One example, according to this story in today's Washington Post business section, KMPG spinoff BearingPoint apparently can't do its own math--sort of embarassing for an accounting consultancy firm.
Because the company did not know how many errors might have been made in the months it was using its new system, it had no choice but to recheck every accounting entry.
The process has been laborious, involving not only the hundreds of accountants, but forcing many of the company's 17,000 employees to retrace the hours they worked on each project and verify their billing information. It was a factor in what has been a troubling talent drain, You said. In the first nine months of the year, about one-fourth of BearingPoint's workers left the company.
New employees have been hired, but You has had to put a premium on retention. He implemented a new merit-based compensation system for the top 800 employees and made it fully open so that each knows the salaries of all the others. He also began holding company-wide conference calls every other week so employees can ask about everything from vacation policy to You's vision for the company.
Not all who follow the company have accepted You's description of BearingPoint's problems or think he has done enough to fix them.
William R. Loomis, an analyst at Legg Mason Wood Walker Inc., said You's explanation about the source of the accounting problems makes sense. But he added that if the financial system the company created "wasn't user intuitive and you have to spend a lot of money to train people, then the system probably wasn't installed right."
In recent months, the company announced it was closing operations in Peru and Thailand, strengthening its presence in India, and focusing on landing larger, more profitable projects. You told analysts two weeks ago he expects BearingPoint to turn a profit next year.
Reviews from Wall Street have been mixed. After a meeting with analysts two weeks ago, Goldman Sachs Group Inc. issued a report saying it was "optimistic the turnaround is gaining steam." Merrill Lynch & Co. Inc., however, said its analysts believe the "risk/reward on [BearingPoint] shares remains unattractive."
According to the article, some 40 percent of BearingPoint's business comes from government contracts. According to this September 29, 2005 article in Consultant News:
BearingPoint has been awarded a three-year contract to support treasury operations and implement efficient business processes within the Islamic Republic of Afghanistan's Ministry of Finance.(The Washington Post story on this deal can be found here.)
BearingPoint will help the Ministry build its accounting and financial management capacity as well as manage incoming funding from international donors.
Valued at $6.85 million, the new engagement calls specifically for BearingPoint to strengthen the Ministry's cash management capabilities and to develop strategies for treasury processes and human resources management.
BearingPoint was first engaged by the Republic in 2002 to provide a benchmark for a fully functional financial management system.
The scope of the current work includes managing the existing Afghan Financial Management Information System (AFMIS, which was implemented by BearingPoint), and continuing the deployment of AFMIS functions.
BearingPoint has handled similar projects in post-conflict environments including Afghanistan, Iraq, Kosovo and South Sudan.
Just think, the company America sends to advise other countries on how to improve financial management--and which just got a contract for improving security at the Port of New York and New Jersey--is unable to keep its own books straight.
Which raises the question: After this sort of revelation, who would hire BearingPoint, and why?
