Military Personnel
DOD Needs More Effective Controls to Better Assess the Progress of the Selective Reenlistment Bonus Program Gao ID: GAO-04-86 November 13, 2003The Department of Defense (DOD) uses the Selective Reenlistment Bonus (SRB) program to reenlist military personnel in critical specialties. In fiscal years 1997-2003, the program budget rose 138 percent, from $308 million to $734 million. In fiscal year 2003, the House Appropriations Committee directed the Secretary of Defense to reassess program efficiency and report on five concerns: (1) how effective the program is in correcting retention shortfalls in critical occupations, (2) how replacement guidance will ensure targeting critical specialties that impact readiness, (3) how DOD will match program execution with appropriated funding, (4) how well the services' processes for administering the program work, and (5) advantages and disadvantages of paying bonuses in lump sum payments. The committee also directed GAO to review and assess DOD's report.
Despite congressional concerns about the SRB program, DOD's May 2003 report stated that the program is managed carefully, bonuses are offered sparingly, and the services need flexibility in administering the program. However, DOD's responses did not thoroughly address four of the five SRB program concerns contained in the mandate. As a result, Congress does not have sufficient information to determine if the program is being managed effectively or efficiently. DOD has not issued replacement program guidance and did not allow us to review the guidance that has been drafted. DOD's report focused primarily on criteria for designating occupations as critical, but the report did not address an important change--the potential elimination of the requirement for conducting annual program reviews. In response to our 2002 report, DOD stated that this requirement would be eliminated from future program guidance. DOD recently told us that the new guidance will require periodic reviews, but neither the frequency nor the details of how these reviews would be conducted was explained. DOD conducted a limited evaluation to address the congressional concern about how well the services are administering their programs. The response consisted largely of program descriptions provided by the services. Among other things, DOD did not use a consistent set of procedures and metrics to evaluate each of the services' programs. Consequently, it is difficult to identify best practices, or to gain other insights into ways in which the effectiveness and efficiency of the services' programs could be improved. DOD thoroughly addressed the congressional concern pertaining to the advantages and disadvantages of paying SRBs as lump sums.
RecommendationsOur 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: Team: Phone:GAO-04-86, Military Personnel: DOD Needs More Effective Controls to Better Assess the Progress of the Selective Reenlistment Bonus Program
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Report to the Subcommittee on Defense, Committee on Appropriations,
House of Representatives:
United States General Accounting Office:
GAO:
November 2003:
Military Personnel:
DOD Needs More Effective Controls to Better Assess the Progress of the
Selective Reenlistment Bonus Program:
GAO-04-86:
GAO Highlights:
Highlights of GAO-04-86, a report to the Subcommittee on Defense,
Committee on Appropriations, House of Representatives
Why GAO Did This Study:
The Department of Defense (DOD) uses the Selective Reenlistment Bonus
(SRB) program to reenlist military personnel in critical specialties.
In fiscal years 1997-2003, the program budget rose 138 percent, from
$308 million to $734 million (see PDF for figure). In fiscal year 2003, the
House Appropriations Committee directed the Secretary of Defense to
reassess program efficiency and report on five concerns: (1) how
effective the program is in correcting retention shortfalls in
critical occupations, (2) how replacement guidance will ensure
targeting critical specialties that impact readiness, (3) how DOD will
match program execution with appropriated funding, (4) how well the
services‘ processes for administering the program work, and (5)
advantages and disadvantages of paying bonuses in lump sum payments.
The committee also directed GAO to review and assess DOD‘s report.
What GAO Found:
Despite congressional concerns about the SRB program, DOD‘s May 2003
report stated that the program is managed carefully, bonuses are
offered sparingly, and the services need flexibility in administering
the program. However, DOD‘s responses did not thoroughly address four
of the five SRB program concerns contained in the mandate. As a
result, Congress does not have sufficient information to determine if
the program is being managed effectively or efficiently. For example,
* DOD has not issued replacement program guidance and did not allow us
to review the guidance that has been drafted. DOD‘s report focused
primarily on criteria for designating occupations as critical, but the
report did not address an important change”the potential elimination
of the requirement for conducting annual program reviews. In response
to our 2002 report, DOD stated that this requirement would be
eliminated from future program guidance. DOD recently told us that the
new guidance will require periodic reviews, but neither the frequency
nor the details of how these reviews would be conducted was explained.
* DOD conducted a limited evaluation to address the congressional
concern about how well the services are administering their programs.
The response consisted largely of program descriptions provided by the
services. Among other things, DOD did not use a consistent set of
procedures and metrics to evaluate each of the services‘ programs.
Consequently, it is difficult to identify best practices, or to gain
other insights into ways in which the effectiveness and efficiency of
the services‘ programs could be improved.
DOD thoroughly addressed the congressional concern pertaining to the
advantages and disadvantages of paying SRBs as lump sums.
