A consulting giant hired to crunch the numbers on Victoria’s bid for the Commonwealth Games did not scrutinise the supplied costings.
A long-running inquiry into the doomed 2026 Games resumed public hearings on Aug. 9.
The ill-fated event was axed in July 2023 following a massive estimated cost blowout.
A business case for the regional Games, developed by the Department of Jobs, Skills, Industry and Regions, was inadequate for the government to make an informed decision on costs, Auditor-General Andrew Greaves found.
The department separately hired KPMG to model the economic impacts of hosting the event based on projections by fellow consulting firm EY.
KPMG principal director Michael Malakellis, who led the project, told the inquiry the 22-page report was delivered within a four-week deadline and cost about $55,000 (US$36,100).
Liberal MP and committee member David Davis compared the model to a “black box.”
“Rubbish in, rubbish out … you’ve been provided with information on which you had to rely,” he said.
“That is correct,” Malakellis replied.
The senior economist said KPMG had no knowledge about whether the estimates were solid or not.
KPMG’s work was previously described as a peer-review of the business case, but risk management partner Marcus McArdle said that would require digging into the inputs.
The auditor-general ultimately ruled the business case relied on “desktop research” of what previous Games had cost, which did not properly account for Victoria’s multi-city model and tight deadline.
Ana Delevska, one of three academics who wrote an independent paper on the cancelled Games, said the review omitted basic information.
“If a student submitted this as an assignment, missing these aspects, they would fail,” the Melbourne Polytechnic lecturer said.
In response, department secretary Tim Ada said the business case was completed under “incredible time pressure.”
“That was led by a desire, including by the Commonwealth Games Federation, to have a host in time for the Birmingham Games,” he said.
In early March 2022, Ada’s department urged then-sports minister Martin Pakula to seek government approval for a Games budget of up to $3.2 billion (US$2.1 billion).
A submission recommending that amount was signed off on by Pakula on March 10 but a final version, dated the same day and given to government, recommended a $2.7 billion (US$1.8 billion) budget.
Ada could not explain what led to the change.
“This is the original sin,” Davis said.
The Commonwealth Games Federation is yet to reveal a replacement host for the 2026 event despite planning to announce one in May.