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Integrating Financial Management Operations in a Logistics Support Environment

During its deployment to Operation Iraqi Freedom 07–09, the 3d Sustainment Brigade was the first to use to modular financial management operations while in theater.

In May 2007, the 3d Sustainment Brigade deployed to Operation Iraqi Freedom to assume command and control of sustainment operations for the Multi-National Division-North (MND–N) and to complete the transformation of legacy personnel services and finance battalions to modular human resources and financial management companies. Initially, the companies capitalized on the experience of the 125th Finance Battalion and the 22d Personnel Services Battalion to identify staff functions that were specific to the finance and human resources communities. These functions would be consolidated under the brigade’s special troops battalion (STB), and the STB staff would assume responsibility for providing command and control of both missions.

On 30 July, the 125th Finance Battalion transformed to become the 82d Financial Management Company (FMCO) under the brigade’s STB. With this transition, the 3d Sustainment Brigade became the first sustainment brigade to conduct modular finance operations in theater. On 28 November, the 22d Personnel Services Battalion transferred authority to the 101st Human Resources Company (HRCO), completing the 3d Sustainment Brigade’s conversion to the first fully modular sustainment brigade in theater.

Getting Organized

The initial challenge was to provide the STB commander with a staff that had the expertise needed to provide command and control to the FMCO. The brigade staff is authorized only three financial personnel: a resource management officer, a financial operations officer, and a finance noncommissioned officer (NCO). The intent of this structure is for the brigade to provide direct technical guidance and oversight of FMCO operations while the STB commander provides administrative control.

However, the brigade commander’s intent was for the STB commander to provide command and control, not just administrative control. To accomplish this, the STB commander pulled one NCO from the FMCO’s operations cell to the battalion staff. This move enabled the battalion to readily interpret finance data and advise the commander on financial operations. It also ensured that the entire chain of command had the expertise needed to make informed decisions involving personnel and the resources required to support the mission.

The next challenge was to integrate FMCO operations with the 316th Sustainment Command (Expeditionary) and the 336th Financial Management Command (FMC) to solidify reporting requirements and the flow of reports in theater. The FMC is responsible for providing theater-level technical oversight of financial operations and coordinating support with national providers such as the Federal Reserve System, the Army Finance Command, and the Defense Finance and Accounting Service. It also reviews theater financial requirements and recommends to the commander of the expeditionary sustainment command (ESC) the appropriate financial detachments and teams to support those requirements. However, the 336th FMC is not in the FMCO’s chain of command.

To build a positive relationship and delineate responsibilities, the 3d Sustainment Brigade hosted a financial summit with the 316th ESC and 336th FMC to discuss responsibilities and reporting requirements. During the summit, everyone agreed that technical reports would flow through the sustainment brigade to the FMC with a courtesy copy to the ESC and tactical reports would flow through the sustainment brigade to the ESC. The sustainment brigade commander would execute normal command functions, approve cash-holding authority, and appoint disbursing officers and investigating officers; the FMC would provide the technical expertise to review loss of funds investigations and accounting discrepancies as appropriate. This teamwork approach to the command and technical chains proved highly successful, capitalizing on the experience and capabilities of the FMC director and staff while reinforcing the position of the sustainment brigade commander as the commander for financial operations in MND–N and MND-West.

Reducing U.S. Dollars

Once the command and technical relationships were cemented, the 82d FMCO began developing solutions to the larger challenges in finance operations. The first challenge was to develop a means of reducing the amount of U.S. dollars on the battlefield. This served three purposes. First, reducing cash payments made to contractors lowered the exposure of Soldiers to the risks associated with transporting large amounts of cash. Second, reducing cash on the battlefield reduced illegal activity. Third, it reduced the amount of money available to insurgent groups to fund operations against coalition forces.

The theater’s first effort to reduce cash on the battlefield was the introduction of the Eagle Cash Card. [The Eagle Cash Card is a stored-value card that can interface with automated kiosk devices located at camps or bases, allowing enrolled cardholders self-service access to funds in their U.S.-based checking or savings accounts. The cards can be used to purchase items at the exchange or from other concessionaires on base.] This was followed by a new theater disbursing policy limiting the amount of cash disbursed to a Soldier in a month in the form of casual pays, Eagle Cash Card transactions, and check cashing.

Next, the FMCO concentrated on converting contract payments from U.S. dollars to Iraqi dinars. The challenge was twofold: acquiring enough dinars to pay an estimated $7 million per month to contractors and paying the conversion fees. The 316th ESC and the 336th FMC worked with the local Iraqi banks to obtain enough dinars to support just over 1 month’s requirements at a time, and the 1st Theater Support Command negotiated a purchase request and commitment for the conversion fee for 1 month and eventually established a separate line of accounting to pay the fees.

Finally, the FMCO worked with MND–N, 1st Armored Division resource management office, and the 336th FMC to change contracts from cash payments to electronic funds transfers (EFT). The Iraqi banks were not accustomed to EFT payments in large amounts and had set their parameters to reject any EFT payments in excess of $50,000. We worked through the Federal Reserve System’s International Treasury Services to increase the maximum amount to $10 million per day with a $200 million per month limitation. With this increase, EFT payments increased from $2.3 million in November 2007 to $13.8 million in February 2008. The net effect of all of these changes was to reduce the amount of U.S. dollars paid to contractors in Iraq from 48 percent of our total disbursements to 18 percent. This amount continued to decrease as MND–N worked with the FMCO to ensure that all future contracts over $50,000 would require the contractor to accept EFT payments.

Over the course of its 15-month deployment, the 3d Sustainment Brigade and the 82d FMCO distributed an average of $40 million per month. The FMCO worked with the 336th FMC and the Federal Reserve System to reduce the amount of U.S. dollars on the battlefield by procuring Iraqi dinars and paying local national contractors an average of $7 million a month in dinars instead of dollars. The brigade resolved issues with international banking transactions, converting a majority of the larger contracts from cash payments to EFT. The brigade eliminated the use of Treasury checks as a form of payment and provided first-class financial support to the Soldiers assigned to MND–N and MND-West. Although the conversion to full modularity was not an easy endeavor, it was successful and proved that the concept works.

Lieutenant Colonel Russell A. Holscher is the support operations officer for the 3d Sustainment Brigade. He is a graduate of the Quartermaster Officer Basic Course, the Combined Logistics Officers Advanced Course, and the Army Command and General Staff College.