Defense Finance and Accounting Service

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Defense Finance and Accounting Service
Defense Finance Accounting Services (DFAS) Official Seal.gif
Official seal
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Official logo
Agency overview
Formed1991
Headquarters Indianapolis, Indiana
Employees>12,000
Agency executives
  • Audrey Davis, Director
  • Jonathan Witter, Principal Deputy Director
  • ~ Aaron Gillison, Deputy Director, Operations
  • Deputy Director, Strategy and Support [1]
Parent department Department of Defense
Website www.dfas.mil

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. [2]

Contents

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. [3]

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. [4]

In FY 2019, DFAS: [5]

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. [6]

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. [4]

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. [7]

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. [4]

Establishing legislation

The Chief Financial Officers Act of 1990 (31 USC 501, Pub. L. 101–576, title I, §101, Nov. 15, 1990, 104 Stat. 2838) and 10 USC 113 laid the groundwork for the Secretary of Defense to establish a more streamlined federal financial management structure. [6] 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).

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 are subordinate agencies of DFAS. [8]

Major events in the history of the agency

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)." [10]

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. [11] 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. [12]

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. [13]

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. [14]

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, [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] Kearney & Co., [25] [26] [27] KPMG, [28] [29] [30] [31] [32] [33] and PwC [34] [35] [36] [37] prominent among them. Other firms, such as Cotton & Co., [38] [39] [40] Deloitte, [41] [42] [43] and Grant Thornton, [44] provided audit readiness and financial improvement.

According to the Pentagon, the DOD's first audit covered $2.7 trillion in assets and $2.6 trillion in liabilities. [45] [46]

The DOD did not pass this first audit. [47] 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. [48]

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." [49]

Deputy Secretary of Defense Patrick Shanahan asserted, "We failed the audit, but we never expected to pass it." [50]

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. [51] Norquist is a former partner of Kearney & Co., one of the firms that conducted the audit. [52]

After the first audit was over, DOD continued purchasing audit services from accounting firms, including from Ernst & Young, [53] [54] [55] Kearney & Co., [56] and KPMG. [57] [58]

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." [59]

DOD failed its second audit, though DOD officials insisted "progress" was being made. [60]

DOD failed its third audit, with DOD officials urging patience, asserting that DOD will likely pass its audit sometime around the year 2027. [61]

As of fiscal year 2022, DOD has still not passed its audit.

