Bruce Quigley We’re getting along with PwC - Big four consultants’ ‘land and expand’ strategy hammered by scandals

• Red: [repeated lies to the parole board during his hearing when asked if he feels rehabilitated] 
• Oh yes sir, absolutely sir, I mean I've learned my lesson. I can honestly say I'm a "changed man", no longer a danger to society here, and that's the God's honest truth.

 

Review of Governance, Culture and Accountability at PwC Australia

Review of Tax Confidentiality Breaches and Related Questions 

 

 Media Release: 

 

Commitments to Change

01/08/24

Quigley Review - July 2024

31/07/24

Quigley Review - March 2021 

Between 2012 and 2022, PWC recruited 24 former tax officers, including two former assistant commissioners. To be fair, other firms were also actively recruiting from the public service.

We’re getting along with PwC, ATO says

By Tom Ravlic

The Australian Taxation Office has told a review of PwC Australia’s tax governance and internal control framework that relationships with the firm and the revenue authority are much better.

Former ATO second commissioner Bruce Quigley has done a second review of PwC Australia’s internal systems, and it reveals that tax office officials find the firm is more transparent with them.

The first review was done in 2021 and followed several years of ongoing tension between the Big Four firm and the ATO over a range of issues such as confidentiality breaches and the firm’s misuse of legal professional privilege.

Quigley’s latest report notes that the ATO has had concerns about PwC’s behaviour in the past but the culture appeared to be shifting following the review done by Ziggy Switkowski in the aftermath of the tax leak saga.

“The ATO has been concerned about certain PwCA behaviour in the past as outlined in the 2021 Review. Both PwCA and the ATO have been working to resolve issues and build better relations,” the report says.

“ATO senior officers acknowledge that there have been improvements in relationships in recent times, however, the TPB matter has again put pressure on PwCA’s relationship with the ATO and the TPB

There is a degree of scepticism as to whether there will be a cultural shift of putting the firm’s values before growth and profit.”

PwC Australia has put in an action plan arising from the eviscerating assessment of its culture by Switkowski that was published in September last year.

Quigley’s report says that the firm will need to ensure that improved relationships with the ATO and the TPB will be critical as tax agent regulation changes.

“The measures for regulator engagement put in place by PwCA to address the Switkowski report should help to address this scepticism, however, it will be important for the change in culture sought in the Action Plan to be demonstrated ‘on the ground’ by all engagement leaders and teams,” the report says.

“Having good relationships with the ATO and TPB will be even more important going forward with significant Government changes proposed to the governance framework impacting tax practitioners.”

News of the Quigley report’s release by the firm comes in the midst of another wave of politicians and parliamentary committees on the personalities that steered the firm during a period when relationships with the tax office hit rock bottom during the multinational anti-avoidance law standoffs.

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Big four consultants’ ‘land and expand’ strategy hammered by scandals

Ronald MizenSenior reporter

Aug 7, 2024

The value of work tacked on to federal government contracts with KPMG, EY, PwC and Deloitte crashed last year, after taxpayers were whacked with extensions worth more than $1 billion in the three years prior.

The big four consulting firms secured about $900 million in work starting in 2022-23. Over the following year, the value of those contracts was extended by about $90 million, for a 10 per cent uplift.

That result was down markedly on 2021-22, when at least $252 million was tacked on to about $1.2 billion in contracts that started the year before.

The outcome shows federal bureaucrats have cracked down on the highly lucrative practice known as “land and expand”, where consultants entered into contracts they knew would need to be extended later on.

The practice was uncovered by a Parliamentary committee last year, which found government agencies were failing to comply with procurement rules or demonstrate value for taxpayer money, and consulting firms were using “an aggressive corporate sales culture with a motto of land and expand”.

“Many small contracts from an unacceptable panel process become beachheads for numerous lucrative extensions,” Labor backbencher and committee chairman Julian Hill said at the time.

The results of The Australian Financial Review’s annual audit of taxpayer spending on major consultancies showed the value of work outsourced to the big four firms has crashed under Labor, with just $607 million worth of new contracts inked in 2023-24, down 50 per cent from a peak in 2021-22.

The Albanese government is trying to cut $767 million from consultants, advertising, lawyers and labour hire over three years to 2025-26. It also wants to prioritise small and medium consultants over the big four firms.

The drive to pull back on outsourcing to consultants and favour small and medium firms has smashed the big four firms over the past year, resulting in hundreds of staff losing their jobs in a wave of lay-offs.  

PwC’s taxpayer work all but dried up in the fallout from the tax leaks scandal which hammered its reputation and resulted in the firm selling its government division to private equity investor Allegro Funds for $1.

The embattled firm did secure $1.7 million in contract extensions last year, which was completely wiped out by nearly $7.5 million in existing contracts being terminated.

Allegro Fund’s spin-off, called Scyne Advisory, took $111 million worth of PwC contracts, according to Finance Department documents, and secured about $28 million in contracts under its own steam over 2023-24. But the upstart has struggled to establish a foothold in the federal bureaucracy and has cut about 10 per cent of its staff since the start of the year.

KPMG secured the lion’s share of government work among the big four consultants last year with $239 million in new contracts. It also had the most contract extensions, adding about $50 million on prior year deals.

Deloitte secured about $168 million and secured an additional $20 million in contract extensions. Rival EY inked about $158 million in new work and added $16 million to contracts that commenced in the year before.

The Financial Review’s annual rankings are based on AusTender contracts published by July 31 that commenced in 2023-24. Contracts often run over years, but the value is only recorded in the commencement year.

Analysis of contract extensions is based on those made in the 12 months after the financial year in which the contract commenced.

Data on the AusTender website is updated regularly and may change over time. Contracts are sometimes added months or years after they come into effect due to poor record-keeping practices by some departments.