By asking the Office of the Auditor General (OAG) to investigate government contracts awarded to the firm McKinsey, the House of Commons has given the guardian of the public accounts a “hot potato” that he would most likely have done without.
This highly political order emanating from Parliament could pose a problem for the impartiality of the BVG. The Auditor General is, in fact, asked to pass judgment on the work of a firm belonging to an industry with which her office is intimately associated. Appearances of institutional conflict of interest should not be taken lightly.
Almost symbiotic links with multinational consulting firms
The BVG spent a dozen million dollars on consultants in 2022-2023, or about 10% of its budget. No contract concerns McKinsey. But there are many contracts with McKinsey’s competitors, the “Big Four”: Deloitte, Ernst&Young, KPMG and PwC. These firms alone receive a large share of the sums spent by the Bureau on consultants.
Most auditors general have gone through one or other of the “Big Four” before being appointed to their position. Karen Hogan, the current incumbent, worked at Ernst&Young, as did her predecessors Sylvain Ricard (2019-2020), Sheila Fraser (2001-2011) and Denis Desautels (1991-2001). And even before them, there was James J. Macdonell (1973-1980), of Price Waterhouse and founding president of the Canadian Association of Management Consultants. As auditor general and head of the consulting industry, he played a key role in integrating these two worlds.
The connections between the BVG and the audit and consulting giants are dense and multiple. They are institutionalized through at least two structures within the Office: the External Audit Committee and the Group of Principal Advisors, the majority of whose members come from the “Big Four”. These same firms also get the lion’s share of government contracts for consultancy services. McKinsey received 120 million in seven years (2015-2022), but the big four collected 692 million in two years (2020-2022).
The lucrative performance audit market
The OAG must have sighed with relief when the call to expand the McKinsey investigation to include the “Big Four” was ignored. This would have put the organization in a real conflict of interest situation. In McKinsey’s case, it’s more about perceptions. The Bureau has no relationship with the firm. Its links are with Deloitte, Ernst&Young, KPMG and PwC.
Unlike McKinsey, these companies don’t just sell consulting services. They are also originally accounting firms. They started with financial auditing, a proven, calculable and reliable technology, and have replicated this model in other areas of management, such as performance or value for money auditing. With this broadening of the notion of audit, accountants transformed into consultants and, since then, they have dominated the global consulting market.
The “Big Four” are part of the same market or industry as McKinsey. Their members share the same networks of experts and similar paradigms. The BVG is closely intertwined in this complex of social and professional relations. He is not outside this reality. Are Big Four consultants employed by the Bureau participating in the McKinsey audit? Do the “senior advisers” give opinions on this mission? These are all questions that arise when consultants investigate other consultants.