Wednesday, May 29, 2024

Alex Mitchell - Billion-dollar NSW consultant spend lashed, cut pledged

Selected PwC matters …


Link to the report  - https://www.parliament.nsw.gov.au/lcdocs/inquiries/2963/Report%20No.%203%20-%20Public%20Accountability%20and%20Works%20Committee%20-%20NSW%20Government's%20use%20and%20management%20of%20consulting%20services.pdf


NSW Government's use and management of consulting services


 NSW inquiry urges government to ditch big four firms for ‘in-house’ consultancy by public service


Billion-dollar NSW consultant spend lashed, cut pledged

By Alex Mitchell

The former NSW coalition government paid for consultants more than 10,000 times in five years and was overly-reliant on the big four firms, an inquiry has found.


A state parliamentary committee on Wednesday handed down a scathing report and recommended a string of changes to how and when consultants are engaged.



The Labor and Greens-dominated committee inquiry followed a report from the NSW Auditor-General, which found the coalition government spent more than $1 billion on external consultants between 2017/18 and 2021/22 and did not manage them effectively.

The Labor government has pledged to cut spending on consultants by $35 million a year, although the total outlay reached $193 million in 2022/23.

Greens upper house MP Abigail Boyd, who chaired the committee, said the former government issued a consultant contract "at a rate of one engagement every hour for five years".

"For too long, highly paid consultants and consulting firms have enjoyed a rarified privilege and prestige in the consciousness of the public and government decision-makers," she said.

"It's time to bring that relationship back down to earth.

"But responsibility for this dynamic cannot be placed at the feet of public servants - it has been cultivated by the big consulting firms, greedy for growth into an increasingly lucrative market for services to government, enabled by policy settings like labour expense caps and so called efficiency dividends."

Recommendations included scrapping any disclosure exemptions for consulting spending, ensuring they are used in a last resort and not on core government work, and strengthening penalties levelled at any consultant that behaves unethically.

It also suggested senior public servants shouldn't be able to work for relevant private-sector clients within six months of leaving their previous post.

Finance Minister Courtney Houssos recently suggested about 15 per cent of the contracts were for "generalist work", which could be done in-house by the public service.

She said it would take time to unwind those measures, but the government had put in place cost controls and probity measures that should have been introduced years earlier.

But Opposition Leader Mark Speakman said the Labor government had an "ideological opposition" to using the private sector, even when it was more cost-effective to employ consultants.


"It's always a case of working out what is the best value for money," he said.

The committee found there had been an over-reliance on the big four consulting firms - PwC, KPMG, EY and Deloitte - as they received a quarter of the spending.

Further measures to curb a reliance on consultants were being considered in the lead-up to the budget, the government has said.

It is yet to formally respond to the committee's findings.

Australian Associated Press


Report lays bare history of ‘outsourcing blowout’ in NSW, slams department cost controls


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The NSW government will establish a regime to punish professional services firms that breach professional standards under a proposal to change the regulation of the consulting sector amid moves to slash the amount spent on hired help in the public service. 
The NSW Legislative Council has published its report into the use of consultants, warning Australia’s biggest state government was bleeding skilled staff to the sector while rewarding it with rivers of cash coupled with poor oversight of contracts. 
Greens member Abigail Boyd, who chaired the committee reviewing the matter, said it was time to bring the consulting sector “back down to earth”, warning it had been enjoying a “a rarefied privilege and prestige in the consciousness of the public and government decision-makers”. 
The review makes 28 recommendations, coming almost a year after it was kicked off in the wake of the PwC tax scandal. 
“What we have found is that NSW government agencies have demonstrated an undue and excessive reliance on the use of consulting firms,” Ms Boyd said. 
“But responsibility for this dynamic cannot be placed at the feet of public servants – it has been cultivated by the big consulting firms, greedy for growth into an increasingly lucrative market for services to government, enabled by policy settings like labour expense caps and so called efficiency dividends imposed by a government ideologically hostile to the idea of a robust and empowered public sector.”
Ms Boyd said the report was a “clarion call” to slash the use of consultants and invest in the public service, coming just a day after the NSW government warned it was looking at “to reduce over-reliance on consultants and rebuild the NSW public sector”. 
NSW Finance Minister Courtney Houssos said on Tuesday the Labor government would “unwind” the use of consultants, which ballooned under the previous Coalition regime. 
She said the report was a “reminder about the former government’s financial waste and its addiction to consultants”
“We will have more to say about the NSW government’s use of consultants ahead of next month’s NSW budget,” she said. 
It comes as the NSW government is preparing to hand down its budget, with Treasurer Daniel Mookhey noting “we’d rather invest more into the essential services that communities rely on and pay external consultants less”. 
The report notes NSW spent more than $1bn on consultants over the past five years, with Ms Boyd warning the state “had not been procuring and managing consultants effectively, lacked a strategic approach to when and how consultants are used and failed to evaluate or assess consultant engagements for quality”.
Among the reports 28 recommendations, the NSW Legislative Council calls on the state government to establish a code of conduct for consultants and introduce sanctions for behaving unethically. The report notes concerns “there do not appear to be any real consequences for those who do the wrong thing”. 
The state government would also amend its rules around the use of consultants, with a range of recommendations to tighten up when hired help can be used and for how long, as well as introducing auditor oversight of the spend. 
However, the report also calls for major accounting and consulting firms to be required to pay company tax and payroll tax on partner earnings, in a move likely to be opposed by the sector. 
Chartered Accountants Australia and New Zealand said it welcomed moves to “embed ethical behaviours” into NSW supplier codes. 
CA ANZ chief executive Ainslie van Onselen said “the people of NSW need to be able to trust that the government is spending public money responsibly”.
“Measures to ensure greater levels of transparency and accountability in work being carried out by consultants to restore that trust is welcomed,” she said. 
But CA ANZ senior tax advocate Susan Franks said she opposed moves to impose payroll tax on partnership profits, warning it was “difficult to apply” and risked an “inequitable” and costly administrative burden on accounting firms. 
“The committee’s recommendation would change the nature of payroll tax from a tax on labour to a tax on profits,” Ms Franks said. 
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