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The Government has rejected an offer from security firm G4S to repay the £24m it owes for overcharging in credit notes.
Officials turned down the settlement and say they will "pursue all possible avenues" to recoup more taxpayers' money.
A Ministry of Justice spokesman said it was still working with the firms and the independent auditors to work out "what the final sum will be".
"The Secretary of State has been clear: we are determined to secure a refund for the taxpayer.
"We have taken appropriate legal advice and will pursue all possible avenues."
Security firm G4S has apologised for overcharging the Government for its provision of electronic tagging services, calling its actions "unacceptable".
The group's chief executive Ashley Almanza said:
G4S said it will give credit notes worth £24.1 million to the Government after an independent review found the security firm had overcharged for its electronic tagging contracts.
The firm said the review of the contract showed that its justice division had "wrongly considered itself to be contractually entitled" to bill the Government, but stressed there was no evidence of dishonesty or criminal conduct.
Electronic tagging contracts run by G4S and rival firm Serco are currently under a criminal investigation by the Serious Fraud Office.
G4S has admitted it wrongly billed the Government for the provision of electronic monitoring, or tagging, services, and said it will pay back £24.1 million.