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Army examines replacing DFAS with own accountants

Mar. 26, 2014 - 12:00PM   |  
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The Army is considering pulling some of its financial activities out of the Pentagon’s Defense Finance and Accounting Services office and handing them off to the Army’s own accountants.

It’s not clear how, if at all, this would affect soldiers. But it’s raising questions about the future of DFAS, which is the world’s largest finance and accounting operation and manages the bank accounts for most of the Defense Department’s massive budget.

The Army is planning to launch a pilot program this spring at Fort Bragg, N.C., that will involve significant changes to how the Army conducts accounting for its soldiers on that base, according to a defense official familiar with the plan.

Army Secretary John McHugh suggested that massive changes may be in store for DFAS as the Pentagon’s budget levels off, the size of the force shrinks and military accountants have fewer financial transactions to manage.

“I think everybody has to be realistic ... as the number of customers gets smaller, you’re gonna have fewer transactions if no one does anything else. It’s just realistic. So I mean, the face of DFAS ... would have to make some adjustments to accommodate the drawdown in the budget as well,” McHugh told the House Armed Services Committee on Tuesday.

McHugh has no direct control over DFAS, which is run by the Defense Department’s comptroller.

An Army spokesman declined to provide details about the pilot program.

Questions about accounting services come as pressure is mounting on the military to keep better track of its money. The Pentagon’s accounting procedures do not meet the same standards upheld by private-sector corporations and most government agencies. Critics say billions of dollars are lost in waste and inefficiency. Lawmakers on Capitol Hill say fixing that would help ease the impact of budget cuts.

A Pentagon spokesman said no major changes to DFAS are in the works.

“DFAS has no plans for major workload shifts or closures at any other DFAS site. We are aware the Army has been reviewing how their financial management work is performed but we have made no agreements to transfer any work,” said Navy Cmdr. Bill Urban.

McHugh said the Army’s underlying goal is to address longstanding concerns about auditability.

“Much of what we are doing is in pursuit of what Congress has legally said we must do, and that is, to become auditable,” McHugh said Tuesday.

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