The $565,000 to be docked from Serco includes a large fine for failing to keep prison violence to levels set out in its contract with government.

It appears to the first occasion Serco has ever missed the target with almost four years of performance reporting - which it conducts - showing it has managed to stay below the rate of 0.9 serious assaults a year for every 100 prisoners.

Department of Corrections chief executive Ray Smith said $315,000 of the money docked from the company hired to manage Mt Eden prison came from Serco's failure to achieve "Key Performance Indicators" around serious assaults.

Mr Smith said other performance notices for Serco included the company losing $200,000 for failing to ensure the safe custody and welfare or prisoners and another $50,000 for serious assaults.

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The breach which cost Serco $315,000 was by going marginally over the threshold for "serious assaults" in prison. Serco is contracted to stay inside a maximum of 0.9 serious assaults for every 100 prisoners, which works out about nine prisoners (8.64) a year.

It's latest report to Corrections had it going from 0.74 serious assaults per 100 prisoners (7.1 people) over the previous nine months to 0.94 per 100 prisoners (nine people) a year.

The number of assaults in Mt Eden prison has shown a sharp increase in the past 12 months. Serco finished the year previously recording 5.5 assaults occurring for every 100 people at Mt Eden prison.

Nine months later, that rate had increased to 7.4 people beaten for each 100 prisoners and then three months after that it leapt to 9.4 people for each 100 prisoners.

Serco had previously been rated at the highest levels of safety despite the allegations of violence inside Mt Eden prison. It was contracted to carry out its own performance management reviews - and was also responsible for telling the Department of Corrections when its pay should be docked.

The figures published by the Department of Corrections as Serco's "Key Performance Indicators" for Mt Eden show it has exceeded its target levels in every area.

The figures claim the company is keeping the level of serious assaults below the minimum accepted standard under the contract.

The contract stipulates that serious assaults in the prison do not occur at a rate higher than 0.9 per 100 prisoners over the course of a year.

The reported rate at Mt Eden, for the nine months to March, was 0.74. On a prison population of 960, that means about seven prisoners were considered victims of serious assaults.

The rate of assaults for the previous year was lower with about five prisoners falling victim to serious assaults.

Over the past week, cases have emerged of prisoners being transported from the Serco prison to other institutions arriving with serious injuries.

The Weekend Herald reported a case in March this year in which a prisoner sent to Manawatu prison was found to be needing urgent hospital care when he arrived.

The contract with Serco defines a serious assault as one involving any form of sexual assault, "bodily harm requiring medical intervention ... followed by overnight hospitalisation in a medical facility" or "bodily harm needing extended period of ongoing medical attention".

The contract also dictates how assaults should be counted, telling Serco it must count the number of victims in an assault and not the number of assault incidents.

The contract gives the example of two prisoners beating up another being one incident.

The contract states that Serco "assess its performance against the Specific Deduction Events and against any Transition Deductions" and tell the Department of Corrections when it should not be paid the contracted rate.

It indicates it is Serco which collects the figures and then marks itself off against the targets it is contracted to achieve. On the occasions it fails to meet those targets, it tells the Department of Corrections when it should be paid less.

According to the contract, Corrections is able to challenge the invoices which arrive if it believes the amount to be wrong.Corrections chief executive Ray Smith told Radio NZ this morning Serco faced $500,000 in financial penalties over prisoner mistreatment.

The figure was likely to increase as the department investigated, he said."We haven't worked our way through all of that yet, we need to review all of the footage and get better understanding of some of the incidents, but I expect more penalties to follow."

A spokeswoman for Corrections said the department "works closely with Serco to monitor and improve performance at a number of levels". Once a year, it would audit reporting done by the prison but also had the ability to do spot checks if needed.

She said Corrections had an on-site monitoring team, employed by the department. It also had had primary and two secondary monitors in the prison who went to daily and weekly meetings. Once a week, the monitors met with the Corrections' Commercial Contracts team to discuss operational and commercial matters.

There was also a monthly contract management meeting attended by the Assistant Regional Commissioner and the MECF Prison Director, she said