The US Securities and Exchange Commission (SEC) is spending millions of dollars on consultants to streamline the agency, but SEC insiders and at least one lawmaker are questioning whether the SEC is getting its money’s worth. At a time when the SEC is fighting Congress for more funds, some agency employees are concerned that the SEC has spent over $8.5 million in just under a year on dozens of consultants from Booz Allen Hamilton to advise on reforming workflows and back-office operations, according to documents and people familiar with the matter. Booz Allen consultants are costing the SEC anywhere between around $100 an hour to over $300 an hour depending on the person’s position, according to internal documents reviewed by Reuters. The number of consultants on site fluctuates each month, but it has ranged from four to 77. At times, the burn rate has been as high as $1.4 million per month, although now it is down to about $700,000, according to documents and people familiar with the matter. A spokesman for Booz Allen Hamilton acknowledged the company is under contract with the SEC, but declined to discuss the details about the work being performed. The SEC has acknowledged the need for an internal facelift. Government watchdogs found in a 2010 report that the SEC had “material weaknesses” because of information security problems, errors in accounting for penalties, and bad reporting of its obligations, among other problems. The SEC is trying to clean up its act. While it is known for watching over the health of financial markets and the honesty of publicly traded companies, it is like a massive corporation of its own. It has roughly 3,500 staff scattered across the United States and must maintain information technology systems, leasing operations and other back-office functions. In May 2010, SEC Chairman Mary Schapiro hired the agency’s first-ever chief operating officer, Jeff Heslop, who previously was in charge of information risk management for Capital One Financial. Also, as part of a review required by the 2010 Dodd-Frank financial oversight law, the SEC brought in the Boston Consulting Group to examine SEC operations and structure and issue a report suggesting reforms. The Boston Consulting Group report, which cost the SEC roughly $4.8 million, urged the agency to re-prioritize its activities, reshape the organization, invest in the proper infrastructure and bolster its relationship with self-regulatory organizations. A spokesman for the Boston Consulting Group declined to comment. Now Heslop is overseeing the contract awarded in May 2011 to Booz Allen to oversee the follow-up work to the BCG report, known internally as the “Mission Advancement Program,” or MAP. Although Dodd-Frank did not require the SEC to hire consultants to conduct the follow-up work, it does put the agency under pressure to show progress to Congress every six months. In an interview, Heslop said hiring Booz Allen was essential because the SEC simply did not have the manpower or experts on hand to conduct the follow-up work. “It wasn’t like we had a bench of people we could turn to,” Heslop said. “The only way we could have done it is to pull people off existing roles of conducting enforcement investigations and examinations where they were already choking on the work.” The SEC said the consultants’ unique skills and employment arrangements justify the pay premium - the consultants are being paid on average $140 per hour compared to It is routine for government agencies to seek the expertise of large consulting firms, such as Booz Allen. But some critics have doubts about the project, and they fear the Booz Allen work has ballooned with little oversight or much to show for what has been accomplished so far. “If they’re not careful, agencies can spend billions of taxpayer dollars on outside studies and contractors and have nothing to show for it,” Republican Senator Charles Grassley said in an emailed statement to Reuters. “The SEC appears to be headed down this path in hiring a consultant to implement another consultant’s work. The onus is on the SEC to make sure outside consultants deliver useful products and pull the plug when necessary,” Grassley added. Booz Allen is not only working on the MAP project, but has a handful of other contracts with the SEC. One contract, for instance, involves a review of financial statements by public companies in over-the-counter markets. Another is to help the SEC with business processes associated with the handling of disgorgement and penalties. The Booz Allen work has caught the attention of some investigators in the SEC’s inspector general’s office. According to one person familiar with the matter, investigators there have been asking questions about what kind of work the company is doing and whether it is necessary. Where those inquiries may lead is unclear. A spokesman from Booz Allen Hamilton declined to comment on the inspector general’s inquiries. The SEC’s inspector general’s office also declined to comment. Return on investment A US House appropriations panel is tentatively scheduled to review the SEC’s budget request on March 6. Congress controls the SEC’s budget, although the agency’s expenses are covered by fees it charges companies. The Obama administration has asked Congress to boost the SEC’s $1.321 billion budget by 18.5 per cent for the year ending Sept. 30, 2013. The SEC has said the increase is necessary to help the agency strengthen its enforcement and examination programs. Also in March, the SEC is expected to deliver a report to Congress updating lawmakers on the progress of the internal reforms. In the roughly 10 months since Booz Allen was hired on the MAP project, it has established a program management office to help oversee 18 different working groups. Each group is headed by one or more senior SEC officials and aims to improve the agency’s structure and business processes. One group, for instance, was assigned to study ways the agency can bolster its staffing during a crisis period, such as during another “flash crash” like the one seen on May 6, 2010. Another group looked into cost-saving measures. The groups report to a steering committee headed by Heslop which votes on the recommendations and then refers them to Schapiro’s office for a final decision. Booz Allen’s job has been to run the program management office, manage the different working groups, provide expertise when needed, and help keep SEC staffers in the loop about the project. Since the project started, Heslop said the results have already given the SEC a “return on investment.” It uncovered between 700 and 900 wireless cards costing the SEC $43 a month that are not being used. It also shut down an underutilized shuttle service that was costing $14,000 a month. “We definitely have tangible, hard saves that can offset this $8 million” spent on the Booz Allen contract, Heslop said.