Deloitte refunds $440K after AI creates fake citations in Aussie government report

Deloitte Australia will refund the Australian government for a report containing AI-generated fake citations and nonexistent research references that were discovered after publication. The consulting firm quietly admitted to using GPT-4o in an updated version of the report, after initially failing to disclose the AI tool’s involvement in producing the $440,000 AUD analysis of Australia’s welfare system automation framework.

What you should know: The fabricated content was discovered by academics who found their names attached to research that didn’t exist.

• Chris Rudge, Sydney University’s Deputy Director of Health Law, noticed citations to multiple papers and publications that did not exist shortly after the report was published in August.
• The report included fake references to nonexistent reports by Lisa Burton Crawford, a real University of Sydney law professor, who said she was concerned to see research falsely attributed to her.
• A fabricated quote was also attributed to federal justice Jennifer Davies (misspelled as “Davis” in the original report).

The big picture: This incident highlights the risks of undisclosed AI use in professional consulting work, particularly for government contracts requiring rigorous fact-checking.

• Of the 141 sources cited in the original report’s extensive “Reference List,” only 127 appear in the corrected version published Friday.
• Deloitte buried its AI disclosure on page 58 of the 273-page updated report, describing the use of “a generative AI large language model (Azure OpenAI GPT-4o) based tool chain.”

Why this matters: The case demonstrates how AI hallucinations can compromise the integrity of high-stakes government analysis and policy recommendations.

• The report focused on Australia’s welfare system automation framework, a critical area affecting thousands of citizens’ benefits and penalties.
• Despite the fabricated citations, a DEWR spokesperson said “the substance of the independent review is retained, and there are no changes to the recommendations.”

What they’re saying: Experts argue the flawed methodology undermines the entire report’s credibility.

• “It is concerning to see research attributed to me in this way,” Crawford told the Australian Financial Review in August. “I would like to see an explanation from Deloitte as to how the citations were generated.”
• Rudge said “you cannot trust the recommendations when the very foundation of the report is built on a flawed, originally undisclosed, and non-expert methodology.”
• “Deloitte has admitted to using generative AI for a core analytical task; but it failed to disclose this in the first place,” Rudge added.

Financial impact: Deloitte will repay the final installment of its government contract, though the specific amount remains unclear from the total $440,000 AUD ($290,000 USD) cost to Australian taxpayers.