Artificial Intelligence
Deloitte to Refund Albanese Government After AI-Generated Report Filled With Errors
In a stunning turn for the global consulting industry, Deloitte Australia has agreed to repay part of a $440,000 government contract after admitting that generative artificial intelligence was used to produce a flawed report for the Department of Employment and Workplace Relations (DEWR).
The report, commissioned in December 2024, was intended to review Australia’s welfare compliance system and its automated penalty processes. Instead, it has sparked national outrage — and a rare government refund — after it was discovered that the Deloitte report contained nonexistent citations, fabricated references, and factual errors linked to the use of OpenAI’s GPT-4 model.
AI “Hallucinations” and Fabricated References
University of Sydney law scholar Dr Christopher Rudge, who first identified the mistakes, said the report displayed clear signs of AI hallucinations — instances where generative models “fill in gaps” with false or invented data.
In his analysis, Rudge found multiple fake academic references, including citations to nonexistent papers by professors from the University of Sydney and Sweden’s Lund University, as well as an invented court case reference — Deanna Amato v Commonwealth.
“Instead of fixing the fake references, they replaced them with more — six or seven in some places,” Rudge said. “That means the original claims weren’t based on any verifiable source.”
Following media scrutiny, Deloitte quietly updated the report in July and later added an appendix disclosing that portions of the report were generated using a large language model (Azure OpenAI GPT-4). The firm, however, insisted that the use of AI did not alter its findings or recommendations.
Government Reaction and Partial Refund
DEWR confirmed that Deloitte will repay the final instalment of its contract, although the exact amount will be disclosed after the transaction is finalised. “The substance of the independent review is retained, and there are no changes to the recommendations,” a departmental spokesperson said.
Still, the controversy has drawn sharp criticism from lawmakers. Labor Senator Deborah O’Neill, a member of the parliamentary inquiry into consulting integrity, blasted Deloitte’s conduct: “Deloitte has a human intelligence problem. This would be laughable if it wasn’t so lamentable. A partial refund looks like a partial apology for substandard work.”
She also warned government agencies to verify who — or what — is producing their commissioned work, quipping that “perhaps instead of a big consulting firm, procurers would be better off signing up for a ChatGPT subscription.”
AI Accountability Under Scrutiny
Deloitte Australia has earned over $25 million in contracts with DEWR since 2021, making this scandal a major blow to its credibility. The firm said it had “resolved the matter directly with the client” and maintained that the errors stemmed from “human oversight.”
However, the episode has reignited debate over AI’s unchecked role in professional consultancy, especially in high-stakes government projects.
As Rudge noted, “You cannot trust the recommendations when the core analysis was done by an AI — especially when that wasn’t disclosed.”
For now, Deloitte’s refund may close this chapter financially, but the reputational damage to the firm — and the credibility of AI-assisted consulting — could prove far costlier.
