Troubled supplier Serco has agreed to reimburse the Ministry of Justice (MoJ) £68.5 million after allegations of fraud and overcharging on an electronic tagging contract emerged earlier this year.
Serco, along with G4S, have been involved in a row with government over billing practices on the contract, which has led to the MoJ being overcharged by millions of pounds. The Serious Fraud Office (SFO) is conducting an investigation into G4S and Serco's roles in the scandal, which has seen off a number of bosses at the companies.
Capita has now taken over delivery of the electronic monitoring - using systems and equipment supplied by G4S and Serco - on an interim basis by April 2014.
The Justice Secretary Chris Grayling confirmed the settlement with Serco earlier today, covering money owed on the electronic monitoring contract and for other costs incurred, including the cost of investigating these matters. It also includes £4.2 million which will be set against future costs for the transition to new electronic monitoring arrangements.
"It's good news for taxpayers that Serco have agreed to recompense £68.5 million for overcharging. We are confident that the company is taking steps to address the issues which our review has identified," said Francis Maude, minister for the Cabinet Office.
"Since day one this government has been working to reform contract management and improve commercial expertise in Whitehall. Everything we have seen has highlighted the importance of these reforms and we will be redoubling our efforts over the coming months, including through the establishment of the new Crown Commercial Service."
He added: "Last year our procurement reforms saved the taxpayer £3.8 million, but there is more to do as part of our long-term plan to drive greater value for hard-working families."
Meanwhile, the Cabinet Office has also reviewed 28 of the largest contracts held by G4S and Serco, worth £5.9 billion in total with the support of PWC, Moore Stephens and a highly experienced Oversight Group.
The broader review found no further evidence of wrongdoing or malpractice, but did highlight areas of focus for departments, such as prioritising performance management, change management processes and incentives for service improvements.
Since accusations emerged, Serco has set out on implementing a corporate renewal plan, which is now said to be in its advanced stages. The government is expected to provide a final opinion on the adequacy of the plan in January.
Alastair Lyons, non-executive chairman of Serco, said: "We are very pleased to be making strong progress in further rebuilding the confidence of our UK government customer. Serco's cooperation with the intensive series of audits and reviews, alongside the significant steps we are taking as part of our renewal programme, demonstrate our commitment to this.
"The contract issues that were identified should never have happened and we apologise unreservedly for them. We are doing everything in our power to make sure that such issues cannot reoccur anywhere in our business around the world."
He added: "Our objective is to deliver excellent public services with openness and transparency, and I believe the actions we are taking will support this now more than ever."