Government departments have been told to take the past behaviour and conduct of all firms into consideration when deciding on contracts for any companies following a scathing assessment of PwC’s conduct by the head of the Finance Department.
But Finance Minister Katy Gallagher would not commit to banning PwC from doing future government work, after the major auditing firm was directed to remove all staff who knew about the tax leak at the firm from any government contracts while investigations were under way.
The Australian Federal Police has also launched a “priority investigation” into PwC after the Treasury secretary referred it to federal authorities on Wednesday.
Earlier this year it was revealed that a Tax Practitioners Board investigation found PwC’s former Australian head of international tax, Peter Collins, had made unauthorised disclosures of confidential information about government plans to combat tax avoidance.
Since then, it has emerged that more than 50 staff within PwC, including people at the company’s overseas operations, were either directly involved or had knowledge of the leak.
Finance Department secretary Jenny Wilkinson said the firm’s failure to disclose the full extent of the leak of confidential government tax plans and how many staff knew undermined the department’s confidence in PwC.
“I consider PwC’s abuse of confidence and trust with the Treasury and PwC’s subsequent handling of this breach to be a very serious issue,” Wilkinson told a parliamentary committee on Thursday.
In response, the Finance Department last week directed PwC to remove all staff who had knowledge of or had been directly involved in the leak from any current or future government contracts.
Those staff would not be allowed to return to working with the government until PwC’s review of the incident had been completed and the department was satisfied with its findings.
The department also advised government officials that they must consider past behaviour and ethical conduct of an organisation when tendering for government contracts.
When asked by Greens senator Barbara Pocock why PwC was not banned from government work, the Finance Minister said the government could not just ban one organisation from all contracts.
“The ball is in PwC’s court now to assure us that they have done what Finance has directed them to do,” Gallagher said.
Professor Percy Allan, from the Institute for Public Policy & Governance at University of Technology Sydney, said the new directive to consider past behaviour means officials would have to look at whether firms have been involved in previous scandals or breaches – but it would be tricky to find any organisation with a completely clean record.
“The problem is all these consulting firms have been involved in scandals, they’ve all been involved in breaches of the law,” Professor Allan said.
Wilkinson also told the Senate committee the department first heard about the Tax Practitioners Board’s investigation into PwC through media reporting earlier this year, and Finance contacted the firm shortly after it failed to disclose the full extent of the leak.
“Critically, PwC did not indicate to my department that the issue was broader than what was being published in media reports at that time,” Wilkinson said.
She said the department later became aware through news reports earlier this month that more than 50 staff had knowledge of the confidential tax information.
“This additional information raised serious concerns about the broader culture within PwC and undermined our confidence in their earlier engagements with Finance around this matter,” Wilkinson said.
Labor senator Deborah O’Neil asked how the department could trust PwC to remove all the involved staff, given the firm’s recent interactions with Finance, unless it knew the names of the workers involved.
“How else do you check, verify what they’ve done?” she asked.
Andrew Jaggers, deputy secretary of the Finance Department’s commercial group, said the department has not asked for that at this stage given the impending AFP investigation.
“We’ve indicated that we need assurance and independent assurance around people being stood down off Commonwealth contracts,” he said.
PwC has said it deeply regrets “that we have failed the high standards we set for ourselves as an organisation”.
“We now need to re-earn trust, which is why we have taken appropriate action, including the announcement that we will establish an independent review in relation to our governance, accountability and culture.”
Other firms are concerned about the building scandal. On Thursday, KPMG sent an email to staff saying there had been significant exposure of the “grave issue” in past weeks.
“We can no longer sit by and watch our profession be tarnished by the unethical actions of a few,” the email said.
KPMG told staff that working with government was a privilege, and acknowledged the firm had in the past “got it wrong” but had since learnt from past experiences. It urged workers to re-familiarise themselves with the company’s code of conduct.
Earlier on Thursday AFP deputy commissioner Ian McCartney confirmed police were investigating a person relating to the PwC tax scandal, and said they would look at further people if necessary as the investigation continued.
“It’s now an active investigation,” McCartney said.
McCartney said the AFP was investigating potential breaches of a federal law, which prohibits the release of confidential information by Commonwealth officers. The offences are punishable by up to two years in prison.
The AFP also defended its ability to investigate PwC while retaining millions of dollars worth of contracts with the consulting giant.
AFP Commissioner Reece Kershaw rejected suggestions he had a conflict of interest because he is friends with former NSW police commissioner Mick Fuller, now a senior PwC employee. There is no suggestion that Mr Fuller was involved in or knew about the leaked information.
Greens senator David Shoebridge said it was an “impossible conflict of interest” for the AFP to investigate the firm’s conduct while granting it access to its systems as an internal auditor, and pressed the organisation to sever its relationship with PwC.
The AFP awarded Fuller a contract in his PwC capacity to prepare a report on ACT Policing. According to the parliamentary library, the AFP has six current contracts with PwC worth $6.73 million.
Kershaw said he could understand that it might look like the AFP had a conflict of interest because it was investigating a former senior official at the firm while continuing to work with the company.
But he said he had confidence in the integrity of the AFP’s processes because the organisation was good at “compartmentalising” its work.
With Colin Kruger
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