Military Personnel
More DOD Actions Needed to Address Servicemembers' Personal Financial Management Issues Gao ID: GAO-05-348 April 26, 2005Congress and the Department of Defense (DOD) are concerned about the financial conditions of servicemembers and their families, particularly in light of recent deployments to Iraq and Afghanistan. Serious financial issues can negatively affect unit readiness. According to DOD, servicemembers with severe financial problems risk losing security clearances, incurring administrative or criminal penalties or, in some cases, face discharge. Despite increases in compensation and DOD programs on personal financial management (PFM), studies show that servicemembers, particularly junior enlisted personnel, continue to report financial difficulties. GAO assessed (1) the extent deployment impacts the financial condition of active duty servicemembers and their families, (2) whether DOD has an oversight framework for evaluating military programs designed to assist deployed and non-deployed servicemembers in managing their finances, and (3) the extent junior enlisted servicemembers receive required PFM training.
The financial conditions of deployed and non-deployed servicemembers and their families are similar, but deployed servicemembers and their families may face additional financial problems related to pay. In both a 2003 DOD-wide survey and non-generalizable focus groups that GAO conducted on 13 military installations in the United States and Germany, servicemembers who were deployed reported similar financial conditions as those who were not deployed. Some of GAO's focus group participants also noted that they--like Army Reservists in GAO's 2004 report, Military Pay: Army Reserve Soldiers Mobilized to Active Duty Experienced Significant Pay Problems--had not received their $250 family separation allowance each month during their deployment. Pay record data showed that almost 6,000 deployed servicemembers had received more than the prescribed $250 in January 2005, and 11 of them received a $3,000 catch-up, lump sum payment--the equivalent of 12 months of the allowance. This pay problem was due, in part, to service procedures being confusing and not always followed. Families who do not receive this allowance each month may experience financial strain caused by additional expenses such as extra childcare. DOD lacks an oversight framework--with results-oriented performance measures and reporting requirements--for evaluating the effectiveness of PFM programs across the services. DOD's 2002 human capital strategic plan stated that a standardized evaluation system for PFM programs is a desired goal; however, DOD does not currently have such a system. In 2003, GAO reported that DOD had included evaluative reporting measures in a draft of its PFM instruction to the services. However, the final PFM instruction issued by DOD in 2004 did not address outcome measures or contain a requirement that the services report program results to DOD because the services objected to these additional reporting requirements. Without a policy requiring evaluation and a reporting relationship between DOD and the services, DOD and Congress do not have the visibility or oversight needed to address issues related to the PFM programs. Some junior enlisted servicemembers are not receiving PFM training that is required in service regulations. While each of the services implements PFM training differently, all of the services have policies requiring that PFM training be provided to junior enlisted servicemembers. Moreover, the extent to which the PFM training is not received is unknown because most of the services do not track the completion of PFM training at the service level. Only the Army collected installation-level data and could provide a service-wide estimate of PFM training completed by junior enlisted servicemembers. Senior Army officers said PFM training had not been a priority given the need to prepare for current operations. Top-level DOD officials have repeatedly stated that financial issues directly affect servicemembers' mission readiness and should be addressed. Therefore, units whose servicemembers do not receive required PFM training risk jeopardizing their ability to meet mission requirements.
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-05-348, Military Personnel: More DOD Actions Needed to Address Servicemembers' Personal Financial Management Issues
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Report to the Honorable Richard J. Durbin, U.S. Senate:
April 2005:
Military Personnel:
More DOD Actions Needed to Address Servicemembers' Personal Financial
Management Issues:
GAO-05-348:
GAO Highlights:
Highlights of GAO-05-348, a report to the Honorable Richard J. Durbin,
U.S. Senate:
Why GAO Did This Study:
Congress and the Department of Defense (DOD) are concerned about the
financial conditions of servicemembers and their families, particularly
in light of recent deployments to Iraq and Afghanistan. Serious
financial issues can negatively affect unit readiness. According to
DOD, servicemembers with severe financial problems risk losing security
clearances, incurring administrative or criminal penalties or, in some
cases, face discharge. Despite increases in compensation and DOD
programs on personal financial management (PFM), studies show that
servicemembers, particularly junior enlisted personnel, continue to
report financial difficulties.
GAO assessed (1) the extent deployment impacts the financial condition
of active duty servicemembers and their families, (2) whether DOD has
an oversight framework for evaluating military programs designed to
assist deployed and non-deployed servicemembers in managing their
finances, and (3) the extent junior enlisted servicemembers receive
required PFM training.
What GAO Found:
The financial conditions of deployed and non-deployed servicemembers
and their families are similar, but deployed servicemembers and their
families may face additional financial problems related to pay. In both
a 2003 DOD-wide survey and non-generalizable focus groups that GAO
conducted on 13 military installations in the United States and
Germany, servicemembers who were deployed reported similar financial
conditions as those who were not deployed. Some of GAO‘s focus group
participants also noted that they”like Army Reservists in GAO‘s 2004
report, Military Pay: Army Reserve Soldiers Mobilized to Active Duty
Experienced Significant Pay Problems”had not received their $250 family
separation allowance each month during their deployment. Pay record
data showed that almost 6,000 deployed servicemembers had received more
than the prescribed $250 in January 2005, and 11 of them received a
$3,000 catch-up, lump sum payment”the equivalent of 12 months of the
allowance. This pay problem was due, in part, to service procedures
being confusing and not always followed. Families who do not receive
this allowance each month may experience financial strain caused by
additional expenses such as extra childcare.
DOD lacks an oversight framework”with results-oriented performance
measures and reporting requirements”for evaluating the effectiveness of
PFM programs across the services. DOD‘s 2002 human capital strategic
plan stated that a standardized evaluation system for PFM programs is a
desired goal; however, DOD does not currently have such a system. In
2003, GAO reported that DOD had included evaluative reporting measures
in a draft of its PFM instruction to the services. However, the final
PFM instruction issued by DOD in 2004 did not address outcome measures
or contain a requirement that the services report program results to
DOD because the services objected to these additional reporting
requirements. Without a policy requiring evaluation and a reporting
relationship between DOD and the services, DOD and Congress do not have
the visibility or oversight needed to address issues related to the PFM
programs.
Some junior enlisted servicemembers are not receiving PFM training that
is required in service regulations. While each of the services
implements PFM training differently, all of the services have policies
requiring that PFM training be provided to junior enlisted
servicemembers. Moreover, the extent to which the PFM training is not
received is unknown because most of the services do not track the
completion of PFM training at the service level. Only the Army
collected installation-level data and could provide a service-wide
estimate of PFM training completed by junior enlisted servicemembers.
Senior Army officers said PFM training had not been a priority given
the need to prepare for current operations. Top-level DOD officials
have repeatedly stated that financial issues directly affect
servicemembers‘ mission readiness and should be addressed. Therefore,
units whose servicemembers do not receive required PFM training risk
jeopardizing their ability to meet mission requirements.
What GAO Recommends:
GAO is making four recommendations to enhance servicemembers‘ financial
conditions and the effectiveness of PFM programs and training. DOD did
not provide comments by the time the final report went to print.
www.gao.gov/cgi-bin/getrpt?GAO-05-348.
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:
Financial Conditions Similar for Deployed and Non-Deployed
Servicemembers, but Pay Administration and Communication Problems Exist
for Deployed Members:
DOD Does Not Have the Oversight Framework Needed to Assess the
Effectiveness of PFM Programs:
Some Junior Enlisted Servicemembers Are Not Receiving Required PFM
Training:
Conclusions:
Recommendations for Executive Actions:
Agency Comments:
Appendixes:
Appendix I: Scope and Methodology:
Sampling Error and Non-Sampling Error:
Appendix II: Findings from GAO-led Focus Groups Held at 13
Installations:
Appendix III: Resources Available to Assist Servicemembers with
Financial Issues:
Financial Management Training:
DOD's Financial Readiness Campaign Resources:
Military Service Resources:
Resources Available Outside of DOD:
Appendix IV: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Hypothetical Examples of Monthly Cash Compensation for
Servicemembers Deployed to Iraq:
Table 2: January 2005 Payments of the $250 per Month Family Separation
Allowance to Servicemembers Deployed and Receiving Hostile Fire Pay:
Table 3: Characteristics of Each Service's Required PFM Training for
Junior Enlisted Servicemembers:
Table 4: Installations in the United States and Germany Where GAO
Conducted Site Visits from May to October 2004:
Figures:
Figure 1: Financial Management Assistance and Training Available to
Servicemembers:
Figure 2: Self-Reported Financial Condition of Servicemembers Who Were
and Were Not Deployed for at Least 30 Days at the Time They Completed
the 2003 DOD Survey:
Figure 3: Negative Financial Events for Servicemembers Who Were and
Were Not Deployed for at Least 30 Days at the Time They Completed the
2003 DOD Survey:
Letter April 26, 2005:
The Honorable Richard J. Durbin:
United States Senate:
Dear Senator Durbin:
The finances of servicemembers and their families have been an ongoing
concern of Congress and the Department of Defense (DOD), especially in
light of more frequent deployments to support the war on terrorism and
conflicts in Iraq and Afghanistan. DOD's Social Compact,[Footnote 1]
which is part of DOD's human capital strategic plan, notes that mission
readiness and quality of life depend on whether servicemembers use
their financial resources responsibly. Some adverse effects that may
result when servicemembers experience serious financial problems
include loss of security clearances, criminal or non-judicial
sanctions, or adverse personnel actions including possible discharge
from the military. Servicemembers with serious financial issues may
also adversely impact the readiness of the unit. For example,
servicemembers' financial problems may take the servicemembers and
possibly their unit commanders away from their primary duties in order
to address problems with creditors. In a 2002 report to Congress, the
Navy identified an estimated $250 million in productivity and salary
losses due to servicemembers' poor personal financial
management.[Footnote 2]
Congress and DOD have taken steps to decrease the likelihood that
deployed and non-deployed servicemembers will experience financial
problems. Since 1999, DOD has requested and Congress has granted annual
increases in military basic pay for all active duty servicemembers and
increases in special pays and allowances for deployed servicemembers,
such as the family separation allowance and hostile fire/imminent
danger pay. In addition, out-of-pocket housing expenses for active duty
military members living in private-sector housing have decreased since
1999. Also, the military has developed personal financial management
(PFM) programs to provide servicemembers with financial literacy
training, financial counseling, and other assistance to avoid or
mitigate the adverse effects associated with personal financial
problems.[Footnote 3]
Despite the added compensation and the assistance provided through the
PFM programs, studies in recent years by DOD and others show that
active duty servicemembers continue to report financial problems. For
example, a 2002 study[Footnote 4] noted that 20 percent of junior
enlisted servicemembers reported that they struggled to make ends meet
financially and another 4 percent regarded themselves as "in over their
heads" with respect to their finances.
The information in this report supplements our February 2004 report to
you on bankruptcies among active duty servicemembers.[Footnote 5] As
agreed with your office, this report answers three questions: (1) To
what extent does deployment impact the financial condition of active
duty servicemembers and their families? (2) Does DOD have an oversight
framework for evaluating military programs that assist both deployed
and non-deployed servicemembers in managing their personal finances?
and (3) To what extent are junior enlisted servicemembers receiving
required personal financial management training? We also are reporting
on the prevalence and effect of predatory lending on servicemembers to
fulfill your request for information on the financial conditions of
active duty servicemembers.[Footnote 6]
In conducting this review, we limited the scope of our work to active
duty servicemembers, particularly those recently returning from
deployments.[Footnote 7] Emphasis was also given to junior enlisted
servicemembers, since DOD and service officials have indicated that
this subgroup is more likely to encounter financial problems. Numerous
methods were used to gather and assess information for this work. We
examined DOD, service, and installation policies on PFM program
requirements, as well as management guidance provided in the Government
Performance and Results Act of 1993.[Footnote 8] In addition, we
reviewed reports by GAO, other congressional research offices, DOD, and
other organizations. We constructed, pre-tested, and administered an e-
mail survey to 225 installation-level PFM managers. During site visits
to 13 military installations located in the United States and Germany,
we requested documents pertaining to the implementation and evaluation
of each installation's PFM programs, and we used structured interviews
to gather data from a variety of personnel on the 13 installations:
command leaders, the manager of the PFM programs, financial counselors,
DOD civilian and military attorneys in the Judge Advocate General
corps,[Footnote 9] chaplains, and staff from the relief/aid societies;
and separate discussion groups composed of 232 officers, senior
enlisted personnel, and junior enlisted personnel who had recently
returned from deployment and 112 who had not deployed, as well as 76
spouses of servicemembers who had not deployed or had recently returned
from a deployment to address all three questions. While information
from these discussion groups is not generalizable to the entire DOD
population of active duty servicemembers, it provides context for
findings in the report. The in-depth information about the PFM programs
on the 13 installations was supplemented with information obtained from
3 group discussions with a total of 50 personnel affiliated with the
PFM programs while they attended a November 2004 conference. We
obtained and reviewed other information such as service and
installation PFM training materials and installation accreditation
reports. We reviewed and analyzed DOD's 2003 active duty survey to
obtain information on the impact of deployment on servicemembers'
finances. The March 2003 survey had a response rate of 35 percent. DOD
has conducted and reported on research to assess the impact of this
response rate on overall estimates. They found that, among other
characteristics, junior enlisted personnel (E1 to E4), servicemembers
who do not have a college degree, and members in services other than
the Air Force were more likely to be non-respondents. We have no reason
to believe that potential non-response bias not otherwise accounted for
by DOD's research is substantial for the variables we studied in this
report. Therefore, we concluded the data to be sufficiently reliable to
address our objectives. Further details regarding our scope and
methodology are presented in appendix I. Data obtained from our
discussion groups at the 13 installations are summarized in appendix
II. We performed our work from March 2004 through February 2005 in
accordance with generally accepted government auditing standards.
