Australian Greens Additional Comments
A Very Public Swindle: Ending the Cost, Conflict and Regulatory Failure in Big Consulting and Rebuilding the Public Sector
1.1The Australian Greens make the following recommendations in relation to the Finance and Public Administration References Committee's report into the management and assurance of integrity by consulting services:
Recommendation 1
The Australian Greens recommend that the Australian Government ensure that:
PwC (or any of its related entities) should not be permitted to tender for government work until all matters arising from current investigations (eg by the Tax Practitioners Board (TPB), the Australian Federal Police (AFP), the Australian Taxation Office (ATO) and the National Anti-Corruption Commission (NACC) are completed, including investigation of recently surfaced matters related to preparation of responses to Request for Information notices for PwC clients and involvement in Foreign Investment Review Board approval processes.
further, PwC should not be permitted to contract for government work until it has provided the Linklaters report to the Australian Senate.
in view of its misdemeanours in the misuse of confidential information, PwC should be excluded from government contracting for 5 years.
Recommendation 2
The Australian Greens recommend that:
in view of the investigations underway extending back to 2012, any consulting entity led by Mr Luke Sayers should be excluded from Australian Government contracting until those investigations are concluded and any of their implications in relation to Mr Sayers considered and concluded.
a ban from Australian Government contracts of at least 5 years should apply to any consulting entity led by its previous CEO, Mr Luke Sayers, who held leadership in the years of PwC's confidentiality misdemeanours.
Recommendation 3
The Australian Greens recommend:
that the Australian Government requires departments and agencies to reduce spending on external consulting services by 15 per cent each year for five years and offset that decline with growth in public sector capacity.
that employment numbers in the Australian Public Service (APS) grow at least in line with population growth in Australia.
Recommendation 4
The Australian Greens recommend that the Australian Government commit to lifting APS wages at least in line with inflation and improve other employment conditions at least in line with community standards.
Recommendation 5
The Australian Greens recommend that the Australian Government require:
the Department of Finance to create a Contract Probity Office to exercise central oversight over government procurement, complementing devolved management of procurement.
that the Contract Probity Office have the power to follow up when contracting failures occur in a department or agency and impose penalties and take regulatory action, modelled on Western Australia's debarment and suspension regime which enables the cancellation of existing contracts.
that the Commonwealth Procurement Rules be amended to ensure they apply to all corporate Commonwealth entities.
that either the Joint Committee on Public Accounts and Audit or the Australian National Audit Office conduct an annual review of consulting services in Commonwealth departments and agencies, highlighting systemic and significant issues or failures.
Recommendation 6
The Australian Greens recommend that the Australian Government:
require entities with government contracts to publish their client lists.
require consultants undertaking public sector work to avoid any conflict of interest, actual or perceived, and disclose details of any material personal interest in connection with their contract.
instate stronger investigative and enforcement mechanisms to ensure actual and perceived conflicts of interest are disclosed, investigated, penalised, and appropriately managed.
ensure that undeclared conflicts of interest should attract a 5-year ban on public sector work.
ensure that any consulting firm under investigation by a regulatory body must advise the government and cannot tender for new work until it is cleared.
create a register of banned firms and individuals.
Recommendation 7
The Australian Greens recommend that the Australian Government ensure more effective management of government contracts, with effective costing, control, milestone management and active management of 'land-and-expand' and power and relationship mapping.
Recommendation 8
The Australian Greens recommend that the Australian Government require publication on AusTender the size and reasons for any amendments or variations to a contract.
Recommendation 9
The Australian Greens recommend that AusTender be improved by:
expanding AusTender disclosure requirements about the nature of work and its purpose.
requiring publication on AusTender for the reasons for contract termination.
improving the usability of the AusTender website.
Recommendation 10
that the Senate agree to an order of continuous effect to require the production of consultant reports, including draft versions that were never finalised, at the completion of each significant contract to ensure greater value for money and transparency.
that the Senate conduct an annual Estimates process in relation to major consulting contracts, where consultancy firms can be required to appear.
Recommendation 11
The Australian Greens recommend that any entities tendering or contracting to the Australian Government be banned from making political donations (direct, indirect, in-kind, pro-bono or otherwise) in the 12 months before applying for contracts, while an application is being considered, or 12 months after contract obligations have been completed.
Recommendation 12
The Australian Greens recommend that the Australian Government stop the revolving door by enforcing a 1-year cooling-off period for:
partners in partnerships and/or executives in consulting and other entities that have held a significant contract with government in the last 12 months from commencing in the public service.
APS Senior Executives commencing with an entity that has contracted to government in the last 12 months in a related form of business.
senior staff in a Minister's office from commencing with an entity that has contracted to government in the last 12 months.
Recommendation 13
The Australian Greens Recommend that the Australian Government require that:
the cooling off period for former Ministers and senior staff in the Code of Conduct for Ministers is extended from 18 months to 5 years, with strong enforcement.
the Australian Public Service Commission to monitor and regularly publish data on the movement of personnel to and from the Australian Public Service and the largest 20 contractors to government.
there is a review of current arrangements, to ensure that consultants with access to Government departments, including Defence, have appropriate passes and access which do not compromise security and enable land-and-expand.
Recommendation 14
amend the Corporations Act 2001 to lower the maximum number of partners for accountants to 100.
ensure that the states and territories refer their remaining power to regulate large partnerships to the Commonwealth.
legislate transparency and reporting requirements for large partnerships as apply to corporations under the Corporations Act.
ban the use of Everett Assignments and that the Government tax the distributions from trusts at the company tax rate of 30 per cent.
Recommendation 15
The Australian Greens recommend that any firm providing audit services in Australia be prevented from providing non-audit services, including when engaging in business with the Australian Government.
Recommendation 16
acknowledge that voluntarist and self-regulation has failed in the consulting sector and that enforceable standards are required, including powers of investigation and penalties.
establish an Independent Regulator for the consulting industry, with an enforceable professional code of conduct, national standards, investigation powers and penalties for breaches.
consider giving responsibility for regulating professional services in one independent institution, with investigative and enforcement powers.
Recommendation 17
require that all consultancy and accounting firms must have the same whistleblower obligations as corporations under the Corporations Act.
establish a National Whistleblower Commission.
Recommendation 18
The Australian Greens recommend that the use and misuse of legal professional privilege to combat legitimate investigations of consultancy malpractice should be reviewed and stricter rules and specific protocols be developed to limit misuse.
Recommendation19
The Australian Greens recommend that greater transparency of confidential tax settlements be provided, and clear protocols be established for their use.
Recommendation 20
The Australian Greens recommend, to ensure robust regulation that is free of actual or perceived conflicts of interest or possible capture:
that the Australian Government ban partners and former partners of consulting firms and other entities who are in receipt of income from those partnerships or entities, from membership of regulatory and standards setting boards for that industry.
that the ban extend to anyone who has within the last 6 months received a material benefit, from such an entity;
and, further, is a former executive officer of a company that is currently regulated by that entity if any of the following apply: the individual is receiving regular and ongoing benefits, or has within the last 6 months received a material benefit, from a company regulated by that entity; or if the individual holds shares in the company.
Recommendation 21
The Australian Greens recommend that the Australian Government ensure robust investigation, and that regulators and investigators be protected from insecurity, political pressure or other forms of threat or constraint while conducting investigations.
Recommendation 22
The Australian Greens recommend that the Senate consider options available to it in relation to KPMG’s misleading and incorrect evidence to the inquiry.
1.2The Additional Comments of the Australian Greens covers the following matters:
Section 1: Introduction
Section 2: PwC, Mr Peter Collins and PwC Leadership
Section 3: A robust public sector working in the public interest
Section 4: Donations and political capture
Section 5: Structure and regulation of big consultants
Section 6: Conclusion.
1.3On behalf of the Australian Greens, we thank all the individuals and organisations who participated in this 14-month long inquiry. Thank you to the witnesses that appeared at the 10 days of hearings, to those that provided the 61submissions, and to all the insiders and whistleblowers who reached out and bravely told their stories about life in the consulting sector–often at the threat of potential damage to their employment.
1.4The Australian Greens thank the committee for the report summarising evidence received through this inquiry, and we thank the committee members who have worked to shine a light on a dark chapter. We also thank the committee secretariat for their very effective work.
1.5Chapters one-to-six of the committee's report provide an accurate account of the large body of evidence received by the committee. We largely concur with the account of this evidence.
1.6While there has been much shared cross-party outrage at evidence we have heard through this inquiry, we hold different views on the necessity, scope and urgency of a response to what we term 'a very public swindle'.
1.7The 12 recommendations set out in chapter 7 of the committee's report offer some steps to address issues raised through this inquiry. However, the committee's recommendations do not go far enough. They do not address the magnitude and scope of problems this inquiry has uncovered.
1.8Specifically they do not address the issue of political donations by big consultants, the revolving door in and out of government, the inadequacy of penalties for PwC, the pressing need for structural reform to cap big partnerships' size, and to address conflicts of interest and the opaque nature of big partnerships.
1.9More actions, and more urgent steps, are essential and, as initiators of this inquiry, we offer these Additional Comments to that end.
1.10This inquiry began on 9 March 2023, when the Greens moved a motion to establish an inquiry to pursue the overreliance of the Australian Government on consulting firms, the erosion of the public service, the opaque industry of consulting, and any related matters.
1.11Like many Australians, the Australian Greens have long been aware of the ethical failures, unchecked conflicts of interest, and lack of regulation in the consulting and auditing sector. The scandals in this sector are frequent, global in nature, and many never see the light of day.
1.12The extraordinary expansion of consultants into our public sector over recent years has had dire consequences: it has gifted billions to the Big Four while cannibalising funding for essential public services; it has given too much power to small numbers of influential people who have assiduously and deliberately farmed a tight network of close relationships for personal benefit–across the big end of town and into governments and regulatory bodies. In too many places, a very profitable network is evident, circulating through revolving doors that spin across the sector. This corrupts our democracy.
1.13PwC is the worst case on many of these counts. But it is far from the only miscreant. A concentric circle of unacceptable behaviours widens out from the initial PwC 'bad apple' scenario that began with Peter Collins' egregious behaviour monetising confidential government information to assist some of the world's biggest multinationals avoid tax and earn millions for PwC.
1.14That circle widened to a much larger and still unknown group in PwC in Australia and internationally, and beyond them, to expose a swag of conflicts of interest, poor governance, ethical failures, state capture and regulatory weakness across the larger consultancy sector and parts of the public institutions that deal with it.
1.15There are many good people in all these organisations who have watched in dismay. Some who are innocent of any wrongdoing have lost income or jobs as the circles of this scandal have rippled outward. Many insiders and whistleblowers have taken great risks.
1.16Others, like those who led PwC through years of ethical failure, have–so far–walked away with large rewards, saying they knew nothing and taking no responsibility.
1.17History tells us that crises of this kind can create momentum and fuel structural reform. It is vital that we, as Churchill put it, understand the past in order to avoid repeating it.
1.18This was our aim in initiating this inquiry: to understand and to remedy the structural and systemic factors that underpin this series of scandals and to ensure proper transparency and governance into the future.
1.19Very large consultancy firms like the Big Four–PwC, KPMG, EY, and Deloitte– are essentially pseudo-corporations. These firms are very large private partnerships not corporations, and as such they lack the accountability, transparency and obligations of other large firms in our economy. Their tax arrangements are unjustifiably different and lesser: they do not pay corporate tax, or payroll tax on partner earnings, their public accountability obligations are meagre, and their obligations to whistleblowers are weak.
