(Image: Private Media/Gorkie)

Who said accounting is boring? Certainly not the green eyeshades at PricewaterhouseCoopers (PwC), who are having a very interesting week. 

Late on Wednesday night, the federal Treasury announced it had referred PwC to the Australian Federal Police over the firm’s tax leaks scandal.

Treasury secretary Steven Kennedy put up a public statement explaining that PwC Australia’s former head of international tax, Peter Collins, “improperly used confidential Commonwealth information” and that “the Treasury has referred the matter to the Australian Federal Police to consider commencement of a criminal investigation”. Ouch. 

That revelation in turn prompted observers to ask what sort of relationship PwC has with the Federal Police, given the AFP is now going to be investigating it. And… yes, the AFP is currently paying PwC for various services. According to publicly available tender data, the AFP has contracted the firm for millions of dollars’ worth of strategy, software… even auditing. 

That then prompted Greens Senator David Shoebridge to ask Australian Federal Police Commissioner Reece Kershaw whether there might be any conflicts of interest there, given that his old colleague Mick Fuller now works for… yep, you guessed it, PwC. Kershaw had received a text from Fuller, he admitted. “He’s disappointed with what’s occurred, as in the conduct, not of him, of course, the firm.” Kershaw hadn’t put in a conflict of interest declaration about this.

That wasn’t the last bad news for PwC this week, though. We also learned from Finance Department secretary Jenny Wilkinson that she’d directed PwC to stand down any of its staff who might be involved in the tax leaks “from all existing and future contracts under the management advisory services panel”. PwC is also conducting its own investigation headed by Ziggy Switkowski. 

It’s the latest low-light in a rolling scandal that has shaken the global accounting giant. The CEO of the Australian arm of PwC, Tom Seymour, has been forced to resign — it turns out he was named in the emails sent out to PwC colleagues by Collins — and the big bosses of the global firm are getting worried. The Australian franchise of the partnership initially covered up the gravity of the tax leak, with the breadth of the unauthorised disclosures only coming to light after an adverse finding from the Tax Practitioners Board was handed to Senate estimates. 

While the imbroglio has chiefly embarrassed PwC, it’s also brought welcome attention to the role and ethics of professional services firms and consultancies. Policymakers and the general public are finally waking up to the scope of the influence of the big firms, which deliver more and more of the core functions and services of the Commonwealth government. It’s a bit like the famous scene in The Godfather when the delusional, defiant guy wakes up covered in blood from the severed horse’s head in his bed. We’re all soaking in it.

Consultancies and professional services firms ramify deep within the apparatus of the Australian state. A recent report by the Australian National Audit Office revealed that consultancy contracts were worth billions across the decade to 2022, with PwC taking home $424 million across 1135 contracts. The other big three — EY, Deloitte and KPMG — booked another $840 million. McKinsey and Boston Consulting also got in on the act. On a broader level, a recent audit by the Department of Finance found that outsourced labour cost the Commonwealth $20.8 billion last year — the equivalent of 53,900 full-time staff. 

The use of consultants is now embedded in the infrastructure of government itself. This is a world of clubbish power, impunity, greed and an absence of boundaries. PwC’s tentacles are everywhere: for instance, Josh Frydenberg and Dan Andrews turned up to the 50th birthday party of Luke Sayers, Collins’ Australian boss at PwC at the time of the tax leak. Since exiting the firm, Sayers has gone out on his own, inking lucrative contracts as a solo consultant. 

Professional services firms have moved well beyond providing management expertise or strategy tips. They now supply critical infrastructure that the Australian Public Service appears to be unable to deliver via public capacity. A good example is payroll. German software giant SAP provides much of the backend of the public service’s pay and HR systems, including payroll functions, “software as a service”, data analytics and basic IT. 

No one seems to have asked why SAP should be running most of the Commonwealth’s pay functions. One reason is that the Big Four firms keep recommending it. Services Australia, for example, has issued a number of large contracts to the Big Four firms to support the federal government’s SAP-driven integration of its enterprise resource planning (GovERP) systems. The Digital Transformation Agency, supposedly on the cutting edge of Commonwealth technology provision, currently has a $117 million contract with SAP for plain vanilla “computer services”.  

The love (you could call it “tender-ness”) goes round and round. SAP Australia has a knees-up that it calls its “partnership awards”, which are handed out to the major consultancies year after year. Deloitte won the grand SAP partnership award in 2022. Unsurprisingly, ex-Deloitte CEO Punit Renjen has succeeded SAP founder Hasso Plattner as the company’s chairman. Ironically, while SAP provides much of the tech stack underlying the Australian Taxation Office, SAP paid no company tax on $1.15 billion in revenue in 2020-21. Did PwC get a partnership prize from SAP? Oh, you bet it did.

The federal government’s massive consultancy bill, paid to a tight network of collaborating firms, tells us something important about the contemporary state: many of its most important functions have been outsourced, from the software to pay people to the running of offshore prisons. The outsourcing extends well beyond the nuts and bolts of the functioning of the public service, to the design of crucial policies and programs at the very heart of political programs.

The feds entrench this dominance by frequently asking the Big Four to review government policies and programs. Who could forget PwC’s $1 million payday for not submitting its “end-to-end” review of robodebt? Another example of how deep the rot has set in was in this week’s Senate estimates testimony, when Tanya Plibersek’s Environment Department admitted that the modelling it was relying on to design a new “biodiversity market” was done by none other than… PwC. 

Australia’s reliance on professional services firms and global proprietary digital infrastructure carries with it significant risks. The APS appears hopelessly reliant on the Big Four and their tech partners for their supposed expertise embodied in a highly specialised shadow labour force.

As economists Mariana Mazzucato and Rosie Collington have recently argued, the dependency on the corporate sector to deliver core public services isn’t good for the public service, digital sovereignty, or democracy itself. A good start for Public Service Minister Katy Gallagher would be to adopt most of the recommendations of the “APS Inc” parliamentary inquiry, especially those that mandate direct public employment and greater consultancy transparency. 

The PwC scandal is most likely just the start. The big consultancies are riven with conflicts of interest, and boast networks that reach the very top of Australia’s corporate and political elites. There are surely many more ethics bombs ticking in filing cabinets. Without wholesale reform, Gallagher risks pulling back the sheets to discover further unpleasant surprises.