Deloitte was paid $440,000 for a government report riddled with AI-generated inaccuracies. Photo: Region.
Consulting giant Deloitte Australia is being forced to return part of its $440,000 fee to the Federal Government after it was caught delivering an AI-generated report full of errors to an APS department.
The report into an IT system used to automate welfare penalties for the Department of Employment and Workplace Relations (DEWR) included non-existent academic references and a totally made-up quote from a Federal Court judgment (Amato v the Commonwealth 2019).
The report was initially released in July, sparking concerns from academics that it contained numerous inaccuracies, most likely the result of what are known as “hallucinations” by generative artificial intelligence.
AI hallucinations occur when user prompts and queries are answered with invented quotes and references.
A Deloitte investigation into the report was initiated and a new version, minus more than a dozen previously published errors, was posted on the DEWR website on Friday (3 October) as much of the country was headed into a long weekend.
It was accompanied by a statement from department Secretary Natalie James, who focused her comments on the integrity of the administration of the Targeted Compliance Framework, which applies to people required to meet mutual obligations.
But she also refers to the inaccurate Deloitte report, published after the firm had looked into the system.
“Reviews are underway to ensure that decisions are taken in a lawful and robust manner,” the Secretary said.
“This includes a legal review and an independent assurance review, which has examined the IT system operating the framework against policy and business rules.
“The independent assurance review was published on the department’s website on 14 August 2025, with an accompanying statement.
“There have been media reports indicating concerns about citation accuracies which were contained in these reports.
“Deloitte conducted this independent assurance review and has confirmed some footnotes and references were incorrect.
“A correct version of the statement of assurance and final report has been released.
“The department continues to focus efforts on addressing the substance and recommendations included in the report.”
The version of the report offers an update stating that the first version contained errors.
“This report was updated on 26 September 2025 and replaces the report dated 4 July 2025,” it states.
“The report has been updated to correct those citations and reference list entries which contained errors in the previously issued version, to amend the summary of the Amato proceeding which contained errors, and to make revisions to improve clarity and readability.
“The updates made in no way impact or affect the substantive content, findings and recommendations in the report.”
While Deloitte is making no comment, DEWR has confirmed the consultancy has agreed to provide a partial refund for its embarrassing blunder and its attempts to make government work easier for itself.
Making the incident even more embarrassing for Deloitte is that it prides itself on providing advice about training in AI, cautioning that humans should always review AI work.
The Greens say it’s not good enough and have demanded that Deloitte repay its total fee, not just the last instalment of the contract.
Greens Senator Barbara Pocock, who has spearheaded parliamentary investigations into corruption in the government consultancy sector, says stronger action should be taken against Deloitte.
“When you make a mistake, most importantly, face up and be honest, and of course, in this case, there should be a full refund of all of the $440,000,” Senator Pocock said.
“Using AI like this is really inappropriate, poor, shoddy work, charging a fortune for it.
“Of course, there should be a full refund, and there should be consequences for Deloitte for letting us all down.”
The Greens are pushing for the Federal Government to accept their proposal to ban consultancy firms from future public service contracts if they are found to have acted unethically or produce poor work.
It follows the highly publicised PwC breach of trust episode in which a partner of the firm shared confidential Treasury information for the benefit of the company and its clients.
The Federal Government still allows PwC to bid for public service consultancy contracts.
