Insight by ASMC

Top-down and bottom-up: How BDO approaches helping DoD transform financial management

If someone had told Todd Johnston a dozen years ago, “You’re going to work as a consultant helping the Defense Department improve its financial management,” he readily admits he wouldn’t have believed it.

“It’s been a journey. It’s one that I’ve been happy to be a part of. I really do love doing this work,” Johnston, managing director for the defense practice at BDO Public Sector, said on the American Society of Military Comptrollers‘ The...

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“This is the largest financial transformation history. Getting into that, and seeing it from the beginning, has been an amazing experience.”

If someone had told Todd Johnston a dozen years ago, “You’re going to work as a consultant helping the Defense Department improve its financial management,” he readily admits he wouldn’t have believed it.

“It’s been a journey. It’s one that I’ve been happy to be a part of. I really do love doing this work,” Johnston, managing director for the defense practice at BDO Public Sector, said on the American Society of Military ComptrollersThe Business of Defense podcast on Federal News Network.

He was quick to add, however, “But to say this was the plan would be a lie.” A move to Washington, D.C., early in his career and a progression of jobs in businesses with federal contracts paved the way.

Today, Johnston and his team at BDO are helping with what he called arguably the largest financial transformation in history.

“The Department of Defense is undergoing financial systems migration, working to achieve a clean audit opinion and gaining financial transparency to achieve the goals of the DoD Financial Management Strategy,” pointed out Rich Brady, CEO of ASMC. “The work of audit advisory and consulting firms like BDO is absolutely critical.”

BDO who?

BDO’s role in helping DoD and the military services improve financial management and ultimately pass an independent financial audit has expanded radically in the past couple of years. Although BDO is “the fifth largest network of accounting, advisory tax and consulting firms in the world,” with U.S. revenue of $2.5 billion annually, it had a relatively small federal footprint before 2020, Johnston said.

That changed when it acquired Morgan Franklin Consulting, which had substantial work in the federal government and in Defense. Johnston came over to BDO through that acquisition.

“We are a growing practice,” he said. “We are one of the eight strategic focus areas within BDO right now.”

BDO has chosen to exclusively provide consulting services within DoD. It’s a business decision based on its strengths in serving Defense clients and growth potential, Johnston said. Auditor independence rules, promulgated by the Securities and Exchange Commission, require that any company that conducts audits cannot also provide consulting services to organizations for which it performs audits.

The rules exist to ensure there is no conflict of interest and to ensure a company is not put in a position where its integrity could be compromised. “We have a massive audit practice in our commercial side. But within Defense, we’ve made the strategic decision that we want to focus on consulting,” he said.

For the defense practice, that’s led to growth both horizontally and vertically within DoD organizations, Johnston said.

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“We have a massive audit practice in our commercial side. But within Defense, we’ve made the strategic decision that we want to focus on consulting.”

The BDO differentiator

“Our strategy has been, ‘OK, we have these big headquarters contracts. Let’s certainly try to be on those — supporting and providing the best support that we can. But let’s also branch down into the operational execution areas at the lower levels of the organizations so that we have a full picture of the enterprise that we’re supporting,’ ” he said.

BDO’s growth has come from increasingly providing services in the major and subordinate commands. “This is not just a top-down thing. It is top-down, bottom-up,” Johnston said. “You need to support at these various levels to understand the guidance coming down from on high so that you can implement correctly and address some of these audit issues.”

He views this approach as critical to helping DoD make measurable change. The department’s financial management lifecycle is so different than any other organization that’s anywhere close to its size, Johnston noted.

The value of having teams working at so many levels within Defense organizations can’t be underestimated when it comes to helping recommend changes that can let the department achieve a clean audit and reimagine it financial management, he said.

When BDO teams discover a hiccup within a system or process, it rarely just recommends a change immediately, Johnston said. Even if a particular process or system is problematic, it was designed that way for a reason, he said. “If we’re going to guide the client in the best way possible to achieve an audit-readiness state, we need to understand why they designed it that way to help them get there.”

Ultimately, he said, that’s what differentiates BDO. “We do understand that. We’ve had those experiences because we support at all levels.”

To listen to the full discussion between BDO Public Sector’s Todd Johnston and Rich Brady, CEO at the American Society of Military Comptrollers, click the podcast play button below:

Discover other The Business of Defense podcasts here.

  • Rich Brady

    Chief Executive Officer, American Society of Military Comptrollers

  • Todd Johnston

    Public Sector Managing Director, Defense Services Leader