Results in Brief:
The financial conditions of deployed and non-deployed servicemembers
and their families are similar, but deployed servicemembers and their
families may face additional financial problems in receiving their
family separation allowance and communicating with creditors. In a 2003
DOD survey, responses from servicemembers who were deployed for at
least 30 days were similar to those of their non-deployed peers with
regards to their overall financial conditions. Moreover, while not a
generalizable sample, 90 percent of the 232 recently deployed
servicemembers in our focus groups indicated that their financial
situations either improved or remained about the same after a
deployment. Some of the recently deployed servicemembers in our focus
groups also noted that they--like Army reservists in our 2004
review[Footnote 10]--had not received their $250 family separation
allowance on a monthly basis. Pay records showed that nearly 6,000
servicemembers received more than the prescribed $250 for January 2005,
and 11 of those servicemembers received a $3,000 catch-up, lump sum
payment--the equivalent of 12 months of the allowance. The failure to
pay the family separation allowance each month is occurring, in part,
because the services' procedures for initiating the allowance are
confusing or not always followed. For example, the Army's regulation
implies that soldiers will receive their allowance after returning from
deployment; however, in practice some installations allow
servicemembers to receive the allowance during deployment. Not
receiving this compensation each month to help defray household costs
such as extra childcare expenses can place a financial strain on the
family when the servicemembers are deployed. In addition, DOD and
installation officials as well as servicemembers told us that problems
communicating with creditors during deployment can cause other
financial difficulties. Servicemembers told us that limited Internet
access, the high cost of calling from overseas, and delays in the
delivery of mail often prevented them from promptly contacting
creditors. Failure to avoid or promptly correct serious financial
problems can result in consequences for these servicemembers, such as
bad credit ratings or adverse effects on unit readiness and morale.
DOD does not have an oversight framework that includes results-oriented
performance measures and the reporting requirements needed to evaluate
the effectiveness of DOD and service programs that assist
servicemembers in managing their personal finances. The principles of
the Government Performance and Results Act of 1993 offer federal
agencies a sound methodology for establishing such a framework. While
DOD's 2002 human capital strategic plan stated that a standardized
evaluation system to measure the effectiveness of the PFM programs is a
desired goal, DOD does not currently have such a system. One factor
contributing to the absence of adequate outcome measures and a
standardized evaluation system is the lack of DOD guidance to measure
or report on the programs' results. Although DOD had included
evaluative reporting measures in a draft of its PFM instruction to the
services, the final instruction issued in 2004 did not contain outcome
measures or reporting requirements because the services objected to the
additional requirements. Without a policy requiring the evaluation and
reporting relationship between DOD and the services, DOD has limited
visibility and oversight to make improvements in the program and
limited ability to achieve a standardized evaluation system. Moreover,
Congress does not have the visibility or oversight it needs to address
issues related to DOD's PFM programs.
Some junior enlisted servicemembers are not receiving the required PFM
training. While each service implements PFM training differently, all
of the services have policies requiring that PFM training must be
provided to junior enlisted servicemembers. Moreover, the extent to
which the PFM training is not received is unknown because most of the
services do not track the completion of PFM training at the service
level. The Army was the only service that collected installation-level
data and could provide a servicewide estimate of PFM training completed
by junior enlisted servicemembers. Senior Army officers at most of the
Army installations we visited acknowledged the need for PFM training,
but noted that PFM training was not a priority because current
deployment schedules limit the time available to prepare soldiers for
their warfighting mission. Top-level DOD officials, however, have
repeatedly stated that financial issues directly affect unit readiness
and morale and should be addressed. Thus, units whose servicemembers do
not receive required PFM training risk jeopardizing their ability to
meet mission requirements.
We are making four recommendations to DOD to enhance the financial
conditions of deployed servicemembers and improve the effectiveness of
PFM programs: (1) take steps to provide deployed servicemembers with
their family separation allowance on a monthly basis, (2) take steps to
provide better communications access for deployed servicemembers with
their creditors, (3) develop a DOD-wide oversight framework with an
evaluation plan for the PFM programs and formalize DOD's oversight role
in the evaluation by including evaluation and reporting requirements in
the PFM instruction, and (4) develop and implement a tactical plan with
time-based milestones to show how the appropriate service policy
offices will monitor and ensure required financial management training
is provided to junior enlisted servicemembers. On March 17, 2005, we
provided a draft of this report to DOD for review and comment. As of
the time this report went to final printing, DOD had not provided
comments as requested.
Background:
Because large numbers of Americans lack knowledge about basic personal
economics and financial planning, U.S. policymakers and others have
been focusing on financial literacy, i.e., the ability to make informed
judgments and to take effective actions regarding the current and
future use and management of money.[Footnote 11] While informed
consumers can choose appropriate financial investments, products, and
services, those who exercise poor money management and financial
decision making can lower their family's standard of living and
interfere with crucial long-term goals.
One vehicle for promoting the financial literacy of Americans is the
congressionally created Financial Literacy and Education
Commission.[Footnote 12] Created in 2003, the Commission is charged
with (1) developing a national strategy to promote financial literacy
and education for all Americans; (2) coordinating financial education
efforts among federal agencies and among the federal government, state
and local governments, non-profit organizations, and private
enterprises; and (3) identifying areas of overlap and duplication among
federal financial literacy activities.
To minimize financial burdens on servicemembers, DOD has requested and
Congress has increased cash compensation for active duty military
personnel over the last 5 years. For example, the average increases in
military basic pay have exceeded the average increases in private-
sector wages for each of the past 5 years.[Footnote 13] Also, DOD has a
plan to totally eliminate out-of-pocket expenses that servicemembers
pay when living in private-sector housing from 19 percent in fiscal
year 2000 to zero in fiscal year 2005.[Footnote 14]
Furthermore, in April 2003, Congress increased the family separation
allowance from $100 to $250 per month and hostile fire/imminent danger
pay from $150 to $225 per month for eligible deployed
servicemembers.[Footnote 15] The family separation allowance[Footnote
16] is designed to provide compensation for servicemembers with
dependents for the added expenses incurred because of involuntary
separations such as deployments in support of contingency operations
like Operation Iraqi Freedom. The expenses include extra childcare
costs, automobile maintenance, or home repairs the deployed
servicemember would normally do while home. Hostile fire/imminent
danger pay provides special pay for "duty subject to hostile fire or
imminent danger" and is designed to compensate servicemembers for
physical danger.[Footnote 17] Iraq, Afghanistan, Kuwait, Saudi Arabia,
and many other nearby countries have been declared imminent danger
zones.[Footnote 18] In addition to these special pays, some or all
income that active duty servicemembers earn in a combat zone is tax
free.[Footnote 19]
Since at least the 1980s, the military services have offered PFM
programs to help servicemembers address their financial conditions.
Among other things, the PFM programs provide financial literacy
training to servicemembers, particularly to junior enlisted personnel
during their first months in the military. The group-provided financial
literacy training is supplemented with other types of financial
management assistance, often on a one-on-one basis. For example,
servicemembers might obtain one-on-one counseling from staff in their
unit or legal assistance attorneys at the installation.
In May 2003, the Office of the Under Secretary of Defense for Personnel
and Readiness,[Footnote 20] DOD's policy office for the PFM programs,
established its Financial Readiness Campaign, with objectives that
include increasing personal readiness by, among other things, (1)
increasing financial awareness and abilities and (2) increasing savings
and reducing dependence on credit.[Footnote 21] The Campaign attempts
to accomplish these objectives largely by providing on-installation PFM
program providers with access to national-level programs, products, and
support through links from DOD's Web site (www.dodpfm.org) to other Web
sites, tools, and contacts.[Footnote 22]
Figure 1 illustrates some of the major types of financial management
training and assistance available to servicemembers (see app. III for
additional details). For instance, most active duty military
installations have an on-site manager who implements the service's PFM
programs. Among other things, PFM program managers and others teach
classes and offer counseling on financial issues, ranging from basic
budgeting and checkbook management to purchasing a car. In addition,
the PFM program managers might work closely with the services'
relief/aid societies. The relief/aid societies offer grants or no
interest loans for emergency situations. Figure 1 also shows that
servicemembers may choose to use non-DOD resources if, for example,
they do not want the command to be aware of their financial conditions
or they need products or support not offered through DOD, the services,
or the installation.
Figure 1: Financial Management Assistance and Training Available to
Servicemembers:
[See PDF for image]
Sources: GAO analysis of DOD data; Image Art Explosion.
[End of figure]
Financial Conditions Similar for Deployed and Non-Deployed
Servicemembers, but Pay Administration and Communication Problems Exist
for Deployed Members:
DOD-wide survey data suggest that the financial conditions of deployed
and non-deployed personnel are similar, but problems were found with
the administration of a special pay to deployed personnel, as well as
the ability of deployed servicemembers to communicate with creditors.
Servicemembers who were deployed for at least 30 days reported similar
levels of financial health or problems as those who had not deployed
when they responded to a 2003 DOD-wide survey. However, some deployed
servicemembers are not obtaining their family separation allowance on a
monthly basis while they are deployed and separated from the families.
And, problems communicating with creditors--caused by limited Internet
access, few telephones and high fees, and delays in receiving ground
mail--can affect deployed servicemembers' abilities to resolve
financial issues.
Data Suggest Financial Conditions of Deployed Servicemembers and Their
Families Similar to Non-Deployed Servicemembers and Their Families:
Data from DOD suggest that the financial conditions for deployed and
non-deployed servicemembers and their families are similar. Figure 2
shows estimates of servicemembers' financial conditions based on their
responses to a 2003 DOD-wide survey.[Footnote 23] For each of the five
response options, the findings for servicemembers who were on a
deployment for at least 30 days were very similar to those of
servicemembers who had not deployed during that time. An additional
analysis of the responses for only junior enlisted personnel showed
similar responses for the two groups. For example, 3 percent of the
deployed group and 2 percent of the non-deployed group indicated that
they were in "over their heads" financially; and 13 percent of the
deployed group and 15 percent of non-deployed group responded that they
found it "tough to make ends meet but keeping your head above water"
financially. These responses are consistent with the findings that we
obtained in a survey of all PFM program managers and during our 13 site
visits. In the survey of PFM program managers, about 21 percent
indicated that they believed servicemembers are better off financially
after a deployment; about 54 percent indicated that the servicemembers
are about the same financially after a deployment; and about 25 percent
believed the servicemembers are worse off financially after a
deployment. Also, 90 percent of the 232 recently deployed
servicemembers surveyed in our focus groups[Footnote 24] said that
their financial situations either improved or remained about the same
after a deployment.
Figure 2: Self-Reported Financial Condition of Servicemembers Who Were
and Were Not Deployed for at Least 30 Days at the Time They Completed
the 2003 DOD Survey[A]:
[See PDF for image]
[A] Sampling errors of estimates for servicemembers who were not
deployed do not exceed +/-2 percentage points. Sampling errors of
estimates for servicemembers who were deployed do not exceed +/-5
percentage points. These sampling errors do not include errors due to
other sources, such as potential bias attributable to the overall 35
percent response rate. DOD conducted research to assess the impact of
this response rate on overall estimates. We have no reason to believe
that potential non-response bias not otherwise accounted for by DOD's
research is substantial for the variables we studied in this report.
[End of figure]
The special pays and allowances that some servicemembers receive when
deployed, particularly to dangerous locations, may be one reason for
the similar findings for the deployed and non-deployed groups. The
hypothetical situations shown in table 1 demonstrate that deployment-
related special pays and allowances can increase servicemembers' total
cash compensation by hundreds of dollars per month. Moreover, as we
noted previously in the Background section of this report, some or all
income that servicemembers earn while serving in a combat zone is tax
free.
