In 1991, the Secretary of Defense created the Defense Finance and Accounting Service to standardize, consolidate, and improve accounting and financial functions throughout the DoD. The intent was to reduce the cost of the Department's finance and accounting operations while strengthening its financial management.
 

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. The new customers include the Executive Office of the President, the Environmental Protection Agency, the Department of Energy, the Department of Veterans Affairs, the Department of Health and Human Services and the Broadcasting Board of Governors.
 

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.

DFAS is financed as a Working Capital Fund, obtaining revenue by charging its customers for the services it provides rather than being funded through direct appropriations. The agency sets annual rates two years in advance based on anticipated workload and estimated costs calculated to offset any prior year gains or losses. DFAS operations are subject to oversight by DoD as well as the executive and legislative branches of the federal government.
 

DFAS has steadily reduced operating costs and has returned those savings to its customers in the form of decreased bills and improved service. These savings are a result of the agency's robust search for continuous innovation and enhanced business practices. DFAS remains the world's largest finance and accounting operation.