Defense Finance and Accounting Service

Prior to 1990, each of the three military departments (Department of the Army, Department of the Navy, and Department of the Air Force) and the other major governmental agencies developed and implemented their own accounting, budgeting, and financial management systems. This freedom of operation lead to numerous specialized systems that were incapable of communicating with one another. In 1990, there were 878 independent finance and accounting systems maintained within Federal Government Agencies.

In 1991, Secretary of Defense Dick Cheney created the Defense Finance and Accounting Service to reduce the cost of Defense Department finance and accounting operations and to strengthen financial management through consolidation of finance and accounting activities across the department. Since its inception, the DFAS has consolidated more than 300 installation-level finance and accounting offices into 10 sites, and reduced the work force from about 27,000 to about 13,000 personnel.

In 2003, the DFAS was selected by the Office of Personnel Management to be one of four governmental entities to provide payroll services for the U.S. government. In 2004, Nielsen Norman Group named the Defense Finance and Accounting Service's portal (ePortal) among the 10 best government intranets in the world. Experts at the Nielsen reviewed hundreds of intranets before naming the top ten which shared traits like good usability and organization, performance metrics and incremental improvements.

The 2005 round of Base Realignment and Closure cuts required the DFAS to be completely restructured. Many sites were integrated into major centers. Since its inception, the agency has consolidated more than 300 installation-level offices into nine DFAS sites and reduced the number of systems in use from 330 to 111. As a result of BRAC efforts begun in FY 2006, the DFAS has closed 20 sites, realigned headquarters from Arlington to Indianapolis and established a liaison location in Alexandria, Virginia.

Establishing legislation

The Chief Financial Officers Act of 1990 (31 USC 501 Archived February 8, 1999, at the Wayback Machine, Pub. L. 101–576, title I, §101, Nov. 15, 1990, 104 Stat. 2838) and 10 USC 113 Archived February 8, 1999, at the Wayback Machine laid the groundwork for the Secretary of Defense to establish a more streamlined federal financial management structure. In late 1990, under the guidelines of the Department of Defense Directive (DoDD) 5118.5, the establishment of DFAS was announced in the Federal Register (55 FR 50179 (1990)). These guidelines were later codified in the Code of Federal Regulations in (32 CFR Part 352a).

Related agencies

The United States Department of Defense is the parent agency of DFAS. Defense Finance and Accounting Service Garnishment Operations Center and the Defense Finance and Accounting Service Out-of-Service Debt Management Center Archived April 14, 2017, at the Wayback Machine are subordinate agencies of DFAS.

Major events in the history of the agency

1991: DFAS founded

1992: Began consolidation of 300 field sites into 26 DFAS centers

Current locations:

Major Sites

Indianapolis, Indiana (Headquarters) – DFAS is headquartered in the MG Emmett J. Bean Federal Center, a 1,600,000-square-foot (150,000 m2) building that was part of Fort Benjamin Harrison. A solar panel system was installed on the roof of the building in 2010, allowing the building to generate 1.8-MW. Prior to housing DFAS, this location was known as the Finance Center, U.S. Army (1953–1972); U.S. Army Finance Support Agency (1972–1974); U.S. Army Finance and Accounting Center (1975–1991).

Cleveland, Ohio

Controversies

Unsubstantiated Change Actions

A 2013 Reuters investigation concluded that DFAS implements monthly "unsubstantiated change actions"—illegal, inaccurate "plugs"—that forcibly make DOD's books match Treasury's books. Reuters concluded:

Fudging the accounts with false entries is standard operating procedure... Reuters has found that the Pentagon is largely incapable of keeping track of its vast stores of weapons, ammunition and other supplies; thus it continues to spend money on new supplies it doesn't need and on storing others long out of date. It has amassed a backlog of more than half a trillion dollars... [H]ow much of that money paid for actual goods and services delivered isn't known.

Audit

In 1990, the U.S. Congress passed the Chief Financial Officers Act, which directed all federal departments and agencies to submit to annual audits.

The DFAS is the lead Department of Defense unit in charge of auditing the U.S. military.

Before the audit kicked off, the Pentagon spent tens of billions of dollars to upgrade its technology in preparation for the audit. Many of the new systems failed, however, as they were "either unable to perform all the jobs they were meant to do or scrapped altogether—only adding to the waste they were meant to stop," according to Reuters.

According to contract announcements, substantial audit activity took place during fiscal years 2016–2018, with the DOD's first comprehensive audit concluding at the end of fiscal year 2018. Corporate accounting firms conducted the audit on behalf of the DFAS, with Ernst & Young, Kearney & Co., KPMG, and PwC prominent among them. Other firms, such as Cotton & Co., Deloitte, and Grant Thornton, provided audit readiness and financial improvement.