INNOVAREModule 6 · AI Project Management

Case 1: The Report That Made Itself Up

A $440,000 government report, produced with AI, cited sources that did not exist. The failure was never the technology — it was the project discipline that was skipped before anyone started.

July 2026 · Case 1 of 6
As you read — hold this question

Before an organisation goes hunting for a problem for AI to solve, what has to be true — and whose name is on the outcome when the machine's work turns out to be wrong?

$440k
the cost of an Australian government report, produced with generative AI, that invented roughly twenty of its own sources.

Deloitte was paid about $440,000 to review an automated welfare-compliance system. When an expert read the report closely, the references fell apart: books that were never written, academics cited for papers they never published, and a quote attributed to a Federal Court judge from a judgment she never delivered. Deloitte later confirmed the report had been produced with the help of a generative AI system and refunded part of the fee. A review of an automated system — itself undone by unchecked automation.

What actually happened
Quiz: Charter & Initiation

A review of a machine, undone by an unchecked machine

The report was not about nothing. It reviewed an automated system government had used to police welfare compliance — a system that had already, unlawfully, cut off payments to real people. The AI-assisted review meant to hold that system to account fabricated its own evidence. Two failures, the same victims: the machine that caused the harm, and the machine brought in to check it.

Notice what did not fail. The technology worked in the narrow sense — it produced fluent, confident, professional prose. It simply was not true. AI projects do not succeed or fail on how clever the technology is. They succeed or fail on how they are managed.

The discipline that was skipped

The AI project charter — the cheapest insurance you can buy

Your course's answer to this failure is a single page: the project charter. It clarifies the problem being solved, the reason for adopting AI, and what success looks like. Each element stops a specific disaster.

Charter elementWhat it forces you to answer
Problem statementThe business problem/need — must be about the business, not the technology
AI technology & objectiveThe solution (short description) and the main objective
ScopeWhat is in, and explicitly what is out
Business case & benefitsWhy do this? Why now? What if we don't? How does it fit business targets?
Strategic goalsAt least 3 OKRs with 2 KPIs each
TimelineInitiating/Planning · Executing · Monitoring/Controlling · Closing
Partners, stakeholders & teamWho is involved, their function, and dedicated time per phase
Responsible AI & ethicsAt least three ethical considerations, with detail
Budget per phaseCost description and cost/price for each phase
The rule above all the others
The scope and problem statement must align with the business objectives, not the AI technology. Everything the Deloitte report skipped — a clear problem, an honest scope, a human accountable for the outcome — is exactly what the charter forces.
Before the charter

Initiation done well — three lenses of blunt questions

The most common way an AI project dies is that nobody stopped to ask whether it should exist at all. Your course frames initiation as three groups of questions (Comptia, 2023). Notice how few are about the technology.

The project
Do we even need AI here? Is the business outcome defined? Realistic benefit expectations? Budget for near and long term? Timeline understood? Competitive pressure handled?
Data & capability
Can we access the data? Have we considered data governance, compliance and privacy? Skills in-house? Build vs buy — and do we know the right questions to ask a vendor?
Living with it
Can we trust the model's predictions enough to decide on them? How do we course-correct when it's wrong? Can the organisation reconcile the impact on its own people?

The problem-framing toolkit the course names sits alongside these: Design Thinking (creative problem solving), Brainstorming, PESTLE or SWOT analysis, Market Research, the Project Charter, 5W2H, and Change Management frameworks. And underneath all of it, the oldest idea in the discipline: the PDCA / PDSA cycle — created by Walter Shewhart in the 1920s, made famous by W. Edwards Deming in 1950s Japan — which prioritises measurement above all: measure results with real data, then repeat what works and drop what doesn't.

Take this away

The charter is not bureaucracy — it is the cheapest insurance an AI project can buy, and the most commonly cancelled. Start with the problem and a named owner, not the technology. A project that ships fluent, confident output nobody checked has not succeeded. It has failed efficiently.

Quick recall — without looking back

Test yourself on this case

Question 1 of 3

List the core elements of an AI project charter, and state the single rule that governs the problem statement.

A charter contains: a problem statement; the AI technology and objective; scope (in and out); business case and benefits; strategic goals (at least 3 OKRs with 2 KPIs each); a timeline across initiating, executing, monitoring/controlling and closing; partners, stakeholders and team with dedicated time; responsible-AI and ethical considerations; and budget per phase. The overriding rule: the scope and problem statement must align with the business objectives, not the AI technology.
Question 2 of 3

Name the three lenses of AI-project initiation questions, with an example from each.

(1) The project — e.g. do we actually need AI, and is the business outcome defined? (2) Data & capability — e.g. can we access the data, and have we considered governance, compliance and privacy? (3) Living with it — e.g. can we trust the predictions enough to decide on them, and course-correct when wrong? Almost none of the questions are about the technology itself.
Question 3 of 3

Where did the PDCA/PDSA cycle come from, and what does it prioritise?

It was created by engineer Walter Shewhart in the 1920s and became famous in 1950s Japan through the American professor W. Edwards Deming, considered the father of quality control. It prioritises measurement: measure results statistically with concrete data, then repeat or scale what works and drop what does not.

Module 6 Videos

Module 6 · Short · The Report That Made Itself Up
Module 6 · Long Form · Why AI Projects Fail

Sources

Deloitte report
Coverage of the Deloitte welfare-compliance report and its AI-fabricated citations (2025); Deloitte partial refund confirmed.
Module content
BUSN9049 Module 6 — AI Project Management lecture deck and transcripts (Comptia 2023; Siteware n.d.). Flinders University, 2026.
Innovare Study
Long-form video: Why AI Projects Fail. Innovare Study, 2026. youtu.be/3YCRiOkmy9w