Defense spends big to save big

Defense sics 20 auditors on its financial statements

Acuity Consulting Inc. of Alexandria, Va.

Brown & Co. of Largo, Md.

Cotton & Co. LLP of Alexandria, Va.

Deloitte & Touche LLP of New York

Ernst & Young of New York

Gardiner, Kamya & Associates of Washington

G&B Solutions Inc. of McLean, Va.

Grant Thornton of Chicago

Kearney & Co. PC of Alexandria, Va.

KPMG LLP of New York

L.F. Harris & Associates Certified Public Accountants of Orlando, Fla.

McConnell, Jones, Lanier & Murphy LLP of Houston

MorganFranklin Corp. of Herndon, Va.

Owusu & Co. of Washington

PricewaterhouseCoopers LLP of New York

Regis & Associates PC of Washington

Reznick, Fedder & Silverman Certified Public Accountants of Bethesda, Md.

Urbach, Kahn & Werlin LLP of Washington

Walker & Co. LLP of Washington

William Adley & Co. LLP of Washington

The Defense Department's inspector general will pay nearly $1 billion to 20 auditing companies to help improve the department's bleak financial systems picture.

'Our auditors, working closely with auditors and accountants from the firms which received contracts, will be focusing on accountability and transparency in the way we manage our finances within the Defense Department,' Defense IG Joseph E. Schmitz said. 'The taxpayers have every right to expect it, and our men and women in uniform depend upon it.'

The vast number of financial transactions complicate the ability of the department to identify where the problems in DOD's financial systems occur. With the help of newly hired IG staff and the contract auditors, DOD hopes to be able to pinpoint system and accounting glitches that need fixing, Defense officials said.

To illustrate the magnitude of the challenge, one DOD official detailed the numbers related to just the department's payroll transactions.

'We have about 3.5 million employees. All these people are paid twice a month,' said David F. Vincent, program manager for the IG's Defense Financial Auditing Service. 'Every time someone is paid that creates an accounting transaction. In this case it's 24 times a year times 3.5 million people. It gives you some idea'just through the volume'how complicated this can become.'

Each of the 20 vendors will compete for task orders under the three-year, indefinite-delivery, indefinite-quantity contracts. The program has a ceiling of $977.5 million.

In July, Defense announced a plan to recruit more than 100 auditors to work in the IG's office so it can develop reliable financial statements for the department.

Those hires and the recent flurry of contracts are consistent with the charge before the IG. As mandated by the Chief Financial Officers Act of 1990, government IGs must do independent audits of their agencies' financial statements to validate their legitimacy.

These IG projects go hand in hand with DOD's efforts to improve its financial record-keeping by consolidating more than 4,700 business systems under an overarching De-fense Business Enterprise Architecture.

The overall goal is a clean audit'something the department has yet to achieve. DOD is shooting for a spick-and-span fi- nancial audit by 2007.

'Getting a clean audit on the Defense Department will be difficult,' Vincent said.

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