3-month ban on KPMG ‘manifestly inadequate’, thinktank argues

The big four firm has been given a temporary three-month suspension from new government contracts following concerns about its handling of a whistleblower complaint, while the government has not yet implemented recommendations from two parliamentary inquiries into the consulting sector's conduct.

The firm has also been accused of abusing legal professional privilege.

Voices in the profession have been extremely critical of the situation, citing concerns about value for money in public spending and arguing that the scale of government contracts awarded to consulting firms represents a missed opportunity to invest directly in permanent public service capacity.

The Australia Institute calculated that, in 2023, the federal government’s annual spending on management consultants could instead employ around 14,700 public servants. According to its findings, the same amount of money being paid to external consulting firms could potentially fund the salaries of thousands of government employees for a year.

The Australian Institute said that, in the last term of parliament, two inquiries identified the need for sweeping reforms to how management consultants are regulated and how the government uses them.

The Albanese government “noted”, rather than agreed to, many of the recommendations.

The Australia Institute director Bill Browne said the government had been “fooled” by consulting firms, and was sharply critical of its approach to enforcement and accountability, indicating that money could be spent better elsewhere.

“The Albanese Government has been fooled by crocodile tears from management consultants, forgiving PwC for its abuse of government information and only banning KPMG from new work for three months,” Browne said.

“The $653 million in taxpayer money going to KPMG could instead expand the Bureau of Meteorology, the Fair Work Ombudsman, the Domestic, Family and Sexual Violence Commission, the Emergency Management Agency and other government services that Australians actually benefit from.”

Speaking with Accounting Times, Browne was pressed on whether the three-month ban for KPMG’s misconduct was sufficient or not.

He said that a three-month ban on new KPMG work was “manifestly inadequate,” arguing it falls short of public expectations around accountability for misconduct in the consulting sector.

“When it previously asked Australians about PwC’s ban, the most common view was that it should be permanent — a finding it said highlights the strength of public concern over behaviour within the Big Four firms,” Browne said.

Questions were also raised regarding why the government hasn’t acted on any inquiry recommendations.

“While the Albanese Government has reduced the use of labour hire and consulting contracts, hundreds of millions of taxpayer dollars are still going to for-profit consulting firms,” Browne noted.

“Senior public servants and ministers find consultants useful because consultants tell the government what it wants to hear, and can be blamed when things go wrong.”

“It is the Australian public, not the government, who pays the price when consultants give dodgy advice.”

Concerns are mounting over whether enforcement actions have been strong enough to deter future misconduct, particularly given the consistency of past regulatory responses.

“The Department of Finance's soft treatment of PwC gives no confidence that KPMG will receive proper sanctions for their breaches of trust and mishandling of whistleblower complaints.”

During last week’s parliamentary inquiry, the firm’s former chief executive, Julian McPherson, rejected a “bad apple” label from Senator Deborah O’Neill.

Separately, the Greens have said that the firm should be banned from all government work.