The consultancy firms raking in billions of taxpayer dollars | Four Corners

[Music] PWC is under five a leaking confidential tax secrets from the government to companies one with PWC chief executive and a senior colleague quit their roles there's been an egregious breach of trust with others in the industry it's one of the biggest scandals to ever hit corporate Australia I think the country is absolutely filthy with PWC the nation's largest consulting firm illegally used confidential government information to help its clients avoid tax and at this point of time who in their right mind would trust the word of PWC it's just so shocking to me that anyone would behave like this but this Scandal is much bigger than just one firm kind of happened in plain sight to a large extent Australia's public service was privatized before our very eyes I mean everyone has now kind of gone oh my God what just happened on this episode of Four Corners we go beyond PWC talking to whistleblowers about a toxic industry that's ripping off taxpayers and trampling our democracy they're absolutely prepared to break the rules to be dishonest and ultimately as taxpayers who are paying for this what I don't hear is anybody calling it for what it is an abuse of privilege and Power [Music] they are the corporate Titans with salaries and glimmering Towers to match [Music] once Dowdy accountants the so-called big four are today household names PWC KPMG ey and Deloitte [Music] in recent years they've embraced the far more lucrative and secretive world of management consulting there's no transparency there is no register of who they're working for anywhere there is no public access to that information these are closed worlds which have been operating in their own little Empires their reach extends from the boardroom to the very heart of government Australia's spending on Consultants is among the highest in the world government is the number one customer in the world the Consultants are pretty much feasting on public service service delivery policy advice it's absolutely pervasive Consultants are everywhere while these firms might have slick offices with sweeping views of Sydney Harbor their biggest client is in Canberra over the last decade Australian governments have paid the big four firms a staggering 10 billion dollars we find big consultant partners peppered across Australian government departments they're in the senior leadership teams in agriculture in the federal police in finance their Auditors internally for a wide range of government departments so they're everywhere and they're really big they're now very much part of the Inner Circle but having them so close presents dangers the PWC Scandal has shown that confidential government information is not always safe in private sector hands certainly got a mounting body of evidence which alarms me about the reach of the large Consultants into the public sector and the serious consequences for us as Citizens for our democracy for the value that we get from very big spends and for the long-term capability of our public sector the roof of parliament lends A New Perspective to this corporate Insurgency foreign so in Canberra proximity is actually everything so right down below me here it's the PWC building which is closer to Parliament House than most government departments back over behind me it's KPMG alongside its biggest client the Department of Defense in the thick of it here Ernst young and then back over this side Deloitte when it's laid out like this it really is quite striking [Music] the explosion in the number of Consultants followed a cull of 15 000 public servants after the Abbott government came to office in 2013. a cap on recruitment was also imposed the intention had been to cut costs but Consultants filled the vacuum federal government spending on the big four is now six times higher than it was 10 years ago [Music] you mentioned 30 or 40 Years of resource stripping from the public service flesh was taken off got down to the bones the bones are pretty osteoporotic now as a result of the inroads that consultancy firms have made it's LED probably to much higher levels of spending than in reality could be achieved under under the traditional system well it was one of those boiling frog problems you know Professor Chris Wallace is a historian and former public servant who has watched Consultants gradually infiltrate the federal government and of course canberra's a really small place uh ex-public service friends ex-staffers ex-politicians going to consulting firms coming back it's it's just completely routine in Canberra now and it's pretty much everywhere it's a revolving door between consultancies and government that keeps all sides employed many politicians public servants ex-staffers can be warehoused in consultancies and when government changes or there's regime change of some kind in a particular part of government they can of course come back from the consultancy go into the public service department and again be a friendly Port of Call for Consultants they'd previously worked with this revolving door continues to spin despite labor pledging to curb the influence of Consultants the Albanese government has appointed three department heads straight from the big firms Blair comely running health he's just spent the past five years at Ernst Young Jim Betts also briefly an ey partner now heading infrastructure and Natalie James in charge of the Department of Employment after four years with Deloitte [Music] labor Senator Deborah O'Neill played a key role in starting the Parliamentary investigation into the big consulting firms she's based on the New South Wales Central Coast [Applause] you know graduates would fight to get their foot in the door the reality is these very secretive Partnerships have been shown to be places where there needs to be a lot more transparency a lot more sunlight there have been failures from the other of the big four we know that they share staff we know that information moves around between them we know that information moves not only between players in the sector but between government and into the sector and I don't think PWC is the only company to have figured out that it might be financially advantage [Music] it's KPMG that dominates the big government contracts kpmg's largest public sector client is the Department of Defense accounting for more than two-thirds of its government business that's 1.3 billion dollars of taxpayers money that's come its way over the last five years [Music] thank you I'm off to meet a whistleblower who was a senior official at the Department of Defense and claims to have been forced out after raising serious allegations about the infiltration of Consultants The Whistleblower won't be identified fearing reprisals from the Department instead they've prepared a statutory declaration for four corners [Music] very much okay good luck [Music] I've had a quick look at this and it's pretty interesting stuff Top Line here serious allegations against KPMG and how they milked the Department of Defense [Music] in months our whistleblower witnessed KPMG seeking to overcharge defense by at least one million dollars and that was just on a single proposal The Whistleblower claims KPMG charged for work never completed and billed for a consultant who wasn't even on the project the stat deck went on to say we discovered that every KPMG invoice reviewed was incorrect defense had been consistently overcharged KPMG wasted a significant amount of public funds enabled by defense Personnel complicit in blindly awarding multiple contract extensions to KPMG with little or no scrutiny The Whistleblower claimed connections helped KPMG win a big contract kpmg's initial contract for over 14 million dollars was significantly higher than any other tendered price within around 12 months KPMG received well over 4 million dollars in contract extensions defense dismissed much of the complaint in 2016 despite the Whistleblower providing Financial reports and documents a spokesperson told us that defense complies with Commonwealth procurement policy they added procurements made in relation to Consulting Services must represent value for money [Music] anybody calling it for what it is an abuse of privilege and Power Senator O'Neill says Consultants are exploiting weaknesses in the public service these companies not just in Australia but around the world operate a land and expand model where they get in sometimes underpriced the first piece of work and once they get in then they expand their reach through familiarity [Music] KPMG has had this land and expand model on full display with defense over the last decade it's one work that was initially valued at 1.1 billion dollars but later increased to 1.8 billion that's a 700 million dollar increase [Music] the whole business model of these companies is billable hours the longer they stay there the less efficiently they do the job it's about getting very very close to government finding out what's going on using the contacts and then growing the business [Music] on a Steely Winter's morning in a fishing Village outside Melbourne we meet whistleblower number two [Music] spent two years working for KPMG on defense projects and backs up what our earlier whistleblower told us a lot of rule breaking have been normalized [Music] he asked not to be identified as he still works in the industry [Music] I absolutely had concerns about the quality of work that KPMG was saying for defense I would say that ktmg was doing work for defense that ultimately wasn't needed kbmg was simply happy in my view to propose these new works get them signed off and reap the financial benefits he claims those financial benefits extended to telling KPMG staff to build defense for work that was never performed I was instructed to record my time spent on internal projects against fence codes I think KPMG in my experience are absolutely prepared to break the rules to be dishonest to work in ways that would be unacceptable in normal business to win more business from the Commonwealth and ultimately as taxpayers who are paying for this told us KPMG walked a fine line when it came to cooling off periods designed to prevent firms profiting from confidential government information in 2019 KPMG hired Peter Corcoran a senior defense official to run its government cyber security business in Canberra he was banned from working with defense for 12 months we obtained an email titled chocks away congratulating Corcoran for creating a storm front of work the six months seemed to have gone incredibly fast Peter has a further six-month ban from working directly with defense but his contribution to date has been immense just two paragraphs later he added Peter continues to meet defense Personnel on the side maintaining relationships and building new relationships [Music] he says it was a toxic environment for staff at KPMG it was pretty vicious and competitive there was a lot of intimidation harassment and bullying I was told in one week of three individual cases of harassment I tried to raise that within KPMG and was pretty much robust what sort of harassment uh it ranged from sexual harassment to workplace bullying to making people feel pretty unvalued despite being warned that his career would suffer he contacted the KPMG whistleblowers hotline did you get any more work