DHS Inspector General awards $63M contract for financial statement audits through FY2019 to KPMG LLP

Contract Overview

Contract Amount: $62,964,612 ($63.0M)

Contractor: Kpmg LLP

Awarding Agency: Department of Homeland Security

Start Date: 2014-12-01

End Date: 2021-04-20

Contract Duration: 2,332 days

Daily Burn Rate: $27.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: Other

Official Description: IGF::OT::IGF - THE PURPOSE OF THIS TASK ORDER IS TO ACQUIRE THE SERVICES OF AN INDEPENDENT PUBLIC ACCOUNTING (IPA) FIRM TO (1) CONDUCT AN INTEGRATED AUDIT OF DHS CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDING SEPTEMBER 30, 2015, AND INTERNAL CONTROL OVER FINANCIAL REPORTING AS OF SEPTEMBER 30, 2015, WITH FURTHER AUDITS THROUGH FY 2019; AND (2) CONDUCT AN AUDIT OF U.S. CUSTOMS AND BORDER PROTECTION S FINANCIAL STATEMENTS FOR THE YEAR ENDING SEPTEMBER 30, 2015, WITH FURTHER AUDITS THROUGH FY 2019. THE OFFICE OF MANAGEMENT AND BUDGET (OMB) REQUIRES AUDIT REPORTS TO BE SUBMITTED AS PART OF THE AGENCY FINANCIAL REPORT (AFR). THE DHS INTEGRATED AUDIT WILL BE COMPLETED ON OR BEFORE THE DEADLINE ESTABLISHED BY OMB.

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20005

State: District of Columbia Government Spending

Plain-Language Summary

Department of Homeland Security obligated $63.0 million to KPMG LLP for work described as: IGF::OT::IGF - THE PURPOSE OF THIS TASK ORDER IS TO ACQUIRE THE SERVICES OF AN INDEPENDENT PUBLIC ACCOUNTING (IPA) FIRM TO (1) CONDUCT AN INTEGRATED AUDIT OF DHS CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDING SEPTEMBER 30, 2015, AND INTERNAL CONTROL OVER FINANCIAL REPORTI… Key points: 1. Contract focuses on independent audits of DHS consolidated financial statements and U.S. Customs and Border Protection. 2. Audit reports are required by OMB for inclusion in the Agency Financial Report (AFR). 3. The contract spans multiple fiscal years, indicating a long-term need for financial oversight. 4. KPMG LLP, a major accounting firm, was awarded the contract. 5. The contract type is Time and Materials, which can lead to cost variability. 6. The contract was awarded under full and open competition.

Value Assessment

Rating: good

The total award amount of $62,964,611.92 for a period of approximately 6.7 years (December 1, 2014, to April 20, 2021) suggests a significant investment in financial auditing services. Benchmarking this against similar large-scale government financial audit contracts is challenging without more specific service details. However, the duration and scope indicate a substantial engagement. The Time and Materials pricing structure means the final cost is dependent on actual hours worked and resources utilized, which can be a risk for cost control compared to fixed-price contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified firms had the opportunity to bid. This competitive process is generally expected to yield fair market pricing and encourage efficiency from the awarded contractor. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust competition.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the most cost-effective audit services for critical government financial reporting.

Public Impact

The primary beneficiaries are the Department of Homeland Security (DHS) and U.S. Customs and Border Protection, which require these audits for compliance and transparency. The services delivered are independent audits of financial statements and internal controls over financial reporting. The geographic impact is national, covering federal financial reporting requirements. This contract supports the federal workforce by ensuring accountability and proper financial management within key agencies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Time and Materials contract type introduces potential for cost overruns if not closely managed.
The long duration of the contract (over 6 years) requires ongoing monitoring to ensure continued value and performance.
Reliance on a single large accounting firm for such critical audits could present concentration risk.

Positive Signals

Awarded under full and open competition, suggesting a fair and competitive bidding process.
The contract addresses a mandatory requirement for federal agencies (OMB mandates audits).
The scope covers critical financial reporting for a major federal department.

Sector Analysis

This contract falls within the professional services sector, specifically accounting and auditing services for government entities. The market for federal audit services is dominated by a few large public accounting firms (the 'Big Four' and others) that have the capacity and expertise to handle the scale and complexity of government audits. Spending benchmarks for similar large-scale federal financial statement audits can vary significantly based on agency size, complexity of operations, and specific audit requirements, but contracts in the tens of millions of dollars are not uncommon for major departments like DHS.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to KPMG LLP, a large public accounting firm. There is no explicit information regarding subcontracting plans for small businesses within the provided data. The focus is on a large-scale audit requiring the resources of a major firm, which typically limits direct opportunities for small businesses in the prime contract role.

Oversight & Accountability

The Office of the Inspector General (OIG) for DHS is the contracting activity, indicating internal oversight. The contract requires adherence to OMB directives for audit reporting, which provides a layer of federal oversight. Transparency is facilitated through the submission of Agency Financial Reports. Further oversight would typically involve periodic reviews by the OIG and potentially congressional committees.

