Chapter 1Introduction
Referral
1.1On 9 March 2023, the Senate referred the following matter to the Senate Finance and Public Administration References Committee (the committee) for inquiry and report by 26 September 2023:
The management and assurance of integrity by consulting services provided for the Australian Government, with particular reference to:
(a)the management of conflicts of interest by consultants;
(b)measures to prevent conflicts of interest, breach of contract or any other unethical behaviour by consultants;
(c)enforcement measures taken in response to integrity breaches, such as the inadequate management of conflicts of interest, breach of contract or any other unethical behaviour by consultants;
(d)the management of risks to public sector integrity arising from the engagement of consultants;
(e)the transparency of work undertaken by consultants, and the accountability of consultants for this work; and
(f)any other related matters
1.2The Senate agreed to extend the presentation of the report on four occasions, most recently granting an extension to 12 June 2024.
Conduct of the inquiry
1.3The committee opened submissions from 9 March 2023 until 21 April 2023. Submissions continued to be received after this date. The committee wrote to a range of key stakeholder groups, organisations and individuals, drawing their attention to the inquiry and inviting them to make a written submission.
1.4The committee received 61 submissions which are listed on the committee's webpage and at Appendix 1.
1.5The committee held 10 public hearings in Canberra for the inquiry on the following dates:
2 May 2023
7 June 2023
17 July 2023
18 July 2023
26 September 2023
27 September 2023
12 October 2023
9 November 2023
9 February 2024
23 February 2024.
1.6A list of witnesses who gave evidence at the hearings is available at Appendix 2 of this report.
1.7The committee thanks all those who contributed to the inquiry by making submissions and giving evidence before the committee at the public hearings.
Context for the inquiry
1.8In January 2023, media reports brought to light that accounting, auditing, and consulting firm PwC and one of its partners, Mr Peter Collins, had been investigated and received sanctions from the Tax Practitioners Board (TPB).
1.9From 2013 to 2016, Mr Collins received confidential information from Treasury consultations and through his engagement with the Board of Taxation in relation to Australia's forthcoming anti-avoidance tax laws.
1.10Despite having signed multiple confidentiality agreements, Mr Collins intentionally shared this confidential information with PwC partners and others both in Australia and overseas.
1.11In sharing this confidential information, Mr Collins sought to assist existing and potential new clients of PwC to avoid the anti-avoidance tax laws to be introduced in 2016—putting at risk $180 million per year of tax to be paid in Australia. Further, 'Project North America' generated new income of at least $2.5 million for the first tranche of PwC's services in assisting clients to sidestep the new laws.
1.12These events were the principal catalyst for the referral of the inquiry into the management and assurance of integrity by consulting services to the committee and caused the committee to table two reports in relation to the matter.
Reports tabled
1.13The first report tabled in June 2023, PwC: A Calculated Breach of Trust, examined the key events of the PwC matter and sets out the committee's views on PwC Australia's conduct at the time of the breach and subsequently in covering up and not reporting the breach. In this report, the committee made two recommendations. First, that PwC publish accurate and detailed information about the involvement of PwC partners and staff in the breach of confidential government information. Second, that PwC cooperate fully with any investigations.
1.14The second report tabled in March 2024, PwC: The Cover-up Worsens the Crime follows up on PwC Australia's progress in implementing the above recommendations and examined other documents and events related to the PwC matter since June 2023.
1.15An important element of the PwC matter examined in the committee's second report was the involvement of PwC partners overseas. The Linklaters report, commissioned by PwC International to identify any overseas PwC partners involved in the breach of confidential government information, was requested on numerous occasions by numerous entities. So far, PwC has declined to provide a copy of the report to the committee.
1.16Despite this lack of cooperation from PwC, the committee is aware that multiple PwC partners overseas are potentially involved in the matter. The Linklaters report apparently identifies six individuals who ought to have questioned the information, the origin, and potential confidentiality of the information they received.
1.17In addition, the Tax Practitioners Board (TPB) currently has nine investigations underway and understands that the involvement of overseas partners goes beyond the six individuals identified in the Linklaters report.
1.18The Australian Federal Police investigation into the PwC matter, referred by Treasury in May 2023 and known as Operation Alesia, which has both domestic and international elements, is still ongoing.
1.19The committee concluded in its second report and maintains the view that PwC has failed to be completely open and honest and to genuinely change.
1.20These events at PwC point to broader issues in the consulting industry, including in the other Big 4 firms: Deloitte, EY, and KPMG. These four firms are in receipt of the largest number and value of consultancy-related contracts.
1.21The inquiry's terms of reference reflect these broader issues and the committee has examined the use of consultants by the Australian government as set out below.
Related reports
1.22The committee is cognisant of several other related reviews and reports which are relevant to this report, including:
Independent Review of the Australian Public Service (Thodey Review)—2018;
Senate Finance and Public Administration Committee's inquiry report—APS Inc: undermining public sector capability and performance—2021;
Independent Review into Workplace Culture at EY Oceania (Broderick Review)—July 2023;
Review of Governance, Culture and Accountability at PwC Australia (Switkowski Review)—August 2023; and
NSW Public Accountability and Works Committee, NSW Government's use and management of consulting services, May 2024.
Content and structure of the report
1.23The remainder of the report is structured as follows:
Chapter 2—Australian Government Procurement Framework
Chapter 3—Reliance on consultants by the Australian government
Chapter 4—APS Contract Management
Chapter 5—Culture in the Big 4 consulting firms
Chapter 6—Regulation of the consulting industry
Chapter 7—Committee view and recommendations.