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An agency of the U.S Department of Defense, the Defense Finance and Accounting Service (DFAS) is responsible for administering finance and accounting services for the military and other members of Defense. The agency provides services primarily for (military) service men and women, or “warfighters” - including processing military, civilian, retiree, travel and contract/vendor pay, and managing military health care and benefits. DFAS also provides accounting for the Department itself (e.g., of appropriations).


The DFAS was created by the Secretary of Defense in 1991 in an effort to streamline, cut costs and improve quality in Department of Defense finance and accounting operations through consolidation and standardization of procedures. In May 1994, after several false starts, DOD announced that DFAS would begin consolidating its finance and accounting infrastructure in fiscal year 1995, and was successful in consolidating more than 300 installation-level finance and accounting offices into 26, and reducing a workforce of 27,000 to 16,000 personnel.
The agency is customer-financed (working capital fund agency financed by reimbursement of operating costs from its governmental customers - mostly the military service departments) rather than funded through direct Senate appropriations.

Base Realignment and Closure Commission (BRAC) reorganizations, especially the latest round in 2005, have had a dramatic effect on DFAS, eliminating the majority of small sites in a major consolidation effort. See Controversy Section.


What it Does  

The world’s largest finance and accounting operation, DFAS supports the OUSD(C) - the principal advisor to the Secretary of Defense for budgetary and fiscal matters. The agency is responsible for coordination and collaboration with all civilian defense agencies, the military services and “combatant commands that provide warfighting capabilities for America's defense.”
The agency disburses over $446 billion yearly:
“[B]y processing 154.6 million pay transactions to 5.9 million military, civilians, retirees and annuitants; 14 million commercial invoices and 6.9 million travel vouchers and settlements. Responsible for 865 active DoD appropriations, DFAS is the trust fund manager for $22 billion in foreign military sales and $328 billion in military retirement and health benefit funds. Each year, it maintains almost 55 million general ledger accounts containing billions of transactions and handles accounts for worldwide operations and multidisciplined appropriations of DoD.” 
In addition to payment operations, the agency is responsible for maintaining the records of all those compensated for military service, and administers services such as wage garnishment - often as a means of paying child support.
The agency is headquartered in Arlington, VA., and has seven sites (Denver; Indianapolis; Cleveland; Columbus;  Kansas City; Limestone, ME: Rome, NY).
Key Leaders (operations, business management, corporate, site directors)
External Analysis of DFAS operations
NFAS in the news/Additional Articles/Info
Defense Says Bye Bye to EDI (by Bob Brewin, Government Executive)

CSC Wins Estimated $250 Million Agreement From Defense Finance and Accounting Service



Where Does the Money Go  

DoD Considers Employees with Bad Credit “National Security Threat”/NFAS Firings
Civilian Employees Charged for Serving
Some federal civilian employees who also served in the Reserves and National Guard may have been wrongly charged leave while performing annual training or serving on active duty. The Butterbaugh decision (as well as some related cases) could restore leave for affected persons. The decision and administrative claims procedures are detailed in the link below.
Delayed Reimbursement for National Guard and Reservists
 “WASHINGTON - Some National Guard and Reservists mobilized for the War on Terror (search) have waited months, even years, to get reimbursed for their travel and meal expenses, they say, costing thousands of dollars in out-of-pocket costs and forcing many to be delinquent in paying other bills on time…”
Guardsmen, Reservists Foot Own War Expenses (by Kelley Beaucar Vlahos, Fox News)
Public-Private Contracting
An investigative report by the DoD Inspector General (IG) on the public-private competition for the DFAS military retired and annuitant pay functions revealed that a contract with a potential 10-year value of $346 million was awarded to a contractor rather than the lower in-house bid because of a $31.8 million error - an error first made by another contractor hired by DFAS to conduct the competition.

