Deloitte fined £4.2m over Serco electronic tagging scandal

Deloitte has been fined £4.2 million by the accounting watchdog for its audit of Serco’s Geografix division during the outsourcer firm’s electronic tagging scandal.

The accounting watchdog said Deloitte’s audit partner, Helen George, had been fined £97,500, and both the firm and Ms George had 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 had 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.

The firm confirmed Ms George remained with the firm as an audit partner.

She has worked for Deloitte for nearly 23 years, having joined the firm straight from university in 1996.

The FRC said further details of Deloitte’s misconduct would be set out in the statement of facts, which has not yet been published due to “parallel investigations”.

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.

Details revealed in a court hearing to approve the deferred prosecution agreement (DPA) struck with the SFO showed Serco “cooked the books” to profit from overcharging for Government tagging contracts.

In his judgment to formally approve the DPA on Thursday, Mr Justice Davis said the fraud had been “relatively simple in its formation and execution”.

He said the Geografix subsidiary had been the “vehicle” by which the fraud was carried out, charging the parent company Serco £500,000 a month for costs which were “complete fabrications”.

Serco and G4S were stripped of their responsibility for tagging criminals in the UK later on in 2013.

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 in the scandal, remains under investigation by the SFO.