G4S staff at Rainsbrook Secure Training Centre were complicit in helping young offenders take drugs at the youth prison.
An Ofsted report published on Wednesday (20 May) revealed security staff at the Warwickshire centre, which accommodates 87 males and females aged between 12 and 18, became so friendly with offenders they colluded with them to settle debts and take drugs.
The damning report, which comes after an inspection in February, found members of staff were under the influence of drugs and one was even sacked for racist comments.
There was serious gross misconduct by staff, including managers, and significant staff turnover meant new starters did not have the experience to deal with offenders' behaviour.
Inspectors said the standard of leadership had deteriorated in the year before the inspection and that "poor care" had been compounded by "poor decision-making".
Some staff behaviour had been "very poor" and was a serious concern to the inspectorate, the report said, with some workers at the centre not knowing what its policies were.
There was generally "good governance and scrutiny" of minimising and managing physical restraint (MMPR) incidents and progress had been made safeguarding youths.
There had been a breakdown in the relationship between healthcare officials and senior management, inspectors concluded, resulting in clinical advice being overruled by non-health qualified managers.
Communication became so bad, one young person did not receive treatment for a fractured arm, apparently sustained when he was restrained by a members of staff, for 15 hours.
Inspectors said the incident was made worse because no report was ever made so a national panel could investigate it.
Director of Children's Services at G4S, Paul Cook, said some of the incidents in the report were "completely unacceptable".
"This is an extremely disappointing report for everyone connected with Rainsbrook and it's the first time in 16 years that the centre has been found by any inspecting body to be less than 'good' or 'outstanding'," Cook said.
"We recognise that the incidents highlighted by inspectors were completely unacceptable and took swift action at the time, in discussion with the Youth Justice Board (YJB).
"'The YJB has expressed confidence in our action plan to address all the concerns raised and I am keen for inspectors to re-visit the centre at their earliest opportunity to check on our progress."