A leading think tank has called for strict and consistent penalties for consulting firms that breach public trust.

The Australia Institute’s Democracy & Accountability Program Director Bill Browne told a Senate inquiry into structural challenges in the audit, assurance and consultancy industry last Friday that the sector needs clear standards, better monitoring and tougher sanctions.

It comes after the latest scandal involving government consultants saw PwC provide confidential treasury information to other clients.

Mr Browne said the overuse of consulting firms has hollowed out the public sector and led to poor government decision making.

“The core work of government should be done by public servants but too often it’s been farmed out to highly paid consultants,” he told the hearing.

“These consultants are at risk of being conflicted and are rarely subject to scrutiny and transperancy as public servants are.”

Governance failures

There were clear governance failures across the sector, he said.

He called for consideration of a ban on the same firm auditing a client and doing other work, as well as a ban on firms consulting for the government if they have a conflict of interest.

He also said there needs to be an investigation of how the tendering process is structurally biased towards large consulting firms, and whether the presence of consultants on government boards and advisory bodies gives their firms an unfair advantage and reduces the quality of advice given to government.

“If consulting firms were appropriately punished for governance failures they would be incentivised to adopt better structures,” he said.

“There should be consistent, strict penalties for consulting firms that breach the public trust, either by misusing government information or by failing to produce work they have been paid for.”

Lack of professional standards

Mr Browne also said it was concerning that there were no binding professional standards for the consulting industry, and he questioned the use of commercial in confidence as an excuse to keep documents secret.

“The term is much abused and used to conceal information that has nothing to do with real commercial considerations,” he said.

“Even when there’s a risk of commercial damage the public interest should be supreme.”

The think tank also wants to see government contractors banned from making political contributions, a clear and strict revolving door policy for public servants and consideration of a ban on auditors doing other work for their clients.

Australia Institute polling has previously found that four in five Australians agree consultants who leak confidential information should be banned.

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