Table 1: Hypothetical Examples of Monthly Cash Compensation for
Servicemembers Deployed to Iraq:
Base compensation;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: $1,641;
Hypothetical situation 2: (E-3)[A], Years of service: 3, Dependents,
On- installation housing: $1,641;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $1,641;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $2,687;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $4,729.
Basic allowance for housing;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: In kind (living in barracks); Hypothetical situation
2: (E-3)[A]: Years of service: 3: Dependents: On- installation housing:
In kind (living in on-base housing); Hypothetical situation 3: (E-
3)[A], Years of service: 3, Dependents, Private-sector housing: $622;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $793;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $923.
Basic allowance for subsistence;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: In kind (eating in mess halls); Hypothetical
situation 2: (E-3)[A]: Years of service: 3: Dependents: On-
installation housing: $267;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $267;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $267;
Hypothetical situation 5: (O-3)[A]: Years of service: 10: Dependents
Private-sector housing: $175.
Subtotal: Basic military compensation; Hypothetical situation 1: (E-
3)[]: Years of service: 3: No dependents Barracks housing: $1,641;
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents:
On- installation housing: $1,908;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $2,530;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $3,747;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $5,827.
Family separation allowance;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: $0;
Hypothetical situation 2: (E-3)[A], Years of service: 3, Dependents,
On- installation housing: $250;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $250;
Hypothetical situation 4: (E-6)[A]: Years of service: 10: Dependents:
Private- sector housing: $250;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $250.
Hostile fire/Imminent danger pay;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: $225;
Hypothetical situation 2: (E-3)[A], Years of service: 3, Dependents,
On- installation housing: $225;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $225;
Hypothetical situation 4: (E-6)[A]: Years of service: 10: Dependents:
Private- sector housing: $225;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $225.
Per diem;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: $105;
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents:
On- installation housing: $105;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $105;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $105;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $105.
Hardship duty pay;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: $100;
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents:
On- installation housing: $100;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $100;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $100;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $100.
Subtotal: Deployment related compensation; Hypothetical situation 1: (E-
3)[A], Years of service: 3, No dependents, Barracks housing: $430;
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents:
On- installation housing: $680;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $680;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $680;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $680.
Total;
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents,
Barracks housing: $2,071;
Hypothetical situation 2: (E- 3)[A]: Years of service: 3: Dependents:
On-installation housing: $2,588;
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents,
Private-sector housing: $3,210;
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents,
Private-sector housing: $4,427;
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents,
Private-sector housing: $6,507.
Source: GAO analysis of DOD data.
[A] E = enlisted servicemember, O = Officer.
Note: Some values are rounded to the nearest whole dollar. Also,
housing data are for Fort Campbell, Kentucky.
[End of table]
The 2003 DOD survey also asked servicemembers whether they had
experienced various types of negative financial events. The differences
in percentages were small between the deployed and non-deployed groups.
As figure 3 shows, the largest of the three differences was 4
percentage points and pertained to falling behind in paying bills.
Figure 3: Negative Financial Events for Servicemembers Who Were and
Were Not Deployed for at Least 30 Days at the Time They Completed the
2003 DOD Survey[A]:
[See PDF for image]
[A] Sampling errors of estimates for Servicemembers who were not
deployed do not exceed +/-2 percentage points. Sampling errors of
estimates for Servicemembers who were deployed do not exceed +/-5
percentage points. These sampling errors do not include errors due to
other sources, such as potential bias attributable to the overall 35
percent response rate. DOD conducted research to assess the impact of
this response rate on overall estimates. We have no reason to believe
that potential non-response bias in the estimates not otherwise
accounted for by DOD's research is substantial for the variables we
studied in this report.
[End of figure]
Several Thousand Deployed Servicemembers Not Receiving Family
Separation Allowance Promptly:
Based on DOD data for January 2005, almost 6,000 of 71,000 deployed
servicemembers who have dependents did not obtain their family
separation allowance[Footnote 25] in a timely manner. The family
separation allowance of $250 per month is designed to compensate
servicemembers for extra expenses that result when they are
involuntarily separated from their families. Servicemembers in our
focus groups told us that the family separation allowance helps their
families with added costs encountered during their absence such as
childcare costs, automobile maintenance, and home repairs. Delays in
obtaining family separation allowances could cause undue hardship for
some families faced with such extra expenses.
Table 2 shows the amount of family separation allowance received in
January 2005 by servicemembers who were deployed and receiving hostile
fire pay. No Marines received more than the prescribed $250 monthly
allowance for January, but approximately 10 percent of the Army and
Navy servicemembers and nearly 5 percent of the Air Force personnel who
were entitled to the $250 monthly allowance received more than that
prescribed amount. This indicates that servicemembers for three of the
services had not received the $250 allowance on a monthly basis and
were given catch-up, lump sum payments. In total, almost 6,000
servicemembers received more than the prescribed $250 monthly
allowance, with 11 servicemembers (1.5 percent) receiving a $3,000
catch-up, lump sum payment--the equivalent of 12 months of family
separation pay.[Footnote 26] We have previously reported similar
findings for the administration of family separation allowance to Army
Reserve soldiers and recommended that the Secretary of the Army, in
conjunction with the DOD Comptroller, clarify and simplify procedures
and forms for implementing the family separation allowance entitlement
policy.[Footnote 27]
Table 2: January 2005 Payments of the $250 per Month Family Separation
Allowance to Servicemembers Deployed and Receiving Hostile Fire Pay[A]:
Amount of payment: $500-$3,000[C];
Army: Number[B]: 2,479;
Army: Percentage: 6;
Navy: Number[B]: 545;
Navy: Percentage: 6;
Marine Corps: Number[B]: 0;
Marine Corps: Percentage: 0;
Air Force: Number[B]: 28;
Air Force: Percentage: 2;
Total: Number[B]: 3,052;
Total: Percentage: 4.
Amount of payment: $251-$499[C];
Army: Number[B]: 2,335;
Army: Percentage: 5;
Navy: Number[B]: 401;
Navy: Percentage: 4;
Marine Corps: Number[B]: 0;
Marine Corps: Percentage: 0;
Air Force: Number[B]: 43;
Air Force: Percentage: 3;
Total: Number[B]: 2,779;
Total: Percentage: 4.
Amount of payment: $250[D];
Army: Number[B]: 40,120;
Army: Percentage: 89;
Navy: Number[B]: 8,727;
Navy: Percentage: 90;
Marine Corps: Number[B]: 12,672;
Marine Corps: Percentage: 85;
Air Force: Number[B]: 1,168;
Air Force: Percentage: 94;
Total: Number[B]: 62,687;
Total: Percentage: 88.
Amount of payment: $1-$249[E];
Army: Number[B]: 89;
Army: Percentage: 0;
Navy: Number[B]: 21;
Navy: Percentage: 0;
Marine Corps: Number[B]: 2,201;
Marine Corps: Percentage: 15;
Air Force: Number[B]: 9;
Air Force: Percentage: 1;
Total: Number[B]: 2,320;
Total: Percentage: 3.
Amount of payment: Total;
Army: Number[B]: 45,023;
Army: Percentage: 100;
Navy: Number[B]: 9,694;
Navy: Percentage: 100;
Marine Corps: Number[B]: 14,873;
Marine Corps: Percentage: 100;
Air Force: Number[B]: 1,248;
Air Force: Percentage: 100;
Total: Number[B]: 70,838;
Total: Percentage: 99.
Source: GAO analysis of DOD data.
[A] DOD supplied information on servicemembers who were eligible to
receive family separation allowance while in Afghanistan, Algeria,
Angola, Arabian Sea, Bahrain, Belarus, Bosnia and Herzegovina,
Colombia, Croatia, Democratic Republic of the Congo, Djibouti, Egypt,
Eritrea, Ethiopia, Georgia, Gulf of Aden, Haiti, Indonesia, Iraq,
Israel, Jordan, Kenya, Kuwait, Kyrgyzstan, Lebanon, Liberia, Macedonia,
Malaysia, Oman, Pakistan, Palestine, Persian Gulf, Philippines, Qatar,
Red Sea, Saudi Arabia, Serbia, Sierra Leone, South Africa, Tajikistan,
Turkey, United Arab Emirates, Uzbekistan, Yemen, and 30 locations that
were simply identified as "other locations."
[B] The Defense Finance and Accounting Service identified the number of
servicemembers who were receiving hostile fire and eligible to receive
family separation allowance.
[C] Amounts in these rows represent the number of servicemembers who
received a catch-up, lump sum payment that exceeded the $250 per month.
[D] Amounts in this row represent the number of servicemembers who
received the prescribed $250 per month family separation allowance.
[E] Amounts in this row represent the number of servicemembers who
received partial payment for the $250 per month family separation
allowance.
[End of table]
The services have different procedures that servicemembers must perform
to obtain the family separation allowance, and some of these procedures
are confusing and are not always followed. For example, an Army
regulation[Footnote 28] states that soldiers must file a DD Form 1561
(Statement to Substantiate Payment of Family Separation Allowance) to
substantiate eligibility to receive the allowance, along with a copy of
the travel voucher to indicate the period of entitlement--which implies
family separation allowance is received after deployment because
substantiating documents are generally provided upon completion of
travel with a voucher. The Army's pay manual, however, states that only
a DD Form 1561 is required to receive family separation
allowance.[Footnote 29] Officials at the Defense Finance and Accounting
Service and Army Finance Office stated that, although they were
following this regulation, they were requiring the DD Form 1561 prior
to departure so soldiers could receive family separation allowance
during deployment, which is contrary to the Army regulation.[Footnote
30] In contrast, Defense Finance and Accounting Service procedures for
Air Force servicemembers[Footnote 31] state that servicemembers may
substantiate eligibility to receive family separation allowance prior
to departure, using the travel order and the DD Form 1561. By using the
travel order, Air Force servicemembers can receive family separation
allowance during deployment. However, elsewhere in the Defense Finance
and Accounting procedures, it notes that most Air Force members are
paid family separation allowance upon returning from deployment. In
April 2003, Air Force officials attempted to clear up any confusion
over how Air Force personnel should initiate payments of family
separation allowance, by sending a message to a Defense Finance and
Accounting official stating that family separation allowance paperwork
should be filed before servicemembers depart for deployment.[Footnote
32] Despite this subsequent change, Air Force servicemembers in our
June 2004 focus group noted that they had not received the family
separation allowance during their deployments. An August 2004 message
from the Defense Finance and Accounting Service reminded Air Force
finance officials of this policy change.
DOD officials suggested many factors other than policy-implementation
differences to explain why some eligible servicemembers are not
receiving their family separation allowance on a monthly basis.
Officials at the Defense Finance and Accounting Service and at service
finance offices suggested that servicemembers might not obtain the
allowance monthly because they are not aware of the benefit, they do
not file the required eligibility form, they file incorrect
documentation, or errors or delays occur when the unit enters the
information into the pay system. Others noted that servicemembers may
elect to receive the allowance as a one-time lump sum payment.[Footnote
33]
Problems Communicating with Creditors and Families During Deployment
May Cause Financial Difficulties:
Servicemembers may experience financial difficulties as a result of
communication constraints while deployed. In our March 2004 testimony,
we documented some of the problems associated with mail delivery to
deployed troops. With regard to deployed servicemembers' financial
management, our focus group participants, surveyed PFM program
managers, and interviewed installation officials noted that delays in
receiving correspondence from creditors have resulted in late payments
and possibly longer-term problems for servicemembers. The longer-term
problems might include negative information about the late payments
being entered in one's financial credit report, which could make it
more difficult or expensive for servicemembers to obtain credit in the
future. Similarly, limited access to telephones or Internet can have
negative financial effects such as (1) delaying or preventing contact
with a creditor when a financial issue arises, (2) making it impossible
to electronically transfer money from a financial institution to a
creditor, and (3) incurring overdraft expenses because the spouse could
not be informed in a timely manner about a cash advance that the
servicemember requested.
Individuals in our focus groups suggested that the access to Internet
and telephones may not be the same across the pay grades and services.
For example, some servicemembers noted that deployed junior enlisted
personnel sometimes had less access to Internet than did senior
deployed personnel, making it difficult for the former to keep up with
their bills. In addition, some Army servicemembers told us that they
(1) could not call stateside toll-free numbers because the numbers were
inaccessible from overseas or (2) incurred substantial costs--sometimes
$1 per minute--to call stateside creditors. In contrast, Air Force
servicemembers in Germany said that the cost of calls to stateside
creditors from Iraq or Afghanistan was not an issue for them because
the Air Force had provided telephone calling cards that could be used
to make such calls free of charge.
