It's much bigger than PwC

In Australia, the PwC affair has dominated headlines over the past few weeks. There is widespread shock and dismay at the scheme to monetise, through the firm’s so-called ‘Dirty Thirty’ private clients, confidential information from the Australian Treasury.

But among people who are closely familiar with the big accounting and consulting firms and their role in government, the events in this affair are not very surprising. Tax and audit scandals have occurred with banal regularity over the past four or five decades, and big firms have often been embroiled in the scandals.

For people who know this arena well, the foot-dragging and buck-passing by oversight bodies was not a surprise. It has been a feature of numerous financial, regulatory and administrative scandals in living memory: think the Hayne banking royal commission; think aged care; think robodebt.

That pattern points to an uncomfortable truth. Looked at in its entirety, our system of oversight and integrity bodies is not very effective. The reasons for this are many.

First of all, there are too many of them. Auditors, regulators, ombuds, professional boards and miscellaneous other oversight bodies and commissions bump up against each other and sometimes contradict each other. In that tangled context, accountability suffers as individual oversight bodies hide in the complexity.

In the case of the robodebt disaster, it took senate inquiries, whistleblowers, journalists and others to flush out precisely what had happened and to paint a complete picture of how the system had failed.

Bizarrely, under the current settings, the ATO could share individuals’ private tax information to enable the illegal activity of robodebt, but it was prevented from alerting the responsible minister or the secretary of treasury to alleged fraud against the commonwealth.

And now there is a new entrant into the oversight terrain. The National Anti-Corruption Commission (NACC) is due to start on 1 July 2023.

Naturally, with the PwC affair front of mind and with the NACC imminent, there are loud calls for the NACC to investigate the matter as one of its first priorities. (Prime minister Albanese did hedge somewhat when asked in parliament about a possible referral of the tax leaks scandal to the NACC: “it has gone well beyond the step that the member suggests,” the PM said.)

When the matter was first referred to the AFP in 2018, it was not pursued — probably because, in part, it was in the ‘too hard’ basket; and probably in part because the facts of the incident were not too far from business as usual in the current state of government administration in Australia.

In a thousand different ways, the big consulting firms are wired into our system of government. They sit on boards, advise on strategy, prepare the accounts, audit the accounts, conduct investigations, provide ‘body shop’ personnel, and offer tidy sinecures for parachuted, late-career officials. They are also big donors to both major political parties.

As we’ve previously pointed out, management consultants don’t get rich by recommending that things stay the same. The big consultancies are a principal driver behind public sector cycles, fashions and ‘paradigm shifts’ that often don’t actually help very much and occasionally may even do harm. Outsourcing of IT services is one possible example, ‘automation’ of welfare debt recovery is certainly another.

In the robodebt royal commission, the final report has been delayed a week to allow commissioner Catherine Holmes AC SC to make referrals to NACC.

If, separately, the PwC matter is also referred to the new anti-corruption commission, the resulting NACC investigation would likely focus on the specific issue of whether “a person has engaged, is engaging or will engage in corrupt conduct”. The NACC might also “conduct broader inquiries into corruption risks and prevention measures within commonwealth agencies”. It might even make recommendations about specific agencies and oversight mechanisms. But therein lies a problem.

The matters at hand are bigger than PwC, bigger than the Big Four, bigger than conflicts of interest in tax advice, and bigger than the actions of one or a few public entities. And yet the NACC is unlikely to diagnose or address the systemic problems that the recent events have revealed.

The special status of big consultancies in the public sector goes to the heart of the roles, responsibilities, behaviours and governance of our oversight institutions and the totality of public administration in Australia.

That‘s why, as with robodebt, we need a PwC-focused NACC referral and a royal commission that goes far beyond PwC to look at how our overall apparatus of integrity and oversight has failed.

This is an excerpt from an article first?published in The Mandarin (Premium) under the headline 'Australia's too-many oversight bodies are what enabled the PwC matter' on 9 June 2023. By Scott Hamilton and Stuart Kells

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Scott Hamilton?and?Stuart Kells?are Melbourne-based authors, researchers and policy advisers. They are researching the history of bipartisanship in Australia.