DOD Infrastructure:

DOD's Planned Finance and Accounting Structure Is Not Well Justified

NSIAD-95-127: Published: Sep 18, 1995. Publicly Released: Sep 18, 1995.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) plan to consolidate over 300 defense accounting offices into 5 large existing finance centers and 20 new sites during the next 7 years, focusing on: (1) the process DOD used to identify the number and locations of the new operating centers; (2) the consolidation's potential impact on customer service; and (3) DOD plans to include commercial business practices in the consolidation.

GAO found that: (1) the DOD plan to consolidate and reduce personnel is necessary to achieve a more effective and efficient finance and accounting service; (2) DOD has not achieved a balance between cost considerations, maintaining customer service, and improving business operations in its process to select the number and locations of new operating centers; (3) DOD has decided to open 20 new operating locations without first determining what functions they would perform or if these centers would support its operations; (4) DOD has mainly emphasized maximizing short-term cost savings during the decisionmaking process; (5) 15 of the 20 operating locations will be housed in excess DOD facilities, even though these facilities may be less desirable from a customer service, cost, or quality workforce standpoint; (6) DOD has not reengineered the finance and accounting functions to be performed at the new locations, thus, DOD business operations will not likely be improved; and (7) DOD has time to reconsider its consolidation decisions, since it will be some time before the operating locations will be fully staffed and operational.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Fiscal Year 1996 Defense Authorization Act included a requirement that DOD study its requirements for additional operating locations and, before opening additional locations, provide Congress with specific justification. DOD delayed its decisions to open three of the five unneeded operating locations and indicated it would provide Congress with the required information if it decided to open them. DOD later decided to open one additional location. By not opening the remaining 2 sites, DOD avoided spending about $22 million in military construction funds.

    Matter: Before approving military construction funds for renovating excess facilities for finance and accounting operations, Congress may want to ensure that DOD has adequately assessed and justified the size and locations of its finance and accounting network.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On January 2, 1996, DFAS completed a reevaluation of the number of locations and personnel needed to perform finance and accounting functions. The reevaluation concluded that DOD did not need 5 of the 21 planned locations.

    Recommendation: The Secretary of Defense should direct the DOD Comptroller to develop an updated estimate of the number of locations and personnel required to perform finance and accounting functions. In developing this estimate, it is important that the Comptroller consider not only today's concept of operations but also how finance and accounting operations will be performed once the Defense Finance and Accounting Service (DFAS) has complied with DOD business process reengineering goals and directives.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: Although DOD concluded that it did not need 5 of the 21 planned operating locations, DOD decided that Congress intended for it to open 2 of the 5 operating locations in question, and has proceeded to do so. It delayed final decisions on the remaining three sites. These decisions will be made during fiscal years 1997 and 1999.

    Recommendation: The Secretary of Defense should direct the DOD Comptroller to use the updated information to reassess the site selection decisions for new operating locations. This reassessment should balance DOD desire for short-term cost savings with the need to select sites that, from a business perspective, offer the greatest opportunity for maintaining or enhancing finance and accounting operations and services to Defense Finance and Accounting Service customers.

    Agency Affected: Department of Defense


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