Locations

See also

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References

  1. ↑ DFAS Leadership
  2. ↑ Office of the Federal Register. (n.d.). Defense Finance and Accounting Service. In the United States Government Manual. Accessed on April 11, 2017.
  3. ↑ "Defense Finance and Accounting Service". www.dfas.mil. Defense Finance and Accounting Service. Retrieved April 6, 2019.
  4. 1 2 3 Defense Finance and Accounting Service. (2016, December 21). Agency Overview. Accessed on April 11, 2017.
  5. ↑ "FY18 Agency Financial Report". www.dfas.mil. Defense Finance and Accounting Service. Retrieved April 6, 2019.
  6. 1 2 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.
  7. ↑ DFAS Portal Named Among the World's 10 Best Government Intranets – DSSResources.com
  8. ↑ USA.gov. (n.d.). Defense Finance and Accounting Service. Accessed on April 11, 2017.
  9. ↑ Defense Finance and Accounting Service. (2016). 2016 DFAS Annual Financial Report. Accessed on April 11, 2017.
  10. ↑ Under Secretary of Defense (Comptroller). (current edition). DoD 7000.14-R, “DoD Financial Management Regulation.”
  11. ↑ Paltrow, Scot J. (November 18, 2013). "Special Report: The Pentagon's doctored ledgers conceal epic waste". Reuters. Retrieved February 16, 2021.
  12. ↑ Paltrow, Scot J. (November 18, 2013). "Special Report: The Pentagon's doctored ledgers conceal epic waste". Reuters. Retrieved February 16, 2021.
  13. ↑ "Chief Financial Officers Act of 1990". govinfo.library.unt.edu. Retrieved February 16, 2021.
  14. ↑ Paltrow, Scot J. (November 18, 2013). "Special Report: The Pentagon's doctored ledgers conceal epic waste". Reuters. Retrieved February 16, 2021.
  15. ↑ "Contracts for January 27, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  16. ↑ "Contracts for May 13, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  17. ↑ "Contracts for December 23, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  18. ↑ "Contracts for July 11, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  19. ↑ "Contracts for August 22, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  20. ↑ "Contracts for September 7, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  21. ↑ "Contracts for October 25, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  22. ↑ "Contracts for December 27, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  23. ↑ "Contracts for December 28, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  24. ↑ "Contracts for September 21, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  25. ↑ "Contracts for September 23, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  26. ↑ "Contracts for July 6, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  27. ↑ "Contracts for December 19, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  28. ↑ "Contracts for January 27, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  29. ↑ "Contracts for December 15, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  30. ↑ "Contracts for August 22, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  31. ↑ "Contracts for December 21, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  32. ↑ "Contracts for December 29, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  33. ↑ "Contracts for February 9, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  34. ↑ "Contracts for May 12, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  35. ↑ "Contracts for May 26, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  36. ↑ "Contracts for March 29, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  37. ↑ "Contracts for May 16, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  38. ↑ "Contracts for February 29, 2016". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  39. ↑ "Contracts for February 6, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  40. ↑ "Contracts for May 30, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  41. ↑ "Contracts for December 21, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  42. ↑ "Contracts for April 17, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  43. ↑ "Contracts for September 27, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  44. ↑ "Contracts for May 30, 2017". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  45. ↑ "The Biggest Audit in Human History ... Really?". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  46. ↑ "DOD Audit: Separating Myth From Fact". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  47. ↑ Cancian, Mark. "Why Auditing The Pentagon Isn't Turning Up a Windfall of Waste". Forbes. Retrieved February 16, 2021.
  48. ↑ Mehta, Aaron (January 10, 2018). "Pentagon is prepared to spend over $900 million in first audit". Defense News . Retrieved February 16, 2021.
  49. ↑ Lindorff, Dave (November 27, 2018). "Exclusive: The Pentagon's Massive Accounting Fraud Exposed". The Nation. ISSN   0027-8378 . Retrieved February 16, 2021.
  50. ↑ Bowden, John (November 15, 2018). "Pentagon fails first-ever audit". TheHill. Retrieved February 16, 2021.
  51. ↑ Mehta, Aaron (January 2, 2019). "Pentagon comptroller to serve as acting deputy defense secretary". Defense News . Retrieved February 16, 2021.
  52. ↑ "David L. Norquist". www.defense.gov. Retrieved February 16, 2021.
  53. ↑ "Contracts for December 19, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  54. ↑ "Contracts for December 20, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  55. ↑ "Contracts for December 21, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  56. ↑ "Contracts for December 13, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  57. ↑ "Contracts for November 30, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  58. ↑ "Contracts for December 21, 2018". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  59. ↑ "Contracts for January 29, 2019". U.S. DEPARTMENT OF DEFENSE. Retrieved February 16, 2021.
  60. ↑ Mehta, Aaron; Jen Judson (November 17, 2019). "The Pentagon completed its second audit. What did it find?". Defense News . Retrieved February 16, 2021.
  61. ↑ Mehta, Aaron (November 16, 2020). "The Pentagon failed its audit again, but sees progress". Defense News . Retrieved February 16, 2021.
  62. ↑ "Major General Emmett J. Bean Finance Center – Building History". U.S. General Services Administration. Archived from the original on April 28, 2011. Retrieved April 27, 2011.
  63. ↑ "Major General Emmett J. Bean Federal Center". U.S. General Services Administration. Retrieved April 27, 2011.
  64. ↑ "SunPower Solar Technology Selected for Multiple U.S. Federal Government Facilities". Electrical Line Magazine. Retrieved April 27, 2011.
  65. ↑ Carnes, W.H. Jr. (1994). U.S. Army Finance Center. In The Encyclopedia of Indianapolis (p. 1369). Indiana University Press.

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