The company running London's congestion charge, Capita, has been fined £1m for its poor performance in delivering equipment and dealing with drivers.

The fine, which knocks a chunk off Capita's expected £7m annual profit from the scheme, was disclosed in a report by the London Assembly, which attacked the mayor of London's contract with the company.

Capita has forfeited the money in "service credits and liquidated damages", relating to missed targets under its five-year deal to manage the scheme. The company's contract entitles it to 96p for every phone call it answers.

Transport for London has not disclosed the precise grounds on which Capita failed to meet targets. However, the mayor, Ken Livingstone, last month revealed he came close to sacking Capita during the early days of the scheme, describing the company's customer services as "completely unacceptable".

Sally Hamwee, the Liberal Democrat chair of the London Assembly, said that while the £5-a-day fee to drive into London had been a success in reducing congestion, its administration was "a dog's dinner".

The assembly's budget committee criticised Mr Livingstone for giving Capita an extra £31m in July to iron out problems in the management of the charge.

It has emerged that £3.5m of the additional money went towards improving computer systems, which the committee said ought to have been paid for by Capita, rather than London's taxpayers.

A Capita spokesman yesterday said the penalties levied against the company represented just 3% of the maximum it could have forfeited for poor performance. He said some of the money related to issues in the six months before the launch.

Yesterday's report revealed that Capita's original deal guaranteed the company 96p for every phone call it "satisfactorily processed". In addition, it got a £5m monthly fee for administering the scheme and between £2.06 and £4.90 for every penalty charge notice it enforced.