Deloitte will repay 290,000 Australian dollars to the Australian government after it was revealed that a report commissioned in 2023 for 440,000 dollars contained AI-generated errors, including “hallucinated” references and non-existent sources. The scandal surfaced in October 2025 and sparked heated debate about the use of public funds and the unchecked application of AI technologies.
The document included references to academic studies and books that do not exist, and even misattributed a quotation to a federal court ruling. These errors were typical examples of AI “hallucinations”, where the technology produces information that appears credible but is in fact fabricated. Deloitte ultimately refunded 66 percent of the contract’s value, amounting to 290,000 dollars, acknowledging that the material delivered had not met professional standards. The government stated that the main findings and recommendations of the revised version remained unchanged, yet the exposure of the errors caused significant reputational damage.
The case demonstrates that the unregulated use of AI in government reports can result not only in factual inaccuracies but also in major financial losses, with the refund covering two-thirds of the original contract. Following the scandal, Deloitte admitted that false entries had appeared in the report’s footnotes and references, necessitating the publication of a corrected version. The incident is expected to lead to stricter rules for the future use of AI in the public sector, with a particular focus on transparency, disclosure of AI involvement, and stronger quality assurance requirements.
Sources:
1.
ROD MCGUIRK
2.
Nino Paoli
3.
Krishani Dhanji