DoD IG Blows Whistle on yet Another Defense Contracting Scandal (American Federation of Government Employees Press Release)



Suggested Reforms  
Congressional Oversight  
Former Directors  

DFAS Directors Past and Present


Jeremy Nordstrom - 7/18/2012 3:44:43 PM              
i would like to do some covert ops missions for the dod that the goverment would like to keep discreet. is there anyway i could get the help to do the work in that field?

connie lee - 7/3/2012 2:39:50 PM              
iworked fr the commisary for 5years from1989 to1994 when i left there they gave me retirement money i would like to know how i could buy back that time so i can get credit with my current emoloyer the us postal service any help with this would be greatlt appreciated

Rocky Townsend - 6/20/2012 10:46:05 AM              
i have been seperated from the military since july 2008. my original ets was april 2007 but was moved due to my units stop-loss in preparing to deploy to afghanistan early february 2007, which caused a rush to clear my post and get my discharge papers when i returned from deployment. during that small window before becoming a civilian i filed for my travel pay with the rest of my company but noticed i was the only one in the compay that seemed to not get paid when everyone else did. i turned in 1 more travel voucher soon as i seen that, and also ended up turning in another while on terminal leave because i had still received no payment. after my ets date had passed and i was "officially" a civilian...i was "officially" ignored by every finance office on base, every pac clerk in my battalion, and every single person i have spoken to in the past 4 years. also, nobody seems to be able to help me with getting a set of deployment orders, which is one requirement for turning in a travel voucher. i wouldnt worry so much about it if it werent for the fact that i was deployed for 15 months and at right around $3.50 for every day deployed, i find it impossible to just right off that much money. i am a married father of two and my only source of income right now is a 70% va disability compensation payment, and that money would help tremendously right now. someone please help me take care of this without the run-around so get the money i rightfully earned and deserve, and not having me track impossible paperwork that i will never find. thanks

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Table of Contents

Founded: 1991
Annual Budget: .3 percent of DoD budget in FY 2004. Customer funded.
Employees: About 12,000 civilian and military DoD personnel at 19 locations.

Defense Finance and Accounting Services (DFAS)
McKay, Terri

Teresa “Terri” McKay has served as director of the Defense Finance and Accounting Service (DFAS) in the Department of Defense since September 15, 2008. In this capacity, she oversees the Pentagon’s day-to-day accounting and finance activities, including processing military, civilian, retiree, travel and contract/vendor pay, and managing military health care and benefits.

McKay earned her bachelor’s degree from Ferris State University in Michigan in 1982 and her master’s degree in business administration from Auburn University at Montgomery in 1992.
A certified public accountant and certified government financial manager, McKay previously served as the Defense Department’s deputy chief financial officer, the principal advisor to the under secretary of defense (comptroller)/chief financial officer for accounting and finance matters. She was responsible for developing and implementing the Pentagon’s accounting, finance and general financial management policies. McKay also served as a member of the United States Chief Financial Officers’ Council and represented the Pentagon on various other inter-agency groups and councils.
McKay then became the DFAS principal deputy director in August 2006, a position she held until being promoted to director of the agency.
In March 2010, McKay’s agency received some unwelcome publicity when it fired 25 employees in the DFAS’s Cleveland office because they failed background checks on their credit. The workers and their union argued that the terminations were unfair due to the fact that the employees didn’t handle classified information, and finding new jobs was going to be challenging in a depressed economy.
Teresa McKay (Defense Finance and Accounting Service)
Gaddy, Zack
Previous Director

Zack E. Gaddy is a graduate of Old Dominion University and has a master's degree from Boston University. He is a certified public accountant and a certified government financial manager.

Gaddy worked as a program manager with the Air Force Audit Agency, where his special areas of responsibility included evaluating and recommending corrective actions for the Air Force's financial management functions for the general, stock, and industrial funds. Gaddy then served as the assistant for Fiscal Control, Office of the Assistant Secretary of the Air Force (Financial Management and Comptroller), where he directed departmental policy for funds distribution and analysis, and was also responsible for oversight, assessment, and corrective actions for problems and deficiencies identified within the Department of the Air Force's fiscal operations.
Gaddy was appointed to DFAS in 1991, serving as the director for Departmental Accounting at the Denver Center. His responsibilities included managing and overseeing all departmental reporting for the U.S. Air Force's general and working capital funds. He implemented DOD financial reporting policies, reviewed and analyzed the U.S. Air Force's financial reports and implemented the Chief Financial Officers Act.
Thereafter, he was the deputy director for Policy and Systems, Directorate for Accounting, DFAS Arlington. His responsibilities included the management and oversight of all DOD accounting operations, the development of procedures to implement accounting standards and policies, and the preparation and review of accounting and financial reports.
Gaddy was the deputy director for the DFAS Denver Center and Special Assistant for U.S. Transportation Command and Accounting at the Denver Center and from February 1 until August 11, 2000, promoted to director of DFAS Denver from August 11 to October, 2000. He took over as director of DFAS in May 2004.