Date: 2024-09-27 Page is: DBtxt003.php txt00026322
US GOVERNMENT ACCOUNTING
DEPARTMENT OF DEFENSE
EY Gives the Marine Corps the Thing Grant Thornton Couldn’t
DEPARTMENT OF DEFENSE
EY Gives the Marine Corps the Thing Grant Thornton Couldn’t
a golden thumbs up statue on desk
Original article: https://www.goingconcern.com/ey-gives-the-marine-corps-the-thing-grant-thornton-couldnt/?
Peter Burgess COMMENTARY
The tone of this article is not very professional ... which surprises me ... and disappoints me.
It puts me 'on inquiry' better to understand the background of the writer and his/her motivation!
My own 'take' in the modern accountancy profession is not very positive at all. I 'qualified' as a Chartered Accountant in London in 1965 with Cooper Brothers & Co.
A key part of the training related to 'professional behavior' and all that meant.
More than a decade after qualifyingm it was pointed out to me that accountancy was no longer a prefession ... it was a business. This happened at a college reunion ... Sidney Susses, Cambridge ... when Peter Allen and I were able to get together again after some 20 years to share experience!
Whether or not accountancy is a profession or a business, my position is that it is a powerful management tool that needs to be reconfigured to be as effective as possible for themodern world where society, environment and economics are all of almost equal importance ... a system dominated by economics with nothing else accounted for is no longer a responsible way forward!
Peter Burgess
Posted on February 27, 2024
by Going Concern News Desk
As you may have heard, the United States Marine Corps recently received an unmodified opinion from EY. In any other sector this might prompt a hearty “who cares?” but for the Marines it’s a huge deal, the first of its kind for any branch of the military. And for real this time (we’ll get to that in a minute).
As you can imagine, the two-year process was no easy feat. Wrote Military.com of prior attempts:
In 2017, the Marine Corps became the first military service within the Defense Department to undergo a full financial audit, which at the time meant sifting through more than 4,300 sample items and 30,000 documents. Verifying similar items in a 2012 limited audit included a trip to Afghanistan. Ultimately, the service failed to pass either previous attempt.This time around it was no less daunting:
In 2023, it meant going to more than 70 sites worldwide to look at thousands of real property assets; more than a million other operating assets, such as vehicle spare parts and weapons and communications systems; and more than 24 million rounds of ammunition — sometimes within Army and Navy stockpiles where the Marine Corps had property stored.The ammo was just one checkbox among assets of $46.3 billion. “We had to have documentation for that asset, in addition to the auditors having to view those assets and count those assets,” said Gregory Koval, the assistant deputy commandant for resources, to Military.com in an interview. “So, not just numbers, not just systems, not just data, but they were actually evaluating what we have on hand, what we have on site, and if something was not there, we had to provide them with information to show where it was.”
From the DoD OIG’s press release:
The auditors considered the material weaknesses in determining the type and extent of audit procedures performed. The auditors used a substantive-based testing approach throughout FY 2022 and FY 2023. A substantive-based approach means that the auditors had to increase the amount of testing necessary because they were unable to rely solely on USMC’s internal control over financial transactions. This included the auditors examining specific transactions, account balances, and other adjustments made while preparing financial statements, as well as physically counting military equipment, ammunition, and other property – all designed to result in adequate audit evidence.If this announcement sounds familiar, it’s because the Marines were the first military branch to “pass” an audit before. After a big celebration in 2014 — then-Secretary of Defense Chuck Hagel famously told revelers at a Pentagon Hall of Heroes party “I know that it might seem a bit unusual to be in the Hall of Heroes to honor a bookkeeping accomplishment, but, damn, this is an accomplishment” — the opinion was rescinded and then promptly ragged on as just more piss poor work from Grant Thornton. Full story on that here:
Inspector General Storch noted, “The two-year audit cycle of the U.S. Marine Corps was unprecedented for the Department of Defense. The U.S. Marine Corps staff, EY, and DoD OIG auditors performed a tremendous amount of work to complete the audit. I encourage the U.S. Marine Corps to continue the momentum of this unmodified (clean) opinion and focus on improving its internal controls to remediate the identified material weaknesses. These efforts will be important for the U.S. Marine Corps to improve audit efficiency and establish sustained financial reporting and operational readiness.”
This time the Marines contracted a real firm and here we are. Although the opinion is good, EY identified seven material weaknesses related to internal controls over financial reporting within the USMC so they have some homework to do. But overall it seems they’ve done the impossible. Impossible for the Pentagon anyway.