The Western Australian government has said it is “extremely disappointed” and is seeking an “expedited” cost recovery from Deloitte after errors were discovered in a report about a potential university merger, including AI-hallucinated references and hundreds of millions of dollars in cost discrepancies.

The government paid Deloitte $166,000 for a feasibility study on merging the University of Western Australia, Curtin University and Murdoch University.

Deloitte considered three merger options between the three universities, with “low”, “mid” and “high” cost scenarios, and broke down the calculations of those costs in the report’s appendix.

Under the “high” cost scenario of a merger between Curtin and UWA, the report calculates the “total costs to day 1” as $514m, and “post day 1” over five years at $145m. The total cost of those two payments is $659m but the report wrote $399m – a $260m discrepancy.

Prof Stephen Bartos, an expert in public sector governance at the University of Canberra, said the errors discredited the report. “In my view, they’re so extensive that you probably need a new report, or at the very least someone to go through that material from the ground up and rework it manually without the use of AI,” he said.

“Any errors in a report like this, especially on something controversial like a university merger, discredits the report, and Deloitte shouldn’t have had these errors.”

Under a “low” cost merger scenario between Curtin, UWA and Murdoch, the total costs to day one are $396m and total post day one over five years are $116m. That total would be $512m but the report calculates the two numbers to $823m – a $311m discrepancy.

Deloitte is already under pressure after it was revealed in the media this month that the same report contained hallucinated AI references, leading the state opposition to label it “AI slop”.

The consultancy firm admits in its report it used generative AI to “support the collation of research, synthesis of information and editorial proofing” and had earlier dismissed the errors as “minor”.

A spokesperson for the WA government told Guardian Australia that the Department of Energy and Economic Diversification had written to Deloitte to expedite the cost recovery process for the report.

“We are extremely disappointed these errors are being found now,” the spokesperson said. “We are advised they do not affect the modelling in the report or its findings, but any errors will be corrected as part of a review by Deloitte which will re-issue the report.

“All available data, along with new information, will be interrogated by the university reform business case.”

The WA tertiary education minister, Tony Buti, described them as “typos”, though a day later said he was angry and disappointed with Deloitte.

Guardian Australia has found that one of the references to a World Health Organization report has a ChatGPT metadata tag on the URL, indicating that the link was directly sourced from the chatbot.

In the report, Curtin University is referred to repeatedly as the Curtin University of Technology – a name the institution has not used since 2010, and that was changed under an act of state parliament in 2017.

Bartos said the numbers diverging so significantly was cause for concern. “Unless the numbers add up, a government might not want to do it,” he said.

Prof Christian Downie, from the Australian National University’s school of regulation and global governance, who has previously examined submissions to government that contained AI hallucinations, said human errors happened and mistakes in reports could be expected and, although Deloitte outlined broadly its use of AI in the report, there was a lack of transparency.

“I think we need much more detail about how [AI is] being used and for what parts of the report writing process,” he said. “If they’re going to use it for data collection and if there’s concerns about the data, then that needs to be detailed in the report.”

Downie said without transparency it was hard to have confidence in the report. He said broadly as AI use increases, governments need to reassess their contracts with consultancy firms.

“I think all levels of government, both state and federal, need to be recalibrating their contractual relationship arrangements when they outsource work to consulting firms to ensure that the proper incentives and penalties are in place in those contracts,” he said.

The WA government has that argued the merger is a “once-in-a-generation” opportunity. Buti told the ABC on Tuesday: “I want to commit to it if the business case stacks up, and then it’s a government decision.”

It was not supported by Murdoch University, whose vice-chancellor, Prof Andrew Deeks, criticised the report and penned an op-ed on the university’s website arguing that “all that a university merger will do for WA is cost a lot of time, money and energy, while reducing choices for students and alienating alumni.

“That the Western Australian Government continues to be taken in by this nonsense is extraordinary,” he wrote. “Another fail for Deloitte.”

Deloitte did not respond to questions from Guardian Australia.