Deloitte repays part of a $440,000 Australian government fee after AI errors in its report

October 2025 — A consulting report on Australia's welfare penalty system turned out to contain made-up references. Here's what happened, what it cost, and what went wrong.

Cost and outcome (as of Oct. 12, 2025)

Contract: about A$440,000. (The Guardian)
Refund: A$97,587, the final instalment, disclosed by the Finance Department at Senate estimates. (Australian Greens)
Recommendations: unchanged, according to DEWR. (The Guardian)

What happened

DEWR hired Deloitte in December 2024 to review the Targeted Compliance Framework, the IT system that automates penalties for jobseekers who miss their obligations. The report, published on July 4, 2025, found a lack of "traceability" between the system's rules and the law behind them. It said the system was "driven by punitive assumptions of participant non-compliance."

The stakes are large. Nearly 350,000 payment suspensions were issued in the first quarter of 2025 alone, affecting more than 280,000 people, according to the Greens.

In August, the Australian Financial Review reported multiple errors, including references that don't exist. They included reports attributed to academics at the University of Sydney and Lund University in Sweden, and a made-up quote from a Federal Court judgment in the robodebt case Deanna Amato v Commonwealth.

Dr. Christopher Rudge, the University of Sydney academic who first spotted the errors, said the report contained "hallucinations." In the corrected version, he said, single fake references were replaced with "five, six or seven or eight" new ones. "So what that suggests is that the original claim made in the body of the report wasn't based on any one particular evidentiary source," he said.

The corrected report went up on DEWR's website on Friday, Oct. 3. Its appendix now says part of the work "included the use of a generative artificial intelligence (AI) large language model (Azure OpenAI GPT – 4o) based tool chain licensed by DEWR and hosted on DEWR's Azure tenancy."

The response

Deloitte said the updates "in no way impact or affect the substantive content, findings and recommendations." A Deloitte spokesperson said "the matter has been resolved directly with the client."

Labor Senator Deborah O'Neill was harsher. "Deloitte has a human intelligence problem," she said. "… A partial refund looks like a partial apology for substandard work."

At Senate estimates on Oct. 8, Finance officials said they learned of the errors from the media, PS News reported. The next morning, DEWR Secretary Natalie James said: "My people should not be double-checking a third-party provider's footnotes. I am struck by the lack of any apology to us." Murray Watt, the minister representing the portfolio, said: "We, of course, expect departmental processes to ensure that the quality of work received from consultants is high." Greens Senator Barbara Pocock called for a full refund.

Deloitte told the government it had instructed the report's authors to take training in how to better use AI, PS News reported. By Oct. 12, the AFR reported that Deloitte had apologised and would discipline staff who failed to vet AI-generated material. In its first public statement on the matter, the firm conceded the errors "occurred from the use of AI" and that its "review and oversight processes" had not been followed, the AFR reported.

What went wrong

The references weren't checked. Made-up sources went out in a published government report.
AI use wasn't disclosed at first. The appendix mention of GPT-4o appeared only in the corrected version.
The errors surfaced outside government. An academic spotted them, and Finance officials said they learned of them from the media.
What we don't know yet: which sections the AI tool chain helped write, and whether DEWR has changed its contract terms on AI use.

Our follow-up question for DEWR

Has the department added AI-disclosure or citation-checking requirements to its consulting contracts since the Deloitte report?

Later developments (added Oct. 2026)

On Nov. 24, 2025, CBC reported that Newfoundland and Labrador had asked Deloitte to review the citations in a 526-page health staffing plan after four incorrect citations were found. The province paid Deloitte C$1,598,485 in eight instalments, according to an access-to-information release. Deloitte stood by the report's conclusions. (CBC)

Sources

The Guardian, Krishani Dhanji, “Deloitte to pay money back to Albanese government after using AI in $440,000 report,” Oct. 6, 2025. theguardian.com
ABC News, “Deloitte pays back government after using AI in report containing errors” (video), Oct. 9, 2025. abc.net.au
Australian Greens, “Greens slam Deloitte's unethical behaviour and measly refund over AI report bungle,” media release, Oct. 9, 2025. greens.org.au
PS News, “Government urged to get Deloitte's total fee returned for delivering a botched AI report,” Oct. 12, 2025. psnews.com.au
Australian Financial Review, report on Deloitte's apology (paywalled; summary only), Oct. 12, 2025. afr.com
CBC News, “N.L. asks Deloitte to carry out review after 'incorrect' citations found in $1.6M provincial health plan,” November 2025. cbc.ca

Disclosure: [not in copy] Editor placeholder