Serco group to repay £68 million to government following tagging fraud

Serco Group, one of the three corporate partners in AWE Management Ltd, the company which runs the UK's nuclear weapons factories, has agreed to repay more than £68 million to the government after overcharging on a contract with the Ministry of Justice for the electronic tagging of prisoners.

Serco will pay £68.5 million plus VAT to the government after it was caught invoicing for the tagging of prisoners who were not being monitored through the tagging scheme, including some who were back in prison, living abroad, or who had died.  

The financial impact is believed to be larger for Serco than the company had been expecting. Last month, it said it had incurred £27 million of costs relating to the tagging contract, as well as another for providing Prisoner Escort and Custody Services.

Serco has been barred from taking on new work on government contracts since July, when the electronic tagging scandal first broke.  A decision will be made in January 2014 on whether to allow the company to sign new contracts with government departments and agencies.  The company remains under criminal investigation by the Serious Fraud Office following the scandal.

Serco has also agreed to repay £2 million in past profits on a separate prisoner escort contract after it was found that its staff had been recording prisoners as delivered "ready for court" when they were not.  However, a separate government review of 28 of the largest contracts held by Serco and G4S, which was also found to have overcharged for tagging services, found no further evidence of deliberate overcharging.

Serco told the stock market yesterday that the cost of its external reviews and audits since the overcharging was disclosed in July had reached £17m.

Grayling said the £68.5 million would reimburse the government for money owed on the tagging contract and for other costs incurred such as the cost of the investigation, which included a forensic audit undertaken by the external auditors PwC.

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