Contractors finding work in Pentagon’s effort to become audit-ready

January 27, 2013

As the Pentagon vows to become audit ready by 2017, local contractors are finding opportunities in helping the Defense Department clean up its books and implement new processes.

Arlington-based Accenture Federal Services has won some of the most recent work, announcing earlier this month new contracts with the Navy totaling more than $30 million to help the service prepare for audits.

The measures come as the Pentagon is facing a hard deadline to make its books ready for audit. Becoming audit-ready goes beyond putting together a budget; it requires the military to consider issues such as the value of its assets in order to put together a full picture of its financial condition.

Robert Hale, the Pentagon’s comptroller, said at a hearing last year that the Defense Department knows where it is spending its money.

“Our financial statements fail audit tests ... because we can’t document the transactions properly and quickly, and because, in some cases, our financial processes and internal controls are not sufficiently strong and consistent,” he said before a congressional hearing. “These are problems we can and will fix.”

The Pentagon has committed to a 2017 final deadline. Defense Secretary Leon Panetta in 2011 sped up that timeline, promising that the department would undertake the first step — an auditable statement of budgetary resources — in 2014.

Panetta has called audit readiness an “all hands” effort, and a Pentagon spokeswoman said the military has set aside close to $500 million for contract-spending related to audit readiness in fiscal 2013.

Under a three-year, $25.5 million contract, Accenture’s federal business will work with six naval commands and the Marine Corps to review existing processes and systems to ensure audit readiness. Through a smaller deal, the company will evaluate the effectiveness of controls in place for a Navy planning system.

“Our role is to help the Navy understand what an auditor might look at ... and then help them understand what corrective actions might be put in place to help them pass an audit,” said Vince Vlasho, who leads Accenture’s Navy work.

The Navy has “a very large budget, there’s a myriad of commands and information systems that need to be looked at in order to pass an audit,” Vlasho said. “The size and magnitude of it requires a good deal of energy.”

For local contractors, the military’s pursuit of audit readiness provides a significant business opportunity.

Bill Phillips, principal in charge of KPMG’s federal advisory practice, said his company has won work with multiple military agencies.

“We’re essentially assessing the ability of [the military’s] transactions, those systems, those processes to provide the right quality of information and data so you can put together a financial statement,” Phillips said.

In some cases, KPMG is conducting mock audits to help agencies identify their weaknesses and get ready for the real thing.

He said the work will continue. “The peak — in terms of the significant focus — now will be sustained for the next couple of years,” he said.

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