Failure to avoid or promptly correct financial problems can result in
negative consequences for servicemembers. This includes increased debt
for servicemembers, bad credit histories, and poor performance of their
duties when distracted by financial problems. In addition,
servicemembers who cannot stay on top of their finances, while
deployed, may require assistance from officials in their chain of
command to address financial problems, which takes those officials from
their normal military duties. This can translate into adverse effects
on a unit's readiness and morale.
DOD Does Not Have the Oversight Framework Needed to Assess the
Effectiveness of PFM Programs:
DOD lacks the results-oriented, departmentwide data needed to assess
the effectiveness of its PFM programs and provide the necessary
oversight. The principles of the Government Performance and Results Act
of 1993 offer federal agencies a methodology to establish a results-
oriented framework that includes strategic plans for program activities
that identifies, among other things, program goals, performance
measures, and reporting on the degree to which goals are met.[Footnote
34] These principles would assist DOD in shifting the focus of
accountability for its PFM program from outputs, such as the number of
training classes provided, to outcomes, such as impact of training on
servicemembers' financial behavior.
The November 2004 DOD instruction that provides guidance to the
services on servicemembers' financial management does not address
program evaluation or the reports that services should supply to DOD
for its oversight role.[Footnote 35] However, an earlier draft of the
instruction included these requirements. In our 2003 report,[Footnote
36] we noted that the earlier draft instruction emphasized evaluating
the programs and cited metrics such as the number of delinquent
government credit cards, servicemembers with wages garnished, and
administrative actions for financial indebtedness and irresponsibility
taken under the Uniform Code of Military Justice. When asked what
caused the evaluation and oversight reporting requirements to be
dropped from the finalized instruction, DOD officials said that they
were eliminated because of objections voiced by the services. The DOD
officials told us that the services did not want the additional
reporting requirements.
DOD's 2002 Social Compact noted that the impact of efforts to improve
financial literacy cannot be determined without effective evaluation.
The Social Compact also stated that a systematic approach to measuring
PFM programs is needed to identify best practices and improved program
performance. Currently, the only DOD-wide evaluative data available for
assessing the PFM programs and servicemembers' financial conditions are
obtained from a general-purpose annual survey that focuses on the
financial conditions of servicemembers as well as a range of other non-
related issues. The data are limited because DOD policy officials for
the PFM programs can only include a few financial related items to this
general-purpose survey. Additionally, a response rate of 35 percent on
the March 2003 active duty survey leads to questions about the
generalizability of the findings. Furthermore, DOD has no means for
confirming the self-reported information for survey items that ask
about objective events such as filing for bankruptcy. Without a policy
requiring common evaluation DOD-wide and reporting relationships among
DOD and the services, DOD will continue to have limited oversight to
make improvements in the PFM programs and limited ability to achieve a
standardized evaluation system. In addition, Congress will not have the
visibility or oversight it needs to address issues related to DOD's
financial management training and assistance to servicemembers.
Currently, service-specific efforts to assess the PFM programs are
largely in their early stages. The services told us that they are
developing outcome measures for evaluating their PFM programs, but none
was operational at the time of our review. In Spring 2005, the Navy
plans to develop and refine Navy-wide metrics such as the number of
sailors performing good and poor financial behaviors, e.g.,
participating in the government's retirement plan, filing for
bankruptcy, and bouncing checks. Similarly, in the third quarter of
fiscal year 2005, Army officials said they expect to implement outcome
measures for assessing programs such as Financial Readiness, Family
Advocacy, and Relocation Readiness. The Marine Corps and Air Force did
not provide details for their plans to develop results-oriented data or
indicate when evaluation systems would be operational. Additionally,
our visits to 13 installations in the United States and Germany
revealed much variability with regard to the use of performance
metrics. The installations that provided us with their metrics often
used output measures such as the number of people trained, rather than
results-oriented outcome measures.
Some Junior Enlisted Servicemembers Are Not Receiving Required PFM
Training:
Some junior enlisted servicemembers are not receiving the required PFM
training. While each of the services implements PFM training
differently, all of the services have policies requiring that PFM
training must be provided to junior enlisted servicemembers. At the
time of our review, the services' policies varied on where and when the
initial training should occur. For example, the Army, Marine Corps, and
Air Force regulations required the training at the servicemembers'
first duty station; however, the Navy guidance required such training
prior to the servicemembers' first duty station.
Despite having these policies, some servicemembers have not received
the required training, but the extent to which the training is not
received is unknown because servicewide totals are not always
collected. Table 3 shows how each service monitors PFM training. The
Marine Corps, for example, only tracks PFM training at the unit level
and does not tabulate these data for a servicewide total. As shown in
the table, the Army was the only service that collected installation-
level PFM data and could provide a rough servicewide estimate of PFM
training completed by junior enlisted servicemembers. Overall, the Army
estimates that about 82 percent of its junior enlisted soldiers
completed PFM training in fiscal year 2003, leaving 18 percent who did
not receive training. PFM program staff at five of the six Army
installations we visited told us that required PFM training was not
being provided to all first-term soldiers. Some of the senior Army
officers at these installations acknowledged the need to provide the
PFM training to junior enlisted servicemembers but also noted that
current deployment schedules limited the time available to prepare
soldiers for their warfighting mission. The officers said they believed
that improving servicemembers' ability to perform duties related to
their mission (e.g., firing a weapon) was more important than improving
their personal financial literacy.
Table 3: Characteristics of Each Service's Required PFM Training for
Junior Enlisted Servicemembers:
Characteristic: How does the service monitor whether required PFM
training is completed?
Army: Monitored at installation level; data then compiled for
servicewide total;
Navy: Monitored by Navy Education and Training Command; data are not
compiled for higher-level total;
Marine Corps: Monitored at unit level; data are not compiled for
higher- level total;
Air Force: Monitored at squadron level; data are not compiled for
higher-level total.
Characteristic: Is the number of hours of required training in a
servicewide regulation?
Army: No[A];
Navy: Yes;
Marine Corps: No;
Air Force: No.
Characteristic: How many hours of PFM training are required, according
to the service's PFM program oversight office? Army: 12;
Navy: 16;
Marine Corps: No minimum requirement; Air Force: No minimum
requirement.
Characteristic: When is the PFM training provided to servicemembers?
Army: 2 hours during basic training, 2 hours during advanced individual
training, and 8 hours at the first duty station; Navy: 16 hours during
advanced individual training; Marine Corps: Within 45 days of arrival
at first duty station; Air Force: Upon arrival at first duty station.
Source: GAO analysis of DOD data.
[A] The Army oversight office stated the number of PFM training hours
it requires is in a 1998 memorandum to the Army Chief of Staff.
[End of table]
In addition to how the services monitor servicemembers' completion of
PFM training, table 3 also shows that the services' requirements for
PFM training for junior enlisted personnel differ on three other
characteristics: where the requirements are documented, the length of
training, and when the training is administered.
* The Navy is the only service that specifies in servicewide
regulations the number of hours of PFM training that junior enlisted
servicemembers must complete. The oversight office for the Army
identified the number of hours of required PFM training for first-term
soldiers in a 1998 memorandum to the Army Chief of Staff.[Footnote 37]
The Air Force and Marine Corps do not specify the number of hours in
servicewide regulations or other documents.
* The Navy's required length of PFM training for junior enlisted
servicemembers is 4 hours longer than the Army requirement. The Air
Force and Marine Corps have no minimum requirement pertaining to the
length of the PFM training provided on its installations.
* The services use different schedules for identifying when PFM
training is to be administered. PFM managers noted that these schedules
take into account service-specific constraints, such as the length of
time available for PFM training at servicemembers' first duty station.
Top-level DOD officials have stated repeatedly that financial issues
have a direct effect on servicemembers' mission readiness and that the
lack of basic consumer skills and training in finances sets the stage
for financial difficulties. For example, we reported in 2003 that a
2002 Navy report to Congress had identified $250 million in
productivity and salary losses due to poor personal financial
management by servicemembers.[Footnote 38] Therefore, units whose
servicemembers do not receive required PFM training risk jeopardizing
their ability to meet mission requirements.
Some services are taking steps to improve their monitoring of PFM
training. During the second quarter of 2005, the Army officials said
they hope to implement Army's Client Tracking System that will allow
the service as well as current and future installations to track the
financial counseling and training that servicemembers receive. The
Marine Corps is updating its order on personal services and developing
a system to track financial management training. While such steps may
improve the monitoring of PFM training completion--an important output-
-they still do not address the larger issues of training outcomes such
as whether or not PFM training helps servicemembers to manage their
finances better.[Footnote 39]
Conclusions:
Although DOD-wide data show that the financial conditions for deployed
and non-deployed servicemembers and their families are similar, some
deployed servicemembers experience delays in obtaining their monthly
family separation allowance. Not receiving this compensation each month
to help defray extra household costs incurred when the servicemembers
are deployed can result in financial hardship for the servicemembers'
family. Without changes to the administration of the family separation
allowance, DOD risks placing a further financial strain on
servicemembers. In addition, problems communicating with creditors
during deployment can cause financial difficulties for servicemembers.
Limited Internet access, delays in ground mail, and the high cost of
calling from overseas often prevent servicemembers from promptly
contacting creditors when financial issues arise. Delays in responding
to creditors can result in serious consequences, including bad credit
ratings for the servicemembers and adverse effects on unit readiness
and morale.
While DOD states in its Social Compact that a standardized evaluation
system to measure the effectiveness of the PFM programs is a desired
goal, the department does not have an oversight framework that includes
the performance measures and reporting requirements needed to fully
measure results from its programs. In addition, the absence of
evaluation and reporting requirements in DOD's newly issued instruction
on personnel financial management suggests that DOD will continue to
have limited visibility and oversight over the PFM programs and little
ability to require standardized assessments of the PFM programs. These
deficiencies, in turn, will limit Congress' ability to address issues
related to DOD's PFM programs.
While DOD and service officials have acknowledged that the lack of PFM
training sets the stage for servicemembers having financial
difficulties later, high deployment levels limit the time available for
some servicemembers to take the PFM training. The absence of
servicewide systems for monitoring the completion of this required
training could result in some servicemembers never being provided such
training if they are unable to take it at the prescribed time.
Moreover, the lack of a monitoring system also will hamper efforts to
improve PFM training since it will be impossible to establish a
measurable relationship between whether or not someone completed
training and how well they subsequently managed their finances.
Recommendations for Executive Actions:
To address issues related to servicemembers' financial management, we
recommend that the Secretary of Defense direct the Under Secretary of
Defense for Personnel and Readiness to take the following four actions
* Take the necessary steps, in conjunction with the Defense Finance and
Accounting Service and the services, to ensure servicemembers receive
family separation allowances on a monthly basis during deployments.
These steps might include those recommended in our prior review of Army
Reserve pay,[Footnote 40] such as clarifying and simplifying procedures
and forms implementing family separation allowance entitlements or
having DOD and the operational components of the services work together
to ensure family separation allowance entitlement eligibility form is
received by the Defense Finance and Accounting Service to start the
allowance when the servicemember is entitled to it.
* Identify and implement, with the services, steps that can be taken to
allow deployed servicemembers better communications with creditors.
These steps may include increasing Internet access and providing toll-
free telephone access for deployed servicemembers when they need to
address personal financial issues.
* Develop and implement, in conjunction with the services, a DOD-wide
oversight framework with a results-oriented evaluation plan for the PFM
programs and formalize DOD's oversight role by including evaluation and
reporting requirements in the PFM instruction.
* Require the services to develop and implement a tactical plan with
time-based milestones to show how the appropriate service policy office
will monitor financial management training and thereby ensure that
junior enlisted servicemembers receive the required training.
Agency Comments:
On March 17, 2005, we provided a draft of this report to DOD for review
and comment. As of the time this report went to final printing, DOD had
not provided comments as requested.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its issue date. At that time we will provide copies of this
report to interested congressional committees and the Secretary of
Defense. We will also make copies available to others upon request.
This report will be available at no charge on GAO's Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-5559 ([Hyperlink, stewartd@gao.gov]) or Jack E.
Edwards at (202) 512-8246 ([Hyperlink, edwardsj@gao.gov]). Other staff
members who made key contributions to this report are listed in
appendix IV.
Sincerely yours,
Signed by:
Derek B. Stewart:
Director, Defense Capabilities and Management:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
In addressing the objectives of our engagement, we limited our scope to
active duty servicemembers because we have previously issued a number
of reports on the compensation, benefits, and pay-related problems of
reservists.[Footnote 41] Emphasis was placed on servicemembers who had
returned from a deployment within the last year because these
individuals were most likely to have recent personal knowledge of
deployment-related financial issues, as well as familiarity with
financial issues of servicemembers serving on installations in the
United States. During the course of our work, we visited 13
installations with high deployment levels, as identified by service
officials[Footnote 42] (see table 4). During these site visits to
installations in the United States and Germany, special emphasis was
given to ascertaining the financial conditions of junior enlisted
servicemembers because DOD and service officials have reported that
this subgroup is more likely to encounter financial problems.
