The growing fallout from KPMG Australia’s governance crisis is raising fresh questions about how supplier integrity is assessed, monitored and enforced once contracts are awarded, as state governments demand assurances and ASIC launches a formal investigation.
The Australian Federal Government has placed more than $270 million in KPMG contracts under scrutiny as a growing data-misuse scandal unfolds, with the Department of Finance formally declaring it a “significant event”.
The Federal Government updated its procurement policy last Thursday, reminding officials that a supplier’s history of unethical behaviour and performance deficiencies must be considered during tender evaluations, with decisions documented where appropriate.
While the Department of Finance undertakes its review, which is expected to run from this week until 30 September, KPMG has agreed to stop bidding on government work for three months.
“This review will closely examine whether KPMG breached the standards expected of government suppliers, and whether taxpayers were charged for work that fell short of those standards,” said Finance Minister Katy Gallagher.
While the Commonwealth Procurement Rules already require officials to consider a supplier’s past performance and behaviour, the KPMG matter raises broader questions about how governments assess integrity risks once contracts have been awarded.
The issue is particularly significant given the central role major consulting firms continue to play in delivering advisory, audit and professional services across the public sector.
Under reforms introduced following the PwC tax leaks scandal, government agencies have placed greater emphasis on supplier conduct and integrity, including seeking assurances about the personnel involved in public sector work.
According to media reports, all states except Tasmania have demanded assurances and updates that their data has not been misused.
In a letter seen by the Sydney Morning Herald (SMH), NSW Treasury Secretary Michael Coutts-Trotter reportedly told KPMG to reveal, “as a matter of priority,” what it will do to address issues arising from its “ethical lapses”.
He has also requested a list of active contracts that KPMG has with all NSW government agencies, regardless of procurement arrangements.
Echoing this, a statement from NSW Minister for Finance Courtney Houssos said the NSW Government was “seeking assurances about the management of confidential information and whether any personnel under investigation are currently working on NSW Government contracts”.
Adding that the information provided by KPMG would “inform any further action the government may take”, Houssos said she expects all suppliers to meet the highest standards of integrity, governance and professional conduct.
She also noted that since coming to office, the Minns Government has strengthened procurement rules, tightened conflict-of-interest safeguards and reduced reliance on consultants across government.
According to SMH, a spokesperson for the Victorian Government labelled the KPMG fallout “a serious matter” and said the government would be reviewing its contracts with the professional services network.
“We are considering our next steps to ensure government information has not been inappropriately used,” they said. “We will also review all contracts with KPMG.”
The scandal itself centres on allegations first raised by a whistleblower – believed to be a former audit director at the firm – in May 2024, who claimed KPMG misused confidential client information to win audits.
The matter went on to gain national attention in March 2026, when Labor Senator Deborah O’Neill raised the allegations in Parliament under parliamentary privilege.
According to the Australian Financial Review (AFR), the claims allege that KPMG partners misused confidential Lendlease board papers to pitch for and win external audits of Westpac and Dexus, and used inside information to also win work from Macquarie Group.
Lendlease is reportedly reviewing an auditing contract worth $10 million annually, while Westpac is reportedly reconsidering a 2024 contract valued at approximately $32 million.
Following the whistleblower’s allegations, internal and external investigations commissioned by KPMG did not substantiate the claims.
However, after the whistleblower complained to several board members, another external law firm, Allens, was brought in to conduct a further investigation.
Allens’ ongoing investigation reportedly identified issues not uncovered in the earlier reviews, including an incident in which client documents were inappropriately shared internally.
KPMG Australia has confirmed that its treatment of the whistleblower and its internal investigations into the allegations “fell short,” adding, “we apologise unreservedly to the whistleblower,” as reported by Crikey.
Following its own scandal, PwC agreed not to bid for new government contracts from April 2024 to July 2025.
The company went on to sell its government advisory business, which had accounted for a fifth of its revenue, for $1, with the renamed entity, Scyne Advisory, subsequently allowed to re-enter the government contracting market.
Whether KPMG faces the same outcome is now a central question for the Federal Government.
The controversy is shaping up as one of the first major tests of the supplier integrity reforms introduced after the PwC tax leaks scandal, and may help determine how governments respond to future concerns about governance, culture and ethical conduct among major suppliers.
