Government Senators' Additional Comments

1.1It was late in the evening of Senate Estimates on the 15th of February 2023 that Tax Practitioners Board (TPB) CEO Michael O'Neill first placed on the public record that '20 or 30 people' at PwC had colluded in the misuse of confidential Australian Government information. Mr O'Neill's admission, which was followed by questions on notice to the (TPB), resulted in the 2 May 2023 release of 144 pages PwC's internal emails.[1]In the almost 18 months since those initial revelations, the consulting sector, and the nature of government engagement with these firms, has faced immense scrutiny. This report documents the wide range of ethical failures within the consulting sector to which the committee has borne witness. It also provides recommendations which are designed to create essential safeguards within government procurement practices, and protect Australian information, interests, and governmental integrity.

1.2The conditions for consultant infiltration of the Australian Public Service (APS) did not occur spontaneously, as the Abbott, Turnbull and Morrison Coalition Governments instituted policies that directly undermined the APS, and by extension, the integrity and security of our government departments and information.[2]The Coalition instituted an APS average staffing level cap, which undermined the capacity of the APS to undertake even key government functions, and saw a dramatic increase of the use of consultants under Coalition governments.[3] Australian Government spending on consultants tripled between 2010 and 2020 to over 1 billion dollars[4], and under the Morrison Government in 2021-2022 the five largest consultancies amassed $2 billion in contracts.[5]This increasing reliance on consulting firms also existed within the context of close personal and professional relationships between consulting firm leadership and former Coalition Ministers Josh Frydenberg[6], Matthias Cormann[7],[8], and Michael Sukkar.[9]

1.3In contrast, the Albanese Labor Government's first budget removed the Average Staffing Level Cap, indicating a renewed faith in the public service as well as a reduction in expenditure from conversion of over $800 million over the forward estimates.[10]

1.4The Albanese Government has also taken decisive legislative action to address key failures within the consulting sector, both in terms of procurement guidelines and in ensuring that the structure and powers of regulatory bodies are fit for purpose. This includes the TPB's expanded compliance programmes for high-risk practitioners, reforms to promoter penalty laws, enhancements to the Code of Conduct for Tax Practitioners and Tax Regulator Secrecy Laws Review[11], as well as the creation of an in-house public service consulting capacity.[12]

1.5The PwC tax leaks scandal, and the wave of ethical failures subsequently exposed at other large consulting and audit firms, has struck at the very core of Australians' faith in the integrity of corporate Australia, and of the way in which such entities engage with government. The Albanese Government has been swift in responding to these emergent issues, and in restoring faith in the integrity of the public service and regulatory bodies, and the appropriateness of relevant legislation. This report builds upon work already undertaken by the Albanese Government in these areas.

1.6This report is comprehensive in its account of historic and present ethical failures facing the consulting sector, and the way in which these failures have presented a clear and significant danger to the integrity, effectiveness and efficiency of the Australian Government and the APS. The recommendations of this report, if implemented, will continue to meaningfully improve the procurement practices of the government, and provide additional assurance that taxpayers money is being spent in ways that are truly of benefit to the Australian people.

1.7Issues of professional accountability, regulatory reform and the inherent pitfalls of partnership structures did not fall within the terms of reference for this inquiry, and as such are not meaningfully addressed by the recommendations of the report. The Parliamentary Joint Committee on Corporations and Financial Services is currently undertaking a separate inquiry which explicitly engages with issues including governance and compliance obligations, firm structure, the scope and power of disciplinary bodies, and the internal management of conflicts of interest. The Parliamentary Joint Committee's report will build upon this report of the Senate Finance and Public Administration References Committee, and move beyond the issue of Government procurement practices to provide recommendations which speak to the fundamental ethical malaise of Big Four Firms, and the importance of addressing structural challenges within the sector.

Footnotes

[1]Mr Michael O'Neill, CEO, Tax Practitioner's Board, Committee Hansard, Senate Economics Legislation Standing Committee, 15 February 2023, pp. 105–106.

[2]Senator the Hon Katy Gallagher, 'Rebuilding and rebalancing public service critical for Australia's future', Canberra Times, 6 May 2024 (accessed 11 June 2024).

[3]RMIT ABC Factcheck, 'Promise check: Abolish the average staffing level cap in the Australian Public Service and increase the number of permanent employees', 28 May 2024 (accessed 11 June 2024).

[4]Consultancy.com.au, 'Federal government spend on big 7 consulting firms tops $1 billion', 30 March 2021 (accessed 11 June 2024).

[5]Tom Burton, 'Consultants banned from public service core work', Australian Financial Review, 23 October 2023 (accessed 11 June 2024).

[6]Daniel Ziffer, 'A damning contradiction during questioning of former PwC boss Luke Sayers means plenty more scrutiny is on the horizon', ABC News Online, 16 October 2023 (accessed 11 June 2024).

[7]Mr Luke Sayers, Executive Chairman, Sayers Group, Committee Hansard, 12 October 2023, pp. 36, 37.

[8]Myriam Robin and Mark Di Stefano, 'Luke Sayers who? PwC and the network that wasn't there', Australian Financial Review, 18 February 2024 (accessed 11 June 2024).

[9]Jotham Lian, 'Former PwC accountant joins Tax Practitioners Board', Accountants Daily, 16 August 2021 (accessed 11 June 2024).

[10]RMIT ABC Factcheck, 'Promise check: Abolish the average staffing level cap in the Australian Public Service and increase the number of permanent employees', 28 May 2024 (accessed 11 June 2024).

[11]The Treasury, Response to PwC – Tax Regulator Information Gathering Powers Review, Consultation Paper (period 3May–31 May 2024) (accessed 11 June 2024).

[12]Senator the Hon Katy Gallagher, Minister for the Public Service, 'Appointments to the Australian Government in-house consulting', Media Release, 4 December 2023 (accessed 11 June 2024).