Deloitte used AI in $1.6M government report, but watchdog says it can’t investigate

Last year, one of the world’s most trusted accounting firms produced a Health and Human Resources Plan for the government of Newfoundland and Labrador. There was just one problem: the costly document had clearly been prepared with the assistance of artificial intelligence — and contained multiple hallucinated citations that simply didn’t exist. 

The firm, and its clients in government, acknowledged the errors but stood by the plan. Now, the provincial watchdog responsible for oversight of accounting firms says it will not be investigating Deloitte following a complaint about the firm’s use of AI in the $1.6-million human resources report it produced for Newfoundland and Labrador’s department of health last year.

That’s because a sleight of hand in the corporate structure of one of the world’s most recognizable audit firms puts much of its core business in the wild west of corporate consulting — and outside the professional standards and oversight of the accounting profession. 

Ricochet and The Independent have also learned that the provincial government and Deloitte collaborated on a response to a media query about the scandal which prompted the Tony Wakeham provincial government to change its policy around AI disclosure in the public procurement process.

Together, the revelations suggest a “troubling” lack of transparency in the PC government while raising the question of whether the province should be paying public money to large consulting firms, according to the province’s NDP leader, when such work could be conducted within government and with greater accountability to the people of the province.

“ I’m not averse to spending public money if it’s about improving services, but there’s an expectation of accountability,” Jim Dinn said in a recent interview with The Independent. “Secondly, it has to do with the healthcare system and we’ve got to get this right in many ways – so it’s got to be subject to scrutiny.”

Do you know which Deloitte your government is hiring?

In March, The Independent reported that Chartered Professional Accountants NL (CPA NL) decided to investigate Deloitte after receiving a complaint from Codroy Valley resident Chris Bruce, who asked the watchdog to look into the global accounting and consulting firm’s apparent use of AI, which Bruce alleged was “in bad faith” and argued the firm was “not trying to find the best path forward” for the province’s healthcare staffing crisis.

“They were trying to sell a particular path,” Bruce wrote in his November 2025 application.

Last November, The Independent reported that at least four citations in Deloitte’s Health Human Resources Plan for the provincial government did not exist and appeared to be produced by artificial intelligence. The firm acknowledged the errors but stood by the quality of its work. 

The Department of Health and Community Services is also standing by Deloitte’s work. “The long-term value of Deloitte’s Health Human Resource Report lies in the occupational forecasting model it provided,” said media relations manager Khadija Rehma in an emailed statement on behalf of the department. “The erroneous AI-generated citations identified in the report summary did not affect that model.”

Provincial legislation empowers CPA NL to investigate allegations against individuals or corporations that sell accounting services, then determine whether the accused party is culpable of professional misconduct or professional incompetence.

If the organization’s complaints committee decides there are “reasonable grounds” to believe an accused party has “engaged in conduct deserving of sanction,” it can “suspend or restrict either or both” of their licence or certificate, refer the complaint to CPA NL’s disciplinary panel, or simply “counsel or caution” the firm, according to the province’s Chartered Professional Accountants and Public Accountants Act.

But in a letter dated May 28, 2026, CPA NL Complaints Authorization Committee Chair Trevor McCormick tells Bruce the organization cannot carry out the investigation because Deloitte Inc., not Deloitte LLP, was the legal entity contracted by the province to produce the report. 

“The report in question was prepared and delivered to government under a contract between the Government of Newfoundland and Labrador and Deloitte Inc., which is not a registered firm with the Association. While Deloitte LLP is a registered firm, it was not a party to the contract and had no involvement in the report,” McCormick writes in his letter to Bruce, explaining the distinction between Deloitte’s accounting and consulting arms.

“The work carried out for the report by Deloitte Inc. consisted of management consulting work, and did not engage any aspects of public accounting, such as an audit, which work is restricted to CPAs requiring a licensed auditor under the Act,” he continues. “The report was authored without the involvement of any CPA NL members, CPA NL students, or any members of the Deloitte LLP’s NL firm,” and therefore, McCormick notes, “in these circumstances the Committee does not have jurisdiction to consider the merits of the allegation against non-CPA NL members.”

Deloitte involvement deceptive, says complainant

Bruce says he’s happy to learn no CPAs were involved in creating the province’s new Health Human Resources Plan. Had there been, “it would’ve been a dereliction of duty, basically.” But he says the watchdog’s finding that various branches of one of the world’s largest audit firms are held to different standards reveals a greater problem.

“Part of the business model of modern consulting firms, it would seem, is to operate in these less regulated environments,” he says. “Had more reputable people been participating in the formation of the study, they may not have been allowed to give the same advice [to government]. And they certainly wouldn’t have been allowed to use fake citations.”

Bruce says the division of labour between Deloitte’s accounting and consulting arms means the firm’s consultants “get to use the good reputation of Deloitte’s accountants to get access to more work and sell lower quality work with the appearance of the credibility of their accounting wing.”

