Deloitte to refund Australia for producing faulty AI-assisted report on welfare

Deloitte will repay Australia a portion of its $440,000 fee after the company presented a faulty report on the country’s compliance framework and IT system, which are important to welfare recipients.

In 2024, the Australian government’s Department of Employment and Workplace Relations (DEWR) commissioned a report requiring Deloitte to review its targeted compliance framework and associated IT infrastructure. This system automatically fines welfare recipients if they do not meet certain requirements, such as attending appointments or reporting income.

The review was commissioned with four goals in mind:

• Determine if the system is legally compliant
• If it’s aligned with legislation
• If it’s well-functioning
• To identify any defects or risks in how the automated system operates

The report was first released this year in July and raised more questions than answers. Deloitte’s document included wrong references and citations, some of which turned out to be AI hallucinations, as they did not exist in real life.

Experts cited by the Guardian say the errors may have been caused by the AI “hallucinating” information, especially in places where some data was missing, and, therefore, it had to guess what was missing.

“Instead of just substituting one hallucinated fake reference for a new ‘real’ reference, they’ve substituted the fake hallucinated references, and in the new version, there’s like five, six, or seven or eight in their place,” said University of Sydney academic, Dr. Christopher Rudge, who was the first to highlight errors.

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Deloitte later confirmed that it used AI to produce the report and fixed its mistakes. However, the company stated that the corrections did not change the report’s main findings or recommendations.

Although the fee Deloitte will repay to Australia for the $440,000 contract is reported to be “partial,” its size has not been publicly disclosed. So far, Deloitte has not issued a public statement on the matter.

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