KPMG Australia going cap in hand for $100m in loans

The Australian arm of embattled consultancy KPMG is considering seeking up to $100 million in loans from the global wing of the firm amid signs that it continues to do work for the federal government worth tens of millions of dollars.

KPMG has been in strife in Australia as it deals with the fallout from a whistleblower scandal that has cost it several marquee clients.

KPMG Australia chief executive John Sams has also presided over major job cuts.Alex EllinghausenAn anonymous KPMG whistleblower warned the firm of a raft of serious allegations in 2024, including that senior partners had misused confidential information to win work. The claims were dismissed until Senator Deborah O’Neill went public with the allegations in March.

On Monday, The Australian Financial Review reported that KPMG Australia chief executive John Sams was in the process of asking KPMG’s global network of firms to loan his division up to $100 million and agree to waive its fee to use the KPMG name and resources, which is worth about the same amount.

KPMG is structured as a network of quasi-independent consultancies that operate in different territories under the ultimate supervision of the global head office.

“KPMG Australia continues to work collaboratively with KPMG International to assess financial projections,” a KPMG spokesman said. “KPMG International will consider any funding request in accordance with its governance arrangements.”

No formal request has yet been made by KPMG Australia.

Documents lodged by one KPMG Australia entity show that as of June 30 last year, the company had $610 million in credit facilities and had used $352 million of that.

The document does not represent the full finances of KPMG, which are spread across numerous entities. Sources at KPMG said its total debt, by one measure, was around $250 million today.

The firm has lost major clients in Australia with contracts worth tens of millions annually, including Macquarie and ANZ, though some of the deals are yet to start or will take years to terminate.

Federal and state governments have also frozen KPMG out of fresh contracts, but that barrier has proven porous. An analysis of federal contract data by online news site Politico on Monday found that the government had registered $38.5 million in work for KPMG while the ban, which began on June 13, was in effect.

The Department of Defence accounted for almost $30 million of that sum, showing how deeply embedded KPMG has become in the public service despite Labor’s vows to reduce the federal government’s reliance on consultants.

A spokeswoman for the Department of Finance, which sets the terms for public service contracting but does not approve individual deals, said the pause did not stop existing contracts, or extensions to them.

“It also allows proposals KPMG submitted before 16 June to be finalised,” she said. “The value of the contracts recorded does not, by itself, show that KPMG has bid for new work during the pause. Finance is not aware of any breach of the agreement.”

She said federal rules required the public service to consider a supplier’s ethics, experience and performance history when assessing a contract.

KPMG’s work for the federal government is likely to be overwhelmingly consulting work, whereas the whistleblower described issues in its audit division.

Minister for Financial Services Daniel Mulino flagged on July 1 that the government was considering forcing firms to do either auditing or consulting, but not both.

Hundreds of KPMG Australia staff have lost their jobs.Thomas WieleckiFirms such as KPMG erect internal barriers to ensure that the prospect of consulting work does not taint its client audits, and vice versa, but there are still concerns in the industry about conflicts.

The government has not enacted that proposal, which is only at the stage of an options paper.

Sams, who was appointed to lead the firm in July, has already presided over major job cuts. The firm announced in August that it was making 27 partners and 360 staff redundant.

The loan, as reported by the Financial Review, would help KPMG keep clients and retain partner pay at a higher level. There is no suggestion KPMG Australia is in any solvency risk.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

You have reached your maximum number of saved items.

Remove items from your saved list to add more.