Consultancy firm EY did not tell the New South Wales government it was conducting work for Santos before being awarded a $67,375 contract to inform a policy statement that greenlit the gas giant’s Narrabri development.
EY’s involvement in the government’s “future of gas statement” was not disclosed in the July 2021 report that described the Narrabri project as “critical to drive regional economic development and support supply security”.
The statement, which was used by the government to announce it was “backing in Narrabri gas project”, also did not disclose EY was being paid by Santos for assurance services. EY separately offers gas companies strategic advice on issues like “changing regulations”.
The payment to EY was subsequently revealed in the department of regional NSW’s annual report, which disclosed payments to consultancy firms worth more than $50,000. It said EY’s work was part of the future of gas statement project.
An EY spokesperson told Guardian Australia it did not disclose the separate paid work with Santos as it did not consider it to be a real or perceived conflict of interest.
“There is no overlap between the services EY provided to the NSW government and the firm’s external assurance work for Santos,” the spokesperson said. “Any suggestion of a conflict of interest, or that EY advocated for Santos, is inaccurate.”
“The work we undertook was economic modelling – identifying the impact of gas price changes on the NSW economy. The parameters of that modelling were set by the government.”
But the current NSW minister for natural resources, Courtney Houssos, criticised EY’s lack of disclosure. She said the incident demonstrated a need to “overhaul the use of consultants in the public service”.
“The revelation of another potential undisclosed conflict of interest under the former government adds to a systematic pattern of behaviour which only serves to undermine confidence in the development of public policy,” Houssos told Guardian Australia.
“The NSW government has been clear and consistent in expressing significant concerns around the growth in the use of consultants in the public service under the former government.
“The government will also consider whether existing rules around disclosures of conflicts of interest are sufficient, as part of its broader consideration of the rules around the use of consultants.”
Greens MP Abigail Boyd, who is leading a NSW parliamentary inquiry into consultants, also rejected EY’s assurances.
“The NSW government should never have offered this work to EY and EY should never have accepted it,” Boyd said. “This decision has and will have a very real impact on community and climate.”
A department spokesperson said EY provided economic analysis of “alternate gas price profiles in NSW”, which was “one of many inputs into the future of gas statement”.
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Former public service commissioner, Andrew Podger, said EY should have been more transparent with the NSW government and disclosed the Santos work to avoid any perception of a conflict of interest.
“While EY’s business with Santos was not directly related to its work for the NSW government, it would have been wise for EY to recognise the possibility of a perception of a conflict from receiving income from a company that would be affected directly by gas price changes,” Podger said.
The Centre for Public Integrity’s research director, Catherine Williams, said the contract with EY showed the need to break-up the “audit and consulting branches of these firms”, an idea championed by former competition watchdog Allan Fels.
“Even if conflicts of interest are able to be managed, the perception of them is not and they are capable of having a seriously damaging impact upon public trust,” Williams said.
“Disclosure and management of conflicts is not always going to suffice. Sometimes, they simply need to be avoided in the first place.”
An EY spokesperson said the firm was “prohibited from advocating for audit clients under the APES110 Code of Ethics for Professional Accountants, a standard which auditors are required to comply with”.
“Management of potential conflicts of interest and independence is, and always has been, of utmost importance to EY and is reiterated in our global code of conduct which every EY employee abides by,” the spokesperson said.
