The inquiry into the way the private sector jailer Serco is running Mt Eden prison is studying whether violence there has been "under-reported", says under-fire Corrections Minister Peseta Sam Lotu-Iiga.

In a statement, his office this afternoon said the terms of reference for the inquiry into violence at Mt Eden prison would study the figures Serco sent to the Department of Corrections showing "prisoner on prisoner violence".

Asked if he had confidence, he said: "I will wait for the review to be completed."

Corrections last night confirmed Serco's self-reporting of its management was part of the inquiry into Mt Eden prison.

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Under its contract to run Mt Eden prison, Serco tells Corrections how many incidents occur on its watch and advises its paymasters how much money it should forfeit when it doesn't come up to contracted standards.

For example, the docking yesterday of $315,000 from Serco over serious assaults in the prison works out at costing the company $35,000 every time it lets Corrections know an inmate under its care suffered a beating bad enough to land him in hospital.

That system is now under review with Corrections' minister Peseta Sam Lotu-Iiga last night unwilling to express confidence in the reporting system.

$565,000 to be docked

Chief executive Ray Smith said: "The review that I've commissioned will look at Serco's management of MECF and includes reviewing their incident reporting systems to ensure they are robust."

Mr Smith announced a total of $565,000 to be docked from Serco as Corrections moved in to take control of the prison after revelations of drug abuse and extreme violence. The money has come from Serco's bonus payment and doesn't affect its over-all $30m contract to manage the prison. It was the first time Serco lost the entire amount of its bonus payments linked to violence in the prison.

The trigger point was when the number of assaults reported by Serco went beyond the maximum allowed limit in the contract of 0.9 serious assaults for each 100 prisoners - a total of about nine people out of the prison population of 960 inmates.

The number had tracked upwards from a total of assaults against about five people in the 2013-2014 financial year. At the end of March 2015, it was sitting on about seven people. Corrections yesterday said the rate of serious assaults had gone up to 9.4/100 inmates - roughly nine people over the last nine months.

Labour's Kelvin Davis said the figures at "face value" showed the rate of assaults had almost doubled in the last year.

"The trouble is, I just can't believe them. There's one way to keep those statistics down and that's not send people to hospital." He said he suspected there were cases of "massive beatings" which would have led to hospital treatment if they happened outside prison. "There needs to be some way to verify those figures."

Mr Davis was also dismissive of the financial penalties inflicted against Serco because the money came from its "bonus" payment.

'Bodily harm'

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. It followed the case of Nick Evans who was shipped from Mt Eden prison to Nga Wha prison in the north and almost immediately being sent to hospital with pneumonia from which he later died.

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 states that Serco "assess its performance" and tell the Department of Corrections when it should not be paid the contracted rate.

Serco had previously rated itself as having the highest levels of inmate safety. 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.

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.

'It's not humane'

Human rights lawyers Michael Bott told Radio Nz this morning that Serco may have breached its legislative obligations over the alleged assault on inmate Alex Littleton.

Littleton broke both his legs when he was allegedly thrown over a prison balcony in February during an attack by other inmates.

Mr Bott said what happened to Littleton, who is now at Kaitoke Prison near Whanganui, could possibly place Serco in breach of the Corrections and Bill of Rights Acts.

He said the law required prisoners to be treated in a safe, secure and humane manner.

"It's not a secure environment for prisoners. It's not humane," Mr Bott said of Mt Eden, which the Corrections Department has since taken over the running of while a series of serious allegations about the prison are investigated.

"The unfortunate thing is the government was warned about Serco prior to privatising the prison system in this way and now we're picking up the carnage."

Mr Bott said Serco could also be in breach of the United Nations standard minimum rules for prisons in an incident that could have left Mr Littleton dead.

He also hit out at staffing levels under Serco, saying profit should not be put first.

"We have to have proper staffing levels and we've got to pay people a decent wage."