KPMG defends itself over Defence misconduct allegations

20 December 2023 Consultancy.com.au 4 min. read
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Following accusations of misconduct over its billing of the Defence department, Big Four professional services firm KPMG has released a statement steadfastly rejecting “any claim of impropriety”.

Big Four professional services firm KPMG has hit back against media reports into its alleged misconduct over a $100 million contract awarded by the Australian Department of Defence. The accusations were levelled against the firm in a review of the half-a-billion dollar ‘One Defence Data’ project by little known advisory Anchoram Consulting, commissioned by the department at the request of independent ACT senator David Pocock.

“There is absolutely no substance to these allegations,” the firm said in a press release, noting it had not been formally provided a copy of the report for response.

KPMG defends itself over Defence misconduct allegations

“KPMG adamantly rejects any claim of impropriety and can confirm Defence has not paid one dollar more than they should have for our work on the project. KPMG and Defence requirements for quality assurance, independence and managing conflicts of interest have been met at all times.”

Otherwise known as ICT2284, the project, aimed at unifying the massive volumes of intelligence data at the Defence department’s disposal into a single platform for the purpose of real-time, high-level analysis and decision-making, is reported to have been beset by serious governance issues and conflicts of interest. According to the allegations, the lack of accountability led to KPMG knowingly overcharging or billing for work it hadn’t delivered.

The revelations follow the earlier report by the ABC’s flagship investigative program Four Corners into whistleblower claims that KPMG had “repeatedly ripped off the department by submitting inflated invoices and billing taxpayers for hours never worked,” – an accusation the firm denied at the time, although the Anchoram review has now revealed that KPMG was “forced to offer credits back after Defence officials caught it charging twice for the same work.”

Among the several instances of potential contract mismanagement outlined in the report, a $100,000 payment from last year has drawn particular interest, with an internal email suggesting the KPMG invoice was cleared in the “interest of maintaining a collaborative relationship” despite the government being of the belief that the work hadn’t been satisfactorily performed to a “quality standard expected given the nature, complexity and scope of the program.”

While Senator Pocock described the report as a further example of the government’s “appalling procurement processes” and oversight when it came to multinational consultancies, Defence has since said it has been “exercising significant power over KPMG by withholding payments and enforcing quality standards”, but that it also had to balance “against an equal and opposite risk of limiting cash flow to industry driving risk of industry insolvency”.

Such a statement however is likely to irk homegrown competitors such as Atturra, with a major factor in the global firms commonly winning the larger, longer-running tenders in the first place is in their ability to deploy significant numbers of employees and cope with the cash flow pressures. Here, KPMG has been the top beneficiary of government largesse over the past decade, with over two thirds of its almost $300 million in contracts reportedly deriving from Defence.

In response to Senator Pocock’s recently passed motion “to encourage the emergence and growth of Australian tech companies” via an inquiry into government procurement policy reform, Atturra CEO Stephen Kowal stated; “A very positive step forward. Australia needs to work out a better way to tap the amazing skills within sovereign technology companies. As I am sure the inquiry will find there is almost an unconscious bias towards large international firms.”

Internal ructions?

While Consultancy.com.au in no way suggests any issues of integrity or unprofessional behaviour have occurred, things can start to look a little murky when it concerns the nature of organisations such as the ADF and Big Four and power machinations within. Of Anchoram’s seven listed partners, all of them have spent time at the ADF, KPMG or rival Deloitte, with just about all having been previously employed at a combination thereof.

Meanwhile, Maria Milosavljevic, who was heralded as Defence’s first-ever Chief Data Integration Officer when brought in to oversee the project in early 2022, left after just 18 months in the role for a CISO position at ANZ, having reportedly guided Anchoram’s investigations over frustrations with KPMG’s progress. Defence has since stated that the financial aspects of Anchoram’s review were “beyond the scope of works” and that “its final report was not endorsed.”