1.20Further, the structure of these very large entities and their involvement in audit as well as consultancy creates conflicts of interest that demand proper regulation and governance.
1.21It is time to remedy this. The Big Four accounting firms wield enormous political and economic power in Australia. Between them they earned more than $11billion in revenue in FY23 and together they account for 70 per cent of total revenue earned by the top 100 accounting firms in Australia.[1]
1.22They provide a range of services to some of the biggest corporations and wealthiest individuals in Australia. The Big Four audited around 40 per cent of all listed companies between 2012-18, and they audited 90 per cent of the ASX 200 companies over the same period.[2]
1.23The Big Four CEO's, partners, and leadership are paid very high salaries. For example, Luke Sayers was paid over $30 million in his 8 years as CEO of PwC between 2012-2020, with a peak of $4.5 million in 2019.[3] The top earning 20per cent of partners at EY and PwC earn more than $1.3 million each annually.[4]
1.24Australian governments at both a federal and state/territory level contribute millions to the bottom line of the Big Four even as they corrode the capacity of the public sector and crowd out the public interest. Federal Government contracts make up around 25 per cent of revenue at the Big Four every year.[5] Over the past decade, the Big Four have received $8.5 billion in contracts from the Federal Government.[6]
1.25According to recent data, the Australian Government is amongst the highest spenders on consultants in the world.[7] We are out of line internationally. This must change. The Labor Government has recognised this problem and made a range of commitments. More is needed, and this report sets out our recommendations on the wide range of measures needed.
What went wrong?
1.26A myriad of scandals have surfaced in relation to the work of consultants and big accounting firms, including:
conflicts of interest extending from PwC's monetisation of confidential government information about tax to assist large multinationals to multiple others including 'walking both sides of the street' and the heavy use of the revolving door along with many other conflicts;
structural conflicts of interest that arise from providing both audit and non-audit services to the same entities;
aggressive 'land and expand' consultant activities: once landed, creating and expanding profitable new or extending existing contracts;
the active mapping of government departments and relationships to maximise commercial gain;
inflated invoices to government and billing for hours not worked or work not completed or on time;[8]
overbudgeting the time and skill of consultants on contracts that are then completed with less time and lower skilled workers;
many examples of poorly detailed but profitable contract overruns and contract extensions;
very high rates of consultant profit;
business models of 'growth at all costs' that drive pursuit of profit and override ethical practice;
fraudulent schemes involving partners that are not appropriately disclosed or managed;[9]
weak, untimely or inappropriate actions (including direct pressure) by regulators with effects that advantage big consultants and individuals within them;
Foxes in the hen house: membership of regulator machinery by those with close association or vested interests in those they regulate (including receipt of income or close personal relationships from those they regulate);
Exploitative employment relationships that put profit generation and long hours well ahead of decent working conditions, psychological safety at work, and employee well-being.
1.27These are just some of the actions and effects of entities with a huge amount of power, deep political networks, and too little accountability. Many Australians have been shocked to learn of them, and want to see action to prevent them in the future.
1.28These amount to a large, very public swindle–one that reaches across the public sector and beyond.
1.29Our Additional Comments address four domains and recommend a range of essential actions.
1.30PwC has committed serious misdemeanours and has yet to provide full details of who did what as the scandal within it widened. It has resisted requests for transparency and provision of reports and faces a range of serious investigations that remain underway.
1.31As result, PwC (or any of its related entities) should not be permitted to tender for government work until all matters arising from current investigations (eg by the TPB, the AFP, the ATO, the NACC or the parliament) are completed, including investigation of recently surfaced matters related to preparation of responses to Request for Information notices for their clients and involvement in Foreign Investment Review Board approval processes.
1.32Further, PwC should not be permitted to contract for government work until it has provided the Linklaters report to the Australian Senate.[10] Finally, we recommend that a long term ban from government contracts of at least 5 years should apply to PwC and to any consulting entity led by its previous CEO, Luke Sayers, who held leadership in the years of PwC's misdemeanours.
1.33The Australian Government must reduce its overdependence on external consultants by ratchetting down annual spending on consultants by 15 per cent a year and offsetting that decline with growth in public sector capacity.
1.34It must rebuild the skills, capability and capacity of the public sector, acting in the public interest, and confining consultancy and outsourcing to genuine specialist and surge demands, excluding their involvement in core functions.
1.35Further the government must clean up procurement by more effectively managing and regulating contracts and contractors, and better governing conflicts of interest and contract failures.
1.36The Big Four consulting firms donated over $6.6 million to the Australian Labor Party (ALP) and the Liberal-National Coalition (Coalition) between 2013 and 2023.[11]
1.37We must put a stop to political donations from those who contract to government, including direct, indirect, in-kind and any form of donation.
1.38We must also end attempts at political and economic influence through the use of the revolving door: that is, the recruitment of public officials to their ranks to harvest commercial opportunities, and the reverse: rotating big consulting staff through the public sector (through secondment, contracts and direct employment) to do the same.
1.39The revolving door must be better managed in the face of the power and influence of big consultants and the competitive commercial advantage they cultivate which creates risks of poor value for money, inappropriate privatisation of public work, and risks to security of public agencies including defence.
1.40The concentration of money and power within big consulting and accounting firms in Australia, combined with the opaque partnership structure and a weak regulatory system has given rise to the scandals and cover ups evidenced through this inquiry.
1.41It is time to restructure the rules around big consultants and their regulators. At least four steps are essential.
1.42The size of consultancy and accounting partnerships should be reduced from 1000 to 100. There should be structural separation of audit from non-audit work. Built in conflicts of interest should be prevented by requiring those firms doing audit work to be precluded from doing non-audit work.
1.43Large accountancy and consultancy entities should not be able to shelter behind opaque partnership or other arrangements that enable them to avoid the level of accountability and transparency that Australians expect and most large Australian business entities must provide.
1.44And finally, there is a strong case for an Independent Regulator of the consulting sector which should be established to set, investigate and enforce industry and professional standards. Self-regulation and voluntary self-discipline have failed.
1.45We dedicate these Additional Comments to the courage and foresight of our friend and colleague the late Fraser Brindley, who helped make this inquiry happen.
1.46As the committee's report states, the committee has already published two reports focussed on the events brought about by the breach of confidentiality by MrCollins and PwC which the company monetised to assist large multinational clients to avoid tax and to recruit new clients.[12]
1.47These breaches by Mr Collins have resulted in three regulatory consequences for him to date. The TPB terminated his registration as a tax agent, prohibited him from reapplying for registration for two years.Further, the Australian Securities and Investments Commission, prohibited Mr Collins from working in financial services for 8 years.
1.48The TPB penalty for PwC was a requirement that it provide appropriate training about conflicts of interest to relevant partners and staff on a 6-monthly basis and report on this to the TPB. That is the limit of the penalty to date for PwC, with a much larger penalty for its one–designated to date–'bad apple' Mr Collins. No other partners or leaders in PwC have received a direct penalty.
1.49The committee's previously published inquiry reports deal with the specific issue of PwC's monetising confidential tax information.
1.50However, answers to Senator Barbara Pocock's Questions on Notice provided in late May 2024 (in the final days of this inquiry) reveal a wider set of ATO concerns about PwC behaviour.[13] Further to the very sparse evidence provided by the ATO to the inquiry on 26 September 2023, we now know that MrHirshhorn, ATO Second Commissioner, raised seven areas of concern at his meeting with Mr Luke Sayers, PwC CEO, in August 2019.[14]
1.51A number of these had not been previously put on the public record, namely:
assisting clients in the preparation of responses to Request for Information (RFI) notices for clients where material in those responses was false or misleading to the knowledge of the PwC staff involved;
involvement in Foreign Investment Review Board approval processes on behalf of clients which, through omission and commission, had the potential to mislead or subvert those processes;
cultural issues within the tax practice of PwC, reflected in several senior partners' attitude towards senior management within the firm, as well as the ATO and other regulators;
adequacy of PwC's risk structure to call out poor behaviours and practices;
in addition, in the conversation Mr Hirschhorn noted potential areas of interest to other regulators including potential breaches of professional duties and potential offshore offences.[15]
1.52In the process of conveying these concerns to Mr Sayers in August 2019, MrHirschhorn read out 'several representative PwC emails' which had previously been provided to the ATO by PwC.[16]
1.53This must have been a memorable experience for Mr Sayers: few Australians will have had a meeting with a Second Commissioner where their internal emails, illustrating potential serious breaches of tax law, are read to them to illustrate and emphasize the seriousness of a range of potential offences. However, Mr Sayers has maintained to this committee and publicly that he has no memory of these emails being drawn to his attention.
1.54To say that this memory failure is plausible is to stretch credibility.
1.55Mr Sayers has not recognised any failures of his leadership at PwC through the period when serious offences in relation to monetising confidential information occurred.
1.56Further, Mr Sayers has not addressed the range of other matters listed above and the full range of behaviours and potential breaches they lay out. Neither has the current leadership of PwC.
1.57A year into this inquiry new information about the scope and content of a wider range of breaches has become public. These have been described as serious by the CEO of ASIC, Mr Longo, and they deserve investigation.[17]
1.58The committee's report lists a range of current investigations into PwC that have yet to report including: a continuing investigation by the Australian Federal Police; ongoing Australian Tax Office discussions with the 'large business five' countries plus two others; and nine continuing and current investigations ongoing by the TPB. In addition, Senator Barbara Pocock has referred the PwC scandal to the National Anti-Corruption Commission (NACC).
1.59PwC has a long way to travel before it can be said to have a clean bill of health, including in relation to the above matters which have recently surfaced and go well beyond the issue of monetising confidential government tax information. In this light we recommend:
1.60The Australian Greens recommend the Australian Government ensure that:
1.61The Australian Greens recommend that:
1.62A rapid increase in government expenditure on outsourcing public work to consultants over the last decade has hollowed out the public service. This has eroded leadership, capability, working conditions, and policymaking capacity. Big consultants have stepped into provision of core strategic, program design and delivery, and advice functions. This has turned skilled public servants, looking to make a career-long contribution to the public interest, into contract managers.
1.63Successive Coalition and ALP Governments have been responsible for this since the 1980s. However, public sector reliance on consultants was particularly exacerbated during the most recent nine years of Coalition government.
1.64In 2015-16, the Abbott Government introduced an APS staffing level cap to artificially keep public service employment growth low–a policy that was in place up until Labor took office in 2022.[18] Over this time, APS employment levels dropped by 7.5 per cent, equivalent to over 12 500 positions.
1.65The 2023 Audit of Employment found that in 2020-21 alone, the Morrison Government spent $20.8 billion on outsourcing–including contractors, consultants, and external labour hire. This was the equivalent to almost 54000public service jobs.[19]
1.66This has significantly weakened the ability of departments and agencies to take back work from consulting firms.
1.67The Australia Institute agreed that the Australian Government has become 'overly dependent on consultants to guide and justify its decision-making' and considered that this dependence is 'corrosive to Australian democracy'.[20]
1.68There are many examples of core public service work that has been outsourced to the private sector, to great detriment.