What GAO Recommends:
GAO recommends that the Secretary of Defense direct the Undersecretary
of Defense for Personnel and Readiness to (1) retain the requirement
for an annual review of the SRB program and (2) develop a consistent
set of methodologically sound procedures and metrics for reviewing the
effectiveness and efficiency of all aspects of each service‘s SRB
program administration. DOD agreed with the recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-86.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Derek Stewart at
(202) 512-5559 or stewartd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD's Report Did Not Thoroughly Address Congressional Concerns:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Figure:
Figure 1: SRB Program Budget Growth, Fiscal Years 1997-2005:
Abbreviations:
DOD: Department of Defense:
OMB: Office of Management and Budget:
OSD: Office of the Under Secretary of Defense:
SRB: Selective Reenlistment Bonus:
United States General Accounting Office:
Washington, DC 20548:
November 13, 2003:
The Honorable Jerry Lewis:
Chairman:
The Honorable John Murtha:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
To meet its total active-duty force requirements, the Department of
Defense (DOD) must reenlist about 150,000 personnel each year. The
Selective Reenlistment Bonus (SRB) program is intended to help the
services increase reenlistments in occupational specialties, such as
linguists and information technology specialists, that the Secretary of
Defense deems to be critical. Concerned about missing their overall
retention goals in the late 1990s, all the services expanded their use
of SRBs to help retain more enlisted personnel. As a result, the cost
of the program more than doubled--from $308 million[Footnote 1] in
fiscal 1997 to $791 million in fiscal 2002. During the last few years,
Congress also approved DOD requests for basic pay increases above the
rate of inflation to address the services' retention concerns. Despite
military pay increases and improved overall retention, funding for the
services' SRB budget is expected to rise to over $800 million in fiscal
year 2005. Moreover, about one-third of all current reenlistments
receive SRBs.
To facilitate closer monitoring of the SRB program, congressional
defense committees requested our 1995 and 2002 reviews of the program.
The House Appropriations Committee also mandated[Footnote 2] our
current review of DOD's recently issued report on the program. In our
2002 report,[Footnote 3] we identified several management and oversight
concerns. For example, some services were not using all the criteria
they had established for selecting occupational specialties to receive
bonuses; the numbers of both reenlistments and SRB-eligible specialties
had grown substantially since 1998; and critical program guidance
canceled in 1996 had not been reissued. Among other things, we
recommended that DOD conduct annual reviews of the services' SRB
programs as required by its directive. In concurring with our
recommendation, DOD noted that a future DOD directive would not require
formal annual reviews of the program. Rather, these reviews would be
accomplished through other means that we concluded were very limited in
scope. In our 1996 report,[Footnote 4] we also raised concerns about
SRB program management and oversight. Our recommendations included that
DOD (1) provide more explicit guidance and criteria for determining SRB
skills and (2) monitor the services' adherence to this guidance. DOD
did not concur with either of these recommendations.
In a House Report accompanying the Department of Defense fiscal year
2003 appropriation bill, you expressed concern that DOD guidance and
oversight of the SRB program was limited and that "a reassessment of
the program was warranted to ensure it is being managed efficiently."
The Committee directed the Secretary of Defense to report back to the
committee on five concerns and directed us to review and assess the DOD
report.[Footnote 5] Those five concerns were (1) effectiveness of the
SRB program in correcting retention shortfalls in critical occupations,
(2) replacement program guidance and how that guidance will ensure that
the program targets only critical specialties that impact readiness,
(3) steps DOD will take to match program execution with appropriated
funding, (4) evaluation of the process the services use to administer
the program, and (5) advantages and disadvantages of paying bonuses as
a single lump sum payment. DOD issued its report in May 2003.[Footnote
6] In introductory remarks, DOD's report stated that the services
manage their SRB programs carefully, offer bonuses sparingly, have
management standards and practices to conduct a review of each skill
receiving a bonus, and do an excellent job tailoring their SRB programs
to changing demands for specific skills. Also, the need for flexibility
in administering the program was a theme present throughout DOD's
report.
In August 2003, we briefed your staff on our preliminary observations
of DOD's report. We provide our final assessment in this review. Our
objective was to determine the extent to which DOD's report thoroughly
addressed the five SRB program management concerns raised in the
congressional mandate.
To conduct our work, we examined DOD's mandated report on its SRB
program, along with supporting documentation from the services and the
Office of the Secretary of Defense (OSD). We also referred to our 2002
report and DOD's comments on that report. We conducted our review and
assessment from June through September 2003 in accordance with
generally accepted government auditing standards. Additional
information on our scope and methodology is presented in appendix I.
Results in Brief:
DOD's May 2003 report on the Selective Reenlistment Bonus (SRB) program
did not thoroughly address four of the five program concerns raised in
the congressional mandate. As a result, Congress does not have
sufficient information to determine if the program is being managed
effectively and efficiently. In responding to the first concern, DOD's
report did not directly address the SRB program's effectiveness or
efficiency in correcting shortfalls in critical occupations. Instead,
the report discussed the general benefits of using bonuses to increase
the retention of military personnel rather than how well the services
are selectively applying bonuses to critical occupations. With regard
to the second concern, DOD has not issued replacement program guidance
and did not allow us to review the guidance that has been drafted.
