The private equity firm behind PwC spin-off Scyne Advisory have conceded there are “inherent conflicts” of interest in consultancies working across the public and private sector, as it moved to distance the new venture from the disgraced Big Four firm this week.
Scyne, which was established through a $1 sale of PwC’s government work arm to Allegro Funds in the wake of the tax leaks scandal, told a NSW inquiry it won’t take private sector clients and has instituted more appropriate governance than its predecessor.
Executives from PwC will front a federal Senate inquiry on Friday and are expected to be questioned on fresh allegations about its former chief executive’s conflicts.
Scyne has picked up federal and state work since launching in June last year after getting clearance from both levels of government and also targets not-for-profit and tertiary education sector clients.
It has been established by Allegro as a corporate entity rather than the popular partnership model of the big four consultancies.
“If you look at the individual partners — if you’re doing work on both sides, that’s where the inherent conflict is,” Allegro Funds co-founder Adrian Loader told a NSW inquiry into consultants on Monday.
“The question really is [not] that there is a conflict. The real question is how do you manage it and what are the ramifications for how you actually manage it? It’s easier to manage if there’s no inherent conflict and so therein lies, I think, the challenge.”
The distinction from the sector’s biggest companies comes as several prepare to front a separate federal Senate inquiry hearing on Friday.
PwC has been allocated a near-two hour block at the Canberra hearing, which comes as PwC reportedly confirmed it had launched an internal investigation into its former chief executive, Luke Sayers.
The investigation has been triggered by a whistleblower who alleged Mr Sayers had improperly influenced ASX-listed Helloworld getting PwC’s travel account in 2016, which resulted in access to then-Finance minister Mathias Corman and former Treasurer Josh Frydenberg, according to the Australian Financial Reviewv.
On Monday, Mr Loader told the state inquiry Scyne has instituted an ASX level of governance and adopted a public sector code of conduct standard, with its employees asked to declare conflicts of interest for any project they work on.
Scyne Advisory acting chief operating officer Richard Gwilym said this has already led to the firm turning down work because some conflicts can’t be managed.
“If there are perceived conflicts of interest, they will be declared, and we will decline work where we do not feel it is appropriate to be doing that if such conflict appears to have arisen,”
A 24-year veteran of PwC before joining around 1200 other staff in the move to Scyne, Mr Gwilym is the interim managing partner of the new firm.
He and other PwC partners that made the move to Scyne had to forego the consulting giant’s lucrative retirement benefits scheme known as the partner termination plan.
The PwC scheme reportedly pays around 625 former partner $140,000 a year and has created a conflict of interest itself when the former partners join other companies.
The PwC partners that moved to Scyne received a one-off payment in lieu of the retirement plan and will now be paid regular salaries and superannuation contributions at Scyne, Mr Gwilym told the inquiry.
Scyne has moved quickly to pick up the work of its predecessor, applying for every state procurement panel PwC had been on in New South Wales and it has been approved for all outside of “a couple” still waiting on the application process.
The firm has either taken over or is working with PwC on all of its state contracts that predate the tax leaks scandal, bar one that was considered too close to delivery to switch, the inquiry heard.
PwC’s Commonwealth contracts have also been novated to Scyne, which took its spot on the lucrative Management Advisory Services Panel after being cleared by the federal Finance department in October.
Finance reviewed Scyne to confirm none of the individuals involved in the tax leaks scandal or the subsequent handling of that matter are transferring had made the switch and that the new company had appropriate governance structures, ethics and culture.
Scyne will also be “actively monitored” for the next year, including monthly engagements with Finance, providing a consolidated ethics framework, and bi-annual reporting on implementation of the framework.