Example 1: The Department of Industry, Science, Energy and Resources outsourced the administration and assessment of government grants to a range of external providers.[21] One of these providers, i4 Connect, was given $31 million to administer grants to businesses.[22] After numerous scandals and shortcomings with i4 Connect and the Entrepreneur's program more broadly emerged, the work is now being done in-house by the department.[23]
Example 2: McKinsey & Company was awarded a $6 million contract for net zero modelling over the CSIRO, Australia's national science agency. Instead of consulting public service experts already employed in the field, the Department of Industry, Science, Energy and Resources's decision to contract McKinsey risked leaving the public service stranded without climate change modelling capabilities. This decision was costly and ineffective, with McKinsey's report widely criticised for not including information on how to reach net zero by 2050, which was the goal of the 'Net Zero 2050 plan'.[24]
Example 3: The Australian Public Service Commission is currently contracting KPMG to deliver a leadership program for the APS Academy, valued at $1.3 million over two years.[25] KPMG should not be teaching our future public servants about leadership given their history of ethical failings.[26]
1.69Putting big consulting firms in charge of core government work undermines quality, integrity, and transparency in government work–whilst creating opportunities for conflicts of interest. There needs to be an end to the overuse of contracting out public service work.
1.70The Greens acknowledge that there are a limited set of circumstances in which it may be necessary to contract consultants. For example:
When specialised expertise is required, particularly if it is not value for money to employ these skills inside a government department or agency, as suggested in evidence at a hearing from Professor Andrew Podger, and in the submission made by Professor Marianna Mazzucato and Ms Rosie Collington.[27]
When there is a short-term surge in work and no net gain from employing public sector workers to cover the additional workload.[28]
When an external perspective is required, for example an independent review needs to be conducted.[29]
1.71Reducing the circumstances in which public service work can be outsourced is an important step in rebuilding the public service. The public service is best placed to do most government work because their interests align with the Australian public.
1.72As Per Capita point out:
…public servants are the 'human machinery' of government and play a crucial role in facilitating the government's constitutional obligations. Their impartiality and professionalism is vital to the efficacy of our constitutionally mandated system of responsible government, and thus they are bound by specific and sometimes onerous, ethical obligations to act in the public interest.[30]
1.73Consulting firms on the other hand have no obligations to act in the interest of the public, they are not bound by the APS code of conduct, and they are incentivised to deliver benefits to themselves and their private clients.
1.74The Community and Public Sector Union (CPSU) warn that consultancies are focused on their own bottom lines and likely make 'recommendations that generate further work for the initial consultant or for a business unit of the same company'.[31]
1.75Consequently, when governments outsource public services, they become more expensive, they are of a lower quality, and they are harder to manage. It means a big slice of our public money goes straight to private sector profit.
1.76The Greens urge the government to continue to turn the tide and reverse contracting public service work to consulting firms and to set specific targets for annual reductions from the current high level.
1.77However, it is not enough just to cut spending on consultants. Unless the cut in spending on consultants is also offset by a commensurate increase in public service employment, it will simply amount to cuts in the public service.
1.78Australia needs a robust APS that provides public services delivered in the public interest and that provide value for money.
1.79The APS is crucial in delivering essential services to the community and responding to new and growing areas of public service demand including the climate crisis and the transition to a clean economy and a sustainable future.
1.80Australia needs a diverse, thriving, secure and innovative public service that can tackle our country's future challenges. This is work that could and should be strategically driven and delivered by a strong, independent, properly resourced public service.
1.81This will only be possible by reducing the spend on consultants and restoring funding to growing the employment and capability of the APS.
1.82Ms Rosie Collington told the committee that this approach has worked overseas. In 2019, Denmark introduced a 50 per cent cut (over three years) on the amount that could be spent on consultants, and concurrently established an in-house public sector consultancy that was then able to do many of the tasks that other government departments had been contracting out to external consultancies.[32]
1.83The Australian Greens recommend:
that the Australian Government requires departments and agencies to reduce spending on external consulting services by 15 per cent each year for five years and offsetting that decline with growth in public sector capacity.
1.84When jobs are outsourced, workers are frequently paid less, and are often employed on worse conditions in insecure jobs without career prospects.
1.85APS employees have experienced declining real wages since 2013, due to the Coalition's concerted strategy to hold down APS wages. This is restraining APS capability, with agencies struggling to attract and retain employees in a tight labour market, high turnover in some areas, and critical roles left vacant.
1.86Attracting and retaining high quality public servants is essential to ensure the public service can meet future challenges and serve the complex and diverse needs of the Australian population.
1.87Professor Podger observed that the current renumeration arrangements in the public service are not 'designed to attract, develop and retain the best talent', and pay arrangements do not reflect what the markets require.[33]
1.88The Greens urge the government to ensure wage rises for the APS address tenyears of declining wages and allow employees to keep up with current and future cost of living increases.
1.89This sends a strong message that workers in the public service are valued and respected, while also encouraging wage increases across into the private sector. It also means that the public service will be more able to compete with the private sector for talented workers in the labour market.
1.90If the government is serious about reducing APS reliance on consultants in the long-term, the APS must be strong, it must have the best workers and it must be bigger.
1.91The Australian Greens recommend that the Australian Government commit to lifting APS wages at least in line with inflation and improve other employment conditions at least in line with community standards.
1.92Australian government spending on consultants is among the highest in the world.[34]
1.93Over the past 10 years, the Australian Government has spent $8.5 billion on government contracts to the Big Four.[35]
1.94In the 2021-22 financial year alone, $1.5 billion was awarded to just four entities: KPMG, Deloitte, PwC, and EY.[36] Government consulting is a lucrative industry for the Big Four, with profits from government work comprising around 25percent of their total revenue.[37]
1.95At present, the Labor Government has taken steps to reduce that spend, but it is still spending millions of dollars of public money outsourcing work to big consulting firms with too little transparency or accountability and many gaps in the procurement framework.
1.96The Australian public want and deserve value for money. This is the core rule of the Commonwealth Procurement Rules (CPRs), which are the foundation of the framework for the procurement of goods and services by the Commonwealth Government.[38]
1.97Public resources must be used in the most efficient, effective, ethical and economic manner. Many examples gathered through this inquiry suggest that we must put the public interest at the centre of public spending.
1.98Additionally, price is not and should not be the sole factor in considering value for money. Procurements must also consider the ethical conduct of tenderers and suppliers, along with the quality of the goods and services.[39]
1.99This inquiry has uncovered a suite of ethical failings from the Big Four firms in public work. In addition to PwC's monetisation of confidential Treasury information, we have seen that contracts with the Big Four firms are riddled with conflicts of interest and are frequently extended to reap large profits that do not represent value for money.
1.100Our procurement system is not fit for purpose and needs reform to address these issues.
1.101While the Department of Finance has overview of the Commonwealth Procurement Rules (CPR) and the AusTender system, the devolved framework means that there is a lack of centralised oversight over government procurement, especially when contract management goes wrong. This allows conflicts of interest to thrive and the land-and-expand strategies of the Big Four to flourish.
1.102The Department of Finance oversees the Commonwealth Procurement Framework, but as the framework is devolved, this has resulted in the Department taking an approach that is 'too passive' and 'not adequate'.[40]
1.103Moving the Commonwealth Procurement Framework away from a devolved model is not under consideration.[41] The Department of Finance has said that they 'do not hold centralised data of the work various organisations perform for individual departments'.[42]
1.104Prior to 2017, the Department of Finance had greater oversight over procurement, as agencies were required to report to Finance on procurement outcomes. This was removed in 2017 with the intent to cut red tape.[43] However, this has significantly weakened overall management of contracts and oversight of procurement systems.
1.105A more macro-oversight is required above the devolved practice.
1.106As a regulator, the Department of Finance must take better control of the procurement system with greater systemic oversight. Evidence shows that a devolved procurement framework means that, in too many examples, no-one is carrying the can and the size and nature of poor outcomes is obscured.[44]
1.107Another issue with the CPRs is that they do not apply to corporate Commonwealth entities (CCEs) by default.[45] Only 24 out of 72 CCEs must comply with the rules, meaning that they are not required to disclose any contract information under the rules.[46]
1.108An example of this problem is with a Department of Finance Procurement Policy Note regarding PwC. The note states that PwC Australia has agreed with the Commonwealth that it will temporarily cease new contract engagements with Australian Government entities captured by the Commonwealth Procurement Rules until 1 December 2024.[47] However, as not all Commonwealth entities need to follow the CPRs, this means that some Commonwealth entities can still sign contracts with PwC.[48]
1.109Further, the absence of stronger systemic oversight of contracting across the public sector obscures an overview of the Big Four activities across the system and systemic responses to misdemeanours.
1.110A potential model for Commonwealth reform of these matters could be the Western Australian example, where contracting failures can be managed through the state's debarment and suspension regime, which enables the cancellation of existing contracts.[49]
1.111The Department of Finance should be using the government's considerable market power to ensure that entities contracting with government are subject to strict criteria and ethical benchmarks.
1.112The current approach to procurement is not working. We need stronger oversight and enforcement mechanisms to ensure that consultants are properly managed.
1.113Chapters 2 and 4 of the committee's report provide a good summary of the issues with our procurement framework. While Recommendation 3 of the committee's report is good, it must be expanded through additional reforms.
1.114The Australian Greens recommend that the Australian Government require:
1.115Conflicts of interest within the consulting sector are frequent, with both the consulting firms themselves and the public sector having failed to demonstrate that they can adequately identify and manage conflicts of interest.
1.116Consulting firms often walk both sides of the street, giving advice to government on issues while also advising private clients on the same topics. The larger the client list, the more chance of conflicts of interest.[50]
1.117While the APS Code of Conduct requires public servants to 'take reasonable steps to avoid any conflict of interest (real or apparent) and disclose details of any material personal interest' in connection with their employment, consultants receiving public money are not bound by the same requirements.[51]
1.118In the case of PwC, it was a clear conflict of interest for them to help develop government anti-avoidance taxation policy while also advising multinational firms on how best to avoid taxation laws.[52] In pursuit of profit and new clients, PwC breached confidentiality agreements with Treasury, and earned at least $2.5 million in profit by monetising this confidential government information.[53]
1.119Another egregious example is KPMG's involvement in the aged care sector. The firm was paid by the federal government to conduct safety and quality audits of aged care facilities, while a separate division within the firm simultaneously charged providers for advice on audits and accreditation.[54]
1.120A third example is provided by EY and McKinsey's involvement in climate policy. EY advised the Australian Government on its carbon credit policy while simultaneously working with the carbon credit and fossil fuel industries. The firm, which is a member of the oil and gas lobby and audits Santos, insists that there is no conflict of interest between its work for industry and government.[55]
1.121In 2020, EY were employed by the Climate Change Authority to advise on carbon market schemes policy. Their final report concluded that Verra and Gold Standard were 'the leading international offset schemes for governance'. However, EY had previously done unpaid work for Verra and Gold Standard, which was undeclared to the Authority as a potential conflict of interest, because they did not see it as such.[56]
1.122In 2021, McKinsey was awarded a $6 million contract for net zero modelling over the CSIRO, Australia's national science agency.[57] The same firm has also advised at least 43 of the 100 largest corporate polluters, including Chevron, BP, Aramco, and Rio Tinto.[58]
1.123McKinsey and EY should not be providing advice to government on climate policy while serving the world's largest polluters. This is a direct conflict of interest.
1.124The Department of Finance is currently developing a Supplier Code of Conduct. This Code of Conduct has draft provisions to place a positive duty on suppliers, including a requirement to actively manage conflicts of interest.[59] This is a step in the right direction, but it will 'only apply to new contracts' by default.
1.125In contracting with consulting firms, the government should apply a far more expansive view of what constitutes a potential conflict of interest and do what they can to prevent conflicts of interest on this scale reoccurring.