Table 4: Installations in the United States and Germany Where GAO
Conducted Site Visits from May to October 2004:
Service: Army;
Installation: Fort Bragg, North Carolina;
Installation: Fort Campbell, Kentucky;
Installation: Fort Drum, New York;
Installation: Fort Lewis, Washington;
Installation: Fort Stewart, Georgia;
Installation: Ray Barracks, Friedberg, Germany.
Service: Navy;
Installation: Naval Air Station Jacksonville, Florida;
Installation: Naval Station San Diego, California.
Service: Marine Corps;
Installation: Camp Lejeune, North Carolina;
Installation: ServiceAir Force: Camp Pendleton, California.
Service: Air Force;
Installation: Bolling Air Force Base, Washington, D.C;
Installation: Langley Air Force Base, Virginia;
Installation: Ramstein Air Base, Germany.
Source: GAO.
[End of table]
To address the extent to which there is a financial impact of
deployment on active duty servicemembers and their families, we
reviewed and analyzed laws, policies, and directives governing military
pay, such as the Servicemembers Civil Relief Act[Footnote 43] and DOD's
Financial Management Regulation 7000.14R, Volume 7A, as well as
documents related to the tax treatment of military pay, including the
Internal Revenue Service Armed Forces' Tax Guide: For Use in Preparing
2003 Returns. We also reviewed and analyzed GAO reports on military
compensation and deployment and reports from other agencies, including
DOD, the Congressional Research Service, and the Congressional Budget
Office. We contacted the Federal Trade Commission to ascertain what
data were available through Military Sentinel[Footnote 44] on
servicemembers' financial conditions and complaints. We conducted focus
groups and surveyed servicemembers and spouses and held individual
interviews with PFM program managers, non-commissioned officers, and
legal assistance attorneys at installations we visited to obtain their
perspectives on the impact of deployment on servicemembers. We also
compared and contrasted results of our survey of servicemembers and
spouses with data obtained through DOD-wide active duty surveys from
2003 for face validity and to identify trends and other indicators of
financial impact. We assessed the reliability of survey data that DOD
uses to obtain information on the financial conditions of
servicemembers and their families. The March 2003 survey had a response
rate of 35 percent. DOD has conducted and reported on research to
assess the impact of this response rate on overall estimates. They
found that, among other characteristics, junior enlisted personnel (E1
to E4), servicemembers who do not have a college degree, and members in
services other than the Air Force were more likely to be non-
respondents. We have no reason to believe that potential non-response
bias not otherwise accounted for by DOD's research is substantial for
the variables we studied in this report. Therefore, we concluded the
data to be sufficiently reliable to address our objectives. Additional
perspectives regarding the financial impact of deployment were obtained
in interviews with DOD and service policy officials. Still other
perspectives were obtained from installation officials using the
structured interviews and an e-mail survey to all PFM program managers.
This information was supplemented with information obtained from three
group discussions with a total of 50 personnel affiliated with the PFM
programs while they attended a November 2004 conference. We also
reviewed family separation allowance data from the Defense Finance and
Accounting Service for servicemembers who were deployed and receiving
imminent danger pay in January 2005.[Footnote 45]
To facilitate the data gathering process for all three
questions,[Footnote 46] we developed and pre-tested four types of data
collection instruments. The content of the instruments was identified
through review of policies, reports, and other materials, and from
interviews with DOD and service officials.
* Structured questionnaires and focus group protocols were used to
increase the likelihood that the questions were asked and procedures
were conducted in a standardized manner, regardless of which GAO
analyst conducted the interviews and focus groups during the 13 site
visits. While the interviews and focus groups provided valuable
qualitative data to illustrate important issues, the findings were not
generalizeable to the population of all active duty servicemembers
because of the small non-random samples of personnel who participated
in the data collection sessions.
* Separate structured interview protocols were created for seven types
of officials: installation commanders, PFM program managers, senior
non- commissioned officers (E8 to E9), legal assistance attorneys,
chaplains, command financial specialists, and officials representing
service relief/aid societies. While some of the questions were the same
or very similar for some issues, the content of the structured
interviews was tailored to the type of official interviewed.
* A single focus group protocol, with seven central questions and
follow-up questions, was used to solicit information from each of the
four types of homogeneous groups: junior enlisted servicemembers (E1 to
E4), non-commissioned officers (E5 to E9), company-grade officers (O1
to O3), and spouses of servicemembers who had recently returned from
deployments.
* An anonymous survey was administered at the beginning of each focus
group to obtain specific, sensitive (e.g., financial difficulties
experienced by the servicemembers and their families) information that
focus group participants might not feel comfortable discussing with
other servicemembers present. Administering the survey before the focus
group questions were asked allowed us to quantify participants'
perspectives and situations, without the servicemembers being
influenced by the subsequent discussions.
* An e-mail survey was administered to the DOD-wide population of 225
PFM program managers identified by service officials. The response rate
for the survey was 74 percent. Because we surveyed the population of
PFM program managers and obtained a sufficiently high response rate,
the findings from this survey are generalizeable to the population of
all PFM managers.
To assess the adequacy of DOD's oversight framework for evaluating
military programs that assist both deployed and non-deployed
servicemembers in managing their personal finances, we reviewed DOD's,
the services', and selected installations' PFM program policies, along
with DOD's strategic and tactical plans for implementing the PFM
programs. In addition, we reviewed DOD's 2002 report on Personal and
Family Financial Management Programs submitted to the House of
Representatives Armed Services Committee. The Government Performance
and Results Act of 1993[Footnote 47] and Standards for Internal Control
in the Federal Government[Footnote 48] provided model criteria for
determining the adequacy of the oversight framework. We gathered
perspectives about the outcome measures to evaluate the PFM programs
from DOD and service-level officials, along with responses from the
previously mentioned discussion groups at the November 2004 conference
and the DOD-wide survey of PFM managers. We reviewed and analyzed data
related to the effectiveness of the PFM programs from DOD-wide active
duty survey conducted in 2003. We also reviewed accreditation reports
for installation PFM programs, where available, and other materials
documenting the use or effectiveness of PFM programs. Finally, we
attended a GAO-sponsored forum in November 2004, in which a select
group of individuals with expertise in financial literacy and education
developed recommendations on the role of the federal government in
improving financial literacy among consumers.[Footnote 49]
To assess the extent to which DOD and the services provide PFM training
to junior enlisted servicemembers, we examined the regulations and
other materials that document PFM training requirements such as the
number of hours of training provided and when the training should
occur. We reviewed DOD's, the services', and selected installations'
PFM training materials, and procedures for monitoring completion of the
training. We also reviewed reports issued by GAO, DOD, and other
organizations that addressed the PFM programs or the content and
delivery of similar programs designed to either increase financial
literacy or address financial problems. Additionally, we interviewed
service headquarters, as well as installation PFM officials about
required training for junior enlisted servicemembers and how it is
administered and monitored.
Sampling Error and Non-Sampling Error:
The e-mail survey that was administered by GAO to the DOD-wide
population of 225 PFM program managers is not subject to sampling error
since it was sent to the universe of PFM program managers. With a
response rate for the survey of 74 percent and no clear differences
between respondents and non-respondents, the findings from this survey
are generalizeable to the population of all PFM managers. Our PFM
survey had differential response rates that were as low as 65 percent
for the Air Force and as high as 89 percent for the Navy.
The questionnaire provided to focus group participants was to gather
supplemental information only and is not generalizable to DOD, but
rather to those who participated in our focus groups only.
Because DOD surveyed a sample of servicemembers in its 2003 active duty
survey, their results are estimates and are subject to sampling errors.
However, the practical difficulties in conducting surveys of this type
may introduce other types of errors, commonly known as non-sampling
errors. Non-sampling errors can include problem(s) with the list from
which the sample was selected, non-response in obtaining data from
sample members, and/or inadequacies in obtaining correct data from
respondents. These errors are in addition to the sampling errors. In
this survey, the response rate was 35 percent. The estimates obtained
from the respondents will differ from the population value to the
extent that values for non-respondents are different, in the aggregate,
from values for respondents.
Non-Sampling Error and Data Quality:
We conducted in-depth pre-testing of the PFM program manager survey, as
well as the questionnaire disseminated to focus group participants, to
minimize measurement error. However, the practical difficulties in
conducting surveys of this type may introduce other types of errors,
commonly known as non-sampling errors. For example, measurement errors
can be introduced if (1) respondents have difficulty interpreting a
particular question, (2) respondents have access to different amounts
of information in answering a question, or (3) those entering raw
survey data make key-entry errors. We took extensive steps to minimize
such errors in developing the questionnaire, collecting the data, and
editing and analyzing the information. For example, we edited all
surveys for consistency before sending them for key-entry. All
questionnaire responses were double key-entered into our database (that
is, the entries were 100 percent verified), and a random sample of the
questionnaires was further verified for completeness and accuracy. In
addition, we performed computer analyses to identify inconsistencies
and other indicators of errors.
DOD also pre-tested its questionnaire to minimize measurement error and
performed analysis to assess non-response error.
We performed our work from March 2004 through February 2005 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Findings from GAO-led Focus Groups Held at 13
Installations:
We held focus group sessions at the 13 military installations we
visited during the course of this engagement to obtain servicemembers'
perspectives on a broad range of topics, including the impact of
deployment on servicemembers' finances and the types of lenders
military families use, along with the PFM training and assistance
provided to servicemembers by DOD and service programs (see app. I for
a list of installations visited). Servicemembers who participated in
the focus groups were divided into three types of groups: junior
enlisted personnel (E1 to E4), mid-grade and senior enlisted personnel
(E5 to E9), and junior officers (O1 to O3). Although we requested to
meet with servicemembers who had returned from a deployment within the
last 12 months, some servicemembers who had not yet deployed also
participated in the focus groups. At some installations, we also held
separate focus groups with spouses of servicemembers. Typically, focus
groups consisted of 6 to 12 participants.
We developed a standard protocol, with seven central questions and
several follow-up questions, to assist the GAO moderator in leading the
focus group discussions. The protocol was pre-tested during our first
installation visit and was used at the remaining 12 installations.
During each focus group session, the GAO moderator posed questions to
participants who, in turn, provided their perspectives on the topics
presented. We essentially used the same questions for each focus group,
with some slight variations to questions posed to the spouse groups.
We sorted the 2,090 summary statements resulting from the 60 focus
groups into categories of themes through a systematic content analysis.
First, our staff reviewed the responses and agreed on response
categories. Then, two staff members independently placed responses into
the appropriate response categories. A third staff member resolved any
discrepancies.
Below, we have identified the seven questions and sample
responses/statements associated with each question. The themes and the
number of installations for which a statement about a theme was cited
are provided in italics. Also, two examples of the statements
categorized in the theme are provided. Only those themes cited at a
minimum of three installations are presented. The number of
installations--rather than the number of statements--is provided
because (1) the focus of this engagement was on DOD-wide issues and (2)
a lengthy discussion in a single focus group may have generated
numerous comments.
1. How has deployment affected military families financially in your
unit?
1.a. Other reason deployment affects families financially
(N=13)[Footnote 50]
* Example: Financial problems stem from relationship problems. Many
Marines file for divorce when they return from a deployment.
* Example: Another sailor said they have to buy a lot of supplies, such
as stocks of deodorant and other toiletries, to take on the deployment.
The government does not pay for those supplies.
1.b. Better financially - increased income (N=13):
* Example: A soldier stated that his family was barely making ends meet
when he left for a deployment. However, when he returned, his wife had
paid off all of the bills and saved some of the money. He and his wife
look forward to deployments as a way to catch up on expenses and
savings.
* Example: Some cited receiving additional hazardous/combat duty pay
and attendant tax exemptions during deployment as reasons for the
financial benefits. In addition, some servicemembers mentioned that
they no longer had to pay rent and incur related household expenses
such as food and other household goods while deployed. The additional
money allowed families to pay off debts and outstanding bills.
1.c. Worse financially - increased needs (e.g., childcare and
transportation) (N=12):
* Example: Deployment worsens some servicemembers' finances because
childcare expenses increased. In many instances, to avoid having
childcare expenses, one parent will work during the day and one during
the night. When the servicemember deploys, the remaining spouse must
find suitable daycare for the children. This is an added expense the
deployment forces on the family.
* Example: During a deployment there are more expenses because the
spouse has to pay for things that the servicemember would usually do
personally, like house and car repairs.
1.d. Worse financially - other (N=11):
* Example: The military encourages soldiers to obtain a power of
attorney before they deploy, but the power of attorney gives the spouse
access to all of the soldier's finances. In many cases, the spouse has
used this power to spend all of the soldier's money. One soldier
returned from his deployment to find that he only had $80 left in his
bank account.
