G4S may make more profit than allowed from removal centres, figures suggest

https://www.theguardian.com/business/2017/sep/13/g4s-may-make-more-pro
Wednesday 13 September 2017 13.36 EDT

The security firm G4S appears to have been making more profit than its contract allows from the immigration removal centres (IRCs) it runs for the government, according to an internal document seen by the Guardian.

According to an outline of G4S’s financial performance at the two IRCs it ran in 2016, the company’s margin on its trading profit at Brook House was 20.7%. At Tinsley House, its other IRC, the margin was 41.5%, though that figure may be distorted by the fact that Tinsley House was closed for part of the year.

The exact profit margin G4S is contractually allowed to make is not published by the Home Office or the company, but under the original contract, drawn up in 2009 and also seen by the Guardian, the agreed initial limit to the profit margin was 6.8%.

G4S won the initial contract on the basis that it would look to make savings and any excess profit would be returned to the Home Office. A more recent email suggests the expected margin now is just over 5%.

G4S said the margins on its trading profits did not factor in centralised costs such as payroll, but declined to reveal the final extent of its profit margin, citing concerns over competition. A spokesperson also declined to comment on why the margins appeared so large.

Nathan Ward, a former duty director of Brook House and now a Church of England priest, said that when he worked at G4S profit margins above the agreed Home Office limit were discussed. “When I was there as a senior manager I sat in trading reviews where profits of around 20% were declared, which were far in excess of what was envisaged in the original contract,” he said. “I was also aware of some cost savings being declared. However, this was separate to the overall profit made.”

According to the financial performance review, G4S made trading profits of more than £2.3m on Brook House IRC and more than £2.2m on Tinsley House IRC. The company made £2m more than it had forecast on Brook House despite receiving £89,574 less from the Home Office than it had asked for to run it.

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The revelations of the scale of the profits come at a difficult time for G4S, the world’s largest security group, which is currently in the process of bidding to renew its multimillion-pound contract to run Brook House. They follow a series of allegations about abusive treatment of detainees. In the past the company has been accused of using dangerous forms of restraint, and it faced a Serious Fraud Office investigation over overcharging, leading to a temporary ban from bidding for government contracts.

Internal G4S emails suggest concerns over the profit margin were shared with the company’s leadership. In one message to a G4S regional president, Peter Neden, a senior manager who filed a grievance and has since left the company, said Tinsley House was making an excessive profit by inflating the number of staff needed to run it from 60 to 80.

In the email, the manager said G4S had mistakenly revealed its true profit margin to the Home Office, prompting a demand for further savings. The manager went on: “At this point, I was questioning the staff we had formally asked the Home Office for as I knew we had only requested 60 to run Tinsley, yet we were asking for money for 80 staff.”

The manager also complained of bullying by senior management and lack of transparency, writing: “I believe there is no truth in our company values, there is no transparency.”

Last week a Panorama undercover operation secretly filmed staff at Brook House, near Gatwick, verbally abusing detainees and ridiculing suicide attempts, saying they did not care if the detainees died. The Guardian revealed that the director of Brook House, Ben Saunders, had previously been in charge of a children’s prison where abuse was rife. Saunders ran Medway secure training centre (STC) in Kent in 2009-10, when children were being maltreated.

In February 2016, after earlier investigations by the Guardian and Panorama, G4S announced it was giving up its UK children’s services operation. It still runs Oakhill STC, near Milton Keynes, but is in sale talks with a probation services company.

The company had previously been banned from bidding for government contracts after allegations of overcharging on contracts for the electronic monitoring of offenders. The ban was lifted in 2014 when G4S repaid £109m and implemented a corporate renewal plan to avoid overcharging in the future.

Sally Keeble, a former MP who has campaigned against the closed culture and dangerous restraints in G4S-run detention centres, said: “Any company that has a contract that allows 5% profit and takes more than 20% should be investigated by the National Audit Office. This shows exactly why there have been so many problems in the delivery of the service.”

A spokesperson for G4S said: “The profit numbers you are looking at are not complete by any means in terms of shared service costs and overheads that would be applicable to Brook House and Tinsley House. This is an internal document compiled locally that includes centre costs, but these centres don’t run without overheads and shared services. For example, IT, HR and payroll are provided from a shared service centre. We don’t make anything like that level of profit on Brook House or Tinsley House. The Home Office is aware of that.”

A Home Office spokesperson said: “In line with other contractual agreements, G4S are required to meet set service standards, including ensuring minimum staffing levels are met, and must provide financial reports to Home Office and Cabinet Office on a quarterly basis. Savings identified by G4S through smarter working practices have been and continue to be reported to the Home Office.

“We do not recognise the profit margins quoted and they do not reflect those reported to the Home Office, which include all overheads and shared services.”

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