Treasury secretary attacks ex-KPMG partner in fiery TAHE hearing
NSW Treasury secretary Mike Pratt has accused former KPMG partner Brendan Lyon of misogynist behaviour towards female public servants during a fiery NSW parliamentary hearing into a controversial multibillion-dollar transport asset agency.
Mr Pratt also confirmed he is considering returning to the private sector ahead of the NSW state election in 2023, during a hearing in which he was told to stop asking committee members questions and instead limit his responses to answering the question put to him.
NSW Treasury secretary Mike Pratt giving evidence at an upper house inquiry on Thursday. Nick Moir
The NSW public accountability committee also heard on Thursday that NSW Treasurer Matt Kean has told the for-profit Transport Asset Holding Entity (TAHE) that its rate of return must increase from 1.5 per cent to 2.5 per cent from July 1 next year, meaning Transport for NSW will have to pay hundreds of millions more for access.
The NSW half-year budget review, also released on Thursday, shows that the state government will give an additional $1.1 billion to Transport for NSW to pay to TAHE so that the latter can achieve this higher rate of return.
Transport pays TAHE about $680 million a year to use the transport assets within the entity, with the extra funding bringing the expected cost to Transport to about $1 billion a year.
The NSW budget review also shows that the dividend TAHE will give the state government will be a fraction of this payment, a figure expected to increase from $16 million this financial year to $233 million by 2024-25.
The chairman of TAHE, former PwC partner Bruce Morgan, told the hearing: “The Treasurer has asked us to consider a higher rate of return that averages 2½ per cent over the next 10 years, and we will be renegotiating the access fees resulting from that … effective from the 1st of July [20]22.”
Mr Morgan would not confirm if the increase in the rate of return had been made to satisfy the concerns of NSW Auditor-General Margaret Crawford about the valuation and classification of the entity.
The Auditor-General has yet to sign off on the total state sector accounts for the last and current fiscal years due to her concerns about “significant accounting issues” relating to TAHE.
Under questioning from Labor member Daniel Mookhey, Mr Pratt admitted he did not know if the Auditor-General would sign off on the accounts by Christmas.
Mr Pratt told the inquiry that a “false narrative” had emerged about TAHE using accounting tricks to hide public transport costs from the state’s budget and that the entity would “compromise safety”.
“Public statements that imply public servants have been engaged in trickery are insulting and unjustifiably undermine public faith in the entire public service. There has been a false narrative that TAHE was created to perpetuate an accounting trickery. That is wrong,” he said.
Mr Pratt also denied that the creation of TAHE would lead to a “budget black hole” and said that former KPMG partner Brendan Lyon was not an accountant and “selectively chose to omit evidence, adjusted timelines to fit his narrative and made statements which are false”.
He said Mr Lyon “referred to female public servants behind their backs as ‘ranting’ and ‘emotional’ … [I] must say I find this misogyny disgusting, unprofessional and highly offensive.”
“Mr Lyon was highly derogatory towards his own colleagues at KPMG in internal emails, and was in fact investigated by KPMG for his own behaviours,” Mr Pratt said.
The truth is that TAHE as a commercial entity will deliver benefits to the citizens of NSW.”
Mr Lyon had earlier told the inquiry that he was bullied by Mr Pratt during the heated battle over the contents of a report he wrote about TAHE for Transport that conflicted with a report done by another KPMG team for Treasury.
Mr Pratt also said there had been a false narrative about Treasury versus the Auditor-General and that there had been “robust debates” over the signing-off of the accounts.
“The truth is that Treasury and the Auditor-General have important but very different roles in ensuring that the state accounts are prepared in accordance with complex national and relevant accounting standards, several of which have recently changed,” he said.
“Treasury is the preparer of the accounts and does so based on its expertise with supporting evidence.
“The Auditor-General is the reviewer of the accounts, and provides her opinions based on the review of the supporting evidence.”
During the hearing, the head of Transport for NSW Rob Sharp also said the creation of TAHEwould not compromise passenger safety. “Safety is always No. 1. It remains the No. 1 priority for all transport operations,” Mr Sharp said.
The previous head of Transport, Rodd Staples, has already told the inquiry that he was sacked without cause last November for raising safety, operational and financial concerns about TAHE, including directly with then-premier Gladys Berejiklian.
Outside the inquiry, Mr Lyon said he was disappointed at Mr Pratt’s evidence.
“It’s disappointing Mr Pratt and his colleagues continue to attack me, rather than explain why NSW is the only state that has not been able to pass its audit,” Mr Lyon said in a statement.
Also outside the hearing, Labor’s Mr Mookhey said the TAHE rate of return would mean taxpayers “lose close to $3.3 billion in just the next four years”.
“This money otherwise could have been spent bringing the budget back to surplus years ahead of schedule … This is a total disaster that was completely avoidable had the Premier [Dominic Perrottet] not engaged in budget trickery of the worst kind.”