1.126Recommendations 6 and 7 of the committee's report are welcome suggestions, but more must be done. Those recommendations put the onus on the Department of Finance and not on contractors. There must be more active management of conflicts of interest on both sides of contracting arrangements.
1.127The Australian Greens recommend that the Australian Government:
1.128Big consulting firms systematically pursue 'land-and-expand' strategies, where a firm acquires new customers by landing a small contract or a reduced cost contract and then generates further work or expands the contract over time. This is a lucrative strategy with 'back end' profit margins often being very wide.
1.129At least $444 million worth of work was tacked on to existing government contracts with Australia's top consulting firms in FY21-2022, adding 25 per cent in billings or $1.2 million a day more.[60] These extensions are not transparent, are extremely lucrative 'sweet money', and are poorly regulated.
1.130One way these firms purse the land-and-expand strategy is through power mapping within government departments and agencies. Power maps, or relationship maps, allow the private sector to map who within government departments should be targeted to win more work.[61]A power map is not an organisational chart, but rather a systematic qualitative assessment about the strengths of relationships, and their capability to be farmed for future contractual work.
1.131Despite initially stating on the record that KPMG 'does not engage in “power mapping” or any similar practice', multiple examples were provided to the Committee.[62]
1.132One of the most egregious examples, a tabled document titled 'Health Infrastructure NSW (HINSW) Workshop Actions', shows a systematic breakdown of how consultants rate and then farm relationships.[63] These maps clearly link actions like meeting for coffee or lunch in different parts of the organisation to enable developing a future set of work for KPMG.
1.133Contracts need to be more actively and effectively managed to mitigate the threats posed by the land-and-expand tactics of the Big Four.
1.134The Australian Greens recommend that the Australian Government ensure more effective management of government contracts, with effective costing, control, milestone management and active management of 'land-and-expand' and power and relationship mapping.
1.135The Australian Greens recommend that the Australian Government require publication on AusTender the size and reasons for any amendments or variations to a contract.
1.136Current procurement disclosure requirements and practices mean that precisely what is purchased with taxpayer dollars is frequently opaque, leaving the government unable to assure the public that they are receiving value for money.[64]
1.137The Commonwealth Procurement Rules require non-corporate Commonwealth entities to report all contracts, including with consultants, above $10000 on AusTender.
1.138AusTender is the Australian Government's central online procurement information system, and it needs serious reform. As a tool for tracking government spending, AusTender is difficult to navigate and insufficiently categorises and details contracts. The Department of Finance is responsible for the administration of AusTender and must provide more active oversight and management of the platform.
1.139AusTender provides limited information on each contract. It does not provide a clear picture of expenditure on consultants.[65]
1.140AusTender data needs to be more detailed, properly structured, accessible, and consistent. Contracts are sometimes added months or years after they come into effect due to poor record-keeping practices by some departments.[66] Reasons for contract termination are not published on AusTender.[67]
1.141When details of contracts are entered into AusTender, a 'consultancy flag' is selected when the primary or main purpose of a contract is to provide consultancy services, which identifies these contracts for reporting purposes. AusTender includes an estimate of the total cost of each contract, but it does not include details of actual expenditure against a contract once it has been entered into.
1.142AusTender must be more accessible, detailed, transparent, and robust for there to be a full picture of government spending on procurement.
1.143The Australian Greens recommend that AusTender be improved by:
1.144Government contracts with consultants often do not deliver value for money, but rather result in serious problems of conflicts of interest, overruns, under-delivery, and very costly procurement disasters.
1.145This is sometimes justified by saying that the public service does not have the in-house expertise for certain projects, and there is a need to bring in private sector experts. While there is a legitimate need for external advice in some situations, consulting firms are too often 'opinions for hire', providing clients the answers that they want.[68] This overreliance on external advice jeopardises the mandate of the Australian Public Service to provide frank and fearless advice to decision makers.[69]
1.146Consultants are experts in winning contracts, producing work that suits their clients, and hiding work that does not. Professor Podger summarised the issue best when he said that 'there is a danger, in using consultants, that they will say what they think is wanted in order to get the next job'.[70] For example, PwC infamously shrunk a very large report outlining the many defects of the illegal Robodebt scheme into an eight-page PowerPoint deck for which PwC invoiced the Department of Human Services around $1 million.[71] It subsequently repaid this amount in response to community outrage.
1.147Time and time again, we see that contracting consultants does not provide value for money. There are many examples.
1.148KPMG submitted inflated invoices and billed the government for hours never worked.[72]
1.149Insider sources indicate that profit margins on consulting contracts can be as high as 50-60 per cent. The same work could be done at a more affordable price by the public service.[73]
1.150Consulting firms receive millions in government contracts to write reports and give advice to departments and agencies but there is no requirement for these outputs to be published or for their work to be scrutinised. In fact, less than 20per cent of consultant reports are published.[74] In addition, while the public sector is subject to Estimates hearings, the private sector conveniently is not.
1.151Requiring departments and agencies to publish reports arising from consultants, by default, will improve transparency and allow the public and civil society to interrogate consultants' reports and advice. It will improve the accountability of consultants and governments, ensuring value for public money and advice that is in the public interest.
1.152The Australian Greens recommend:
1.153Consulting firms aggressively use a revolving door of staff as well as make political donations to 'farm' new business opportunities, buy influence, inflate profit margins, access confidential information, and deliver benefits to their private clients.
1.154Donations to political parties should not be possible from those who tender for, or receive, government contracts. Such donations are indefensible by any test of probity. Money must not buy, or be perceived to buy, political access and influence. This applies to both direct, indirect, in-kind and pro-bono donations.
1.155Over the past decade, the Big Four consulting firms have donated over $6.6 million to the ALP and Coalition and received a staggering $8.5 billion in government contracts, over the same period.[75] It is no surprise that the Australian Government has become amongst the highest spenders on consultants in the world.[76]
1.156While consulting firms and politicians may be meeting the existing low bar of reporting obligations in relation to such donations, this practice does not pass the pub test. It must stop immediately.
1.157There is widespread support among stakeholders that allowing political donations by entities also bidding for government contracts creates unavoidable conflicts of interest. They are also anti-competitive especially in relation to small and medium sized consultants and service providers.
1.158Research by The Centre for Public Integrity found that donors to political parties were 2.49 times more likely to win procurement contracts than non-donors.[77] They conclude that donations by the Big Four were 'unrelated to any ideological goal or end sought but are rather focused on currying favour with whoever may be in power and warned that they left the major parties vulnerable to corruption in the form of clientelism, whereby patron-client relations emerge, and political support is exchanged for privileged access to public goods'.[78]
1.159Dr Zirnsak from the Tax Justice Network told the committee 'I have deep concerns about the ability of any entity to have government contracts and at the same time be a political donor. I think that is a conflict of interest'.[79]
1.160In relation to political donations by consulting firms, Professor Allan Fels said, 'they're an investment to get a return and that makes us very worried about them'.[80]
1.161Consulting firms, especially the Big Four, use donations to gain access to decision makers, secure favours, and wield undue influence over political and tendering decisions. They undermine the integrity of governance.
1.162In the wake of the PwC scandals uncovered in this inquiry, PwC announced that they would 'no longer make political donations … this includes payments to attend fundraising events, in-kind donations for event hosting/catering and other direct donations'. The then CEO Kristen Stubbins said, 'we recognise that doing away with political donations is the best way of ensuring the highest standards of governance.'[81]
1.163This explicit statement from a consulting firm illustrates the perceived and actual conflict of interest associated with making donations to political parties while seeking business from them.
1.164Other major consulting firms gave evidence in the inquiry that although they would not necessarily stop donating to political parties, they would support legislation banning political donations for the sector.
1.165When asked whether they would support legislation banning political donations and leveling the playing field, Mr Larocca CEO of EY said 'Yes' and Mr Yates CEO of KPMG said, 'I think that's something the parliament could consider'.[82]
1.166Accenture and Boston Consulting Group do not make donations to political parties.[83]
1.167Support for a ban on political donations extends far beyond stakeholders and some of the key figures in the consulting industry. Research by the Australia Institute shows that three in four Australians (74 per cent) support banning political donations from entities that receive funding from government contracts, including 80 per cent of Coalition voters and 70 per cent of Labor voters.[84]
1.168There is widespread agreement that this is important for a healthy democracy. The NSW ICAC has described such use of donations as causing 'serious damage to representative democracy' and the Victorian IBAC has stated that political donations can 'erode public trust in the people and institutions that are relied on to make decisions in the public interest.
1.169It is time to level the playing field for a higher standard of governance. There is no excuse for inaction on this.
1.170The Greens urge the government to immediately legislate a ban on political donations from those who tender or receive government contracts.
1.171We must prevent political donations that could influence the outcome of government contracts and tendering processes.
1.172A ban on political donations is key to restoring public confidence that decisions regarding allocation of government resources are guided by public interest, rather than the interests of donors.
1.173There is no excuse for not making this change to political donations immediately.
1.174The Australian Greens recommend that any entities tendering or contracting to the Australian Government be banned from making political donations (direct, indirect, in-kind, pro-bono or otherwise) in the 12 months before applying for contracts, while an application is being considered, or 12 months after contract obligations have been completed.
1.175The revolving door between government and industry is an insidious, corrosive and corrupting phenomenon. It blurs the lines between the public and private sectors, risking the regulatory capture of public interests. It is used aggressively to generate personal and firm income at the cost of the public interest and value for money. It is on the rise, and it has the potential to increase risks to national security and the integrity of government policy and spending.
1.176This revolving door is one way in which consulting firms seek to influence government, especially in respect of procurement and consultancy work.[85]
1.177Major conflicts of interest arise from the revolving door between consultants and government departments and even regulators. They enable an exchange of confidential information, cultivation of unfair advantage, and corruption of tendering processes. This can reduce competition and lock out small and medium enterprises from government work.
1.178The revolving door between parliaments and the public sector to some of the largest and most profitable firms in the Australian economy has long been an issue. Ex-employees of big consulting firms like PwC, KPMG, Deloitte and EY appear across the public service and public institutions. Consulting firms strategically recruit ex-public servants. Regulatory capture is enabled by means of this revolving door.
1.179A list of those who pass through this 'revolving door' illustrates how power flows between politics and the Big Four consultancies.[86] This includes senior public servants who engage in regulation having had many years' experience inside large consultancies which can create long lived loyalties.
1.180It works the other way too, with prominent public servants and politicians moving to the consulting sector. There are no effective penalties when ex-ministers breach regulation of these arrangements.
1.181The revolving door is not limited to upper management. KPMG has hired almost 100 people who previously worked at the Department of Defence over the last five years. Defence is KPMG's largest government client, giving them a staggering $1.8 billion in government work over the past decade.[87] This relationship led to KPMG doing work for Defence that was ultimately not needed and billing for work not done.
1.182There are 1,891 staff from the Big Four consulting firms who have a Defence Common Access Card (DCAC), granting them unescorted access to Defence sites.[88]
1.183Defence do not track staff once they leave Defence, and neither does KPMG.[89] It has become clear through this inquiry and Estimates questioning that no agency or department is centrally responsible for tracking the number of federal government employees that have moved from the APS into the Big Four, and vice versa.[90]
1.184There have been some attempts to stop the revolving door.