He points to Deloitte’s report itself, noting there’s “no reference that it wouldn’t be [produced] by Deloitte the accounting firm until the watermark on the last page.

“They just say Deloitte with a period, which is a brand identity that all the different branches of Deloitte use collectively, but have these different obligations under it. And that seems unfair to me, like it is doing sort of a reputational laundering. And the consultants at Deloitte don’t deserve the same prestige as the accountants at Deloitte if they’re going to be behaving in the way that they are by using fake citations.”

The consulting and accounting wings of the companies “use a variety of shared resources to improve their tax operations and their efficiency. But it would seem that they also get access to a market that is incredibly less well-regulated than accounting,” Bruce says, adding there “doesn’t seem to be an appetite or a body that could or would regulate consultants, because they would say [consulting] is just giving advice rather than sort of direct operational direction.”

Consulting ‘highly lucrative’ work without same level of scrutiny: professor

The largest, by revenue, of the “big four” global audit firms – the others being PricewaterhouseCoopers (PwC), EY and KPMG – Deloitte’s brand name carries significant weight around the world, says Ryan Stack, an associate professor of accounting in Acadia University’s Manning School of Business.

Stack says people may think of Deloitte “as a big audit firm,” but that the corporation’s various branches engage in non-accounting work that isn’t regulated the same way chartered professional accountants are.

“The reason that accounting is regulated the way it is, that auditing is regulated the way it is, is because there’s a public interest in having high confidence in what accountants do in terms of doing the audit or these other services,” he explains. “We think of big firms all the time [and] we’re talking about them doing work for public markets, right? You do an audit, and that audit means if I’m looking at the financial statements of Cineplex or TD Bank or something, the fact that Deloitte or PwC has put their stamp on that and said, ‘This accurately reflects what’s going on in this organization,’ — that gives me higher confidence. And so we try to regulate that.”

But in recent decades big accounting firms have expanded to offer management and other forms of consulting services. “One of the reasons they’ve done it, in truth, is because it can be highly lucrative and because it doesn’t have that same level of scrutiny, or that same level of direct regulation,” Stack says. “Meanwhile, the consulting arm of Deloitte certainly benefits from the reputation of the audit arm of Deloitte.”

Deloitte helped draft government messaging

When The Independent reached out to the province in November 2025 for the initial story, the government said it had “directed Deloitte to confirm the accuracy of the citations and literature review.

“We look forward to them completing their review so we can assess how serious an issue this is and take the appropriate steps,” the statement read.

Internal emails obtained by The Independent through an access to information request reveal that government communications staff involved Deloitte in crafting the government’s messaging to media.

On November 20, 2025, an hour before the Department of Health and Community Service’s deadline to respond to The Independent’s request for comment, a communications staffer emailed the proposed response to other high-ranking communications officials, but the statement is redacted in its entirety. A note beneath the statement indicates the message was “approved by” Health Minister Lela Evans, Deputy Minister John McGrath, and “Deloitte”.

However, less than an hour later the same communications person sent another email to the communications team noting, “Deloitte has requested a small edit,” followed by a redacted line, and ending with, “HCS DM [Deputy Minister] suggests the highlighted edit below. Approved with that edit?”

The department did not send a statement that day. The next message in the email thread obtained by The Independent comes from controversial Conservative consultant Steve Outhouse, who at the time was on contract with the Wakeham government as an advisor, noting, “Approved statement is below,” accompanied by an entirely redacted paragraph.

A couple hours later, and almost 24 hours after the original deadline for the statement, another senior communications staffer emails the group saying Minister Evans “was not comfortable” with the response, and that she had drafted her own, which is the one eventually shared with The Independent and other media outlets.

In an emailed statement for this story, Rehma said on behalf of the Department of Health and Community Services that, “Deloitte was consulted only to confirm the timeline of the review to ensure that this component of the statement was factually accurate.”

The records released through the access to information request cite Section 29(1)(a) of the province’s Access to Information and Protection of Privacy Act, 2015, which says the government can withhold information “that would reveal advice, proposals, recommendations, analyses or policy options developed by or for a public body or minister.” 

Meanwhile, the redaction of what appears to be information about Deloitte’s requested change to the statement cites Section 35(1)(d) of the Act, which says government does not have to release information, “the disclosure of which could reasonably be expected to result in the premature disclosure of a proposal or project or in significant loss or gain to a third party.”

Dinn says Deloitte’s involvement in crafting the government’s response to Ricochet’s request “smacks of a lack of transparency and a conflict of interest.

“We’ve had enough scandals within the system, and especially with regards to the use of AI, that it should be open to scrutiny,” the NDP leader said. “I’ve had trouble, when it comes to transparency, with both [Liberal and PC] governments. But certainly with the PCs, they’ve promised [transparency], and yet they’ve engaged Deloitte in writing the media release on it.”

Justin Brake is a Local Journalism Initiative reporter based in Newfoundland, on a new beat covering Atlantic Canada for Ricochet Media and The Independent. Contact him with tips and story ideas at justin.brake@theindependent.ca.