Related Government Programs

DHS Financial Statement Audits
CBP Financial Statement Audits
Federal Agency Audit Services
Office of Management and Budget (OMB) Mandated Audits
Inspector General Audits

Risk Flags

Potential for cost overruns due to Time and Materials pricing.
Long contract duration requires sustained oversight.
Dependence on a single large contractor for critical services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $63.0 million to KPMG LLP. IGF::OT::IGF - THE PURPOSE OF THIS TASK ORDER IS TO ACQUIRE THE SERVICES OF AN INDEPENDENT PUBLIC ACCOUNTING (IPA) FIRM TO (1) CONDUCT AN INTEGRATED AUDIT OF DHS CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDING SEPTEMBER 30, 2015, AND INTERNAL CONTROL OVER FINANCIAL REPORTING AS OF SEPTEMBER 30, 2015, WITH FURTHER AUDITS THROUGH FY 2019; AND (2) CONDUCT AN AUDIT OF U.S. CUSTOMS AND BORDER PROTECTION S FINANCIAL STATEMENTS FOR THE YEAR ENDING SEPTEMBER 30, 2015, WITH FURTHER AUDITS THROUGH

Who is the contractor on this award?

The obligated recipient is KPMG LLP.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (Office of the Inspector General).

What is the total obligated amount?

The obligated amount is $63.0 million.

What is the period of performance?

Start: 2014-12-01. End: 2021-04-20.

What is the track record of KPMG LLP in performing federal financial audits, particularly for large agencies like DHS?

KPMG LLP is one of the 'Big Four' accounting firms and has extensive experience auditing large, complex organizations, including numerous federal agencies. They regularly perform financial statement audits for various government departments and entities, often competing for and winning significant contracts. Their track record includes audits of financial statements, internal controls, and compliance with regulations. While specific performance metrics for this particular DHS contract are not detailed in the provided data, KPMG's general reputation and market position suggest a high level of expertise. However, like any large contractor, past performance reviews and any audit findings or disputes related to their federal contracts would provide a more granular assessment.

How does the $63 million cost compare to similar large-scale federal financial audit contracts?

The $63 million award for approximately 6.7 years of service for DHS and CBP financial audits is substantial. Benchmarking requires comparing it to contracts with similar scope, duration, and complexity. Large federal agencies, such as the Department of Defense or Treasury, often have multi-year audit contracts that can range from tens to hundreds of millions of dollars, depending on the size and intricacy of their financial operations. Given that DHS is a major federal department with significant budgetary outlays and complex operations (including Customs and Border Protection), this award appears to be within the expected range for comprehensive, multi-year financial audit services. The Time and Materials nature of the contract means the final cost could fluctuate based on actual effort expended.

What are the primary risks associated with this Time and Materials (T&M) contract structure for financial auditing?

The primary risk with a Time and Materials contract, especially for a long-duration service like financial auditing, is the potential for cost overruns. Unlike fixed-price contracts, T&M agreements reimburse the contractor for direct labor hours at specified rates and for the actual cost of materials. If the scope of work expands, if the audit encounters unforeseen complexities requiring more labor, or if billing rates increase, the total cost to the government can exceed initial estimates. Effective oversight, detailed tracking of hours and expenses, and clear definition of work requirements are crucial to mitigate these risks and ensure the government receives good value. The government must actively manage the contractor's effort to prevent scope creep and ensure efficiency.

What is the expected effectiveness of these audits in improving DHS's financial management and accountability?

The effectiveness of these audits hinges on several factors. Firstly, the independence and thoroughness of KPMG's audit work are critical. Secondly, the responsiveness of DHS and CBP management to the findings and recommendations from the audits is paramount. Independent audits provide an objective assessment of financial statements and internal controls, highlighting areas of weakness, non-compliance, or potential fraud. When agencies act upon these findings by implementing corrective actions, it directly improves financial management, strengthens internal controls, enhances accountability, and increases transparency. The multi-year nature of this contract suggests a commitment to ongoing assessment and improvement, which is generally conducive to sustained progress in financial management.

How has DHS spending on financial audit services evolved over the years prior to and during this contract period?

The provided data focuses on a single delivery order ($62.9M) awarded in late 2014 for services through April 2021. To understand the evolution of DHS spending on financial audit services, one would need to examine historical contract data for DHS and its components (like CBP) over multiple fiscal years. This would involve looking at prior audit contracts, their values, durations, and the contractors involved. It's also important to consider changes in audit requirements mandated by OMB or Congress, which could influence spending levels. Without access to that broader historical data, it's impossible to detail the spending evolution. However, the significant award suggests a consistent and substantial need for these services throughout the contract period.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Offices of Certified Public Accountants

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HSIGAQ-14-R-00002

Offers Received: 1

Pricing Type: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kpmg L.L.P. (UEI: 001667906)

Address: 1801 K ST NW STE 12000, WASHINGTON, DC, 20006

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $192,986,679

Exercised Options: $103,516,938

Current Obligation: $62,964,612

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $1,144,204

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS23F8127H

IDV Type: FSS

Timeline