Deloitte returns thousands of dollars to the Australian government over a report with AI errors

SydneyWhen Christopher Rudge, an academic at the University of Sydney, was reading a Deloitte report commissioned by the Australian government in early August, he had to check the references twice: "I didn't recognize any of the book titles, and some of the essays had outlandish names," he recalls. Anxious, he knocked on the doors of some colleagues ("This was the title of your book, wasn't it?") before returning to the document and discovering that three references were missing. "At that moment, I realized it could only be artificial intelligence."

The report, commissioned by Deloitte's Department of Labour and Industrial Relations (DEWR), explored the legality of an automated system for canceling unemployment benefits. Rudge saw it being discussed in the press, but without mentioning the use of AI, and decided to email journalists atAustralian Financial Review

It was then that the Department of Labour and Labor Relations learned of the errors, and the following day, August 24, Deloitte contacted the Australian government's Department of Finance. The multinational not only agreed to review the 237-page report—which cost the public coffers AU$439,142, or about €246,750—but ultimately agreed to return AU$97,587 (about €54,830).

"Someone had to get caught using AI on an important document eventually," says Terry Flew, co-director of the Centre for Artificial Intelligence, Trust and Governance at the University of Sydney. Flew points out that this case is a good example of pointing to consulting firms as the scapegoat, but that banning the use of AI is "impossible" and is based on the idea that they are "mechanisms to perpetuate fraud."

"Would you turn off spell check in Word? These are context-dependent issues. I think the idea that a government can legislate whether or not AI can be used to create documents is very difficult to sustain. You can have provisions in public contracts, but here it's the government that has the power," Flew points out.

Deloitte, which bills more than $50 billion annually providing AI advice and training to its clients, corrected the footnotes and a fabricated reference from the Federal Court after asserting that the report's conclusions were unaffected. "It's not rigorous research," suggests Rudge, who emphasizes that the company initially claimed a transcription error, "although the references were real, it was still absurd."

The addition to consulting firms

According to a Senate investigation, spending on consulting firms tripled between 1989 and 2017, and tripled again between 2010 and 2020, making Australia the fourth largest market in the world with per capita spending twice that of Sweden or Canada. This is a trend that the current Prime Minister, Anthony Albanese, promised to reverse with 8,700 public sector workers. However, a study commissioned by the Australian Greens and conducted in the parliamentary library shows that, while it is true that the Big Four (Deloitte, KPMG, EY, and PwC) have lost some market share, the total figure is still approaching one million dollars (approximately 600,000 euros). "The Deloitte AI debacle was worrying, but not a surprise after the PwC scandal [which in late 2014 was caught sharing government information with its clients about changes in tax policy]," says Green Party Senator Barbara Pocock. "Once again, we see key government work being outsourced at a high cost to taxpayers," she adds. That's why her party has introduced a bill to ban public contracts for five years with companies that don't behave ethically. "This would give Australia the power to exclude such behavior from government contracts. It's a long-awaited step towards transparency, and we hope the government will choose to work with us," adds Pocock, who is also the Green Party's spokesperson on finance and the public sector. However, such a proposal would only pass with the support of the Labour majority that sustains the government, which this month agreed to allow PwC to bid on public contracts again after less than a year of exclusion.