Deloitte fined £6.05m for Go-Ahead Group audit failures

The UK’s Financial Reporting Council (FRC) has fined Deloitte £6.05 million following audit deficiencies related to the transport operator Go-Ahead Group (GAG) between the 2016 and 2020 financial years. The penalty was reduced from an original £11 million in recognition of Deloitte’s “exceptional co-operation” and admissions during the investigation. In addition to the fine, Deloitte received a severe reprimand and was ordered to prepare a root cause analysis report.

The regulatory breaches involved three of GAG’s passenger rail subsidiaries: London & South Eastern Railway (LSER), London & Birmingham Railway (LM), and Go-Ahead Bayern (GABY). A primary issue involved LSER, which had received erroneous overpayments from the Department for Transport (DfT) under a rail franchise agreement. Rather than returning the funds, LSER retained the capital and, in some instances, released accruals to profit.

The FRC stated that Deloitte “failed to challenge the wrongful retention by GAG of over £30m of public money for an extended period”. Specifically, LSER released £2.4 million in overpayments to profit in FY16 and accrued a further £27 million between FY16 and FY20. Evidence suggested an intention to release these funds to profit if they were not discovered by the DfT. Deloitte has also reimbursed the costs incurred by the FRC’s executive counsel during the inquiry.