1.185Recommendation 10 from NSW Legislative Council's report into the NSW Government's use and management of consulting services recommends that the NSW Government prohibit senior public servants from working for relevant private sector clients and consultants or their representative bodies within six months of leaving the public sector.[91]
1.186In 2023, the Department of Defence introduced a contractor moratorium that prevents the department, for a 12-month period, from engaging ex Defence members or public servants who are now contracting to Defence. This means that, if employees from the Department of Defence choose to leave, they will need to work elsewhere for 12 months before they can come back and work in the Department.[92]
1.187While the committee's report briefly touches on the revolving door, it makes no recommendations to close it.
1.188Hiring ex-government staff poses risks to transparency and integrity. We need effective post-separation employment provisions and transparency measures. Any recommendations to stop the revolving door need to be enforceable and must address movement in both directions. This must extend to staff with security clearances who leave the public sector.
1.189The Australian Greens recommend that the Australian Government stop the revolving door by enforcing a 1-year cooling-off period for:
partners in partnerships and/or executives in consulting and other entities that have held a significant contract with government in the last 12 months from commencing in the public service,
APS Senior Executives commencing with an entity that has contracted to government in the last 12 months in a related form of business, and
1.190The Australian Greens Recommend that the Australian Government require that:
1.191All four big accounting firms, PwC, KPMG, Deloitte, and EY are structured as partnerships not corporations. Corporations are governed by duties and obligations set out in the Commonwealth Corporations Act 2001, whereas partnerships are primarily governed at the state and territory level and their regulatory obligations vary and are meagre. As a result, their operations are opaque and poorly governed.
1.192One of the only Commonwealth powers of partnership regulation is setting limits on size. The Corporations Act 2001 allows accounting firms to have up to 1,000 partners, a much higher cap than medical practitioners (50) and pharmaceutical chemists or vets (100).[93]
1.193There does not appear to be any historical rationale for these variable partnership caps. When asked why the cap on accounting partnerships was set at 1,000 under the Corporations Act2001, Treasury Official Mr Dickson responded, 'I don't have a conclusive rationale as to what was driving the decision at the time'.[94]
1.194Many stakeholders involved in this inquiry viewed this cap to be too high, including the government's own Treasury officials.
1.195In the Treasury's discussion paper on regulation, they say that the partnership limit 'may be too high in the absence of mandated governance requirements … or transparency requirements'.[95]
1.196Partners in larger firms of up to 1,000 are not effective or true partnerships, where partners know the people with whom they share liability and decision-making around risk, borrowing, and strategy.
1.197Mr Adam Powick, CEO of Deloitte acknowledged that once a partnership gets above 100 equity partners, it becomes complex to manage.[96]
1.198The PwC tax leaks scandal is case and point. PwC has around 800 partners. The size and complexity of this leadership structure enabled Mr Peter Collins to use confidential government information for the benefit of PwC's private clients undetected by many other partnerships for a long period. For those that did know, the hierarchy of the partner evidently made it difficult to challenge the actions and decisions of those at the top.[97] The partnership structure made it harder to uncover, investigate, enact penalties, and hold the firm broadly to account.
1.199The Greens recommend the cap on partners for accounting firms be lowered to 100.
1.200A major obstacle in addressing the issues around partnership regulation uncovered in this inquiry is that responsibility for regulating partnerships sits with the states and territories, and the requirements on partnerships are minimal.
1.201Treasury says that 'the formation, operation or winding up of general partnerships is not subject to any active oversight and there is no regulator empowered to intervene in the governance of a general partnership'.[98]
1.202Partnerships are not subject to the same requirements as companies, governed by the Commonwealth Corporations Act 2001. Unlike corporations, partnerships are not required to disclose documents, or lodge financial reports with ASIC, they don't have to follow rules around information disclosure associated with listing shares on a stock exchange. They don't pay corporate tax, they are not subject to directors' duties, or required to hold general annual meetings, and they don't have to follow company laws around forming, operating, restructuring, and growing a business.[99] Whistleblower obligations are poor or non-existent.
1.203The opaqueness of partnership structures hides much of the activity and power wielded by these firms and their partners.
1.204Partnerships do not pay corporate tax, and profit is taxed as partners' income. This creates opportunities for the use of tax minimisation strategies, in particularly income splitting methods that allow partners to attract lower tax rates and reduce public revenue.
1.205Big four partners and firms are not shy or unskilled in the use of tax minimisation methods, many assign a portion of their income to others to cut their own overall tax bill: 243 partners at PwC, 121 partners at KPMG and 197partners at EY use Everett assignments to reduce the tax they pay.[100]
1.206This minimisation of personal income tax, sets the partners in the big consulting firms apart from other tax payers. It is time for this to change.
1.207Concerns about the culture within the Big Four consulting firms have also been raised throughout this inquiry, in particular in the Switkowski Review into PwC and the Broderick Review into EY.
1.208Many of the cultural and ethical failures within these firms stem from the profit at all costs mentality, the difficultly to speak up and the poor complaints processes – issues that are made worse by the partnership structure.
1.209The Switkowski Review attribute the PwC tax leaks scandals to issues including the lack of independence and external 'voices' within the ultimate governing body and decentralised business model without sufficient visibility of the enterprise view.[101]
1.210The Broderick Review found that 31 per cent of people at EY Oceania are routinely working 51 or more hours a week, and approximately 11 per cent are routinely working 61 hours or more in a week. The 'growth at all costs' culture also allow for unethical behaviour to go unpunished. The review found that 15per cent of people experienced bullying in the last five years and 10 per cent of people experienced sexual harassment in the last five years.[102]
1.211The lack of transparency surrounding the behaviours and activities within partnerships enable poor employment conditions and bullying and harassment to flourish.
1.212Partnerships need a serious structural and regulatory overhaul.
1.213The number and size of partnerships have big implications for our economy and consequently there must be more transparency, accountability, and oversight of partnership activities.
1.214To ensure effective regulation of partnerships, the Greens recommend that the states and territories refer their powers to regulate large partnerships to the Commonwealth and that the Government then use these powers to extend the requirements of corporations to partnerships.
1.215The Australian Greens recommend that the Australian Government:
amend the Corporations Act to lower the maximum number of partners for accountants to 100.
1.216The big accounting firms were originally established to provide audit and accounting services. Since then, their provision of services has expanded to include consulting, tax, financial and legal services. Many of these are far more lucrative than audit.[103]Currently, on average, 80 per cent of the big four firms' revenue in Australia comes from consulting clients, as opposed to audit clients.[104]
1.217However, unlike other services, the quality of audit is critical to the integrity of our financial system. Audit is a legal requirement of public companies and poor audit quality can undermine economic stability.
1.218Stakeholders told the Committee that there is an inherent conflict of interest arising from allowing a firm to provide both audit and non-audit services. Many witnesses to the inquiry gave such evidence.
1.219The Centre for Public Integrity advised there has been a 'blurring of the line between audit and non-audit consultancy services' and this has led to questions regarding audit quality and independence.[105]
1.220Associate Professor Andy Schmulow gave the example that 'audit quality and probity could potentially be sacrificed in order to keep happy clients who offer the potential of more lucrative consulting work.'[106]
1.221There are many examples of auditors who provide non-audit consulting services to the same client, which have resulted in conflicting interest and compromised audit quality.
1.222In 2018, EY earned more than $21 million for a combination of audit and non-audit work from NAB.[107] The same year, EY prepared a prudential report for NAB and failed to advise the regulator of issues with NAB's risk management that it uncovered in the process.
1.223The lack of audit independence leads to conflicts of interest, which undermines audit quality in Australia.
1.224The quality of audit has been declining over the past few years. In 2018-19 ASIC found that one in four audits failed to meet the required standard.
1.225Currently, just over a third of audits fail to meet the standard required, namely, to obtain 'reasonable assurance that the financial report as a whole is free of material misstatement'.[108]
1.226The Big Four accounting firms talked about their 'sterile corridor' approach to managing conflicts of interest associated with providing audit and non-audit services. Rolling scandals from the Big Four make it clear that they do not adequately self-regulate or mitigate such structural conflicts of interest.
1.227Professor Allan Fels told the Committee that 'measures to resolve conflicts in this sector usual work badly in practice, are steadily eroded over time and are poorly enforced by regulators'.[109]
1.228Associate Professor Schmulow also critiqued the long history of trusting large accounting firms to manage their own conflicts of interest. He said, 'if you want to build regulatory structures that work, instead of having faith in the ability of people to manage conflicts of interest, why not have faith in people's inability to manage conflicts of interest and design regulation accordingly—design for the worst-case scenario?'.[110]
1.229The Committee gathered a large body of evidence supporting the idea of structurally separating audit from non-auditing functions in the industry, to help reduce conflicts of interest and safeguard high-quality audits.
1.230This policy is already adopted in many consulting and audit firms – major consulting firms Accenture, Boston Consulting Group and McKinsey do not provide audit services.[111]
1.231The UK Parliament's 2019 report on The Future of Audit, concluded that 'a structural break-up would prove more effective in tackling conflicts of interest and providing the professional scepticism needed to deliver high-quality audits'.[112]
1.232Professor Fels told the Committee that 'total separation is the clean, clear, sensible solution, and as the current UK situation suggests, the global audit industry is already headed there. It would be wise to go this way from the start here, rather than incur all the costs of a compromise 'solution' which is imperfect, and more likely to encourage audits that do not deal properly with pending corporate collapses.'[113]
1.233The Greens agree with Professor Fels. Structural separation is the surest solution to address the inherent conflict of interests that arise when a small group of extremely powerful firms hold a near monopoly over auditing.
1.234Maintaining audit quality is essential to the proper functioning of the economy and financial services, including the public service.
1.235The Australian Greens recommend that any firm providing audit services in Australia be prevented from providing non-audit services, including when engaging in business with the Australian Government.
1.236Practitioners delivering accounting, auditing, and consulting services are subject to a patchwork of professional standards, regulations, and laws. These requirements are 'often applied to individual practitioners (rather than whole firms) and comprise a mix of self-regulation and government regulation.'[114]
1.237The Committee heard contradictory and insufficient explanations as to who does what, who is responsible to whom, and whether penalties for non-compliance are enforceable.
1.238This system creates regulatory gaps and tangled responsibilities.
1.239Some of the key regulators and standards setters are the Australian Taxation Office (ATO), the Australian Securities and Investments Commission (ASIC), the Tax Practitioners Board (TBP), the Financial Reporting Council (FRC), the Auditing and Assurance Standards Board (AUASB), and the Australian Accounting Standards Board (AASB).
1.240In February 2024 Estimates, Mr Longo from ASIC said 'it's absolutely the case that we're operating in a modern environment now, where we have these huge consulting firms and professional service firms that provide services across an extraordinary range of activity across jurisdictions…We're a sliver of that activity. Whether that sliver expands is a matter for government, but it is a sliver at the moment.'[115]
1.241The level of complication and confusion only serves those with the resources to understand and monitor all of the complexities and to navigate their way around and through a patchwork of overlapping and voluntaristic arrangements.
1.242In November 2023, Treasurer Jim Chalmers made the announcement that they will be restructuring financial reporting bodies by rolling three bodies including the AUASB, the AASB and the FRC, into a single entity. The goal is to 'make them more efficient, effective and fit for purpose'.[116]
1.243This proposed change is welcome but is not enough to address the problems with the currently regulatory system for the audit, accounting, and assurance sector.
1.244Conflicts of interest, secrecy, and tax avoidance thrive in regulatory gaps and complexities.
1.245A key issue is that Australia's current regulation of the consulting services is weak and inadequate. It lacks meaningful enforceability and is too opaque.