at KPMG no I didn't and my contract wasn't renewed what's been the cost to you I lost close to 20 kilos in weight I lost enamel from my teeth my little costs are still increasing and I think in the end I'm likely to have incurred more cost than I ever earned from my work at KPMG kpmg's chief executive declined to be interviewed in a statement The Firm said the whistleblowers complaints had nothing to do with his contract not being renewed KPMG said it had investigated claims made by a former contractor in 2019 and there was no evidence to support overbilling of Defense as to Peter corcoran's continued contact with his old colleagues KPMG said we have reviewed this matter and it is clear there was no breach of the contractual cooling off period thank you [Music] over the last decade kpmg's defense business has soared its annual defense Billings peaked at almost 450 million dollars last year a six-fold increase this is coincided with kpmg's targeting of Former Defense staff Four Corners research shows that over the last five years almost 100 Former Defense staff have moved to KPMG [Music] you know if you've got a very senior public servant with that immense deep departmental knowledge and extraordinary Rolodex you know they know everybody they're a familiar face that the consultant can then roll into the department when pitching for work it just raises the degree of comfort that government departments have when hiring consultants and of course it's a two-way street thank you good morning welcome to am I'm sober Lang I think if you go right and then left I'm on my way to see one of the Senators who's made it her business to follow the money green Senator Barbara pocock helped kick off the Senate inquiry and the defense department is squarely in her sights I just ran into Senator O'Neill so labor have moved for another new piece of inquiry Consultants breed secrecy she says enabling governments to avoid accountability for every dollar that you spend on a consultant you remove the possibility that a senator can ask a question in estimates why is that or you they're not they're not exposed to estimates they aren't exposed to questions on notice unless they're in inside an inquiry and affected by an inquiry so a whole lot of the key transparency devices and tools for our parliament are prevented from really looking at the big spend on Consultants big impact on democracy has that undermine democracy it has certainly undermined democracy absolutely and you have to ask is one of the intentions of moving so much of the government spend outside the public view is a deliberate strategy to give certain governments um You Know cover for what they want to do we've certainly got a mounting body of evidence which alarms me about the reach of the large Consultants into the public sector defense is a black box for many of us who look at government and I think we need a lot more transparency a lot more accountability and evaluation of the Contracting Services into defense and more broadly do you need to go and vote I do it's like a red yes okay good okay um here we go sorry to interrupt we might walk with you walk with me come with me after just a year in the Senate Barbara pocock has locked onto her Target I really think we're Australian taxpayers being ripped off and it's unethical Dash I was beginning to wonder how the consultancies had managed to keep us in the dark for so long oh [Music] I'm back in Melbourne to meet a man who I hoped might have some answers Adam Evans is himself a consultant so why do people so angry about what you've done I think was probably broken the code right because just as the owner of a small firm he's miffed at how the big guys dominate government work democratizing the data and giving it to people to enable them to ask more questions I think is going to make um has made some people uncomfortable I'd heard it's hard to find out how much taxpayer money the big consulting firms are really getting Adam Evans says they Shuffle between multiple business names and numbers KPMG he's prime example KPMG is referred to a lot of different ways it has at least a dozen different business names registered in Practical terms what does it mean to the average person trying to trying to understand how government money is spent it makes it very very hard to understand from the government's page the government's website um how as KPMG is the example how many contracts they've been awarded what the value is and what they were called when the contract was awarded his database also shows KPMG success at upselling the federal government there's been nearly 4 000 contracts issued over the 10-year period totaling 1.64 billion dollars with um 1904 contract amendments that's nearly one billion dollars in additional revenue for KPMG it's about a 60 uplift of the original contract values wow that's that's a lot of money that's a significant amount of money that's management advisory 101 get a contract and make it longer and sell more people in it's a strategy of increasing revenue and profit generally intended to keep Pace with the client's needs they would be looking to increase their revenue their market share and their dominance five Consultants on billable work is worth a lot more money to the shareholders than one do you think that the interests of the consultant don't necessarily always align with the interest of the Commonwealth it's a very tricky relationship to to navigate [Music] Australia's tax office is itself navigating this tricky Terrain it has no shortage of Consultants moving in and out of its revolving doors the upper echelons of the tax office are stacked with former Consultants amazingly two of them whose salaries