DOD's report focused primarily on changes that would provide greater
flexibility to the services in designating occupations as critical. The
report did not address an important change--the potential elimination
of the requirement for conducting annual program reviews. In response
to our 2002 report, DOD stated that this requirement would be
eliminated from future program guidance. DOD recently told us that the
new guidance will require periodic reviews, but neither the frequency
nor the details of how these reviews would be conducted was explained.
Although the third concern mandated that DOD describe steps that it
will take to match program execution with appropriated funding, DOD did
not describe such steps. Instead, DOD stated that the services need
execution flexibility and have operated consistent with the law and
within the overall Military Personnel appropriation. Our analyses
showed that in fiscal years 1999-2002 the services spent a combined
total of $259 million more than Congress appropriated for the SRB
program. In responding to the fourth concern, regarding an evaluation
of how the each service administers its SRB program, DOD's limited
assessment consisted primarily of program descriptions provided by the
services. Because different procedures and metrics were used to
evaluate the services' programs, it is difficult to identify best
practices and other insights into ways in which the effectiveness and
efficiency of the services' programs could be improved. As mandated in
the fifth concern, DOD identified the most salient advantages and
disadvantages that could result from implementing a lump sum payment
option for paying retention bonuses. We generally concur with DOD's
observations about the positive and negative aspects of using lump sum
bonuses.
We are making recommendations to DOD to improve management
and oversight of the SRB program with more methodologically rigorous
evaluations. We are recommending that DOD (1) retain the requirement
for an annual review of the SRB program and (2) develop a consistent
set of methodologically sound procedures and metrics for reviewing the
effectiveness and efficiency of all aspects of each service's SRB
program administration. DOD agreed with the recommendations.
Background:
Over the past 7 years, DOD has increasingly used the SRB program to
address retention shortfalls. The program's budget has grown from
$308 million in fiscal year 1997 to an estimated $734 million in fiscal
year 2003--a 138 percent increase after the effect of inflation was
held constant (see fig. 1). The budget is estimated to grow to
$803 million in fiscal year 2005, with most of the projected growth
resulting from increases in the Air Force SRB program budget. Our 2002
report noted that in fiscal year 2001 the Air Force extended
reenlistment bonuses to 80 percent of its specialties.
Figure 1: SRB Program Budget Growth, Fiscal Years 1997-2005:
[See PDF for image]
[A] In-year (or current) estimate.
[B] Fiscal year 2004 budget request.
[C] Fiscal year 2005 budget estimate.
[End of figure]
In recent years, Congress has appropriated less money than the
services have requested for the SRB program. Based on our work, in
fiscal 2003 Congress appropriated $32 million less than DOD requested.
Congressional committees proposed further SRB budget reductions
during their reviews of DOD's fiscal year 2004 budget request. The
House Appropriations Committee proposed a $44.6-million reduction; the
Senate Appropriations Committee, a $22-million reduction; and the
Senate Armed Services Committee, a $46-million reduction. The Senate
Armed Services Committee additionally noted concerns about proposed SRB
program budget increases at a time when overall retention rates are
robust and the benefits of military service are increasing overall. DOD
appealed these proposed reductions, noting that "the effects of an
improving economy and the waning emotional patriotic high of the
decisive victory in Operation Iraqi Freedom will combine to increase
pressures on both the recruiting and retention programs." For fiscal
year 2004, Congress appropriated $697 million for the SRB program,
which was a reduction of $38.6 million from the amount DOD requested.
Despite increased use of the SRB program, DOD has cited continued
retention problems in specialized occupations such as air traffic
controller, linguist, and information technology specialist. A more
favorable picture is present with regard to overall retention. All of
the services reported that they met overall retention goals for fiscal
year 2002 and, with the exception of the Air Force missing its
retention goal for second term airmen, expect to meet overall retention
goals in fiscal year 2003. Further bolstering these retention
expectations are recent survey results showing improvements in
servicemembers' attitudes toward remaining in the military. For
example, the 2002 DOD-wide status of forces survey found that the
career intent of military personnel had improved between 1999 and 2002,
rising from 50 to 58 percent. The survey results showed that retention
attitudes were particularly better for junior enlisted (up 11 percent)
and junior officers (up 13 percent). In addition, the 2002 Air Force-
wide quality of life survey found that 66 percent of enlisted personnel
reported they would make the Air Force a career, which is an increase
from 58 percent, reported in 1997. According to DOD officials,
the effects of more recent events such as extended deployments and
other higher operations tempo issues could change servicemembers'
attitudes toward remaining in the military.
Congressionally approved reforms in basic pay implemented during the
last 3 years were intended in part to address retention problems,
particularly with mid-grade enlisted personnel. In the 2002 Quadrennial
Review of Military Compensation,[Footnote 7] DOD attributed the
increased use of SRBs in the late 1990s to a growing pay discrepancy
between civilians and the mid-career enlisted force. For that period,
the review noted an increased use of bonuses for personnel with 10 to
14 years of service. DOD noted that while bonuses are a very important
compensation tool, their use is intended for specific purposes and for
relatively short periods of time. According to that review, bonuses are
appropriate for use within particular skill categories, not as a tool
for resolving military and civilian pay differentials across an entire
segment of the force. The report noted that widespread pay
differentials should be remedied through pay table restructuring. Pay
table restructuring began in fiscal year 2001, and additional military
pay adjustments have been approved in subsequent budgets.
