Deloitte used AI to write an Australian government report and had to refund $290,000

In August 2025, the Australian Financial Review reported that academics had raised the alarm over a report Deloitte had written for Australia's Department of Employment and Workplace Relations, alleging it contained fake academic references and invented quotes. The report was meant to review a compliance framework tied to the country's welfare system.

Deloitte confirmed to Australia's Department of Finance, in an email later released under freedom-of-information law, that its use of generative AI tools had produced 'inaccurate outputs' — citations in the footnotes and reference list that did not check out. The firm republished a corrected version of the study in September 2025.

In November 2025, Deloitte refunded A$290,000 of the A$440,000 it had charged the government for the work, after the errors became public and drew sustained scrutiny over consulting firms' use of AI on taxpayer-funded contracts.

Refunded A$290,000 of the A$440,000 fee; republished a corrected report after academics found fabricated citations and quotes.

Deloitte used generative AI tools to help draft the report without verifying the citations and quotes the tools produced.

Nobody at the firm cross-checked the footnotes against the actual academic sources before delivering the report to a government client.

Academics who reviewed the published report were able to find that several of the cited studies and quotes did not exist.

Generative AI output used in a paid client deliverable still needs human verification — fabricated citations are easy to catch and expensive to admit to.

Deloitte republished the corrected report in September 2025 and refunded part of its fee in November 2025. The episode became a widely cited example in later reporting — including a Rest of World roundup of AI hallucinations in government documents — of consulting and government clients failing to verify AI-assisted work before publication.