The firm admitted the report contained serious errors, some caused by its use of AI in drafting. The Australian Department of Employment and Workplace Relations (DEWR) confirmed Deloitte will refund the contract’s final payment once the process is formalized.

The report, commissioned in December 2024, assessed the system used to impose sanctions on unemployed people failing to meet program obligations. Deloitte claimed to find problems such as “lack of transparency” linking the system to relevant laws and “technical malfunctions,” suggesting the system assumed noncompliance by default.

Published July 4, the report was soon criticized when Australian Financial Review exposed fake or nonexistent sources and incorrect citations. Dr. Christopher Rundj, from the University of Sydney, called parts of the document “hallucinations” — a term used when AI fills gaps with invented information.

Rather than remove false citations, Deloitte replaced them with new—but equally unsupported ones, raising doubts about the report’s foundation. In its revised version, Deloitte said it made “corrections to footnotes and references,” but insisted the core findings and recommendations remain unchanged.

A ministry spokesperson said the “substance” of the independent evaluation is intact. Deloitte disclosed that some sections were produced “with the help of an Azure OpenAI GPT‑4o AI tool, licensed by the ministry and run in a secure Microsoft environment.” However, Deloitte denied the mistakes were caused by AI and maintained the updates did not affect the report’s content.

Labor Senator Deborah O’Neill sharply criticized the episode, stating, “It seems AI did most of the work. Deloitte has a problem with human intelligence.” She called it “sad if it weren’t so embarrassing” and argued that parties contracting with such firms must know whether the work is done by humans or algorithms.