DOD's Report Did Not Thoroughly Address Congressional Concerns:
DOD's May 2003 report did not thoroughly address four of the five
congressional concerns about effective and efficient management of
the SRB program. First, the report indirectly addressed SRB program
effectiveness and efficiency by discussing bonuses as a general
military retention tool instead of the effectiveness and efficiency of
the program in targeting bonuses to improve retention in selected
critical occupations. Second, DOD did not permit us to review the draft
guidance, but--based on DOD's comments on our 2002 SRB report, excerpts
of draft criteria contained in DOD's mandated report, and our
discussions with DOD officials--the replacement guidance could expand
the SRB program by giving the services more flexibility in designating
occupations as critical and either eliminate or weaken the requirement
for annual SRB program reviews. Third, OSD did not outline steps to
match program execution to appropriated funding as the mandate
required; instead, OSD reiterated the need for program-execution
flexibility. Fourth, OSD's evaluation of the services' administration
of their SRBs program was limited, relied largely on service-provided
descriptions, and did not use consistent procedures and metrics.
Finally, as required by the fifth concern in the mandate, DOD
identified the most salient advantages and disadvantages resulting from
paying SRBs as lump sums.
DOD Report Indirectly Addressed Program Effectiveness and Efficiency in
Correcting Retention Shortfalls:
DOD's report did not directly discuss how effectively and efficiently
each service is currently using the SRB program to address retention
problems in critical occupations. Although the mandate noted, "a
reassessment of the program is warranted to ensure it is being managed
efficiently," DOD's response to concern one did not provide sufficient
detail to document the effective and efficient use of the program in
awarding SRBs. In response to one of the other four congressional
concerns, DOD stated that the "intent of retention bonuses is to
influence personnel inventories in specific situations in which less
costly methods have proven inadequate or impractical." The report did
not, however, document what methods had been used previously or the
cost-effectiveness of those methods in achieving desired retention
levels.
Also absent from the report was a discussion of how key factors
influence the current use of SRBs. Examples of key factors include the
effects of changes in the basic pay, overall retention rates, and
civilian unemployment. For example:
* Despite increasing basic pay to address the discrepancy between
military and civilian pay noted in the 2002 Quadrennial Review of
Military Compensation, the budgets for the SRB program are projected to
grow to $803 million in fiscal year 2005. In comments received on our
preliminary observations briefing, DOD officials noted that our use of
constant 2004 dollars in our budget trend analysis did not fully
account for the effects of the basic pay changes that exceeded the
inflation level and thus increased the size of individual bonuses. At
the same time, future SRB program budgets do not show decreases that
might be expected as these pay table changes address overall military-
civilian pay discrepancies and problems identified within various pay
grades.
* The report did not address the extent to which recent higher levels
of overall retention offer opportunities for reducing the number of
occupations eligible for SRBs or the bonus amounts[Footnote 8] awarded
for reenlistment. DOD officials have noted that all of the services met
or exceeded their aggregate retention goals in fiscal year 2002 and
that strong overall retention is expected to continue. However, they
cited retention shortfalls in some occupational specialties as areas of
concern. Although a generally positive aggregate retention climate
might present DOD with opportunities to curtail use of its SRB program,
the report did not discuss under what conditions reductions in the
program might or might not be appropriate at this time.
* Despite noting a relationship between civilian unemployment rates
and military retention, DOD's report did not indicate whether civilian
unemployment--which is at a 9-year high--might result in the need for
fewer SRBs being offered and possibly at lower bonus levels. One study
cited in DOD's report noted that there is a relationship between higher
unemployment rates and improved overall military retention. In part of
its answer to concern three, DOD noted that changes in the economy and
labor market drive changes in actual reenlistment rates. Just as
periods of relatively lower civilian unemployment might suggest the
need for greater use of the SRB program, periods of relatively higher
unemployment might conversely suggest less need for SRBs. Despite
civilian unemployment being at its highest rate in several years, the
SRB program budget is projected to increase in fiscal year 2005.
Instead of directly addressing program effectiveness and efficiency,
the 2003 report discussed the general benefits of using bonuses to
retain military personnel. DOD's report cited numerous studies that
demonstrated or postulated this effect. However, findings from some
studies may not be readily generalized to the way that the SRB program
is currently managed or to the economic conditions that currently
exist. More specifically, some studies used outdated retention data
obtained in the mid-1970s or were performed in a very different
retention environment (e.g., the increase in force size during the
1980s and the large draw-down of military forces in the 1990s). Even
given our concerns about some of the findings, we believe DOD presented
sufficient support for its conclusion that bonuses can be effective in
promoting retention. A largely unaddressed, but more pertinent issue is
how effectively and efficiently DOD applied this tool to improve
retention in critical occupations under recent and current economic
conditions.
