The consultancy firm Deloitte stood down an employee who shared confidential government information without permission but has so far refused to reveal which government department was involved, drawing criticism from senators.
Deloitte’s leadership has told a Senate inquiry that the internal breach – which occurred at some stage in the past financial year – was not motivated by commercial gain. It was not reported to regulators as it “did not fit within the reportable framework”, Deloitte’s chief risk officer, Sneza Pelusi, said.
“For certain engagements, we do have confidential information management plans in place. In this case, the protocols in place were inadvertently breached,” Pelusi said.
“We worked with the department to go through the investigation and shared the investigation with them including the outcomes, which included deleting the information, standing down the individual [responsible for] the inadvertent breach, and further disciplinary action outside of that as well.”
Greens senator Barbara Pocock repeatedly asked Deloitte to reveal which government department was implicated, but the question was taken on notice. Pocock told Deloitte’s leadership that they knew this information would be asked for and came to the inquiry unprepared.
“That is one of the reasons why there is distrust about large consultancy firms,” Pocock said. “You are opaque in the information you provide.”
Pelusi told the inquiry that Deloitte reported only one of the 121 substantiated misconduct cases in the past financial year to regulators. That case involved fraud and not the misuse of government information.
Deloitte’s chief executive, Adam Powick, said there was “certainly a lack of clarity” about regulatory oversight and said the firm would support a government review to strengthen accountability.
Labor senator Deborah O’Neill said the lack of reporting to Asic or Chartered Accountants raised the prospect of people who were fired by Deloitte continuing to work with government at different firms.
“These people that you exited could well be a consultant that can get another job with the government and say ‘I used to work for Deloitte’,” O’Neill said.
“How are we ever going to find out who the people are that you exited because they were not sufficient to meet the standards of Deloitte?”
Powick said he “did not have a clear answer” to that question.
Break up the big four, former competition chief says
Alan Fels, a former chair of the Australian Competition and Consumer Commission, has urged the government to break up the big four consultancy firms to reduce conflicts of interest and to ban “unhealthy” political donations from the sector.
Fels told the inquiry it was problematic for a consultants to simultaneously work for government and businesses that interact with departments. He has proposed a model similar to that recently adopted by PwC, which sold its government services division for just $1.
“I think government legislators should come down hard on the industry, almost too hard at the beginning, rather than leaning on the soft side,” Fels said.
“It is better to start with some tough approaches like a break up [of the businesses], but also restrictions on donations, maybe for several years.”
In his opening statement, Powick said Deloitte would not break up its business.
“We believe our global multi-disciplinary model enables us to deliver high-quality services to meet the rapidly expanding needs of our clients. And it is for this reason, that we have no intention of ringfencing any part of our businesses,” Powick said.
The finance minister, Katy Gallagher, said the government’s reliance on consultancy firms was far worse than she initially thought.
“We’re taking steps to rectify that, but it’s going to take a bit of time because of the way the imbalance has occurred over particularly the last five to seven years,” Gallagher told the ABC.
“There will always be things that you need to seek external advice from, but at the moment, the balance is out of whack.”
Fels told the inquiry that imbalance has given consultancy firms greater bargaining power and in return, higher profit margins.
“[Consultancy firms] are [not] keen for this information to become public, but the public needs to understand, and governments need to understand, what is going on.”