* Example: One unmarried soldier said he was 5 months behind in paying
his bills because he's single and did not have anyone to help him while
he was deployed.
1.e. No change financially because of deployment (N=11):
* Example: Overall, servicemembers are not really making more money
when they are deployed. The additional pay and allowances make up for
the increased spending that a family must do when the servicemember is
not at home.
* Example: Another servicemember stated that she was a single parent
and had to send her child back to the west coast with her parents. She
stated she came out about even financially because the extra money she
made was spent on the additional expenses to care for her son.
1.f. Effect issue - servicemember has dependents (N=11):
* Example: Single parents face an entirely different set of issues
during a deployment. For example, in many cases, the member will be the
only parent for a child;
therefore, when that member is deployed long- term childcare must be
arranged. In most situations, the member will arrange for an immediate
or extended family member to assume the childcare responsibilities.
* Example: Some Navy servicemembers said that the status of personal
finances during a deployment will vary based on the marital status of
the sailor. For example, sailors with dependents will collect more
entitlements than those who are single.
1.g. Worse financially - increased wants (N=11):
* Example: Some soldiers were buying expensive cars with their
deployment pays. However, when the servicemembers returned from
deployment to their regular pay they were not able to afford their
deployment standards of living because the increase in income and tax
free status no longer applied.
* Example: The spouse may be depressed during the deployment and spend
the money the soldier is being paid. In these cases, they have no one
around telling them to save it or to pay the bills. They shop to fight
the depression and to make themselves feel better.
1.h. Better financially - other (N=10):
* Example: In some cases, the family's finances actually improve
because the spouse takes control of the bills during the deployment.
* Example: Another participant stated that she and her husband are more
financially responsible now compared to when they were younger. Thus,
they are able to benefit more from the monetary benefits of deployment.
1.i. Effect issue - personal ability to manage money (N=9):
* Example: Poor post-deployment spending habits (e.g., buying a new
expensive car) of some single servicemembers caused them to lose extra
income earned during deployment. This left them with more debt than
before they left for the deployment.
* Example: In many cases, it is when the soldier returns from the
deployment that families will get into financial troubles. During the
deployment, there is a significant increase in pay and an increase in
spending. After the deployment, the servicemember's pay returns to
normal and the family may have trouble dealing with the loss of income,
which can encourage increased debt.
1.j. Effect issue - servicemember does not have dependents (N=7):
* Example: Single servicemembers seemed to fare better financially
because they do not incur the same expenses as married couples, such as
childcare and transportation costs. The single member is more likely to
be living with roommates and when deployed, he/she only has a small
amount to pay for rent. The married servicemember, on the other hand,
still has a mortgage to pay back home, along with the additional
expenses previously mentioned.
* Example: Single servicemembers are better off financially because
they only have to take care of themselves financially.
1.k. Effect issue - where deployed (N=6):
* Example: The effect on finances depends on the location to which a
servicemember is deployed. The pay and allowances that a soldier
receives vary from location to location. In some places, soldiers can
make a lot of money; in others, they will not.
* Example: The financial impact of deployment depends on where an
officer was deployed. In South Korea, servicemembers pay taxes and do
not receive extra pay, as did those who served in combat zones. In
addition, individuals deployed to South Korea lost their Basic
Allowance for Housing, even though they needed it while deployed. The
officer needed to live off base because of a lack of housing on base
there. This meant paying for two households, one on deployment and one
for the spouse and children at home.
1.l. Worse financially - loss of income (N=5):
* Example: Some spouses mentioned that they know of some soldiers that
had to give up their second jobs when they left on the deployment and
the loss of this income had a big impact on the family's finances.
* Example: While at their home station, sailors collect commuted
rations, also referred to as comrats. Commuted rations are a pay
allowance given to sailors to cover the cost of meals incurred off base
when they are not serving on and eating aboard the ship. When a sailor
goes out to sea, the commuted rations payments are stopped and sea pay
is started. Also, a sailor is entitled to Career Sea special pay, or
sea pay, at a monthly rate of up to $750. The actual amount of sea pay
varies based on the sailor's rank and number of years served and can
range from $70 to $750 a month. However, younger sailors do not have
enough time accrued on their sea pay clock to make up for the loss of
commuted rations pay. Therefore, some families will actually lose money
during the deployment.
1.m. Better financially - decreased expenses (N=5):
* Example: At some deployment locations, there is nowhere to spend the
extra income. There are no bars, no daily expenses like gasoline, and
no phone bills. Yet the Marines are being paid the additional
entitlements and pay.
* Example: One participant said she thought her family's finances were
in better shape during her husband's deployment because he was not able
to spend the extra money he earned and the family was able to save more
money while he was deployed.
2. Could you tell me about servicemembers you know who have gone
through any financial difficulties such as declaring bankruptcy,
falling behind on bills, or having a car or appliance repossessed?
2.a. Overspending/bad money management (N=13):
* Example: There were servicemembers who ran into severe financial
problems after they returned from deployment due to overspending and
overextending themselves financially while they were deployed.
* Example: Another participant said that he knew of a few junior
enlisted servicemembers who spent all their money on expensive cars and
other things, once they returned from deployment. They did not save any
of the extra money they received.
2.b. Other experiences with financial difficulties (N=13):
* Example: One airman experienced a situation in which a creditor would
not accept the automatic money transfer that was set up before the
deployment.
* Example: One soldier's ex-wife took him to court while he was
deployed in an attempt to obtain additional child support money.
Because of the additional entitlements and pay that the soldier was
collecting, the court increased the payments to match. The soldier was
unable to return home or communicate to prevent the action or mediate
in the situation.
2.c. Defense Finance and Accounting Service errors (N=11):
* Example: One of the airmen had a series of late payments during a
deployment because Defense Finance and Accounting Service did not
process an allotment correctly and the money was not getting sent to
the correct place.
* Example: Almost all of the airmen knew someone who did not have their
pay entitlements stopped after returning from the deployment. In most
instances, Defense Finance and Accounting Service was continuing to pay
the entitlement for several months; unfortunately, once the problem was
resolved, Defense Finance and Accounting Service took back the amount
owed in one lump sum. This left the airmen with paychecks amounting to
zero dollars.
2.d. Communication problems (lack of Internet/e-mail/mail/phone)
(N=10):
* Example: A servicemember stated that a major issue with deployment
was not being able to pay bills on time because the infrastructure down
range (combat zone) was not immediately set up to deliver/send mail.
* Example: During deployments, the junior enlisted personnel do not
have as much access to the Internet as the senior Marines. This can
have a negative impact on their ability to access their checking and
other financial accounts, thereby impacting their ability to manage
their finances.
2.e. Difficulty maintaining checkbook/finances (N=10):
* Example: Many servicemembers have the mentality that because they
earn the money it is theirs to manage. When the soldier is at home, he
or she controls the finances; and when the soldier leaves, the spouse
does not know how to handle the bills, finances, or budget.
* Example: In many situations, single sailors may not have someone back
home to take care of their bills or manage their finances.
2.f. Car repossessed (N=9):
* Example: Some soldiers spent their money quickly after they returned
from the deployment and bought expensive cars. In a few instances,
these cars were repossessed because the soldiers could not make the
monthly payments.
* Example: A soldier stated that some servicemembers' allotments were
not processed, which resulted in their cars being repossessed. This
also left the servicemembers with a bad credit rating.
2.g. Did not experience financial difficulties during deployment (N=6):
* Example: A participant stated he knew of very few soldiers who were
negatively affected financially because of deployment.
* Example: Those who fared well with their finances had relationships
with helpful people/spouses who were able to manage their finances for
the servicemembers while they were deployed.
2.h. Fell behind in bills (N=6):
* Example: A servicemember said that he and his spouse had fallen
behind on paying their bills.
* Example: A soldier said that a servicemember's phone was disconnected
because his spouse went to another state to visit relatives for 2
months and the phone bill was not paid.
2.i. Bankruptcy (N=5):
* Example: Participants stated that they had heard of very few
servicemembers who had to file for bankruptcy as a result of
deployment.
* Example: One of the officers was aware of a sergeant who had to file
bankruptcy upon returning from deployment. During the deployment, the
sergeant's spouse spent all of the extra money and took out "a ton" of
additional debt.
2.j. Problems with government credit card (N=4):
* Example: The government travel card causes more problems than other
cards. Sailors are traveling back to back with several deployments and
take out back to back debts. The Travel Processing Center may not
process the travel claims in 10 days like they are supposed to, so
people are running up debt on the government travel card that they
cannot pay off.
* Example: Sometimes servicemembers have had to pay (their government
travel card bill) with their own money while waiting for funds to be
provided/reimbursed by the government. This takes money out of their
household and can affect their credit rating. It can take up to 2
months to get their money from the Defense Finance and Accounting
Service.
3. During your deployment, how did servicemembers in your unit handle
situations when there were financial problems at home?
3.a. Used in-theatre resources (chain of command, e-mail, Internet)
(N=10):
* Example: Soldiers had to go through their chain of command to take
care of some of their financial situations and the issues were resolved
with the assistance of the chain of command.
* Example: Most of the other participants said they had a non-
commissioned officer log them onto the Internet to check on their
bills, and this helped them.
3.b. Used resources at home (family support center, family readiness
officer) (N=8):
* Example: There are many people on base that help spouses during the
deployment. The key volunteers group that meets once or twice a week is
a good resource for the families to use if they need assistance during
the deployment.
* Example: On Air Force bases, there is an abundance of assistance for
servicemembers with financial problems. Information is provided
through: First Term Airman Center, Personal Financial Counseling, Air
Force Aid Society, Air Force Assistance Fund, First Sergeants, Finance,
and the Judge Advocate General. These are some of the resources
available to servicemembers for finance-related issues.
3.c. Other financial problems on homefront (N=5):
* Example: Sometimes a single servicemember will leave advance rent
checks for the landlord of the apartment and the landlord will deposit
all of the checks at once, which results in overdrafts for the
servicemember.
* Example: There are many instances of spouses back home that spend all
of the additional income that the Marine is making during the
deployment. When the Marine returns, he or she will find all of their
money gone and nothing to show for it.
3.d. Waited until they got home (N=5):
* Example: Some participants said they just waited to handle the
problems until after they returned home if they do not have anyone to
help them and the situation had not been brought to the command's
attention. They did not want the command involved in their finances.
* Example: In instances where the servicemember's spouse spends all of
the money, the member normally is not able to do anything until he or
she returns from the deployment.
4. What kind of financial assistance does your service or the military
need to take care of financial problems when people are deployed?
4.a. Pre-deployment briefs (more information or briefs before
deployment notice received) (N=11):
* Example: More financial awareness training prior to the deployment
would have helped alleviate many problems that individuals experienced.
The current 2-minute brief is not enough.
* Example: Even though the base legal office offers a will and power of
attorney class every Tuesday, some Marines are unable to attend. The
information in the classes needs to be incorporated into the pre-
deployment briefings.
4.b. Other kinds of financial assistance needed (N=9):
* Example: Small groups, such as married servicemembers with children
or single servicemembers, should be given specific attention or focus
when information on finances is distributed because the different
groups have different needs when it comes to finances.
* Example: The First Term Airmen Center should give out warnings to new
airmen about which lenders around base are good to work with and which
ones are not so good.
4.c. Sustained training (provided throughout career) (N=7):
* Example: Financial training should occur upfront and be proactive--
not be reactive, like it is now. Currently, classes are required only
if the soldier has written bad checks.
* Example: More overall financial education is needed. One soldier was
enlisted for 5 years before he got any formal financial management
training, and that was only because he got in trouble. Education is the
key in improving financial management.
4.d. Early training (boot camp, Advanced Individual Training) (N=6):
* Example: The military needs to provide more financial training in
basic/boot camp to include in-depth discussions of allotments,
deductions, and leave and earnings statements. One soldier said he did
not know what a leave and earnings statement was until he came to his
unit.
* Example: Financial training courses should be incorporated into basic
training or technical school. By conducting this training early, DOD
may have an impact on initial purchase decisions made by
servicemembers.
5. What kinds of experiences have your fellow servicemembers or
subordinates had with predatory lenders?
5.a.Other issues regarding experiences with predatory lenders (N=13):
* Example: Business representatives will tell young Marines that they
can buy an item for a certain amount each month. They keep the Marine
focused on the low monthly payments and not on the interest rate or the
term of the loan.
* Example: Some Marines feel that a business would not take advantage
of them because they are in the military. This leads them to be more
trusting of the local businesses than they should be, which in turn,
leads the businesses to take advantage of them.
5.b. Predatory lender used - car dealers (N=11):
* Example: Most of the participants stated that the car dealerships
around the base were the worst predatory lenders because they charge
high interest rates and often provide cars that are "lemons." They said
that most of the sales people at the dealerships are former military
who know how to talk to servicemembers to obtain the members' trust.