Replacement Program Guidance Not Issued but Proposed Changes Could
Weaken Controls for Targeting SRBs:
DOD did not permit us to review the draft guidance[Footnote 9] that
will replace the current DOD directive and the DOD instruction canceled
in 1996. Our findings for this concern are based on DOD's comments on
our 2002 SRB report, excerpts of draft criteria contained in DOD's
mandated report, and our discussions with DOD officials. Changes to the
guidance could lower the threshold required for designating occupations
as critical and may eliminate or weaken the requirement for formal
annual reviews of the SRB program.
DOD's planned changes to the replacement guidance could provide the
services with greater flexibility for designating a specialty as
critical but could weaken the controls for targeting the specialties
receiving SRBs by lowering the threshold required for making such a
designation. The canceled 1996 instruction required the services to
consider five criteria[Footnote 10] before designating a specialty
critical and making it eligible for SRBs, but DOD's 2003 report stated
that the revised program instruction would require occupations to meet
a lower threshold--meeting "at least" one of five criteria. For the
period since 1996 when the instruction was canceled, our 2002 report
found that, in some cases, the services had already been using only one
of the five criteria to designate occupations for inclusion in the
program. This allowed the services to define broadly what constituted a
critical occupation and included more occupations than would have
likely qualified if all five criteria had been considered.
DOD's planned changes could also eliminate or weaken the requirement
for formal annual reviews of the SRB program and thereby weaken the
ability of Congress and DOD to monitor the program and ensure that it
targets only critical specialties. To implement the SRB program, DOD
Directive 1304.21 assigns specific responsibilities for administering
the program to the OSD and to the service Secretaries. According to
this directive, the Assistant Secretary of Defense for Force Management
Policy, under the Under Secretary of Defense for Personnel and
Readiness, is responsible for annually reviewing and evaluating the
services' enlisted personnel bonus programs in conjunction with the
annual budget cycle. These reviews are to include an assessment of the
criteria used for designating critical military specialties. As a
result of these reviews, the OSD is to make the revisions needed to
attain specific policy objectives. Our 2002 report found that DOD had
not conducted any of the required annual program reviews since 1991. In
its response to our 2002 SRB report, DOD stated that it plans to
eliminate those requirements from the replacement guidance. More
recently, a DOD official stated that the new guidance will require
periodic reviews, but neither the frequency nor the details of how
these reviews would be conducted was explained. In its report to
Congress, DOD maintained that much of the SRB program oversight takes
place during ongoing internal service program budget reviews. In
contrast, we concluded in our 2002 report that those program budget
reviews were limited in scope and did not provide the detailed
evaluation needed to ensure the program was being implemented as
intended. A more in-depth discussion of the current limited oversight
is provided when we discuss DOD's response to the fourth concern.
In contrast to the previously mentioned changes, DOD's report noted
some steps that we believe could strengthen controls on the SRB
program. According to the report, the new SRB program instruction will
(1) require the services to establish parameters to define "critical
shortages" and (2) base those requirements on factors such as the
potential impact of a shortage on mission accomplishment. In addition,
DOD has recently established a working group that has been tasked with
developing a "common understanding and definition of critical skills."
Previously, we found that DOD had not clearly defined the criteria the
services were to use in designating critical occupations since the SRB
program instruction was canceled in 1996.
DOD Report Outlined No New Steps to Match Program Execution
with Appropriations:
Contrary to the mandate, DOD's 2003 report did not outline steps that
it will take to match program execution with appropriated funding.
Instead, DOD stated that the services need execution flexibility and
have operated consistent with the law and within the overall Military
Personnel appropriation. Our trend analysis in current year dollars
showed that the services spent a combined total of $259 million more
than Congress appropriated for the SRB program in fiscal years 1999-
2002. DOD's use of this flexibility has resulted in the services
overspending their SRB budgets by as much as $111 million in a single
year--fiscal year 2001. More recently, two of the services stayed
within their appropriated budgets. In fiscal year 2002, the Air Force
and Marine Corps spent, respectively, $26 million and $4 million less
than their fiscal year 2002 SRB appropriation. However, the Army and
Navy exceeded their appropriated SRB budgets by $38 million and
$21 million, respectively.
DOD noted that the services can reallocate funds within the Military
Personnel appropriation without seeking congressional authority. In the
report, DOD did not agree with the congressional concern that program
expenditures needed to match funding levels appropriated specifically
for the SRB program. Rather, DOD maintained that monies were available
from other parts of the Military Personnel appropriation if a service
needed additional SRB funding in a fiscal year. DOD's response noted
that budget submission timelines require reenlistment forecasts up to
2 years prior to execution and that intervening changes in the economy
and labor market can add uncertainty and drive changes in actual
reenlistment rates. Using the services in-year, or current estimates--
created during the year of program execution--we found that the
services had exceeded their fiscal year 1999-2002 estimates for the
number of expected SRB reenlistments by a combined total of 32,466
personnel. Furthermore, our current trend analysis on their budget
justifications showed that for the Army and Navy, reallocation or
reprogramming of funds had become a reoccurring pattern of activity. In
our 2002 report, we concluded that better OSD program oversight and
management would have required the services to justify their need to
exceed appropriations during fiscal years 1997-2001.