1.246Instead of a vigorous regulator with enforcement powers, the consulting profession is 'governed' by ethical standards that rely on self-regulation.
1.247The age of self-regulation through multiple bodies dominated by those with an interest in the industry must now end. The long history of failures and scandals both in Australia and abroad have made it clear that big firms cannot be trusted to abide by voluntary rules.
1.248In 2022, more than 1,100 KPMG partners were found to have cheated on internal tests relating to independence rules which included a section on managing conflicts of interest and the separation of roles. This cheating reportedly occurred systematically for at least 5 years. This is a clear breach of standards and internal codes of conduct. However, there have been minimal consequences for the firm in Australia.[117]
1.249The US accounting regulator – the Public Company Accounting Oversight Board (PCAOB), fined KPMG Netherlands with a $38 million civil penalty for the offence of exam cheating. The maximum fine Australia's Charted Accountant Australia and New Zealand (CAANZ), one of Australia's standards setters is $50 000.[118] This is a completely insufficient amount to work as a deterrent for bad behaviour.
1.250Professor Brendan Lyon told the committee that 'unaddressed CEO-level ethics scandals in PwC and KPMG combined with a sustained decline in audit quality by the major accounting firms suggests that professional standards are falling, because self-regulation is failing… Australia is unusual in our continuing reliance on self-regulation of the accounting profession.'[119]
1.251There is a pressing need for governments to rethink and reset regulation of professional services, in particular consulting services.
1.252We must do away with self-regulation, create enforceable standards and requirements for professions (individuals and firms), protect the independence and agency of regulators and simplify responsibility for regulation.
1.253Professor Fels indicated to the committee that 'a good case has been made for having a separate regulator. Certainly, self-regulation does not work'.[120]
1.254The Greens call on the government to establish an independent consulting regulator with powers to:
maintain a register of professional consultants;
set standards and a code of practice focusing on ethics and professional conduct;
have the capacity to make rulings and impose penalties in relation to breaches; and
ensure robust governance of Board members (including that they must be arms-length from the firms they regulate and not receiving income from such firms).
1.255Associate Professor Andy Schmulow suggests that 'to ensure the independence of such an oversight authority, regulated firms should not be permitted to fill board positions or advise to, or be seconded by, such an authority'.[121]
1.256When asked if he agreed that anyone who is in receipt of an income from entities like the big four should not be on any professional regulatory body for consultants, Mr Peter De Cure said, 'I agree wholeheartedly with that.'[122]
1.257The Australian Greens recommend that the Australian Government:
1.258The committee's report briefly mentions whistleblowers, but it does not make any recommendations in relation to offering them better protections.
1.259Evidence crucial to this inquiry would not have surfaced without the work of whistleblowers such as Professor Brendan Lyon, Tracey Murray, and countless others. Many whistleblowers have brought forward information, seeking anonymity and feeling very frightened, as they did not feel that they could stay silent in good conscience.
1.260Insiders and whistleblowers have assisted this inquiry in innumerable ways and in relation to many matters.
1.261Protecting whistleblowers is about enabling insiders to bring forward evidence and protecting the truth. The ongoing prosecution of whistleblowers in Australia shows that they need much stronger protections across the system. We must do more to protect our whistleblowers, not punish them.
1.262According to Treasury, whistleblower laws may not apply to employees in a partnership like those applying in corporations. As a partnership is not a 'regulated entity' for the purposes of the whistleblower laws in the Corporations Act, partners, employees and suppliers of partnerships are not supported by Commonwealth legislation.[123] Voluntary policies and procedures within firms are not robust enough.
1.263Whistleblowers must clearly and unequivocally be protected by law.
1.264However, without an independent National Whistleblower Commission, even the best laws will still leave whistleblowers at an extreme legal and resourcing disadvantage.[124]
1.265The Australian Greens recommend that the Australian Government:
1.266PwC consistently hid behind the incorrect application of thousands of legal professional privilege claims to prevent the ATO from accessing potentially incriminating evidence'.[125] This has raised serious concerns in organisations like the Law Council about such overuse bringing the legal profession into 'disrepute and diminishing public confidence in the administration of justice'. Noting that there is a review currently underway by the Attorney-General's Department and the Department of Finance, we recommend that the Government consider ways to reduce the overuse of Legal Professional Privilege.
1.267The Australian Greens recommend that the use and misuse of legal professional privilege to combat legitimate investigations of consultancy malpractice should be reviewed and stricter rules and specific protocols be developed to limit misuse.
1.268PwC was fined $1.4 million in relation to its misuse of legal professional privilege. ATO's confidential settlement with PwC shaved $785 400 off the original penalty of $1.4 million according to the copy of this Settlement Deed provided to the inquiry. This effectively means that in negotiation, in the face of possible 'deep pocketed' legal action, the ATO halved the fine for false legal professional privilege claims.
1.269ATO's annual report publishes some summary data on confidential settlements. It separates outcomes for different types of entities but does not publish details of specific large settlements of this kind by entity. There is a good argument that making such settlements public, (along with their negotiated settlement amount and their rationale where they have been reduced) would act as a public deterrent to other wrongdoers.
1.270Professor Graeme Samuels offered some commentary on this process as he gave evidence, saying that he could not 'for the life of me, understand while these settlements are reached privately'[126].
Recommendation 19
1.271The Australian Greens recommend that greater transparency of confidential tax settlements be provided, and clear protocols be established for their use.
1.272This inquiry has exposed inappropriate pressure on the ambit and conduct of the TPB's investigations into Mr Peter Collins and PwC, especially on TPB CEO Mr Michael O'Neill who led the investigation.
1.273Recently released email and internal documents show how, when and to whom this pressure was applied by senior leaders at the ATO, some Treasury officials and the office of Minister Michael Sukkar[127].
1.274Others within the ATO opposed these inappropriate actions and called out some that denied natural justice or were industrially inappropriate or exhibited poor leadership.
1.275It seems likely that these processes and pressures were also affected by the appointment of two ex-PwC partners to the TPB (a Board of 7). Both were in receipt of trailing/retirement income from PwC while they sat on the Board as it investigated PwC, and the evidence shows that they did not always recuse from themselves from Board discussions involving PwC. In evidence to this inquiry the current Board chair recognised that this was a failure of proper process.
1.276It is important to note that Minister Sukkar's office made the PwC appointments to the TPB and that his office initiated the process of changing the contract terms of the TPB's CEO to make it a non-ongoing contract and remove the right to return to the ATO.
1.277There is copious documentation available arising from responses to Questions on Notice from Senator Barbara Pocock that substantiate these successive multiple efforts to apply pressure to Mr O'Neill.
1.278They include:
(1)allegations of bullying and harassment made by ATO staff (coincidental with the senior ATO Commissioner's expressions of resistance - by letter and in the 1 September 2021 meeting - to Mr O'Neill's investigation). The allegations were not substantiated, lacked evidence and were not even put to Mr O'Neill;
(2)the TPB Board's internal inquiry into the PwC investigation which reanimated these unsubstantiated bullying and harassment accusations but resulted in a clean bill of health for the TPB in terms of the way it conducted its inquiry into PwC;
(3)a prolonged process, led out of Minister Sukkar's office and through Treasury, to change Mr O'Neill's employment contract and make it a less secure limited term contract without a right to return to permanent employment in the ATO. Mr O'Neill was not provided with timely information about these processes; indeed he was deliberately excluded from these contract discussions against the principles of natural justice and fair treatment. Jeremy Moore (A/G Deputy Comm ATOP) critiqued the announcement of this ministerially led contract change, saying that doing so 'before even doing rudimentary consultation with the incumbent could be industrially fraught, appears to lack real leadership and would potentially make the incumbents position untenable'.
(4)a workplace assessment [The Oliver Review] which also reanimated the bullying accusations (still without evidence or Mr O'Neill's knowledge) and yet again did not make any substantive findings against the TPB or Mr O'Neill;
(5)finally, a fraud investigation which examined Mr O'Neill's emails and electronic communications testing for evidence of leaks or inappropriate communication with media. None was found.
1.279While it has been asserted that these processes were not focussed on Mr O'Neill, the documentation makes clear that, in every case, they included a focus on Mr O'Neill either directly or indirectly.
1.280This set of processes unfolded against the background of Mr O'Neill's leadership of the PwC investigation. It is clear that senior Commissioners at the ATO took strong offence at the methods of the TPB in undertaking its investigation. The ATO referred Peter Collins to the TPB but did not support the TPB widening of that investigation to PwC itself in March 2021.
1.281The AFR's Mr Neil Chenoweth reported comments from a senior ATO executive asking at the time 'Is it worth running Peter Collins out for something he did eight years ago?' and suggested that the investigation of PwC was a 'wild goose chase'.[128] Chenoweth's analysis points to 'sharply different views within the federal bureaucracy about the PwC tax leaks scandal' before it became public in 2023.
1.282The ATO took strong exception to the TPB's attempts to gather and examine data held by the ATO in executing its investigation. When access was denied the TPB turned to other methods to establish its case, and the ATO took exception to this. The level of anger and push back from senior leaders in the ATO is evident in in reports of the meeting between ATO Commissioners and the TPB Board on 1 September and in Mr Jordon's letter of 26 September 2021.
1.283Evidence received in the process of this inquiry, including in its closing days, in response to Questions on Notice, raises important questions about the ATO's interactions with the TPB. The TPB inquiry was vigorously resisted through an inter-agency push back from the ATO's senior leadership, pushback that was particularly focussed upon Mr O'Neill, the TPB's CEO. This is a serious matter.
1.284None of the five processes described above resulted in any report of wrongdoing, bullying, wrongful behaviour, investigatory overreach or fraudulent interaction with media by Mr O'Neill or officers of the TPB. The documentation of these outcomes is clear.
1.285The proposed change in contract for the CEO, would have worked to make Mr O'Neill's position 'untenable' if Minister Sukkar's office's strategy had not been derailed by the failure to adopt basic human resources processes of consultation, recognise the need for legal change, and the inconvenient fact of an election on May 22 2022. These facts and failures stopped it all in its tracks.
1.286They did not, however, stop the Minister's office from put out a Media Release in March 2022 announcing the contract change, despite the advice received about it.
1.287Effective regulators need freedom from Ministerial interference and confidence that their masters (e.g. the TPB Board) are independent of the interests of those being investigated.
1.288They also need the resources and security to conduct investigations without interagency interference or the withholding of information or data, as well as freedom from unsubstantiated bullying and harassment claims, workplace reviews, fraud or other processes that lack evidence and/or are backed by opponents of an investigation, or its vigor or methods or offer competitive resistance to the use of powers. Such actions can derail or impede an investigation and can offer, in effect, protection to offenders or potential offenders.
1.289In this case, the processes appear to amount to pressure on the PwC investigation and investigators, involved actions potentially by Minister Sukkar's office, senior officers in the ATO, some TPB Board members, and some officers in Treasury.
1.290The documentation available to this inquiry reveals how these actions and relationships, in the context of a flawed regulatory regime and institutional failure worked, or almost worked, to protect PwC.
1.291They did not stop the penalty for Mr Peter Collins of his loss of tax agent license for 2 years and the requirement that PwC undertake training of its staff.
1.292It is vital that investigations into wrongful behaviour by tax agents, accountants and consultants are free of interference from Ministers, Boards, inter-agency competition, poor leadership or other behaviours that have the effect of slowing or narrowing investigations, protecting wrongdoers or vested interests.
