Cancelling existing PricewaterhouseCoopers contracts would put taxpayers at "significant financial risk", the government has warned.
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Calls for the government to dump or suspend current PwC contracts have intensified amid revelations major departments including Treasury and Defence are relying on the scandal-hit consultancy to conduct internal audits, potentially giving partners and employees at the firm access to sensitive information.
But Finance Minister Katy Gallagher has slammed insinuations that donations the embattled firm gave to both the major political parties had helped it win government contracts.
In exchanges that were at times ill-tempered, opposition and crossbench Senators used estimates hearings to probe Treasury officials on the extent of the department's use of PwC, when it knew of the alleged PwC confidentiality breach, actions it was taking to ameliorate the risks involved in engaging external advisers and the feasibility of ripping up current contracts or banning the firm from future work.
Outside the hearing, Greens senator Barbara Pocock said the government should slap PwC with a "straightforward and open ban of any new contracts".
"In relation to the large body of existing contracts, I think we should have a pause on any for which there is an identified conflict of interest, potential, perceived or actual," Senator Pocock said. "So all of those contracts should be being looked at very carefully right now. Pause if that is a possibility and shut down if it's seen to exist."
But Senator Gallagher warned such action could be costly.
The minister insisted she was not defending PwC.
"What they have done here is absolutely outrageous and, appropriately, has been referred to the AFP [Australian Federal Police]," Senator Gallagher said.
But the minister said former PwC tax partner Peter Collins had not been engaged under a procurement contract when he allegedly perpetrated the confidentiality breach and so "there was no breach of procurement".
Treasury secretary Steven Kennedy told the hearing the procurement of this and other services "is a matter to be considered carefully".
"We are going to very carefully consider our future procurement arrangements as they come up," Dr Kennedy said.
"We are going to act in line with advice provided to us by the Finance Department."
But the Treasury secretary echoed Senator Gallagher's warning that cancelling existing arrangements with PwC could be costly.
"This is a significant firm that provides a large range of services to the government," he said.
"I am in no way diminishing the circumstances around this firm. That is reflected in my referral [of the alleged confidentiality breach] to the AFP.
"We are carefully working through all these matters and ensuring that we do not feel exposed from a risk point of view...particularly with our obligation to ensure that we do not impose on the public unnecessary financial consequences."
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Earlier, Dr Kennedy confirmed to the Senate Economics Legislation Committee hearing that PwC was providing internal audit services to the department on a contract that Greens senator Nick McKim claimed was worth $985,000.
Dr Kennedy refused to endorse Senator McKim's assertion the PwC auditors had "unobstructed access" to Treasury information and Treasury deputy secretary Roxanne Kelly said the auditors only had access to information relevant to their audit work.
Ms Kelly said they were blocked from Treasury's document management system but did have access to the Treasury intranet and a secure SharePoint site set up specifically for audit purposes. She added that no PwC auditor currently had access to a Treasury laptop.
Ms Kelly said any sensitive material required by the PwC auditors was reviewed in person in consultation with the relevant business unit within Treasury.
Ms Kelly said PwC had assured Treasury that neither of the PwC staff involved in providing internal audit services were connected with the confidentiality breach.
Dr Kennedy said Treasury was closely examining the audit arrangement, confirming the contract terminates at the end of the year.
During the heating Senator Gallagher hit back at Senator McKim after he raised questions about the contracts awarded to PwC and its history of donations to the major political parties.
The Greens senator asked if "there is a problem here with the relationship between the major parties and the Big Four consultancies".
But Senator Gallagher said all the laws around political donations had been adhered to by Labor and objected to Senator McKim's insinuation.
"Your implicit allegation is that because donations are made that results in procurement contracts being awarded," she said. "That's absolutely offensive.
"If you've got specific allegations, make it. Don't just sneer from the sidelines and throw dirt and hope some of it sticks."
Adrian Rollins
