Accountancy firm Deloitte fined £4.2M for part in Serco electronic tagging scandal
Accountancy giant Deloitte has been fined £4.2 million by the Financial Reporting Council for its audit of Serco’s Geografix division over the outsourcer’s electronic tagging scandal.
The accounting watchdog said Deloitte’s audit partner, Helen George, has been fined £97,500, and both the firm and Ms George have been “severely reprimanded” following admissions of misconduct.
It comes after Serco was fined £19.2 million, plus £3.7 million in costs, by the Serious Fraud Office (SFO) on Wednesday after it overcharged the Government for offender tagging contracts between 2010 and 2013.
It brought to an end a lengthy probe by the SFO without Serco facing any criminal charges.
Serco said its Geografix subsidiary had taken responsibility for three offences of fraud and two of false accounting.
As part of the settlement, the Financial Reporting Council (FRC) said Deloitte has also arranged for all its audit staff to undergo a training programme aimed at improving the behaviour at the heart of the misconduct.
It said Deloitte and Ms George “failed to act in accordance with the fundamental principle of professional competence and due care”.
Deloitte’s fine was discounted from an initial £6.5 million due to settlement, as was Ms George’s from £150,000.
Deloitte will also pay £300,000 towards investigation costs.
Serco and fellow outsourcer G4S found themselves at the centre of a public and political storm in 2013 when it emerged that the pair had been overcharging the Government for electronically monitoring people who were either dead or in jail, or had left the country.
The two companies were stripped of their responsibility for tagging criminals in the UK later that year.
Serco’s SFO fine came on top of a £70 million settlement with the Ministry of Justice in December 2013.
G4S, which repaid the Government £109 million plus VAT for its part of the scandal, remains under investigation by the SFO.
Justice Minister confirms Serco contracts under examination
The Ministry of Justice (MOJ) is conducting an investigation and audit of its contracts with outsourcing giant Serco, a minister has confirmed.
Justice minister Paul Maynard was questioned by Labour over the continued role of Serco in prisons contracts after the firm was fined £19.2 million and ordered to pay £3.7 million in investigation costs after it overcharged the Government for tagging contracts.
Shadow justice secretary Richard Burgon called for a full audit of Serco’s contracts with the MoJ and said the firm should not be awarded any deals to run new prisons.
In response, Mr Maynard told MPs: “The ministry has already begun an investigation and audit into its contracts for prison escort and custody services that Serco currently hold.”
Mr Burgon called for the Government to admit there was a “systematic failure” with private contracts in the justice sector.
He said: “This is just the latest scandal to hit our justice system involving the private sector in recent months.
“Each time we’re told it’s an isolated case, so will the minister admit that in reality, it is a systematic failure.”
Mr Maynard responded: “All we have heard today is a predictable ideological tirade of hostility towards the private sector’s role that they play within our justice system that does not stand up to scrutiny.”
Judge defends use of deferred prosecution deal in Serco case
A senior judge has defended the use of deferred prosecution agreements against potential “cynicism”.
Mr Justice William Davis formally approved an agreement, known as a DPA, between outsourcing giant Serco and the Serious Fraud Office which saw the firm fined millions of pounds for overcharging for Government contracts.
But while the company’s UK subsidiary, Serco Geografix, has taken responsibility for fraud and false accounting committed between 2010 and 2013, the agreement means the firm has not faced any criminal charges.
DPAs, which were introduced in the UK in 2014, are court-approved deals which allow a prosecution to be suspended for a defined period provided the organisation meets certain specified conditions.
They allow a corporate body to make full reparation for alleged criminal behaviour without the collateral damage of a conviction, and the SFO has previously said they avoid lengthy and costly trials, and are transparent, public events.
Mr Justice Davis said his approval of this three-year DPA came after Serco demonstrated a willingness to learn lessons from what happened.
In his judgment he said: “There may be cynicism in some quarters about the process by which a corporate entity can take advantage of a DPA.
“This cynicism is not well-founded. On the previous occasions when a DPA has been approved the point has been made that approval will only be given where there is the clearest possible demonstration of integrity on the part of the company concerned once the criminal activity has become apparent.
“This will require early self-reporting to the authorities, full co-operation with the investigation, a willingness to learn lessons and an acceptance of an appropriate penalty.
“The willingness to learn lessons must be shown via real, substantial and continuing remedial measures.
All of that has been demonstrated by Serco Group PLC in this case.”
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