Evaluation of Services' Processes for Administering the Program Was
Limited:
DOD's limited evaluation of the services' SRB programs relied primarily
on program descriptions provided by the services. The report presented
different issues for each service and used inconsistent procedures and
metrics to reach conclusions about each service's program
administration effectiveness and efficiency. Absent was a discussion of
key performance indicators, the means used to verify and validate the
measured values, and other characteristics such as those GAO identified
in its report assessing agency annual performance plans.[Footnote 11]
The absence of a consistent, explicit methodology made it difficult to
determine (1) best practices that might be applied from one service to
another and (2) other insights that could result in each service more
effectively and efficiently administering its SRB program.
Although OSD assembled a multi-service panel to discuss the evaluation,
DOD's response consisted largely of program descriptions that the
services supplied. Each service made statements about the effectiveness
of its program but provided insufficient documentation to support those
statements. OSD conducted its last comprehensive review of the SRB
program in 1991. As noted earlier in our assessment of DOD's response
to the second concern, DOD stated that it intends to eliminate the
requirement to perform detailed annual program reviews when its
replacement program directive is issued.
In introductory comments to the 2003 report, DOD stated that the SRB
program is evaluated annually within the context of three Planning,
Programming, and Budgeting System activities. In our 2002 report, we
found that those reviews, conducted by the DOD Comptroller and the
Office of Management and Budget (OMB), and the testimony provided to
Congress were limited.
* When the services prepare budget submissions for the SRB program,
they discuss the small sample of occupations included in their
justification books. As we noted in our 2002 report, the DOD
Comptroller stated that the budget submissions are not detailed
programmatic evaluations.
* DOD's 2003 report also cited OMB reviews as part of an evaluation of
the programs. During the preparation of our 2002 report, OMB officials
told us that their reviews were limited and did not constitute a
detailed assessment of the services' programs.
* DOD's 2003 report stated that the services' out-year budgets were
carefully reviewed during congressional testimony. It is our view that
congressional testimony does not represent a detailed programmatic
review of a program this complex. For example, in March 11, 2003, DOD's
testimony before the Military Personnel Subcommittee of the Senate
Armed Services Committee[Footnote 12] included very limited statements
about the SRB program.
DOD's report listed some positive steps that the services have proposed
to administer the SRB program more effectively and efficiently. For
example, the Navy and Army are validating and improving the models used
to manage their SRB programs, and the Air Force has created a new bonus
review board to keep its leaders apprised of how the SRB program is
functioning. At the time of our review, the services were just starting
to implement these steps to improve their programs, and there was no
data to determine how effective and efficient these efforts are.
DOD Report Identified Advantages and Disadvantages of Using a Lump Sum
Payment Option:
DOD identified the most salient advantages and disadvantages resulting
from implementing a lump sum payment method for paying retention
bonuses.[Footnote 13] We generally concur with DOD's observations about
the positive and negative aspects of using lump sum bonuses. DOD's
report cited a 1985 GAO study[Footnote 14] that found lump sum payments
had three main advantages: more cost-effective, better visibility to
Congress, and more adaptable to budget cuts than paying bonuses
incrementally. The 2003 DOD report cited another important
consideration in awarding bonuses in lump sum payments. Because
enlisted personnel prefer "up-front" payments and are willing to
receive less money initially than more money offered in the future, we
believe that the federal government could reenlist more personnel for
the same amount of money if bonuses were paid in a lump sum.
DOD cited several disadvantages to using a lump sum payment option. For
example, there are significant up-front costs associated with paying
both lump sum SRB payments in the implementation year and completing
the anniversary payments for SRBs awarded previously. The first year of
change would require the largest budget increase, and each subsequent
transition year would become less costly. The implementation of a lump
sum SRB program could become cost neutral over the long term if bonuses
paid in a lump sum eliminated the need for equal amounts of anniversary
payments in succeeding years. It could even save money if sufficient
reenlistees were attracted with less money because up-front
compensation--even if less--is more attractive than compensation
promised in the future.
DOD's report addressed other potential disadvantages of using a lump
sum payment method. These include the possibility that a recipient will
fail to stay in the military for the full reenlistment period after
receiving a bonus and the problem associated with recouping all or part
of bonus amounts from personnel who do not complete their obligated
term of service. Despite these disadvantages, our 1985 report stated
our support for the use of lump sum retention bonuses. The Marine Corps
began using the lump sum payment option for its SRB program in fiscal
year 2001 and is the only service currently using this payment method.
In February 2004, the Marine Corps expects to have preliminary results
from an evaluation of its use of lump sum payments.
Although not required by the mandate to do so, DOD and the services
could have made the response to concern five more informative for
Congress by identifying alternative strategies for implementing the
lump sum option and estimating the costs of each strategy for each
service. For example, one strategy might be to phase in the lump sum
payment option. Phasing in lump sum payments could provide DOD with
increased program administration flexibility and decreased budgetary
problems caused by switching from installment payments in a single
year.