1.293The Australian Greens recommend, to ensure robust regulation that is free of actual or perceived conflicts of interest or possible capture:
1.294The Australian Greens recommend that the Australian Government ensure robust investigation, and that regulators and investigators be protected from insecurity, political pressure or other forms of threat or constraint while conducting investigations.
1.295Throughout this inquiry many witnesses have diligently and helpfully brought forward evidence. We owe a debt not just to the many insiders and whistleblowers who have assisted, but also to the many academics, researchers, civil society organisations and journalists who have investigated events and assisted the Committee and the public to understand them and their implications.
1.296Alongside these many examples of positive assistance, there have also been examples of disrespectful and unhelpful treatment. For example, as the committee's report shows KPMG provided false evidence about their mapping of relationships in government departments.[129] Others gave evidence that was simply implausible, including Mr Luke Sayers' memory loss about discussions with senior ATO staff about serious matters of concern including the reading of emails which illustrated these concerns.
1.297The Australian Greens recommend that the Senate consider options available to it in relation to KPMG's misleading and incorrect evidence to the inquiry.
1.298This inquiry, initiated by the Australian Greens, has revealed a very public set of swindles. They have shocked the Australian public and its elected representatives across the political spectrum. They should not be allowed to recur. We must use the momentum of this outrage to propel real reform. Australians deserve action.
1.299The Australian Greens look forward to building on the work already underway by the Government to cut back dependence upon consulting services, rebuild a robust public sector and clean up procurement.
1.300We also look forward to discussing and negotiating with the Government substantial and structural reforms to partnerships, professional services, procurement, political donations, and the proper regulation of this sector including the actions and leadership in public regulatory institutions and departments.
1.301The consulting sector has shown that it cannot be left to its own devices or the regulatory status quo.
1.302It should not take a long-running Senate committee inquiry to surface and deal with the bread and butter work of ethical practice in our accounting and consultancy entities.
1.303We need a regulatory system that does the job, setting out clear standards, with strong powers of investigation and meaningful penalties.
1.304And we need a public sector that acts in the public interest, delivering value for money in our essential public services, rather than wasteful–if highly profitable–income for very large, greedy entities that are poorly regulated and lack both transparency and accountability.
1.305While appalling stories of poor leadership, unbelievable claims of memory loss, straightforward corruption, conflict of interest, payments made for work not done, waste, and the failure of public officials, has sold a lot of newspapers through this crisis, it has also imposed a heavy cost on the public interest.
1.306The world of extreme salaries for underperforming executives offering overpriced services better done by a skilled public sector, is a long way from the daily life of farmers, nurses, educators, retail workers and many others whose taxes foot this bill. Many of them are gobsmacked by what they have heard. They are looking for action.
1.307The Australian public will be waiting and watching to see what the Australian Government does next.
Senator Barbara Pocock
Member
Greens Senator for South Australia
Footnotes
[1]Data from Edmund Tadros, 'Revealed: Australia's best accounting firms in 2023', AFR Online, 14 November 2023(accessed 11 June 2024).
[2]Treasury submission to the Parliamentary Joint Committee on Corporations and Financial Services (PJC CFS), Inquiry into Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry (Ethics and Professional Accountability inquiry), Submission 50, p. 2.
[3]PwC Australia, answers to written questions on notice from Senator Barbara Pocock, 30 June 2023 (received 21 July 2023), p. 20.
[4]Edmund Tadros, 'One in five EY, PwC partners earns more than $1.3m', AFR Online, 26 September 2023(accessed 11 June 2024).
[5]For example, see evidence provided by Mr Adam Powick, Chief Executive Officer, Deloitte Committee Hansard , 17 July 2023, pp. 17, 28–29 and 30. See also EY, answers to written questions on notice from Senator Barbara Pocock, 28 and 30 June 2023 (received 7 July 2023), p. 4; KPMG, answers to written questions on notice from Senator Barbara Pocock, 28 June 2023 (received 7 July 2023), pp. 2–3; PwC Australia, answers to written questions on notice from Senator Barbara Pocock, 28 June 2023 (received 7 July 2023), p. 3.
[6]AusTender data as of May 2024.
[7]Angus Grigg, Jessica Longbottom, Jonathan Miller and Maddison Connaughton, 'Consulting firm KPMG overcharged Defence while raking in billions of dollars, whistleblowers say', ABC Online, 7August 2023 (accessed 11 June 2024).
[8]Edmund Tadros, 'KPMG accused of inflating Defence invoices, billing for hours never worked', AFR Online, 6 August 2023(accessed 11 June 2024).
[9]Simone Fox Koob and Nick McKenzie, 'Deloitte Australia chief executive admits to investing in allegedly fraudulent scheme', Sydney Morning Herald, 16 February 2023 (accessed 11 June 2024).
[10]In May 2023, PwC appointed the international law firm, Linklaters, to 'form an independent assessment of what happened in relation to the unacceptable sharing of confidential information by PwC Australia with PwC personnel outside of Australia'. Linklaters handed its report to PwC in late September 2023. See PwC, Statement on Linklaters' PwC Network Review, 27 September 2023 (accessed 11 June 2024).
[11]Australian Electoral Commission (AEC), Transparency Register (accessed 11 June 2024).
[12]See the committee report at p. 82. The earlier reports of the committee were titled PwC: A calculated Breach of Trust and PwC: The Coverup Worsens the Crime, and are available on the committee's website here.
[13]Australian Taxation Office, answers to questions on notice from a public hearing of the Parliamentary Joint Committee on Corporations and Financial Services, Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry inquiry on 22 April 2024 (received 13 May 2024), pp. 1–2.
[14]Mr Jeremy Hirschhorn, Second Commissioner, Australian Taxation Office, Committee Hansard, 26 September 2023, pp. 24-25 and pp. 28-29; Australian Taxation Office, answers to questions on notice from a public hearing of the Parliamentary Joint Committee on Corporations and Financial Services, Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry inquiry on 22 April 2024 (received 13 May 2024), pp. 1–2.
[15]Australian Taxation Office, answers to questions on notice from a public hearing of the Parliamentary Joint Committee on Corporations and Financial Services, Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry inquiry on 22 April 2024 (received 13 May 2024), pp. 1–2.
[16]Australian Taxation Office, answers to questions on notice from a public hearing of the Parliamentary Joint Committee on Corporations and Financial Services, Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry inquiry on 22 April 2024 (received 13 May 2024), pp. 1–2.
[17]Mr Joseph Longo, Chair, Australian Securities and Investments Commission, Senate Economics Legislation Committee, Proof Estimates Hansard, 4 June 2024, p. 25.
[18]Per Capita, Submission 19, p. 1
[19]Australian Government, The Australian Government's report on the Audit of Employment, p. 3(accessed 11 June 2024).
[20]The Australia Institute, Submission 13, p. 4.
[21]Community and Public Sector Union (PSU Group), Submission 6, pp. 11–12.
[22]Australian National Audit Office (ANAO), Procurement of Delivery Partners for the Entrepreneurs' Programme(accessed 11 June 2024).
[23]Australian National Audit Office (ANAO), Procurement of Delivery Partners for the Entrepreneurs' Programme(accessed 11 June 2024).
[24]Hannah Wooton, 'McKinsey advising on net zero modelling limits transparency: Labor', AFR Online, 16 November 2021 (accessed 11 June 2024).
[25]Ms Samantha Montenegro, Assistant Commissioner, Enabling Services, Australian Public Service Commission, Committee Estimates Hansard, 30 May 2024, pp. 50–51; Aus Tender, Contract Notice View–CN4030135 (both accessed 11 June 2024).
[26]Hannah Wooton, 'KPMG accountants cautioned over systemic exam cheating', AFR Online, 13 June 2022 (accessed 11 June 2024).
[27]See: Professor Andrew Podger AO, Private capacity, Committee Hansard, 2 May 2023, pp. 1–2; and Professor Marianna Mazzucato and Rosie Collington, Submission 7, p. 4.
[28]Kiah, Submission 23, p. 9.
[29]Professor Andrew Podger AO, Private capacity, Committee Hansard, 2 May 2023, pp. 1–2.
[30]Per Capita, Submission 19, p. 1.
[31]Community and Public Sector Union (PSU Group), Submission 6, p. 5.
[32]Ms Rosie Collington, Researcher, UCL Institute for Innovation and Public Purpose, Committee Hansard, 7 June 2023, p. 67.
[33]Professor Andrew Podger AO, Private capacity, Committee Hansard, 2 May 2023, p. 7.
[34]Angus Grigg, Jessica Longbottom, Jonathan Miller and Maddison Connaughton, 'Consulting firm KPMG overcharged Defence while raking in billions of dollars, whistleblowers say', ABC Online, 7August 2023 (accessed 11 June 2024).
[35]AusTender data as of May 2024.
[36]AusTender data for 2021-22.
[37]For example, see evidence provided by Mr Adam Powick, Chief Executive Officer, Deloitte Committee Hansard, 17 July 2023, pp. 17, 28–29 and 30. See also EY, answers to written questions on notice from Senator Barbara Pocock, 28 and 30 June 2023 (received 7 July 2023), p. 4; KPMG, answers to written questions on notice from Senator Barbara Pocock, 28 June 2023 (received 7 July 2023), pp. 2–3; PwC Australia, answers to written questions on notice from Senator Barbara Pocock, 28 June 2023 (received 7 July 2023), p. 3.
[38]Australian Government, Commonwealth Procurement Rules, 13 June 2023, p. 3 (accessed 11 June 2024).
[39]See: Department of Finance, Procurement Policy Note–Ethical conduct of tenderers and suppliers, 18 January 2024; and Australian Government, Commonwealth Procurement Rules, 13 June 2023, p. 11 (both accessed 11 June 2024).
[40]Joint Committee of Public Accounts and Audit, Report 498: 'Commitment issues'–An inquiry into Commonwealth procurement, August 2023, p. 37.
[41]Department of Finance, answers to questions on notice from a public hearing on 7 June 2023 (received 10 July 2023).
[42]Department of Finance, answers to questions on notice from Senator Richard Colbeck, 23 January 2024 (received 19 February 2024), p. 11.
[43]Joint Committee of Public Accounts and Audit, Report 498: 'Commitment issues'–An inquiry into Commonwealth procurement, August 2023, p. 37.
[44]See evidence provided by the Department of Finance to the Parliamentary Joint Committee on Corporations and Financial Services, Committee Hansard, Monday 22 April 2024, p. 26.
[45]Joint Committee of Public Accounts and Audit, Report 498: 'Commitment issues'–An inquiry into Commonwealth procurement, August 2023, p. 36.
[46]Centre for Public Integrity, Submission 58, p. 35.
[47]Department of Finance, Procurement of Goods and Services from PricewaterhouseCoopers (accessed 11June 2024).
[48]Department of Finance, answers to written questions on notice from Senator Barbara Pocock, 3May2024 (received 24 May 2024), question 60 (unpaginated).
[49]See the Western Australian Government, Debarment Regime: Guide for Western Australian Government agencies (accessed 11 June 2024); and the Community and Public Sector Union (PSU Group), Submission 6, p. 15.
[50]Community and Public Sector Union (PSU Group), Submission 6, p. 5.
[51]Australian Public Service Commission,APS Code of Conduct (accessed 11 June 2024).
[52]Community and Public Sector Union (PSU Group), Submission 6, p. 5.
[53]Senate Finance and Public Administration References Committee, PwC: A Calculated Breach of Trust, June 2023.