The servicemember does not expect this.
* Example: One captain had a Marine in his unit who signed a contract
with a car dealer for a loan with 26 percent interest rate. The captain
took the Marine to the Marine Credit Union and got him a new loan with
9.5 percent interest rate.
5.c. Predatory lender used - payday lenders (N=10):
* Example: A master sergeant got caught in the check-cashing cycle. He
would write a check at one payday lender in order to cover a check
written at another lender during a previous week.
* Example: One participant told us that when he was a younger Marine he
got caught up with a payday lender. The problem did not resolve itself
until he deployed and was not able to go to the lender anymore.
5.d. Reason for using predatory lender - get fast cash and no hassle
(N=10):
* Example: People use payday lenders because they are quick and easy.
All the soldiers have to do is to provide their leave and earnings
statement and they get the money.
* Example: Most of the participants say they know people who have used
a payday lender, and those soldiers use them because they have bad
credit and can get quick cash.
5.e. Predatory lender targeting - close proximity and clustering around
bases (N=9):
* Example: It is almost impossible to be unaware of lenders and
dealerships because many are clustered in close proximity to the
installation. They also distribute flyers and use pervasive advertising
in local and installation papers.
* Example: The stores and car lots near the installation use signs that
say "E1 and up approved" or "all military approved" to get the
attention of the military servicemembers.
5.f. Command role when contacted by creditors (N=8):
* Example: The non-commissioned officers offer to go with the junior
enlisted to places like car dealers; but the young soldiers do not take
them up on these offers.
* Example: One participant said that debt collectors do call his house
and the command. He noted that one lender called him nine times in one
day and his Chief Petty Officer eventually asked the lender to stop
harassing his sailor.
5.g. Predatory lender targeting - advertising in installation/local
newspaper (N=7):
* Example: Soldiers are being targeted by predatory lenders in a
variety of ways; for example, flyers are left on parked cars at the
barracks, advertising is done at installation functions, and words such
as "military" are used on every piece of advertising to make the
servicemember believe that the company is part of or supported by the
military. The servicemember would normally trust lenders associated
with the military.
* Example: Most predatory lenders have signs that say "military
approved" or have commercials that say the same thing or "E1 and above
approved."
5.h. Reason for using predatory lender - urgent need (N=6):
* Example: Many soldiers use payday lenders because they are in a bind
for money and they know these lenders can provide quick cash.
* Example: Soldiers will use a payday lender because they need money
for a child, the kids, the house payment, etc. In many cases, it does
not matter why they need it; they just need it. So, they go where they
can get cash the fastest and the easiest way possible.
5.i. Predatory lender used - furniture/rent-to-own (N=6):
* Example: One of the participants stated that he had obtained a loan
to purchase a new washer and dryer. The loan had a 55 percent interest
rate and the appliances cost a lot more than they should have.
* Example: Rent-to-own businesses are widely used by soldiers. One
soldier paid $3,000 for an $800 washer and dryer set.
5.j. No problem with predatory lenders (N=5):
* Example: There have not been any problems with predatory lenders
lately. The state of Florida has been using legislation to shut them
down.
* Example: The participants said that they had never encountered an
officer that had to use payday lenders or predatory lenders. Most of
the officers' problems come when they have a bitter divorce.
5.k. Reason for using predatory lender - other reasons (N=5):
* Example: One soldier stated that his credit was so bad that he had no
other option but to use high interest rate lenders. He stated that, "I
have bad credit and I will always get bad credit."
* Example: One participant said he has several friends that use payday
lenders because they are E1s or E2s and don't make much money.
5.l. Predatory lender targeting - employing former military members
(N=4):
* Example: The people running and working for the predatory businesses
are usually former military servicemembers. They will use their
knowledge of the system to take advantage of Marines.
* Example: Many times the predatory lenders are veterans, former
Marines, or retirees. The participant said that by using these types of
people, it gives the younger Marines a false sense of trust and then
the lenders will take advantage of the servicemember or "stab them in
the back."
5.m. Reason for using predatory lender - command will not know
financial conditions (N=3):
* Example: When a soldier needs money, a payday loan can be used
without notifying the chain of command. Any of the Army forms of
assistance require a soldier to obtain approval from "a dozen people"
before they can get any money.
* Example: The most significant reason that people use payday lenders
is privacy. The spouses stated that if you try to obtain assistance
through the Air Force, you must use the chain of command to obtain
approval. By doing so, everyone in the unit will know your business.
6. What types of financial services have fellow servicemembers and/or
subordinates in your unit used?
6.a. Service relief/aid societies (N=13):
* Example: Servicemembers are often reluctant to approach Army
Emergency Relief Society because they have to complete too much
paperwork. Some have concerns that their superiors will find out that
they used these services and superiors may think this is a sign of
weakness or failure on the part of the servicemember.
* Example: One soldier stated that he used the Army Emergency Relief
Society because he did not have good credit and needed $1,400 as a
security deposit. He said they gave him a loan and that he is paying
them back at $60 per month.
6.b. Other types of services used/aware of (N=13):
* Example: Assistance is available for Marines with financial problems.
For example, there is a Key Volunteers Network made up of enlisted and
officers' wives.
* Example: One of the sailors was having financial problems and did not
want the command to know, so he sought help from the Federal Credit
Union. The credit union was able to help with the $50,000 he had
accumulated in debt. They contacted the lenders for him and told them
not to contact anyone in the command about the problem. The debt was
re- organized and repayment began. All of this was accomplished without
the help of the Navy.
6.c. Community service center/family support center's personal
financial managers (N=13):
* Example: Some servicemembers who have problems have received help
from Army Community Services. Army Community Services does not provide
money or loans but does give some household items such as pots and pans
and these items do provide some help to those in financial trouble.
* Example: When supervisors recognize a subordinate is having financial
problems, most of them will refer the subordinate to the family support
center for counseling, budget planning, and basic personal finance
skills like balancing a checkbook.
6.d. DOD Financial Readiness Campaign/services' Internet resources
(N=11):
* Example: None of the participants had heard of the Financial
Readiness Campaign.
* Example: Only one of the 11 participants was aware of the Financial
Readiness Campaign. The servicemember that did know about it said that
the information was difficult to sort through and may not be helpful to
those without a basic knowledge of finances.
6.e. Servicemembers Civil Relief Act (N=9):
* Example: One airman said that he used the Servicemembers Civil Relief
Act to reduce his total indebtedness during his deployment. In fact,
after returning from the deployment, the credit companies kept the
interest rates at 6 percent or less.
* Example: One of the participants talked about how he used the
Servicemembers Civil Relief Act to get out of a lease prior to
deployment.
6.f. No services used or not aware that any service was used (N=7):
* Example: One participant said that there are financial services
available but because they are not very well advertised, many
servicemembers do not know about them.
* Example: The spouse stated she was not aware of any available
assistance programs because information about programs does not get
communicated well at the installation.
6.g. Legal office (N=6):
* Example: There is a legal office that can review purchase contracts
while the sailor is at home and a legal assistance attorney onboard
ship who can provide assistance.
* Example: Sometimes the family at home cannot take care of financial
issues, even if they have power of attorney. The best solution is to
obtain help from the on base legal office.
6.h. Command financial specialists (N=5):
* Example: Soldiers have used the command financial specialist within
their units to receive counseling, training, and information.
* Example: Most of the participants said that they had a command
financial specialist in their unit but did not use these individuals,
primarily because of a lack of trust. They said that if a servicemember
talked about financial problems with these people, it would end up
through the chain of command. If someone were to see a servicemember in
the command financial specialist's office, then they would know/assume
the servicemember had a financial problem.
7. Is there additional assistance that could be provided to
servicemembers or subordinates by the chain of command or DOD to
improve the financial condition of military families?
7.a. Additional financial management training at installation and
throughout career (N=13):
* Example: Some of the participants said the briefings provided to
soldiers during base "in processing" are too quick. They normally last
about 10 minutes and that is not enough time to discuss financial
matters.
* Example: There should be financial management training points
throughout a sailor's career. For example, basic training, Advanced
Individual Training, reenlistment, and then annual recurring training.
7.b. Other additional assistance (N=12):
* Example: A soldier stated that the offices that provide finance
information are closed when the servicemembers get off work. Their
hours should be longer because the soldiers' unit will not allow them
time off to go to the finance centers just to browse and acquire
general financial information.
* Example: The military credit unions should be combined into one
institution. No more Marine, Navy, or Army Federal Credit Unions, just
one large credit union. This would lead to more lending power and
better interest rates.
7.c. More money (N=10):
* Example: All military members should get pay raises. The pay increase
should be significant and not just a few dollars every paycheck. People
are dying every day for their country, so they should get paid well.
* Example: Servicemembers, particularly in the junior enlisted ranks,
should be given more pay.
7.d. Improve timeliness/accuracy of Defense Finance and Accounting
Service (N=7):
* Example: Make the finance office provide more timely reimbursement
for vouchers. One soldier just got back from Iraq and said that
currently, it takes the Defense Finance and Accounting Service about 6
months to pay the voucher.
* Example: The deployment actually messes up the servicemember's
paychecks. When starting the deployment, the addition of certain pay
and allowances and the subtraction of other allowances are never done
quickly and efficiently. Defense Finance and Accounting Service is
always either overpaying or underpaying the Marine. When they overpay,
they take the money back in one shot, not over a period of time.
7.e. Armed Forces Disciplinary Control Board/off-limits list (N=7):
* Example: When the Armed Forces Disciplinary Control Board does put a
business on the off-limits list, the word is not put out and it is
never enforced.
* Example: The Navy needs to blacklist places that practice predatory
lending. One participant, who is a legal officer in her unit, does
provide a list of places to avoid to her sailors when they check in
even though she is not allowed to do this. She does not understand why
the Navy is allowed to tell sailors not to go to a porn shop, but is
not supposed to tell them not to go to predatory lenders. The Navy
needs some type of list of businesses that have done questionable
things. It does not necessarily have to be an "off-limits" list.
7.f. Care packages (N=6):
* Example: It is common for spouses to send care packages to soldiers
during a deployment. The expense of shipping these packages is
significant. In addition, they generally include items for friends of
soldiers who do not have spouses or families sending items.
* Example: Care packages can be expensive for the family, especially
when they have to send equipment that is not supplied by the military.
7.g. Improve Internet access during deployment (N=5):
* Example: Navy should have better Internet access on the ships. They
could provide Internet access in the library. Right now the junior
enlisted have to ask officers to log them on.
* Example: The Navy needs to increase the number of computers on ships
and the access to the Internet. It is not beneficial to have Internet-
based resources if no one can access the Internet during a deployment.
Furthermore, when the sailors are at home station, the work computers
are used for work and not for personal use. Therefore, the sailors
still cannot access information on the Financial Readiness Campaign.
[End of section]
Appendix III: Resources Available to Assist Servicemembers with
Financial Issues:
Several resources exist to assist servicemembers with financial issues.
These include military-sponsored PFM training, DOD's Financial
Readiness Campaign, individual service resources, such as command
financial specialists and personal financial managers, and resources
outside of DOD such as those provided through on-and off-installation
banks and credit unions.
Financial Management Training:
All four military services require PFM training for servicemembers, and
the timing and location of the training varies by service. The Army
begins this training at initial military, or basic, where soldiers
receive 2 hours of PFM training. Training continues at Advanced
Individual Training schools, where soldiers receive an additional 2
hours of training and at the soldiers' first duty station, where they
are to receive an additional 8 hours of PFM training. In contrast, Navy
personnel receive 16 hours of PFM training during Advanced Individual
Training. The Marine Corps and the Air Force, on the other hand, begin
training servicemembers on financial issues at their first duty
stations.
Events, such as deployment or a permanent change of station, can
trigger additional financial management training for servicemembers.
The length of this additional training and the topics covered can vary
by installation and command. Also, unit leadership may refer
servicemembers for financial management training or counseling if the
unit command is made aware of an individual's financial problems. For
example, the Army requires refresher financial training for personnel
who have abused check-cashing privileges.
DOD's Financial Readiness Campaign Resources:
DOD's Financial Readiness Campaign, which was launched in May 2003,
supplements PFM programs offered by the individual services. The Under
Secretary of Defense for Personnel and Readiness stated that the
department initiated the campaign to improve the financial management
available to servicemembers and their families and to stimulate a
culture that values financial health and savings. The campaign allows
installation-level providers of PFM programs to access national
programs and services developed by federal agencies and non-profit
organizations. The primary components of the campaign are the Web-based
resources and partnerships with federal agencies and non-profit
organizations.
