The 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 the DOD.

[3] The 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.

Since its inception, the 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 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.

As a result of BRAC efforts begun in FY 2006, the DFAS has closed 20 sites, realigned headquarters from Arlington to Indianapolis and established a liaison location in Alexandria, Virginia.

[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and other supplies; thus it continues to spend money on new supplies it doesn't need and on storing others long out of date.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]In 1990, the U.S. Congress passed the Chief Financial Officers Act, which directed all federal departments and agencies to submit to annual audits.

Corporate accounting firms conducted the audit on behalf of the 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.

[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.