Conclusions:
Overall, our analysis of DOD's May 2003 congressionally mandated report
on the SRB program showed that DOD's report did not provide sufficient
information to enable Congress to determine whether the program is
being managed effectively and efficiently. With one exception, DOD's
report did not thoroughly address congressional concerns about the
effective and efficient management of the SRB program. Of DOD's
responses to the five congressional concerns, three were incomplete or
nonresponsive--those regarding program effectiveness and efficiency in
correcting retention shortfalls in critical occupations, DOD actions to
match program execution with appropriations, and DOD's evaluation of
the services' program administration. A fourth response--regarding
replacement program guidance--did not provide information essential for
us to make an independent determination as to the response's adequacy.
DOD directly and fully addressed one of mandated concerns--the
advantages and disadvantages of lump sum bonus payments. Although the
SRB program is expected to grow to over $800 million in fiscal year
2005, the report did not address factors that may have reduced the
services' retention concerns and could reduce SRB program cost.
Underlying many of these shortcomings is a lack of empirically based
information caused by DOD's limited reviews of the SRB and inconsistent
use of evaluation procedures and metrics. DOD's possible elimination of
the requirement for a detailed annual review and continued reliance on
service-specific procedures and metrics could further weaken
Congress's ability to monitor the SRB program.
Recommendation for Executive Action:
To assist Congress in its efforts to monitor the management of the SRB
program and to ensure that DOD is effectively and efficiently targeting
retention bonuses to critical occupations, we recommend that the
Secretary of Defense direct the Office of the Under Secretary of
Defense for Personnel and Readiness to (1) retain the requirement for
an annual review of the SRB program and (2) develop a consistent set
of methodologically sound procedures and metrics for reviewing the
effectiveness and efficiency of all aspects of each service's SRB
program administration.
Agency Comments:
In written comments on a draft of this report, DOD concurred with
our recommendations. DOD further stated that, with regard to our
recommendation to develop review procedures and metrics, it would
(1) conduct research to develop meaningful metrics for reviewing the
effectiveness and efficiency of all aspects of each service's
administration of the SRB program and (2) implement those metrics so
that they are consistent with DOD's Human Resource Strategy Plan. DOD's
comments are reprinted in their entirety in appendix II.
We are sending copies of this report to the Secretary of Defense. We
will also make copies available to appropriate congressional committees
and to other interested parties on request. In addition, the report
will be available at no charge at the GAO Web site at http://
www.gao.gov.
If you or your staff have questions about this report, please call me
at (202) 512-5559. Key staff members contributing to this report were
Jack E. Edwards, Kurt A. Burgeson, Nancy L. Benco, and M. Jane Hunt.
Derek B. Stewart:
Director, Defense Capabilities and Management:
Signed by Derek B. Stewart:
[End of section]
Appendix I: Scope and Methodology:
We reviewed the Department of Defense's (DOD) May 2003 congressionally
mandated report and documents used in the preparation of that report.
That information was supplemented with prior Selective Reenlistment
Bonus (SRB) program guidance, budget request documentation, and other
information gathered during our 2002 review of the SRB program. To
assess the adequacy and accuracy of the information contained in DOD's
report, we obtained and reviewed documentation used by the Office of
the Secretary of Defense (OSD) to support its responses. For example,
we reviewed the eight studies cited in DOD's response to concern one in
the mandate. In addition, we reviewed information provided by each of
the services, as well as past GAO and DOD reports on the SRB program.
We compared findings from these past reports to DOD's mandated
responses to assess the validity of what was presented. We updated the
program budget analysis from our 2002 review using budget data
contained in DOD's Military Personnel budget justification books
prepared for Congress. We sought to review updated SRB program
guidance, but DOD indicated that these pre-decisional documents would
not be released until the final versions had been approved.
We met with DOD officials to update information obtained during our
2002 review of the SRB program. Interviews were primarily conducted
with officials in the Office of the Under Secretary of Defense for
Personnel and Readiness because these officials were the primary
authors of DOD's report. We also met with personnel responsible for
administering the services' SRB programs. We obtained updated retention
data contained in prepared statements used by DOD during congressional
hearings. We also reviewed the results of DOD's 2002 status of forces
survey and the Air Force's 2002 quality of life survey.
We conducted our review from June through September 2003 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
4000 DEFENSE PENTAGON:
WASHINGTON, D.C. 20301-4000:
OCT 29 2003:
PERSONNEL AND READINESS:
Mr. Derek B. Stewart:
Director, Defense Capabilities and Management U.S. General Accounting
Office:
Washington, D.C. 20548:
Dear Mr. Stewart:
This is the Department of Defense (DoD) response to the General
Accounting Office (GAO) draft report, GAO-04-86, `MILITARY PERSONNEL:
DoD Needs More Effective Controls to Better Assess the Progress of the
Selective Reenlistment Bonus Program (SRB)', dated October 6, 2003 (GAO
Code 350389)." We appreciate the opportunity to comment.
The Department concurs With the GAO recommendations. We agree that
Services should systematically report to the Department the metrics
they use that provide insight to the efficiency and effectiveness of
their SRB programs. By the same token, we agree that the office of the
Under Secretary of Defense (Personnel and Readiness) should annually
review the Services' SRB program metrics. Provided in the enclosure are
supplementary details that address the GAO recommendations.
