Page 18 - FCA Diamond Point Dec 24-smg review

FROM THE FIELD

BEING A PIONEER IN MILITARY BANKING BY LTC(R) JOHN

HERKO

Continuation. The first part of this three-part series laid out why the U.S. Army needed trained
military banking officers and identified the first two officers who served as banking officers from
1979 to 1985, Sharon Volgyi and John Herko. Part two discussed the initial design and testing of
government charge cards and traveler’s checks, which were both successfully tested and
implemented. While Government charge cards were expanded to include Government Purchasing
Cards in 1993 and continue to this day, the traveler’s check program faded away in the late 1980’s
(with over $1 billion sold) primarily due to the use of charge cards, emphasis on mandatory check-
to-bank programs, and emergence of better personal financial management technologies. Part 3 of

the series will be presented in two segments. This first segment, presented below, discusses the

“Why” of the Army/Treasury joint project between 1983 and 1985 to use automated teller machines

to pay Soldiers without a “check to bank” pay option. The second and final segment will be
presented in the next issue of Diamond Points and will cover “How” it was accomplished and

discuss the final results.

Part 3

The Army/Treasury Automated Teller Machine Project (the ATM Project) – Why???

In early January 1984, the President’s Private Sector Survey on Cost

Control (the Grace Commission), formed by Executive Order on June 30,

1982, formally submitted its final report to President Reagan. One of the

nearly 2,500 recommendations included using ATMs to provide military
pay to members who did not have a “check to bank” pay option. While the

Army supported two other Grace Commission recommendations,

government charge cards and travelers checks, it strongly objected to
ATMs managed by the military branches. Apparently, the Grace
Commission saw significant benefits to the government in the increasing

proliferation and acceptance of ATMs and ATM networks. Considering the

Army’s military pay methods in the early 1980s, described below, one

could understand the appeal of ATMs. The intent of using ATMs focused
only on Soldiers without a “check to bank” pay option. Some perceived

the ATM Project’s mantra “A Better Way for Soldier Pay” as government competition with

commercial banks and overseas military banking contracts. But everyone involved in military pay

understood the tremendous effort and expense in getting paychecks to Soldiers on payday.

The Office of Management and Budget (OMB) accepted the Grace Commission’s

savings estimates from use of ATMs by reducing federal agencies FY 1985

budget requests in passback actions. In the Army’s case, that resulted in a $40
million reduction in the Army Operations and Maintenance appropriation. In

December 1983, as part of the Army’s appeal of OMB’s action, I represented the

Army at an OMB meeting to restore the budget cut. OMB agreed, but only after the

Army promised to conduct a test of the emerging ATM technology and the

practicality, feasibility and cost effectiveness of incorporating ATMs as a part of
Army’s military pay system. But, before delving into the details of the ATM Project, a brief review of

existing payday procedures would help readers understand the Grace Commission’s ATMs
recommendation.

In 1984, the Army used the Joint Uniform Military Pay System (JUMPS). Although a DoD financial

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