Millions Written Off in Former Service Members' Debts--Future Losses Can Be Cut

During fiscal years 1977 to 1979, $67 million owed by former service members was written off by the military services as bad debts, while only 13 percent of the total owed was collected. The collections made by the services were barely more than the costs incurred for processing and collecting the debts.

The Department of Defense (DOD) can substantially reduce its annual bad debt losses by making sure that service members' debts are offset against amounts due them at the time they separate from the service, acting more quickly to initiate collection of those debts remaining after separation, and using effective, businesslike collection techniques. GAO found that, when service members separated from the military, disbursing offices frequently did not compute the separating member's final pay in accordance with DOD regulations. Statistics showed that millions of dollars of overpayments were made by disbursing offices when members separated. DOD needs to strengthen controls and provide enough time to ensure that pay records are complete so that debts can be identified and offset against separation pay. Also, GAO believes that disbursing offices and their commanders need to be informed of separation disbursement errors so that corrective action will be taken. Millions of dollars in debts were not being collected because of lengthy delays in initiating collection action on the part of the services. Having all military finance offices formally notify members of their debts upon separation would help the offices initiate collection actions more promptly. Finally, GAO believes that the military services must become more effective and businesslike in their collection actions through increased contact with debtors and the charging of interest on debts not payed promptly.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: John F. Simonette Team: General Accounting Office: Accounting and Financial Management Division Phone: (202) 275-1581