Deloitte Refunds $440M Australian Government Over AI-Fabricated Report Errors

Deloitte Australia has agreed to partially refund the Australian government $440,000 following the discovery that a 2024 report commissioned by the Department of Employment and Workplace Relations (DEWR) contained numerous fabricated citations and quotes generated by AI, specifically Azure OpenAI's GPT-4o. The report, which reviewed an automated penalty system for welfare compliance, was found to include fake academic references and a fabricated quote from a federal court ruling, raising serious concerns about the use and oversight of AI in professional consultancy work. University of Sydney researcher Chris Rudge identified multiple errors and AI hallucinations in the report, noting that Deloitte's revisions replaced some fake references with even more fabricated ones rather than correcting them. Despite these issues, Deloitte maintained that the core findings and policy recommendations of the report remained valid. The incident has intensified scrutiny of the transparency and accuracy of AI-assisted analyses in government contracts, highlighting risks associated with overreliance on AI-generated content without sufficient human verification. The Australian government and Deloitte have both acknowledged the problems, with Deloitte agreeing to refund the final payment and the department releasing a revised version of the report with corrections and disclosures about AI usage.