Comments or questions should be addressed to Major Harvey Johnson at
(703) 614-3973, or Harvey.W.Johnson@osd.mil.
Sincerely,
Signed by:
Charles S. Abell:
Principal Deputy:
Enclosure: As stated:
GAO-04-86/GAO CODE 350389:
"MILITARY PERSONNEL: DOD NEEDS MORE EFFECTIVE CONTROLS TO BETTER ASSESS
THE PROGRESS OF THE SELECTIVE REENLISTMENT BONUS PROGRAM":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct the Office of the Under Secretary of Defense for Personnel and
Readiness USD(P&R) to retain the requirement for an annual review of
the Selective Reenlistment Bonus (SRB) program. (Page 18/Draft Report):
DOD RESPONSE: Concur. The Department concurs with the GAO
recommendation that the Office of the USD(P&R) retain the requirement
for an annual review of the SRB program. The Department currently
requires Services to submit for approval any reprogramming action
greater than $10 million between budget authority lines needed to fund
proposed adjustments to the bonus program. The Services' currently
manage their SRB programs carefully and offer bonuses to qualified
enlisted personnel in designated critical skills. At least annually,
the Services examine the health of individual occupational specialties
to shape a sustainable force, which will meet readiness needs today and
in the future. Each Service prepares a plan for use of bonuses, which
are carefully reviewed in the course of the Departments Planning,
Programming, Budgeting and Executing System.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
direct the Office of the USD(P&R) to develop a consistent set of
methodologically sound procedures and metrics for reviewing the
effectiveness and efficiency of all aspects of each Service's SRB
program administration. (Page 18/Draft Report):
DOD RESPONSE: Concur. The Department will research a viable system to
ensure meaningful metrics are developed for reviewing the effectiveness
and efficiency of all aspects of each Service's SRB program
administration. These metrics will be implemented in the Balance Score
Card metrics and consistent with the Human Resource Strategy Plan.
FOOTNOTES
[1] All budget information in this report has been converted to
constant fiscal year 2004 dollars, except where noted otherwise.
[2] House Report (H.R. Rep. 107-532), June 25, 2002, accompanying H.R.
5010, Department of Defense Appropriations Bill, 2003.
[3] U.S. General Accounting Office, Military Personnel: Management and
Oversight of Selective Reenlistment Bonus Program Needs Improvement,
GAO-03-149 (Washington, D.C.: Nov. 25, 2002).
[4] U.S. General Accounting Office, Retention Bonuses: More Direction
and Oversight Needed, GAO/NSIAD-96-42 (Washington, D.C.: Nov. 24,
1995).
[5] The Senate Appropriations Committee also directed the Under
Secretary of Defense for Personnel Readiness to report on other aspects
of DOD's SRB program.
[6] Department of Defense, Report on Selective Reenlistment Bonus
Program: Report to the Committees on Appropriations of the United
States Senate and House of Representatives, Office of the Under
Secretary of Defense Personnel and Readiness, (Washington, D.C.: May
2003).
[7] Department of Defense, Report of The Ninth Quadrennial Review of
Military Compensation, Vol. 1, (Washington, D.C., 2002).
[8] Total bonus amounts are determined by multiplying (1) the
servicemember's current monthly basic pay by (2) the number of
additional years of obligated service and by (3) a bonus multiple that
can range from 0.5 to 15. The bonus multiples are determined by each
service for all specialties they deem critical. Under current SRB
program authority, the services are allowed to pay reenlistment bonuses
of up to $60,000, though some services have set lower maximums.
[9] Issuance of DOD Directive 1304.21; Policy on Enlistment, Accession
of Officers in Critical Skills, Selective Reenlistment, and Critical
Skills Retention Bonuses for Active Members; and DOD Instruction
1304.22, Administration of Enlistment, Accession of Officers in
Critical Skills, Selective Reenlistment, and Critical Skills Retention
Bonuses for Active Members; are expected in fall 2003 instead of August
2003 as had been specified in DOD's report.
[10] The canceled instruction required the services to identify
critical specialties by providing a balanced evaluation of five
factors: (1) serious understaffing in adjacent years, (2) persistent
shortages in total career staffing, (3) high replacement costs, (4) the
arduousness or unattractiveness of the work, and (5) whether the
specialty is essential to the accomplishment of defense missions.
[11] U.S. General Accounting Office, The Results Act: An Evaluator's
Guide to Assessing Agency Annual Performance Plans, GAO/GGD-10.1.20
(Washington, D.C.: Apr. 1998).
[12] Department of Defense, Prepared Statement of the Honorable David
S. C. Chu, Under Secretary of Defense (Personnel and Readiness), Before
the Military Personnel Subcommittee, Senate Armed Services Committee
(Washington, D.C.: Mar. 11, 2003).
[13] The Army, Navy and Air Force currently pay 50 percent of the
reenlistment bonus up front, and they pay the remaining 50 percent in
equal installments over the term of reenlistment.
[14] U.S. General Accounting Office, Navy Management and Use of the
Selective Reenlistment Bonus Program, GAO/NSIAD-85-143 (Washington,
D.C.: Sept. 9, 1985).
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