Washington, April 30, 2026, 09:02 EDT
- KPMG is pulling out of U.S. federal audit work, following the loss of a Pentagon contract that had brought in roughly $60 million annually.
- Over 450 employees are set for redeployment as contracts phase out. The final federal audit contract wraps up in 2030.
- The Pentagon, facing mounting pressure to deliver a clean audit by 2028 after eight consecutive misses, is making the move now.
KPMG plans to exit federal audit work in the U.S., marking a significant move by the Big Four accounting giant. After losing a Pentagon audit worth roughly $60 million annually, the firm has started reassigning over 450 staff members, according to the Financial Times.
The Pentagon’s push comes as it works to fix its audit process, having flunked every yearly review since 2018. Defense Secretary Pete Hegseth told lawmakers this week, “will pass an audit by 2028”—a clean bill from auditors, meaning the department’s numbers are solid enough to trust and approve.
KPMG told Reuters it’s moving federal audit staff to other parts of the firm as part of a “multi-year process” to wind down its federal audit business. Reuters said the Pentagon didn’t respond to a request for comment. Reuters
KPMG’s audit work for the U.S. Army—its top federal client for almost ten years—has ended, according to the FT via Reuters. Going Concern, also quoting the FT, lists KPMG’s remaining government clients: Justice, Labor, Transportation, Energy, and Treasury. All of those contracts are set to expire by 2030.
KPMG’s move is being cast as a change in focus, not a wholesale pullback from government business. In comments to the FT, the firm said it had “prioritised advisory services” for its federal clients and is stepping away from audit assignments in a phased, compliant exit that satisfies both client needs and regulatory requirements. Going Concern
KPMG’s U.S. branch is dialing things back amid a wider overhaul. Bloomberg Tax broke the news Wednesday: the firm notified staff of around 400 consulting layoffs—roughly 4% of the U.S. advisory workforce. KPMG characterized the decision as a way to redirect resources into expanding segments, spanning audit, advisory, and tax.
The shift puts even more strain on the Pentagon’s troubled audit campaign. In December, Reuters reported the department came up short for the eighth year in a row, auditors pointing to 26 material weaknesses and two significant deficiencies in fiscal 2025 internal controls. A material weakness signals a big flaw—one capable of letting major mistakes pass in the books.
Hegseth’s written remarks outlined a shift to a more centralized approach, with the department aiming for under 10 audit opinions—instead of the current two dozen-plus. The plan is to secure an opinion for the consolidated working capital fund in 2027, pushing the broader general fund target to 2028. The statement also noted that artificial intelligence would play a role, assisting with account reconciliations and anomaly detection.
The numbers show what’s at play. According to Bloomberg Tax, which referenced a Bloomberg Government analysis, KPMG’s listed contracts with government agencies add up to $217 million for fiscal 2026. Over in fiscal 2025, the Pentagon alone shelled out more than $776 million on auditing services. Deloitte came out on top as the Pentagon’s biggest provider, with KPMG right behind.
EY stands out among its peers, having already handled the only military-service audit success so far. According to the Defense Department inspector general, Ernst & Young was tapped to audit the Marine Corps’ fiscal 2025 general fund financials. In February, the Marine Corps reported that it secured an unmodified opinion for the third consecutive year—a first for any military service.
Switching out audit firms or restructuring oversight might not solve the Pentagon’s core accounting issues. The department’s ledgers stretch wide and deep; even the Marine Corps secured its clean audit with seven major weaknesses still flagged. That leaves the 2028 goal looking more about fixing systems, data, and controls than picking a new auditor.
