Occupational Education #1: The Cost of Contractor Accounting Services

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June 18, 2012

Looking for billions of dollars' worth of savings for taxpayers? Look no further than government service contracting. Last September, POGO released a report that found service contractors cost taxpayers nearly twice as much as federal employees who do the same work. With the final discussion of the mammoth defense budget bill looming in Congress and with the nation’s deficit crisis largely unresolved, we figured there’s no better time to take another look at data from the report.

Our report examined 35 different occupations. Over the next few days, we’ll offer a fresh look at ten of those occupations. Today’s occupation is accounting. Let's check out the numbers!

According to our report, accounting is one of the most expensive services to contract out to the private sector. The annual contractor billing rate for such services is $299,374, compared to a federal employee’s annual compensation (including benefits!) of $124,851 for comparable work. To put it another way, a federal employee costs taxpayers just four-tenths the cost of a contractor for accounting services.

Accounting services, of course, represent just one piece of the puzzle. In fiscal year 2011, the federal government spent $325.3 billion on all kinds of service contracts, according to USAspending.gov, of which the Pentagon doled out $198.6 billion.

The key takeaway here is that it's time for the government to start conducting meaningful comparisons of the costs of performing work in-house and contracting out to the private sector. The conventional wisdom that outsourcing is by default more cost effective simply doesn't hold water.

It doesn’t take a CPA to see that the government’s balance sheet on service contracts is out of whack. Check out our Bad Business report for more details on this problem and recommendations for how we can begin to fix it.

Topics: Contract Oversight

Related Content: Occupational Education

Authors: Bryan Rahija

Project On Government Oversight (POGO)

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