KPMG, one of the Big Four accounting firms, is winding down its federal government audit business after losing a $64 million-a-year U.S. Army audit contract, a major setback as the Department of War under Defense Secretary Pete Hegseth moves to bring in another accounting firm.
According to the Financial Times, the Army's shift to a new auditor comes as pressure intensifies on Hegseth to gain control of the DoW's finances after nearly a decade of failed independent audits.
The DoW, which oversees an annual budget of roughly $840 billion, has not passed an independent audit in eight years, and Washington lawmakers have set a deadline for the department to do so by 2028.
"We're ending the wasteful process of agency-by-agency opinions and slashing the number of disjointed separate audits by two-thirds," Hegseth said. "The mission is simple: break down bureaucratic barriers to get you, the taxpayer, concrete results."
FT sources said the Army was KPMG's largest federal audit client, and 450 U.S. staff who oversaw the federal audit work will be transitioning to other roles.
"Over the past few years, KPMG has prioritized advisory services for the federal government," KPMG said, adding, "We are transitioning out of federal audit roles through an orderly, multiyear process, meeting all client and regulatory obligations. As demand continues to grow across both audit and advisory, we will be redeploying our talented federal audit professionals across the firm to meet client needs."
Meanwhile, EY remains the prime auditor for the Air Force, Navy, and Marines. The Marines are the only military branch to have received an unqualified audit opinion.
The DoW says the new consolidated audit strategy will streamline the process toward full audit compliance by 2028.
Last month, Platte Moring, the Pentagon's inspector general, stated, "This new composite approach to auditing and its implementation reflect meaningful progress toward compliance with the statutory mandate for the department to achieve a clean audit opinion by 2028."
We have previously reported that DOGE has placed more than 400,000 DoW contracts under scrutiny, while Goldman has been bearish on government IT services for the same reason: the Trump administration is trying to clean up the financial mess inside the DoW.
The problem is that entrenched bureaucracy and swamp-like career DoW personnel appear more focused on preserving the status quo than fixing the department.
Whether Hegseth can fix the DoW remains an open question.