monitoring people who were actually back in prison, had already left the country or, in a few cases, where "the subject was known to have died".

The findings are the result of an independent audit instigated in May when significant anomalies in respect of billing arrangments began to surface during the process of preparing for a new round of contracts, due to be awarded shortly.

Mr Grayling told the Commons: "In some instances, charging continued for a period of many months, indeed years, after active monitoring had ceased." He said the auditors estimated 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."

Serious Fraud Office

The audit has shown that overcharging goes back at least to 2005, and may date back as far as the previous contract, which was agreed in 1999. Mr Grayling spoke of his "astonishment that two of the government's biggest suppliers would seek to charge in this way".

A fundamental pillar of Conservative policy has been shaken, writes our Home Affairs Correspondent Simon Israel.
A very angry Chris Grayling threatens to bar the country's largest private employer, G4S, from future contracts.
Privatisation of the probation service now looks decidedly shakey.
The Justice Secretary raises the possibility of fraud yet with little evidence.
There've been at least 24 external and internal audits of the tagging contracts since 2005 but only now has the alarm been raised.
He admits so far there's no evidence of dishonesty but he wants to bring in the Serious Fraud Office anyway.
G4S insists it's not aware of any misconduct either.
There's been no claim for a refund from MoJ at any stage and Mr Grayling has not made clear how the tagging of dead people, or of those sent back to prison took place.
While it doesn't look good for the security multinational, so soon after the Olympics debacle, Mr Grayling's problems may actually lie in his own backyard.

Mr Grayling told MPs that Serco, an international service company, had agreed to a full independent forensic audit, including examination of internal company emails relating to the electronic monitoring contract, and he thanked them for their co-operation. Serco has also agreed to withdraw from the current process of tendering for the new monitoring contracts.

However, he said that G4S, another multinational services company, had refused to allow such an investigation and therefore he had decided "on very clear legal advice" to ask the Serious Fraud Office (SFO) to consider whether an investigation is appropriate into what happened at G4S, and to confirm whether any of the actions of any G4S staff member constitutes "more than a contractual breach".

In a statement, G4S said that the "justice secretary has confirmed that, following the PwC audit, he has no evidence of any dishonesty in relation to the contracts.

"G4S is conducting its own review, assisted by external advisers, and is not aware of any indications of dishonesty or misconduct."

Probation to be privatised

Sadiq Khan MP, Labour’s shadow justice secretary, said news of the overcharging meant that the government should think twice before actioning plans to put probation services in the hands of private firms.

He said: "The government is proposing to privatise £800m worth of probation, with both these companies in the running to win very profitable contracts, without any testing or evaluating whether this will work or put the public’s safety at risk.

"Today’s announcements are even more reason why these plans should be piloted as we cannot afford any wrongdoing by the major players that might put at risk the safety of our communities."

Mr Grayling said that managers at the Ministry of Justice first discovered some of these issues in 2008: "Whilst it appears that these contract managers only had a limited idea of the scope and scale of the problem, nothing substantive was done at the time to address the issues."

The companies are supposed to supervise the tagging of individuals on bail and offenders in the community.

Under review

The Cabinet Office will now carry out a review of the biggest contracts with Serco and G4S: eight G4S contracts, worth £250m a year will be looked at, and 9 Serco contracts worth £750m.

When the stock market closed, G4S shares were down 5.6 per cent and Serco shares had fallen 7.9 per cent.

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