Deloitte Australia has agreed to refund part of its $440,000 fee to the federal government after admitting that it used generative AI to help produce a Department of Employment and Workplace Relations (DEWR) report, which contained false references and a fabricated court quote.
The report, released in July, examined the IT system automating welfare payment penalties. Within weeks, University of Sydney academic Dr Christopher Rudge identified numerous errors, including fake academic citations and a non-existent judgment quote, prompting Deloitte to investigate. A revised version, quietly uploaded to DEWR’s website before a long weekend, removes more than a dozen false references, rewrites the bibliography, and corrects typographical mistakes.
The updated methodology section now discloses that Deloitte used an Azure OpenAI GPT-4o tool to address “traceability and documentation gaps”. Rudge said this confirms AI hallucinations were responsible for the original report’s inaccuracies and criticised the firm for failing to disclose its use of AI upfront, arguing that “the core analysis was done by an AI” and its recommendations are therefore unreliable.
DEWR stated that while the “substance” of the review and its recommendations remain unchanged, Deloitte will repay the final instalment of its contract (amount undisclosed). Since 2021, Deloitte has earned nearly $25 million from DEWR contracts.
The incident is an embarrassment for the firm, which markets itself as a leader in AI adoption and training. It comes amid growing public concern over the unregulated use of generative AI in the workplace. Despite Deloitte’s internal review attributing the problems to human error, the revised report confirms that false references to academic works and a fabricated court quote were deleted. Both report versions identified serious flaws in DEWR’s welfare compliance systems, including inadequate documentation, undetected defects, and a punitive design that exacerbated the impact of system errors on welfare recipients.
Source: AFR.com
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