A day after Serco was fined by the accounting watchdog Serious Fraud Office (SFO), Deloitte gets slapped with a penalty of £4.2m for its audit of Serco. Deloitte was fined on the pretext of helping the outsourcing company’s UK subsidiary, Serco Geografix Ltd (SGL) division in covering up its “deliberate fraud” of government tagging contract.
The Financial Reporting Council (FRC) said that Deloitte’s audit partner, Helen George, has also been fined £97,500, and both the firm and Ms.George have been “severely reprimanded” following admissions of misconduct.
The FRC also levied multiple penalties a day after Serco, revealed the settlement with SFO, including the payment of a £22.9m fine for cheating the government by overcharging in offender electronic tagging contracts between 2010 and 2013.
In 2013, Chris Grayling, British MP invited SFO to investigate the matter as G4S and Serco had been overcharging the Ministry of Justice. In May 2013 Grayling commissioned PricewaterhouseCoopers for the audit on being suspicious of G4S and Serco’s billing. SFO looked into audit by PWC and discovered discrepancies in billing during a re-tendering process.
The Ministry of Justice was billed for the services which were never provided, dating back from as long ago as 1999 to 2005. Overcharging included billing for tracking the movements of people who had shifted abroad, those who had gone back to prison and had their tags removed, and even people who had died.
On Wednesday High Court judge, Mr.Justice Davis, approved the much-deferred prosecution agreement between Serco and the Serious Fraud Office.
He claimed that SGL had “engaged in quite deliberate fraud against the Ministry of Justice” and had “cooked the books” to make money by from this form of daylight robbery.
SGL had charged parent company Serco £500,000 a month for costs which were “complete fabrications”, Southwark Crown Court was told. As per deferred prosecution agreement, SGL was accountable for three offences of fraud and two of false accounting.
SFO director Lisa Osofsky said: “SGL engaged in a concerted effort to lie to the Ministry of Justice in order to profit unlawfully at the expense of UK taxpayers.”