1.2 In July 2013 the Ministry of Justice announced that it had found significant overbilling in its electronic monitoring contracts with G4S and Serco dating back to 2005. The Home Office let contracts to G4S and Serco for electronic monitoring in 2005, which were transferred to the Ministry of Justice in 2008.11 The contracts were due to end in April 2013. Ministry staff working on the competition for new contracts discovered data anomalies and separately a whistleblower reported their concerns about operating practices at G4S. The Ministry commissioned PwC to undertake a forensic audit of the contracts in May 2013. The Secretary of State later announced that he was referring the matter to the Serious Fraud Office (SFO), whose investigation is ongoing.12
1.3 Departments undertook a number of separate reviews to determine whether there was any further overbilling and assess the quality of contract management:
• The Cabinet Office announced a review of central government contracts with G4S and Serco on 11 July 2013 (the cross-government review).13 It commissioned PwC and Moore Stephens to audit 28 of the largest contracts held with G4S and Serco across 8 central government bodies.
• The Ministry of Justice and the Home Office decided to further review a selection of their major contracts with various contractors.14
• In June 2014 the Department for Work & Pensions (DWP) commissioned its own internal review on its management of 15 of its major contracts. This did not look for overbilling; 5 other DWP contracts had already been tested as part of the cross-government review.
1.4 The cross-government 15 and Ministry of Justice 16 reviews reported publicly on 19 December 2013. The other reviews reported their findings internally. The reviews were thorough. Those that looked at overbilling examined a large enough sample of invoices to give reasonable assurance that contractors had provided the service and the amount billed agreed with the contract. Across all the reviews, 60 different contracts were tested for overbilling and 73 were tested for contract management control (Figure 3).
1.5 The cross-government review did not find evidence of deliberate wrongdoing by Serco or G4S. It found some instances of small unexplained discrepancies between amounts billed and the underlying contract. These included under- and overbilling thought to be through error rather than deliberate intent.
1.6 The Ministry Of Justice's review found 3 possible instances of wrongdoing. Early findings from the Ministry's review suggested that Serco staff may have falsified data on prisoner arrival times. The Ministry and Serco jointly referred the matter to the City of London Police on 28 August 2013.17 The Ministry also referred 2 G4S contracts for facilities management in courts to the Serious Fraud Office (SFO) on 19 December 2013.18 The Home Office review found no evidence of deliberate wrongdoing, but did find minor billing errors and weaknesses with the control environment.
1.7 Of the 60 contracts tested, some 34 had issues with billing, including instances of underbilling and lack of documentation to determine whether the service had been provided.
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11 Comptroller and Auditor General, The Electronic Monitoring of Adult Offenders, Session 2005-06, HC 800, National Audit Office, February 2006.
12 Further details on the history of these reviews are included in our report: Comptroller and Auditor General, The Ministry of Justice's electronic monitoring contracts, Session 2013-14, HC 737, National Audit Office, November 2013.
13 Available at: www.gov.uk/government/news/review-of-government-g4s-and-serco-contracts, 11 July 2013.
14 Further details of the Home Office and Ministry of Justice reviews are in our report: Comptroller and Auditor General, Transforming contract management in the Ministry of Justice and the Home Office, Session 2014-15, HC 268, National Audit Office, September 2014.
15 HM Government, Cross Government Review of Major Contracts, December 2013.
16 Ministry of Justice, Contract management review, December 2013.
17 Available at: www.gov.uk/government/news/moj-audit-of-serco-contracts-prison-escort-services
18 G4S website, Investor News announcement, 19 December 2013.