EXCLUSIVE — The Office of Management and Budget on Monday sent a memo to executive department and agency heads directing them to change the way they perform internal audits, citing findings from the Department of Government Efficiency indicating that traditional audits have missed matters ranging from “fund control lapses to procurement irregularities,” according to a copy of the document obtained by the Washington Examiner.
Federal auditing guidelines will be updated to require the use of a single-year format to better track granular transactions that policymakers suspect could be driving wasteful spending, according to the memo. Additionally, the OMB has directed agencies to utilize their accounting practices to stop waste before it happens.
The OMB’s memo charges that past administrations have failed to use audits proactively, arguing that, at many agencies, they have become “rote exercises” as “reports acknowledging waste are never used to address root causes, and as debts, deficits, and spending continue to skyrocket, while contractors and firms rake in hundreds of millions of dollars from agencies spending taxpayer dollars for useless and ineffective audits.”
A senior White House official told the Washington Examiner that the Trump administration is seeking to get away from the norms of the past, which involved trying to recover wasted funds after they’ve been spent, by using increasingly frequent data reporting to address the root causes of waste.
“Independent reviews and oversight bodies have highlighted that we are spending heavily on audits, but still failing to prevent large-scale fraud, waste, and abuse,” the memo says.
As part of this effort, the OMB memo states that the administration will be “auditing the auditors” by assessing the value of federal dollars spent paying independent auditing firms and Offices of Inspectors General to oversee public spending.
“We will identify which audit activities drive real risk reduction, accountability, and financial integrity — and reduce or consolidate those that do not,” the memo continues. “Compliance for its own sake is no longer the goal … We are working to integrate audit results with program oversight, performance management, and root cause analysis to ensure findings lead to reform — not just reporting.”
Spending records show that the federal government sets aside hundreds of millions of dollars for Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers, the “Big Four” of the accounting world, to audit agencies’ books — an expense the OMB’s memo argues has largely failed to stop wasteful spending from occurring.
In addition to more proactive waste prevention, agencies are also being directed to switch to a single-year reporting format, as the OMB believes that audits spanning multiple years can serve to obfuscate the current financial state of a given agency.
“Government-wide, what this will do is allow agencies to really focus in on the important things and that is tracking the dollars that we have right now, tracking the liabilities we have right now,” a senior Trump administration official told the Washington Examiner. “We’re going to put our time and effort into making sure we’re accounting for the dollars and cents from what we’re doing and, going forward, we’re not putting dollars and resources into trying to explain why the last administration exploded the size of government.”
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Indeed, there is precedent for the single-year format improving government accountability. The Marine Corps, for instance, became the first branch of the armed services to pass a full financial audit while using such a format. The Department of Defense, which has consistently failed to account for its hundreds of trillions of dollars in assets, is listed as a priority at the top of the memo.
The federal government’s inability to stop improper payments, which are legally defined as disbursements “made by the government to the wrong person, in the wrong amount or for the wrong reason,” is cited in the memo as a major matter that federal accounting practices have failed to address. The Biden administration, for instance, made over $925 billion in such payments during its four years in power.
