A former executive of School Infrastructure NSW (SINSW) has been accused of spending millions of taxpayer dollars on inappropriately procured contractors, including PwC.

Former SINSW CEO Anthony Manning is being investigated by the Independent Commission Against Corruption (ICAC) for allegedly engaging friends and business associates in lucrative government contracts, resulting in significant cost blowouts for public school projects.

Between April 2017 and February 2024, SINSW spent over $344 million taxpayer dollars on over 1,400 contract workers, many performing roles that could have been fulfilled by permanent employees, such as project administration, IT, accounting, and communications roles.

“It is not obvious why an employee could not have been engaged, and where it is not apparent that any attempt was made to do so. Most were paid well in excess of what an equivalent employee would have been paid,” ICAC alleged.

On top of this, millions of dollars were paid out to additional contractors by SINSW while Manning was CEO. One woman was contracted at a rate of $1,450 per day to provide investor assurance services to SINSW, ICAC said.

The contingent workers were largely paid for through capital funding and not the department’s ordinary recurrent budget, in a way that was unlikely to have been consistent with the Treasury guidelines, ICAC alleged.

“During Mr Manning’s tenure as chief executive of SINSW, the rate of these ‘overhead’ recovery charges was increased from 1 or 1.5 per cent to 5 per cent, adding tens of millions of dollars to the cost of school infrastructure projects performed during that period,” ICAC said.

In September 2017, SINSW jointly engaged PwC and advisory firm Paxon for a contract titled “School Pilot Projects Commercial Advisor”, with the intended scope of developing a “preliminary delivery strategy” outlining possible procurement and delivery models for school infrastructure.

PwC told Accounting Times: “The NSW ICAC is undertaking an inquiry into allegations concerning conduct at SINSW between 2017 and 2024. PwC had an engagement with SINSW during this period. The engagement was led by a former partner of PwC. The partner left the firm in 2018. The firm is assisting the ICAC with its inquiry. Given the inquiry is underway, it is not appropriate for the firm to comment further.”

The former PwC partner was allegedly well-acquainted with Manning. ICAC alleged that he had previously put Manning forward as a candidate for the CEO role at SINSW and helped him prepare for his initial interview for the role.

While Manning was not directly involved in the tender process, ICAC alleged he was in contact with the PwC partner throughout the process and was listed as a referee in PwC and Paxon’s tender submission.

No conflict of interest was declared by any involved party, ICAC said.

The initial contract had outlined a limited scope with fixed deliverables and a confined time frame.

However, almost immediately after the contract was awarded to PwC and Paxon, SINSW converted it to a “standing offer arrangement”, which was then used to engage PwC and Paxon to provide additional services that had no apparent relationship to the subject of the original tender, ICAC alleged.

“They were, in effect, direct source engagements for different work without a competitive process,” ICAC said.

“To give a sense of the value attributed to the standing offer arrangement by PwC, at one stage the PwC partner referred to it as a ‘$20 million project’.”

In 2016–17, the NSW budget allocated approximately $2.6 billion in funding for school infrastructure over the following four years. By 2019–20, this budget allocation had spiralled upward to $6.7 billion.

SINSW was responsible for managing these substantial amounts of taxpayer funds, ICAC said. They had paid approximately $4.45 million to Paxon between May 2018 and November 2022, while over $1.8 million was paid to PwC in 2017 and 2018.

When procurement staff raised concerns about the scope of the PwC arrangement, Manning engaged consulting firm O’Connor Marsden & Associates (OCM) to provide probity advice, ICAC alleged.

Early drafts of that advice identified significant probity risks – potential for breaches of ethical conduct – particularly related to the “substantive and high-value” variations to PwC and Paxon’s scope of work compared to the original tender request, ICAC alleged.

However, after a meeting between Manning and OCM executive director Andrew Marsden, a sanitised version of the report was prepared that watered down or removed many of the references to probity risks, ICAC said.

On the same day as that meeting, Manning approved a further contract with OCM worth $75,000. ICAC said it would investigate whether this contract was a quid pro quo for Marsden sanitising the probity report.

ICAC also accused Manning of taking reprisal action against staff following complaints and public interest disclosures at SINSW regarding his conduct.

“A number of employees and contingent workers were ostensibly made redundant or had their engagements terminated after they made complaints or raised concerns about decisions or conduct that had occurred within SINSW involving Mr Manning or his close associates,” ICAC alleged.

The ICAC public hearing, which began on Monday, is expected to take five to six weeks.