NSW government agencies are under-reporting how much they spend on external consultants, the state's auditor has said, while criticising the body tasked with policing the system as ineffective.
Amid the under-reporting and regulatory oversight, consultancy expenses have risen by more than 80 per cent since 2012/13, with $327 million spent last financial year alone.
Auditor-General Margaret Crawford on Tuesday released a scathing review of 12 government departments, finding not one of them materially complied with procurement guidelines.
The audit report found eight agencies did not comply with annual reporting requirements in the 2016/17 financial year.
Another three agencies failed to report expenditure on consultants that had been capitalised as part of asset costs, while another didn't disclose agency fees incurred by its subsidiaries.
The agency charged with overseeing the process, the NSW Procurement Board, was described as "not fully effective".
Ms Crawford said the board relied on government agencies self-reporting any issues with the information provided "insufficient to properly monitor compliance".
Transport NSW was found to be the biggest spender, splashing $462 million over the past five years.
Consultancy firm Deloitte received more than $340 million from the NSW government over five years while Accenture pocketed $256 million and PwC $242 million.
In total, the government has spent $1.2 billion on six firms since 2012/13.
A NSW finance department spokesman said the government agreed with the findings and recommendations but stood by the use of external experts.
"The government is spending a record amount on infrastructure and services and pursuing an unprecedented level of reform," he told AAP in a statement.
"Given the complex nature of these reforms, external advice and expertise from outside the public sector is often required, to ensure we secure the best outcomes for NSW citizens."
NSW Procurement is introducing a centralised monitoring system which will ensure compliance from suppliers, the spokesman added.
Opposition treasury spokesman Ryan Park described the numbers revealed in Tuesday's report as "staggering".
"While the Liberal government slashes public servant jobs it outsources to private consultants and spends record amounts of taxpayer money doing so," Mr Park said in a statement.
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