Federal Government Maintains Significant Contracts with KPMG Despite Scandal

Extensive parliamentary data reveals the federal government holds 297 active contracts with the accounting firm KPMG, collectively valued at over $653 million. This disclosure arrives as KPMG faces scrutiny and investigation by the corporate regulator, ASIC, concerning allegations of misused confidential client information and subsequent mistreatment of an internal whistleblower.

Parliamentary Committee to Hear from Key Witnesses

The unfolding situation is set to be a central focus at an upcoming parliamentary committee hearing. More than 30 individuals, including former and current senior KPMG leadership, clients, regulators, and representatives from industry bodies, are scheduled to appear next Friday. This session is expected to delve into the details of the ongoing investigations.

Whistleblower Allegations and Internal Investigations

The controversy first surfaced in 2024 when a whistleblower raised concerns internally about the alleged use of confidential board papers from construction firm Lendlease. These documents were reportedly utilized in pitches to secure audit contracts with other major entities, including Westpac and Dexus. An initial internal investigation by KPMG did not substantiate these claims, a stance supported by a subsequent review from an external legal firm. However, after the whistleblower escalated their complaints to the board, a different external law firm, Allens, was appointed to conduct a further inquiry, which is still underway. This more recent investigation has uncovered additional instances of inappropriate document sharing.

Leadership Changes and Regulatory Actions

The scandal led to significant leadership changes within KPMG. In late May, Chief Executive Andrew Yates and audit partner Julian McPherson resigned. The firm acknowledged that the internal investigations “fell short of the firm’s expectations” and issued an apology to the whistleblower. Chief Operating Officer Eileen Hoggett was also demoted.

In early June, ASIC confirmed it had initiated a formal investigation into KPMG. The regulator indicated that two registered auditors under scrutiny were Eileen Hoggett and audit partner Paul Rogers.

New Contracts Awarded Post-Scandal Revelation

Despite the emerging scandal, the federal government has continued to award contracts to KPMG. Thirty-one government contracts, amounting to nearly $24 million, were signed after the allegations became public on March 24. These include agreements with ASIC itself, the Bureau of Meteorology, and departments such as Finance, Defence, and the Attorney-General’s.

Senator Barbara Pocock has expressed strong criticism, stating, “This government is completely addicted to KPMG.” She has called for a review of all current contracts and a ban on future engagements with the firm until thorough investigations are completed.

KPMG’s current situation follows a similar scandal involving fellow accounting giant PwC, which was found to have misused confidential government information to assist multinational corporations in tax avoidance. The division of PwC that dealt with public contracts was sold off in 2023 and is currently not bidding for federal government work due to a non-compete clause.

Organisations Re-evaluating Ties with KPMG

In the wake of the scandal, numerous public and private sector organizations are re-evaluating their ongoing and future relationships with KPMG. Assistant Treasurer Daniel Mulinio has indicated that the government will examine all existing contracts. The Treasurer, Jim Chalmers, has been contacted for comment.

The Reserve Bank has confirmed that KPMG will no longer manage its whistleblower hotline. The Victorian government is undertaking a review of all its contracts with the firm. Additionally, the governments of Queensland, New South Wales, the Australian Capital Territory, and South Australia have requested further information from KPMG.

Lendlease, the only client to publicly confirm the misuse of its documents by KPMG, plans to put its annual $10 million external auditing contract out to tender next year.