are funded by us taxpayers are still receiving payment from their former employers the ATO has confirmed this to us but refused to disclose their identities thank you it's a conflict of interest and and even if it's declared how do you manage that properly right so these are conflicts of interests that are now being discovered as people look more and more Tax Commissioner Chris Jordan spent a decade as chairman of KPMG New South Wales his second in charge Jeremy herschhorn also came from KPMG two other senior managers came over from ey and three of the ato's top I.T people were previously employed by Tech consultancy Accenture two of them still hold shares in the company which has won 1.4 billion dollars worth of work from the tax office over the past decade the ATO told us they have a robust framework and process for managing conflicts of interest and less than 10 percent of its senior Executives had come from the big consultancies the consulting firms are your major alternative employer and they pay extremely well so this is where the moral hazard starts to arise if you're in a public service position and you're dealing with consultants and you think well that's my alternative employer are you going to be a bit more keen to hire them PWC is a case study in just how cozy these relationships can be hi I'm James Downey I'm the CEO of the independent Hospital pricing Authority until mid last year James Downey headed an independent government agency that advises on the price of Hospital services and medical equipment PWC was a consultant to his agency as well as working for the health agency PWC also worked for the very companies who could profit from the agency's pricing advice when conflicts of interest like this arise the big firms say they have checks and balances in place to protect their clients I think the notion of Serial corridors is laughable and I can tell you that many of the whistleblowers who rang to me and ring me and talk about conflicts of interest think they are laughable people have lunch together they socialize together they exchange information we're humans when James Downey left his government job you guessed it he joined PWC now he's back with a health pricing body this time as a PWC consultant PWC said it has rules and processes to manage conflicts of interest James Downey said the health pricing body did not require him to complete a cooling off period [Music] foreign behind hiring Consultants was to bring some business savvy to an inefficient public service to make the bureaucracy more responsive but in many cases the opposite has happened especially on big projects for Consultants there's few more lucrative jobs than overhauling a government I.T system in early 2020 Deloitte landed just such a job and struck it big with a deal that would increase almost five-fold in value but it is how Deloitte won this deal that is now under serious scrutiny those who lost their jobs in the pandemic flood Centrelink officers and the mygov website as the government backflips on claims the site was hacked Deloitte was tasked with upgrading the mygov website after it was overwhelmed at the start of the pandemic there's lots of property questions that need answers there none of it looks good to me [Music] in March 2020 Deloitte signed a contract with the federal government's digital transformation agency the contract wasn't even awarded in writing it was granted verbally and without a competitive tender [Music] that contract would start at nine and a half million dollars then ballooned to 28 million all up deloitte's work on the project would cost taxpayers 47 million dollars the auditor general was scathing he said the Deloitte contract failed in 12 areas of evaluation including offering taxpayers value for money it was revealed Deloitte charged daily Consulting rates above those recommended by the agency and its payments were not even linked to results a government audit earlier this year found mygov fell well short of what had been promised although other parties had worked on the project a source with direct knowledge of it said it would have been easier if Deloitte had never been involved [Music] Deloitte also declined our invitation for an interview in a statement The Firm said it was proud of its work on the mygov website it said appropriate procurement processes were followed it blamed the cost increases on software licenses and changes requested by the government [Music] the profit was number one and every time Brendan Lyon knows how enmeshed the big consultancies are with government and how they use these relationships to profit handsomely if ever you need to back a horse you back the horse called self-interest he was a partner at KPMG until 2021 but made the mistake of giving Frank and fearless advice to the New South Wales government on its rail assets yeah it wasn't what the government wanted to hear so they're using Consultants to get the answer they want essentially well I mean I think in many instances that we're saying they're starting with the answer and then there is a process of evidence making that goes around it there's a huge amount of pressure to get the answers that are needed for Brendan Lyon the required answer was an accounting fudge cooked up by the New South Wales government the plan was to understate the cost of maintaining the rail assets to make the state budget appear far healthier than it actually was when Brendan lion wouldn't go along with this a new report was commissioned which said what the New South Wales government wanted to hear the profession exists so that we can all have trust in the way that corporations not-for-profits governments and everybody else account