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The State of DFAS FY 2003

To our DFAS team

I am pleased to say that fiscal year 2003 was the best year ever in our 12-year history. We are very proud of our DFAS team accomplishments and look forward to FY 2004 being even better. The purpose of this State of DFAS message is to recap our progress as an organization, to highlight how we performed as a team and to look forward to what lies ahead.

A Strong Team
Our organization is strong. In FY 2003, we made more big strides toward our vision of becoming a world-class finance and accounting organization and solidified our place as the best value finance and accounting leader in the federal government.

Our customers notice the difference. A recent independent customer satisfaction survey showed improvement in every one of the nine areas important to customer satisfaction--recovery, choice, access, knowledge, timeliness, tangibles, reliability, quality and courtesy.

The rest of the federal government is also taking note of the value DFAS delivers. This past year, the Office of Personnel Management chose DFAS as one of the four agencies that will provide payroll services across the federal government. In the next couple of years, DFAS will pay more than half of all federal civilian employees as we add nearly 300,000 new civilian payroll customers from the Departments of Energy, Veterans Affairs and Health and Human Services.

Looking inside DFAS, our 2003 Organizational Assessment Survey scores showed steady improvement toward making DFAS a better place to work. Since FY 2000, we improved in every measure of the OAS, by an overall average of nine percentage points.

Our core values of integrity, innovation and service are directly linked to our vision. They fuel our passion and keep us focused so that our team can continue increasing customer satisfaction, building business and improving morale.

Delivering Excellent Performance with Integrity,
Innovation and Service
Our mission is to provide professional, responsive finance and accounting service to the men and women who defend America. Making that service more efficient produces even better value to the Department of Defense and the taxpayer. In FY 2003, we lowered the cost of the services we provide to 0.34 percent of the defense budget. That's a decrease of almost 40 percent from 0.56 percent in FY 1999. This means that out of every dollar spent on defense more can go toward protecting, training and equipping our soldiers, sailors, airmen and Marines. A more efficient DFAS means stronger national security and a greater value to the American taxpayer.

This past year, our DFAS team performed important roles as America mobilized for war in Iraq. Our trusted support helped the warfighters focus on their mission, while we focused on their financial needs. The DFAS team has a key role supporting the effort to rebuild a nation by providing finance and accounting expertise to establish control, disbursing and pay processes.

In Military and Civilian Pay Services, we now pay about 5.9 million people. Of those customers, more than 2.1 million have chosen to make myPay their key to accessing and controlling pay information. Our customers enjoy taking charge of their own pay information.

In Commercial Pay Services, our team continued to reduce the amount of interest paid per million dollars disbursed, lowering this figure to just $160, down from $343 in FY 2001 and $224 last year. That's a decrease of 29 percent from last year alone.

In Accounting Services, we saw significant improvement on many fronts. In the area of problem disbursements, the team exceeded all performance expectations - reducing negative unliquidated obligations by 34 percent more than the performance goal; unmatched disbursements by 17 percent more; and in-transit disbursements by 71 percent more. Accounting reports are now delivered in 13 days instead of 14. Our accounting team disbursed $416 billion in FY 2003, managed more than $194.4 billion in the Military Retirement Trust Fund to generate a return of more than 5.6 percent versus a -1.0 percent return for competitive commercial funds and performed nearly 121 million accounting transactions. All of these accomplishments enhance DFAS' value to clients.

Internally, a variety of teams provide the mission-critical systems, resources, information and environment without which these achievements would not have been possible. The enhanced ePortal makes access to information and applications easier and allows individual members of the DFAS workforce to collaborate effectively from their desktops no matter what the geographic distance. Our DFAS systems have competed against other DoD entities, federal agencies, and commercial enterprises to win an impressive array of awards. Executive leaders have taken steps to better link our budget to strategy. Our Portfolio Management initiative gives us the "total picture" to ensure we make the best resource decisions. The Corporate Resources realignment has delivered improved personnel, resources and administrative support for us all while reducing the overhead cost to our customers.

Smooth teamwork, professional knowledge and expertise, and intrinsic core values of integrity, innovation, and service combine to give us a winning edge. Proving again that we will continue our journey toward being a world-class finance and accounting service provider for the people who defend America.

A Transformed Future
DFAS Transformation is our integrated approach for assessing every product line and function within our agency to ensure we deliver the right products and services to the right customers in the best way possible. It will allow us to better anticipate and meet our customer needs and increase the future value we deliver. DFAS team members have always demonstrated the ability to adapt and succeed in the face of significant change. That is why I am confident that our DFAS Team will achieve a successful transformation.

Less than a year into our Transformation, our teams have completed several Business Case Analyses. For Marine Corps Accounting, the team recommended conducting an A-76 competition, while the Vendor Pay team recommended transforming that function into a High-Performing Organization without conducting a competition in the foreseeable future. Several other BCAs are in the final stages of review and coordination before the results can be announced.

In FY 2004, we will take on the significant challenge of conducting BCAs for Army, Navy, Air Force and Defense Agencies Accounting, Corporate Communications, and Equal Employment Opportunity functions.

In addition to the structural and procedural changes involved in Transformation, Lean Thinking and Six Sigma are producing cultural change where everyone on the team is entrusted, empowered and energized to fight waste and look for opportunities to continually pursue perfection. Lean Thinking and Six Sigma will help ensure that everything we do generates value for the client and will help us to better identify and act on opportunities to improve.

The principles of Lean Thinking are based on ensuring value is defined by the customer, clearly determining the complete value chain, allowing value to flow through the entire process, and letting the customer demand pull the process along. The final principle of Lean Thinking involves continuously pursuing perfection.

Such fundamental change will be successful only if we take care of DFAS' most valuable resource--our team members. DFAS' Human Capital Working Group is evaluating and addressing all the challenges facing our team members in order for DFAS to truly become an employer of choice. In FY 2003, DFAS spent nearly 3.8 percent of its total payroll on training--or $1,811 per employee -- which nearly doubles the industry average of 1.9 percent for similar agencies and private firms. The investments we make in retaining qualified employees and recruiting new ones make certain DFAS will continue to employ the best and the brightest to serve the men and women who defend America.

To Continued Success in FY 2004
A strong team, meaningful core values, good performance and a process for continued improvement mean the state of DFAS is in the highest state of readiness as we begin FY 2004. I hope you share my pride in being part of DFAS fulfilling the world's most important finance and accounting mission.

Thomas R. Bloom
Director