Defense Finance And Accounting Service

The Defense Finance and Accounting Service (DFAS) is an agency of the United States Department of Defense (DOD), headquartered in Indianapolis, Indiana. DFAS was established in 1991 under the authority, direction, and control of the Under Secretary of Defense (Comptroller)/Chief Financial Officer to strengthen and reduce costs of financial management and operations within DOD. DFAS is responsible for all payments to servicemembers, employees, vendors, and contractors. It provides business intelligence and finance and accounting information to DOD decisionmakers. DFAS is also responsible for preparing annual financial statements and the consolidation, standardization, and modernization of finance and accounting requirements, functions, processes, operations, and systems for DOD.

One of the most visible responsibilities of DFAS is handling military pay. DFAS pays all DoD military and civilian personnel, retirees and annuitants, as well as major DoD contractors and vendors. DFAS also supports customers outside the DoD in support of electronic government initiatives. Customers include the Executive Office of the President, Department of Energy, Department of Veterans Affairs, Department of Health & Human Services, Department of State, U.S. Agency for Global Media and Foreign partners.

DFAS is a working capital fund agency financed by reimbursement of operating costs from its governmental customers (mostly the military service departments) rather than through direct appropriations. DFAS remains the world's largest finance and accounting operation.Defense Finance and Accounting Service. (2016, December 21)
Agency Overview
Accessed on April 11, 2017.

In FY 2019, DFAS:
* Processed 140.8 million pay transactions (~6.5 million people/accounts)
* Made 6.2 million travel payments
* Paid 15.1 million commercial invoices
* Maintained 98 million General Ledger accounts
* Managed $1.17 trillion in Military Retirement and Health Benefits Funds
* Made $558 billion in disbursements
* Managed $616.6 billion in Foreign Military Sales (reimbursed by foreign governments)
* Accounted for 1,349 active DoD appropriations

History

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.Southerland, G. W. (1997)
''A Feasibility Study into the Use of a Single Local Financial Management System for the Department of the Navy'' (Unpublished thesis)
Naval Postgraduate School, Monterey, California.

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, 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 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 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, 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
ttp://uscode.house.gov/statviewer.htm?volume=104&page=2838 104 Stat. 2838 an
10 USC 113
laid the groundwork for the Secretary of Defense to establish a more streamlined federal financial management structure. In late 1990, under the guidelines of th
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 th
Defense Finance and Accounting Service Out-of-Service Debt Management Center
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
* 1994 Began paying all DoD civilian employees; established centralized disbursing
* 1995 DoD establishes DFAS as a Fourth Estate Human Resources Regional Service Center
* 1998 Consolidated military pay operations into one system
* 2000 First unmodified financial statement audit opinion
* 2002 Received first unmodified audit opinion for Defense Commissary Agency and Defense Contract Audit Agency
* 2005 Base Realignment and Closure realigns DFAS into 10 sites
* 2006 Initiated Wounded-in-Action program providing real-time financial support to wounded service members
* 2007 Wounded Warrior Family Support Debit Card Program implemented providing funds to families of wounded warfighters
* 2010 Created Audit Readiness Directorate
* 2013 Achieved unmodified opinions on Statement on Standards for Attestation Engagement No. 16 for Civilian Pay, Military Pay, and Disbursing
* 2016 Achieved the 17th unmodified audit opinion for DFAS WCF Financial Statements

Major laws associated with and/or enforced by agency

DFAS must "establish and enforce requirements, principles, standards, systems, procedures, and practices necessary to comply with finance and accounting statutory and regulatory requirements applicable to the Department of Defense." The DFAS responsibilities and authorities are outlined in DoD 7000.14-R, "DoD Financial Management Regulation (DoD FMR)."Under Secretary of Defense (Comptroller). (current edition)
DoD 7000.14-R, “DoD Financial Management Regulation.”

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… w much of that money paid for actual goods and services delivered isn’t known.

Audit

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

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 DOD's first comprehensive audit concluding at the end of fiscal year 2018. Corporate accounting firms conducted the audit on behalf of 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.

According to the Pentagon, DOD's first audit covered $2.7 trillion in assets and $2.6 trillion in liabilities.

DOD did not pass this first audit. Five of twenty-one units got a passing grade (an “unmodified opinion”). All the rest failed. The Pentagon estimated that this first audit cost close to $1 billion: $367 million for military infrastructure to support the audits and for the corporations conducting the audit, and $551 million to fix the problems identified in the audit.

Investigative journalist Dave Lindorff described the situation: The accounting firms eventually concluded that the Department’s “financial records were riddled with so many bookkeeping deficiencies, irregularities, and errors that a reliable audit was simply impossible.”

Deputy Secretary of Defense Patrick Shanahan asserted, “We failed the audit, but we never expected to pass it.”

A few months after the first audit was over, David Norquist—the man who as the Pentagon’s comptroller oversaw the entire audit process—got promoted to Acting Deputy Secretary of Defense. Norquist is a former partner of Kearney & Co., one of the firms that conducted the audit.

After the first audit was over, DOD continued purchasing audit services from accounting firms, including from Ernst & Young, Kearney & Co., and KPMG.

In January 2019, the U.S. Air Force contracted Diligent Consulting (San Antonio, TX) to realign “the fielding strategy to match the needs of individual units" and "incorporate two financial processes necessary to be compliant with Financial Improvement and Audit Readiness and the Federal Information System Controls Audit Manual.”

DOD failed its second audit, though DOD officials insisted "progress" was being made.

DOD failed its third audit, with DOD officials urging patience, asserting that DOD will likely pass its audit sometime around the year 2027.

As of fiscal year 2021, DOD has still not passed its audit.

Locations

*Current locations:
**Major Sites
***Indianapolis, Indiana (Headquarters) – DFAS is headquartered in the MG Emmett J. Bean Finance Center, a 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).Carnes, W.H. Jr. (1994). U.S. Army Finance Center. In ''The Encyclopedia of Indianapolis'' (p. 1369). Indiana University Press.

***Cleveland, Ohio
***Columbus, Ohio
***Limestone, Maine
***Rome, New York
****Europe
****Japan
**Smaller scaled back sites
***Alexandria, Virginia
***Texarkana, Texas
***Bratenahl, Ohio
*Closed sites:
**Patuxent River, Maryland
**Charleston, South Carolina
**Dayton, Ohio
**Denver, Colorado - Lowry Air Force Base
**Kansas City, Missouri - Richards-Gebaur Air Force Base
**Lawton, Oklahoma
**Lexington, Kentucky
**Norfolk, Virginia
**Omaha, Nebraska
**Oakland, California
**Orlando, Florida - Naval Training Center Orlando
**Honolulu, Hawaii
***Pacific
**Pensacola, Florida
**Rock Island, Illinois
**St. Louis, Missouri
**San Antonio, Texas
**San Bernardino, California - Norton Air Force Base
**San Diego, California
**Seaside, California

See also

* Air Reserve Personnel Center

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