for the monies that they have I guess if we start to see an erosion in ethics and Professional Standards in one side of the business it's very hard to say that that's not going to be a risk across the rest of it so what were you forced out for I was forced out because I wouldn't play the game because I upset the then New South Wales treasury secretary because I wouldn't sign off on results that misstated the state's accounts by 10 billion dollars what does it tell us how the big consulting firms operate I'd say that it was not the sort of culture where bad news was welcomed it was more of a glee club around revenue and uh no questions asked about what you're going to do for it I guess I was just surprised by the you know by the naked motivation to get cash to ensure that the firm is continuing to turn over more than two billion dollars a year the auditor general eventually forced the New South Wales government to correct this budget fudge KPMG has faced no sanction in my example every single person that was involved on the other side is in a more senior position than they were at the time that shows that there is no consequence internally there's no consequence professionally [Music] KPMG has acknowledged that mistakes were made but rejects many of Brendan Lyon's allegations KPMG said it complied with guidelines on conflicts of interest and professional ethics foreign [Music] a better explanation about how their billions have been spent so we've come here to one of Sydney's wealthiest suburbs to ask KPMG chief executive Andrew Yates not only about the money but also about the allegations of misconduct we've heard from three separate whistleblowers let's go and see these home [Music] KPMG Australia earned more than two billion dollars in Revenue last year it's the only big four firm that is not disclosed how much its chief executive is paid the other three pay their CEOs between two and a half million dollars and four and a half million dollars a year [Music] [Music] foreign but he doesn't appear to be these big firms don't have to front up to shareholders file accounts or it seems talk to us [Music] the rise of the so-called consultocracy has coincided with an increasingly insecure public service Chris Wallace has seen this first hand you need to kind of remember how the system used to work that the public service in a traditional Westminster system which we had is permanent it's merit-based it's completely apolitical and you're there for life and at the very top departmental heads could give Frank and fearless advice because they weren't in fear of losing their job but in recent decades that's ended departmental heads now on Five-Year contracts so if you're a senior public servant everybody knows if you tell the truth and it's not what you your minister wants to hear now you'll get fired do you think governments like Consultants because they give them the answer they want put yourself in a consultant shoes you want to get repeat Billings right repeat business is the most profitable if you tell a government what it doesn't want to hear are you going to get rehired [Music] that's what happened to Brendan Lyon standing up to KPMG came at Great personal cost [Music] I am not a perfect human being I'm not trying to say that I sort of walk around like ethical Jesus but when you're being asked to do something that you know is wrong it's sometimes time just to stand up and do the right thing thank you when you're facing a lot of pressure you do things that you need to do to cope you drink too much you smoke too much you you spend periods of time inside with all the windows shut thinking about how it could be different look I lost about 29 kilograms in an eight-month period because of the pressure that was on me that's not healthy the mental health impacts were material and ongoing [Music] foreign [Music] [Music] s know winter has arrived the Albanese government has pledged to cut its spending on consultants and contractors by three billion over the next four years and the new national anti-corruption commissioner has signaled Consultants are squarely in his sights you know we've all been slow to join the dots to work out what's really going on here this is not about a few Consultants behaving badly it's about the systematic replacement of a once Fearless public service with voracious private sector operators driven by profit not public good the question is is it too late to fix it I think we need stronger governance of what's going on when things go wrong I think we need real consequences now I grew up on a mallee farm where my dad measured value in bags of Wheat and bales of wool we're a long way from that and I know as a taxpayer and who I've lived my life amongst Ordinary People they are horrified and they're in my inbox every day now saying what is going on what is this money for why are we spending so much on basic activities we've got to have consultants and and even back in the day before the system started decaying Consultants were sometimes used the the public service cannot possibly have every single element of expertise in a deep and timely way all the time and using public sector advice wisely in conjunction with limited Consulting input fantastic but this pervasion this absolute permeation of the public service as a whole has really led to a decaying standards of advice of integrity and you know without systemic change it's it's going to be very difficult to turn around foreign [Applause] [Music]

Channel: ABC News In-depth

Views: 157,268

Keywords: abc news, australian news, abc news indepth, documentaries, long-form journalism

Id: pduOqZPnqVc

Length: 41min 30sec (2490 seconds)

Published: Sun Aug 06 2023