By Paul Osborne and Andrew Brown in Canberra

FINANCE Minister Katy Gallagher has admitted the over-reliance of consultancy firms in the public service was worse than expected.

The comments came as senior executives from one of the big four firms will be asked to explain conflicts of interest at a Senate inquiry.

Deloitte chief executive Adam Powick and chairman Tom Imbesi are scheduled to face the committee which is looking at problems with the federal government’s use of consultants in the wake of the PwC tax advice scandal.

The firm said in a submission to the inquiry it was aware of two incidents of conflicts of interest.

In August 2022, it was identified Deloitte had breached its own independent and conflict management policy when it did not seek pre-approval from the auditor-general to audit an unnamed government entity, while it was also auditing other data held by the same entity.

The auditor-general later concluded it “did not represent an independence threat to the financial statements being audited”.

The second incident involved a conflict of interest identified by the auditor-general in its report on a home affairs department procurement.

Senator Gallagher said while she was aware of an over-reliance on consultancy firms being used for government projects, the scale became apparent after she won office.

“It is a problem – it is worse than I thought,” she told ABC Radio on Monday.

“We’re taking steps to rectify that, but it’s going to take a bit of time because of the way the imbalance has occurred over particularly the last five to seven years.”

The finance minister said the government was trying to bolster in-house consultancy for the public service.

“There will always be things that you need to seek external advice from, but at the moment, the balance is out of whack,” she said.

Shadow treasurer Angus Taylor said conflicts of interest with consultants needed to be better managed.

“Government can become a better client. That means using consultants for when they have real value. There are times when consulting skills are extremely useful to government and to businesses,” he said.

“If there are conflicts of interest, they need to be managed properly, and they should be dealt with forensically and appropriately.”

Deloitte said the firm took its obligations about the use of confidential information seriously.

“Any matters in relation to the misuse of confidential government information would be investigated in line with our normal processes.”

Those processes were overseen by the firm’s ethics and conduct leader, or in matters relating to confidentiality led by the business security officer.

Consequences could include disciplinary actions.

In 2022/23 the company took disciplinary action in one case of misuse of government information and the previous year took similar steps in relation to one conflict of interest matter.