[54]Henry Belot, 'KPMG Australia launches internal review after potential conflict-of-interest concerns raised', Guardian Australia, 27 June 2023 (accessed 11 June 2024).
[55]Henry Belot, 'EY Oceania accused of potential conflict of interest over government contracts on climate policy', Guardian Australia, 24 January 2024 (accessed 11 June 2024).
[56]See evidence provided by EY, Committee Hansard, 18 July 2023, p. 23.
[57]CSIRO Staff Association, 'CSIRO staff slam outsourced net-zero modelling', 26 November 2021 (accessed 11 June 2024).
[58]Michael Forsythe and Walt Bogdanich, 'At McKinsey, Widespread Furor Over Work With Planet's Biggest Polluters', New York Times, 27 October 2021 (accessed 11 June 2024).
[59]Department of Finance, Commonwealth Supplier Code of Conduct, 27 March 2024 (accessed 11June2024).
[60]Ronald Mizen, 'PwC, EY, Deloitte, KPMG book $444m in contract extensions on government work in 2022-23', AFR Online, 9 August 2023 (accessed 11 June 2024).
[61]Mark Di Stefano, 'Senate inquiry into big four consultancies: KMPG CEO Andrew Yates denies the existence of secret power maps', AFR Online, 10 December 2023 (accessed 11 June 2024).
[62]See KPMG's response in KPMG, answers to written questions on notice from Senator Deborah O'Neill, 9 August 2023 (received 25 August 2023), p. 4.
[63]KPMG, Health Infrastructure NSW (HINSW) Workship Actions, 15 May 2023, tabled Senator Barbara Pocock on 9 February 2024.
[64]Centre for Public Integrity, Opaque big four contracts increase 1276% (accessed 11 June 2024).
[65]The Australia Institute, Submission 13, p. 15.
[66]Ronald Mizen, 'Firms' 'land and expand' strategy costing taxpayers $1.2m a day', AFR Online, 9August 2023 (accessed 11 June 2024).
[67]See Department of Finance, answers to questions on notice from a public hearing on 7 June 2023 (received 10 July 2023), answer to question 4 (not paginated).
[68]For example, see Hannah Wooton, 'Senators slam EY's 'very unusual' economic modelling', AFR Online, 16 November 2022 (accessed 11 June 2024).
[69]See APS values set out in Section 10 of the Public Service Act 1999 (Cth).
[70]The Australia Institute, Submission 13, p. 22.
[71]Julian Bajkowski and Tom Ravlic, 'First robodebt royal commission scalp confirmed at PwC', The Mandarin, 7 July 2023 (accessed 11 June 2024).
[72]Angus Grigg, Jessica Longbottom, Jonathan Miller and Maddison Connaughton, 'Consulting firm KPMG overcharged Defence while raking in billions of dollars, whistleblowers say', ABC Online, 7August 2023 (accessed 11 June 2024).
[73]Unnamed whistleblower with extensive contract management experience who provided evidence directly to Senator Barbara Pocock.
[74]Bill Browne, ‘How the public is kept in the dark about what consultants tell the government’, Australia Institute, 8 May 2023 (accessed 11 June 2024).
[75]Advice provided by the Parliamentary Library.
[76]Four Corners, 'Consulting firm KPMG overcharged Defence while raking in billions of dollars, whistleblowers say', ABC, 7 August 2023 (accessed 11 June 2024).
[77]See the submission made to the Finance and Public Administration Legislation Committee’s inquiry into the Electoral Legislation Amendment (Fairer Contracts and Grants) Bill 2023 by the Centre for Public Integrity, Submission 4, p. 2.
[78]The Centre for Public Integrity, Submission 58, p. 52.
[79]Dr Mark Zirnsak, Spokesperson, Tax Justice Network Australia, Committee Hansard, 18 July 2024, p.10
[80]Professor Allan Fels AO, Private Capacity, Committee Hansard, 17 July 2023, p. 7.
[81]Josh Butler and Henry Belot, 'PwC announces it will cease donations to political parties as part of attempt to rebuild reputation', Guardian Australia, 10 July 2023 (accessed 11 June 2024).
[82]See respectively: Mr David Larocca, Oceania Chief Executive Officer and Regional Managing Partner, EY, Committee Hansard, 18 July 2023, p. 23; and Mr Andrew Yates, Chief Executive Officer, KPMG Australia, Committee Hansard, 27 September 2023, p. 41. 23
[83]See: Boston Consulting Group, answers to written questions on notice from Senator Barbara Pocock, 30 June 2023 (received 7 July 2023), question 37; and Accenture, answers to written questions on notice from Senator Barbara Pocock, 29 and 30 June 2023 (received 18 July 2023).
[84]The Australia Institute, Voters Back Donations Ban for Government Contractors, 2023 (accessed 11 June 2024).
[85]See the submission made to the PJC CFS Ethics and Professional Accountability inquiry by Dr Andy Schmulow, Submission 68.
[86]Peter Gearin and Anton Nilsson, ‘The Mandarin and Crikey’s ‘revolving door’ list: How power bleeds between politics and the Big Four’, The Mandarin, 15 April 2024 (accessed 11 June 2024).
[87]Angus Grigg, Jessica Longbottom, Jonathan Miller and Maddison Connaughton, ‘Consulting firm KPMG overcharged Defence while raking in billions of dollars, whistleblowers say’, ABC Online, 7 August 2023 (accessed 11 June 2024).
[88]Senate Foreign Affairs, Defence and Trade Legislation Committee, 2023-24 Additional Estimates answer to written question on notice QON 163, p. 1.
[89]Angus Grigg, Jessica Longbottom, Jonathan Miller and Maddison Connaughton, ‘Consulting firm KPMG overcharged Defence while raking in billions of dollars, whistleblowers say’, ABC Online, 7 August 2023 (accessed 11 June 2024).
[90]See evidence provided by the Department of Finance, Committee Hansard, 23 February 2024, p. 74.
[91]Public Accountability and Works Committee, NSW Legislative Council, NSW Government’s use and management of consulting services, May 2024, p. xiii.
[92]Mr Matt Yannopoulos PSM, Associate Secretary, Department of Defence Foreign Affairs, Defence and Trade Legislation Committee, Estimates Hansard, 25 October 2023, p. 80.
[93]Corporations Act 2001.
[94]Mr Tom Dickson, Assistant Secretary, Corporations Branch, Department of the Treasury, Parliamentary Joint Committee on Corporations and Financial Services, Committee Hansard, 22 April 2024, p. 63.
[95]The Treasury, Response to PwC–Tax Regulator Information Gathering Powers Review, Consultation Paper (period 3 May–31 May 2024), p. 13 (accessed 11 June 2024).
[96]Mr Adam Powick, Chief Executive Officer, Deloitte, Committee Hansard, 23 February 2024, p.52.
[97]See, for example, Professor Brendan Lyon, Submission 45.
[98]The Treasury, Response to PwC–Tax Regulator Information Gathering Powers Review, Consultation Paper (period 3 May–31 May 2024), p. 40 (accessed 11 June 2024).
[99]See the submission made by the Treasury to the PJC CFS inquiry into Ethics and Professional Accountability inquiry, Submission 50, pp. 13 and 14.
[100]PwC Australia, answers to written questions on notice from Senator Barbara Pocock, 20 March 2024 (received 10 April 2024), question 123; KPMG, answers to written questions on notice from Senator Barbara Pocock, 20 March 2024 (received 10 April 2024), question 124; and EY, answers to written questions on notice from Senator Barbara Pocock, 20 March 2024 (received 17 April 2024), question 126.
[101]Dr Ziggy Switkowski AO, Review of Governance, Culture and Accountability at PwC Australia, August 2023.
[102]Elizabeth Broderick & Co, Independent Review into Workplace Culture at EY Oceania, July 2023.
[103]Edmund Tadros and Hannah Wootton, 'Big four consulting firm data tracker', AFR Online, 16 March 2022 (accessed 11 June 2024).
[104] Mr Channa Wijesinghe, CEO, Accounting Professional and Ethical Standards Board, Committee Hansard, 23 February 2024, p. 21.
[105]The Centre for Public Integrity, Submission 58, p. 82.
[106]See the submission made by Andy Schmulow to the PJC CFS Ethics and Professional Accountability inquiry, Submission 68, p. 3.
[107]Centre for Public Integrity, Submission 58.
[108]ASIC, REP 743 Audit inspection report: 1 July 2021 to 30 June 2022, 2022 (accessed 11 June 2024)
[109]Professor Allan Fels, Private Capacity, Committee Hansard, 17 July 2023, p. 2.
[110]Professor Allan Fels, Private Capacity, Committee Hansard, 17 July 2023, p. 29.
[111]See the submission made by the Treasury to the PJC CFS Ethics and Professional Accountability inquiry, Submission 50, p. 2.
[112] UK Parliament, Split 'Big 4' audit functions from consultancy services, say MPs, 2 April 2019 (accessed 11 June 2024).
[113] See the submission made by Professor Allan Fels AO to the PJC CFS Ethics and Professional Accountability inquiry, Submission 52, p. 2.
[114]The Treasury, Response to PwC–Tax Regulator Information Gathering Powers Review, Consultation Paper (period 3 May–31 May 2024), p. 15 (accessed 11 June 2024).
[115]ASIC Officials, Senate Economics Legislation Committee, Committee Hansard, 15 February 2024, p. 30.
[116]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, 'Streamlining financial reporting architecture', Media release, 21 November 2023 (accessed 11 June 2024).
[117]Edmund Tadros, 'KPMG fined $615 000 over ‘widespread’ exam cheating', AFR Online, 16September 2021 (accessed 11 June 2024).
[118]See evidence provided by Mrs Ainslie van Onselen, Chief Executive Officer, Chartered Accountants Australia and New Zealand, to the PJC CFS Ethics and Professional Accountability inquiry, Committee Hansard, 5 March 2024.
[119]Professor Brendan Lyon, Submission 45.
[120]Professor Allan Fels, Private Capacity, Committee Hansard, 17 July 2023, p. 7.
[121]Andy Schmulow, Submission 68, Parliamentary Joint Committee for Corporations and Financial Services, Inquiry into Ethics and Professional Accountability.
[122]Mr Peter de Cure, Chair, Tax Practitioners Board, Committee Proof Hansard, 9 February 2024, p. 25.
[123]The Treasury, Response to PwC–Tax Regulator Information Gathering Powers Review, Consultation Paper (period 3 May–31 May 2024), p. 40 (accessed 11 June 2024).
[124]Community and Public Sector Union (PSU Group), Submission 6, p. 16; Centre for Public Integrity, Submission 58, p. 10; see also ‘Additional Comments by Senator David Shoebridge’ in the Senate Standing Committee on Legal and Constitutional Affairs, Report of the inquiry into the Public Interest Disclosure Amendment (Review) Bill 2022 [Provisions] (14 March 2023).
[125]Senate Finance and Public Administration References Committee, PwC: The Cover-up Worsens the Crime, March 2024, p. 40.
[126]Professor Graeme Samuel, Parliamentary Joint Committee for Corporations and Financial Services, Committee Hansard, 2 November 2023, p. 20.
[127] Department of the Treasury, Answers to Questions taken on Notice, Senator Barbara Pocock, May 2024.
[128]Neil Chenoweth, ‘This may not end well for you’: The secret war behind the PwC inquiry', AFR Online, 3 June 2024 (accessed 11 June 2024).
[129]See chapter 5 of the committee's report.
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