The Australian Taxation Office (ATO) failed to demonstrate value for money when the cost of six contracts with consultancy firms for IT procurement advice blew out by around $69 million, with some individual agreements inflating by more than 1,000 per cent, an audit has found.
A report released on Monday by the Australian National Audit Office (ANAO) found the ATO’s demonstration of value for money “was deficient”, with an estimated initial cost of $19.06 million for advisors increasing to a total cost of $88.11 million between April 2021 and February 2025.
“The value of advisor procurements increased significantly throughout the life of the program without ongoing assessment of whether the services continued to represent value for money,” ANAO said.
While the audit found ATO’s procurement of IT managed services had been “largely effective”, ANAO made four recommendations which were all accepted by the ATO.
These included using “an appropriate amount of rigour when assessing value for money”, as well as making improvements to conflict of interest processes after a former senior ATO officer’s relationship with an ATO contractor was called into question.
The detailed audit involved the ANAO analysing more than 30,000 documents over 10 months relating to the ATO’s large-scale procurements, according to a letter sent by ATO commissioner Rob Heferen to auditor-general Dr Caralee McLiesh in March.
“I am pleased the audit has independently confirmed the ATO conducted largely effective and compliant procurements for IT managed services with largely sound governance, while flagging improvements to further strengthen our processes for the future,” he wrote.
Cost increases ‘out of proportion’
Price rises for the ATO’s procurement of advisors on IT managed services “were out of proportion with the forecast maximum price at the time of approving the initial contract”, ANAO found.
The audit studied six contracts ATO had signed for IT procurement advice: with ISG Information Services on sourcing; PwC on technical advice; Galent on probity; ITNewcom on financial assurance; Sparke Helmore Lawyers on legal services; and Tullius on project management.
The cost of two of those contracts increased by more than 1,000 per cent between initial approvals and when current values were reported in February, the audit found.
Financial assurance advisor ITNewcom saw its $1.02 million contract increase a whopping 1,537 per cent to $16.7 million, while legal advisor Sparke Helmore Lawyers saw its initial quote of $665,000 rise 1,111 per cent to $10.9 million.
“This indicates that whole of life costs estimates were incomplete at the time of procurement,” the audit found.
ATO was also found to have failed to observe “core elements of the Commonwealth Procurement Rules (CPRs)” in procuring the services of Sparke Helmore Lawyers, as required plans and records were not maintained, including an assessment of value for money.
It said it had “improved its procurement processes and practices to ensure procurement for legal services represents value for money for the Commonwealth”.
“To support these processes, record keeping and governance have been strengthened,” ATO said.
Former ATO officer's ‘conflict of interest’ with Accenture
The ANAO audit also found a former senior ATO officer’s conflict of interest with his ex-employer Accenture was “not appropriately managed”.
Ramez Katf was the ATO’s chief information officer between 2015 and early 2024, and was previously a former managing director at Accenture.
The multinational consulting firm was already an ICT provider for the ATO in 2021 when the tax office began planning to replace five major contracts worth an estimated $3.75 billion, and Accenture went on to win an ATO contract worth almost $136 million in June 2024.
While Accenture had participated in initial market discussions between July and August 2021, Katf did not declare a conflict of interest regarding his relationship with Accenture and shares he held in the company until six months later in February 2022, according to the audit.
The ANAO audit found a former ATO officer’s conflict of interest with his ex-employer Accenture was 'not appropriately managed'. Image: Shutterstock
The ATO allegedly advised in August 2024 that an alternate delegate would make procurement decisions, but ANAO said the tax office did not provide evidence of this.
ANAO said the ATO told it in September 2024 that “the conflict was well-known within the ATO”, as Katf had made 11 “progressive declarations” internally since 2015.
Nonetheless, the audit found Katf was “was not removed from decision-making for procurement decisions where Accenture was a potential tenderer or has tendered”.
An independent probity review finalised in November 2023 also found “a lack of clarity and detail of the delegate’s shareholding in Accenture, which resulted in limited management of the conflict”.
“Conflict of interest processes could have been better managed, including to address risks in a timely manner,” ANAO said.
The ATO said it had improved its processes relating to conflicts of interest and procurement over the last three years “to ensure that they are best practice”.
Previous ANAO audits have also found issues with procurement processes at the Australian Passport Office, Digital Transformation Agency (DTA), and Department of Industry, Science and Resources in recent years.
