Victoria continues to sign contracts with PwC after tax leak scandal

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The Andrews government has continued to sign contracts with embattled consultancy PwC, including for an audit of an agency that manages $70 billion of public funds, despite the deepening tax leak scandal and mounting pressure for a freeze on future work with the firm.

In response to questions from this masthead about the contracts, the government has announced an overhaul of its code of conduct for suppliers of services, possibly including tough new penalties for contraventions of the code.

PwC has won Victorian government work this year despite the tax leak scandal.Credit: Aresna Villanueva

But the opposition and the Greens say such a review is inadequate.

Details from the government’s tender website show the Victorian Funds Management Corporation – which manages investments for 31 government agencies and several major hospitals – has signed and renewed contracts with PwC since it was revealed in January that the firm leaked confidential federal government information to clients about changes to Australian multinational tax-avoidance laws.

In April, the Funds Management Corporation signed a $128,000 contract with PwC’s US arm for assistance with US tax compliance, and the Energy and Environment Department signed a $150,000 contract with PwC for financial and insurance advice on a scheme known as the Digital Twin Victoria Benefits Estimation Project.

After the scandal deepened in May, when PwC emails released in Senate estimates showed staff planning to use the confidential information for commercial gain, the Funds Management Corporation signed a $500,000 contract with PwC for internal auditing.

PwC has more than $110 million in current state contracts and has won more than $6.6 million in contracts to date this financial year.

Since the tax leak emerged, the Reserve Bank and some of the nation’s biggest superannuation funds, including AustralianSuper, HESTA and Aware Super, have banned future contracts with PwC.

In a move viewed as being an effective Commonwealth ban, the federal Finance Department in May issued a procurement note to “remind” government agencies tendering for consultants that they must consider a potential supplier’s history including “unethical behaviour”. The Australian Federal Police is now investigating the PwC leak.

Queensland has paused new contracts with PwC, and the NSW government is considering new multimillion-dollar fines for consultancies that leak sensitive information.

But in Victoria, Premier Daniel Andrews has repeatedly responded to the scandal by saying his government sought assurances from the firm and was confident there had been no leak of Victorian information.

He told the public accounts and estimates committee this month that his government would not act in a “unilateral fashion” and preferred a nationally consistent approach. “Now if they, if the Commonwealth take what we deemed to be too long to resolve these matters, we may revisit it [a Victorian response],” he told the committee.

On Saturday, responding to questions from this masthead about contracts signed his year, the government said it would look at introducing penalties as part of an overhaul of the Supplier Code of Conduct that sets out minimum ethical standards for government contractors.

“In light of what has occurred at PwC, we’re reviewing our contract clauses related to the engagement of consultancy firms – and if we can strengthen the code of conduct, we will,” a spokesperson said.

Coalition finance spokeswoman Jess Wilson says the Victorian government must “review its tax-related relationship with PwC”.Credit: The Age

But opposition finance spokeswoman Jess Wilson said the government must explain why it was appropriate to continue receiving tax advice from PwC.

“The Andrews government must review its tax-related relationship with PwC and not enter into any future tax-related contracts while these matters remain outstanding,” she said. “Victorians are rightfully asking why these consultancies are necessary.”

Greens deputy leader Ellen Sandell called for a wider freeze on all future contracts with PwC. “Given the recent tax leaks, Victorians should expect the government to act, not just rely on assurances from PwC, who clearly can’t be trusted right now,” she said.

The tax leak scandal has highlighted the problem of the government’s growing reliance on consultants in general and the “big four” professional services firms – KPMG, PwC, Ernst & Young (EY) and Deloitte – in particular.

Integrity experts have repeatedly warned of potential conflicts of interest when consultancies have privileged access to sensitive government information while also advising private clients about government policies, programs and projects.

The Victorian Auditor-General reported last week that the state had spent $671 million on consultants in the five financial years to June 30, 2022. After KPMG, PwC was the second-biggest earner, winning almost $80 million of work.

The figures are broadly consistent with revelations by this masthead in March that spending on consultancies had tripled since the Andrews government was elected, with government departments spending almost $1 billion over eight years.

Asked for details about contracts signed this year with the Victorian government, a PwC spokesman said it was not the company’s role to provide such detail. “These questions are a matter for the government and its departments,” he said.

In an open letter late last month, PwC chief executive Kristin Stubbins apologised for the leaking of the tax law details and promised to work to rebuild trust in PwC.

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