DOD's Web-based Resources:
The primary tool of the Financial Readiness Campaign is a Web
site[Footnote 51] designed to assist PFM program managers in developing
installation-level campaigns to meet the financial management needs of
their local military community. This Web site, which is also available
to the public, contains important documents for the campaign as well as
links to partners' Web sites. For example, the DOD Web site contains
the original memorandum announcing the start of the campaign, overall
campaign objectives, as well as the names of, agreements with, and
links to the campaign's 27 partner organizations. DOD's May 2004
assessment of the campaign[Footnote 52] noted, however, that
installation-level PFM staffs have made minimal use of the campaign's
Web site. DOD campaign officials stated that it was early in
implementation of campaign efforts and that they have been
brainstorming ideas to repackage information given to PFM program
managers, as well as servicemembers and their families. For example,
officials are considering distributing financial information to
servicemembers and military families at off-installation locations, as
well as implementing "financial fairs" and "road shows" at military
communities to increase awareness and encourage financial education.
Partnerships with 27 Organizations:
DOD has partnered with 27 organizations that have pledged to support
DOD in implementing its Financial Readiness Campaign. For example, the
Association of Military Banks of America is a not-for-profit
association of banks that operate (1) on military installations, (2)
off military installations but serving military customers, and (3)
within military banking facilities designated by the U.S. Treasury.
That association is supporting the Financial Readiness Campaign by
encouraging member banks to provide, participate in, and assist DOD
with financial training events. Another partner, the InCharge Institute
of America, is producing a quarterly periodical called Military Money.
The periodical is aimed at promoting financial awareness among the
spouses of servicemembers.
Military Service Resources:
Each military service has several resources available at the
installation level to assist servicemembers with financial issues.
These include command financial specialists, the PFM program managers
and staff, legal services, and service relief/aid societies.
Command Financial Specialists:
Command financial specialists are senior enlisted personnel (usually E6
and above) who are trained by PFM program managers to assist
servicemembers at the unit level, by providing financial education and
counseling. These non-commissioned officers may perform the role of the
command financial specialist as a collateral duty in some units or as a
full-time duty in others. The Navy, Marine Corps, and Army use command
financial specialists to provide unit assistance to servicemembers in
financial difficulties; the Air Force does not use command financial
specialists within the unit, but has the squadron First Sergeant
provide first-level counseling.
PFM Program Managers and Staff:
Individual servicemembers who require counseling beyond the capability
of the command financial specialists or First Sergeant in the Air Force
can see the installation's PFM program manager or PFM staff. The PFM
program manager is a professional staff member designated and trained
to organize and execute financial planning and counseling programs for
the military community. PFM program managers and staff offer individual
financial counseling as well as group classes on financial issues.
Army, Navy, and Marine Corps regulations state that each installation
should have a manager for PFM issues. The Air Force no longer
designates one staff member as the PFM program manager, but it uses
"work life consultants" in its family support centers to provide PFM
training and counseling. The DOD's November 2004 PFM
instruction[Footnote 53] places certain requirements on staff who
provide PFM training and counseling. For example, it states that the
one staff member within a family support center shall be designated and
trained to organize and execute financial planning and counseling
programs for the military community. In addition, that staff member
must receive continuing education on PFM annually and maintain
professional certification.
Legal Services:
Individual installation legal offices also offer financial services to
servicemembers. For example, the legal assistance attorneys may review
purchase contracts for large items such as homes and cars. In addition,
the legal assistance attorneys offer classes on varying financial
issues including powers of attorney, wills, and divorces.
Service Relief/Aid Societies:
Each service has a relief or aid society designed to provide financial
assistance to servicemembers. The Army Emergency Relief, Navy-Marine
Corps Relief Society, and the Air Force Aid Society are all private,
non-profit organizations. These societies provide counseling and
education as well as financial relief through grants or no-interest
loans to eligible servicemembers experiencing emergencies. Emergencies
include funds needed to attend the funeral of a family member, repair
of a primary vehicle, or funds for food. For example, in 2003, the
Navy- Marine Corps Relief Society provided $26.6 million in interest-
free loans and $4.8 million in grants to servicemembers who needed the
loans for emergencies.
Resources Available Outside of DOD:
Servicemembers may utilize financial resources outside of DOD, which
are available to the general public. These can include banks or credit
unions for competitive rates on home or automobile loans, commercial
Web sites for interest rate quotes on other consumer loans, consumer
counseling for debt restructuring, and financial planners for advice on
issues such as retirement planning.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Jack E. Edwards (202) 512-8246:
Acknowledgments:
In addition to the individual named above, Leslie C. Bharadwaja; Alissa
H. Czyz; Marion A. Gatling; Gregg J. Justice, III; David A. Mayfield;
Brian D. Pegram; Terry L. Richardson; Minette D. Richardson; and Allen
D. Westheimer made key contributions to this report.
[End of section]
Related GAO Products:
[End of section]
Military Personnel: DOD Tools for Curbing the Use and Effects of
Predatory Lending Not Fully Utilized. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-349] Washington, D.C.: April
26, 2005.
Credit Reporting Literacy: Consumers Understood the Basics but Could
Benefit from Targeted Educational Efforts. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-223] Washington, D.C.: March
16, 2005.
DOD Systems Modernization: Management of Integrated Military Human
Capital Program Needs Additional Improvements. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-189] Washington, D.C.:
February 11, 2005.
Highlights of a GAO Forum: The Federal Government's Role in Improving
Financial Literacy. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
05-93SP] Washington, D.C.: November 15, 2004.
Military Personnel: DOD Needs More Data Before It Can Determine if
Costly Changes to the Reserve Retirement System Are Warranted.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1005] Washington,
D.C.: September 15, 2004.
Military Pay: Army Reserve Soldiers Mobilized to Active Duty
Experienced Significant Pay Problems. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-911] Washington, D.C.: August
20, 2004.
Military Pay: Army Reserve Soldiers Mobilized to Active Duty
Experienced Significant Pay Problems. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-990T] Washington, D.C.: July
20, 2004.
Military Personnel: Survivor Benefits for Servicemembers and Federal,
State, and City Government Employees. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-814] Washington, D.C.: July
15, 2004.
Military Personnel: DOD Has Not Implemented the High Deployment
Allowance That Could Compensate Servicemembers Deployed Frequently for
Short Periods. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-
805] Washington, D.C.: June 25, 2004.
Military Personnel: Active Duty Compensation and Its Tax Treatment.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-721R] Washington,
D.C.: May 7, 2004.
Military Personnel: Observations Related to Reserve Compensation,
Selective Reenlistment Bonuses, and Mail Delivery to Deployed Troops.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-582T] Washington,
D.C.: March 24, 2004.
Military Personnel: Bankruptcy Filings among Active Duty Service
Members. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-465R]
Washington, D.C.: February 27, 2004.
Military Pay: Army National Guard Personnel Mobilized to Active Duty
Experienced Significant Pay Problems. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-413T] Washington, D.C.:
January 28, 2004.
Military Personnel: DOD Needs More Effective Controls to Better Assess
the Progress of the Selective Reenlistment Bonus Program. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-86] Washington, D.C.: November
13, 2003.
Military Pay: Army National Guard Personnel Mobilized to Active Duty
Experienced Significant Pay Problems. [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-89] Washington, D.C.: November
13, 2003.
Military Personnel: DFAS Has Not Met All Information Technology
Requirements for Its New Pay System. [Hyperlink,
http://www.gao.gov/cgi- bin/getrpt?GAO-04-149R] Washington, D.C.:
October 20, 2003.
Military Personnel: DOD Needs More Data to Address Financial and Health
Care Issues Affecting Reservists. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-1004] Washington, D.C.: September 10, 2003.
Military Personnel: DOD Needs to Assess Certain Factors in Determining
Whether Hazardous Duty Pay Is Warranted for Duty in the Polar Regions.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-554] Washington,
D.C.: April 29, 2003.
Military Personnel: Management and Oversight of Selective Reenlistment
Bonus Program Needs Improvement. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-149] Washington, D.C.: November 25, 2002.
Military Personnel: Active Duty Benefits Reflect Changing Demographics,
but Opportunities Exist to Improve. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-935] Washington, D.C.: September 18, 2002.
(350491):
FOOTNOTES
[1] See Department of Defense, Deputy Assistant Secretary of Defense
(Military Community and Family Policy), A New Social Compact: A
Reciprocal Partnership between the Department of Defense, Service
Members and Families (July 2002).
[2] See Department of Defense, Report on Personal and Family Financial
Management Programs (Mar. 31, 2002) in response to a House Committee on
Armed Services requirement in the National Defense Authorization Act
for Fiscal Year 2002.
[3] Army Regulation 608-1, Army Community Service Center (Oct. 20,
2003). Office of the Chief of Naval Operations Instruction 1740.5A,
Personal Financial Management Education, Training, and Counseling
Program (Jan. 30, 2002). Marine Corps Order P1700.24B, Marine Corps
Personal Services Manual (Dec. 27, 2001), is being revised and will
have a list of topics that each installation will be required to cover
during financial literacy training for first-term Marines. Air Force
Instruction 36-3009, Family Support Center Program (July 1, 1998).
[4] See RAND, Assessing the Personal Financial Problems of Junior
Enlisted Personnel, MR-1444-OSD (2002). This report defines junior
enlisted as those enlisted servicemembers with less than 10 years of
service. Our report defines junior enlisted as servicemembers in pay
grades E1 to E4.
[5] See GAO, Military Personnel: Bankruptcy Filings among Active Duty
Service Members, GAO-04-465R (Washington, D.C.: Feb. 27, 2004).
[6] See GAO, Military Personnel: DOD's Tools for Curbing the Use and
Effects of Predatory Lending Practices Not Fully Utilized, GAO-05-349
(Washington, D.C.: Apr. 26, 2005).
[7] Our work focused on active duty servicemembers and DOD surveys of
the Army, Navy, Marine Corps, and Air Force servicemembers, excluding
National Guard and Reserve members who (1) have at least 6 months of
service when the survey is fielded and (2) are below flag rank when the
sample is drawn 6 months prior to the survey. Information on the
financial condition of servicemembers in the Reserves and the National
Guard can be found in GAO, Military Personnel: DOD Needs More Data to
Address Financial and Health Care Issues Affecting Reservists, GAO-03-
1004 (Washington, D.C.: Sept. 10, 2003), and GAO, Military Personnel:
Observations Related to Reserve Compensation, Selective Reenlistment
Bonuses, and Mail Delivery to Deployed Troops, GAO-04-582T (Washington,
D.C.: Mar., 24, 2004).
[8] Pub. L. No. 103-62, (Aug. 3, 1993).
[9] Hereafter referred to as legal assistance attorneys in this report.
[10] See GAO, Military Pay: Army Reserve Soldiers Mobilized to Active
Duty Experienced Significant Pay Problems, GAO-04-911 (Washington,
D.C.: Aug. 20, 2004). We found that the procedures to determine
entitlement and to process family separation allowance were not well
understood by either pay technicians or soldiers themselves. We
recommended that the Secretary of the Army, in conjunction with the
Under Secretary of Defense (Comptroller), clarify and simplify
procedures and forms implementing family separation allowance
entitlement policy.
[11] See GAO, Highlights of a GAO Forum: The Federal Government's Role
in Improving Financial Literacy, GAO-05-93SP (Washington, D.C.: Nov.
15, 2004). This report resulted from a July 28, 2004, forum that GAO
hosted to develop recommendations on the role of the federal government
in improving financial literacy. The forum's participants included a
select group of individuals with expertise in financial literacy and
education. They included representatives of federal and state agencies,
the financial industry, non-profit organizations, and academic
institutions.
[12] Pub. L. No. 108-159, Title V, (Dec. 4, 2003).
[13] See GAO-04-465R.
[14] See GAO-04-465R.
[15] Congress in the Ronald Reagan National Defense Authorization Act
for Fiscal Year 2005 (Pub. L. 108-375, Section 623 (Oct. 28, 2004))
made this a permanent increase for servicemembers.
[16] DOD Financial Management Regulation 7000.14.R, Volume 7A, Chapter
27, Family Separation Allowance (FSA), (January 2005).
[17] DOD Financial Management Regulation 7000.14R, Volume 7A, Chapter
10, Special Pay-Duty Subject to Hostile Fire or Imminent Danger
(November 2004).
[18] See Congressional Research Service Report for Congress, Military
Pay: Controversy Over Hostile Fire/Imminent Danger Pay and Family
Separation Allowance Rates, (Washington, D.C.: Oct. 8, 2003).
[19] Department of the Treasury, Internal Revenue Service, Armed
Forces' Tax Guide: For Use in Preparing 2003 Returns, Publication 3,
Cat. No. 46072M. This publication noted that all military pay for the
month is excluded from income when an enlisted service member, warrant
officer, or commissioned warrant officer served in a combat zone during
any part of a month or while hospitalized as a result of service in the
combat zone. The amount of the exclusion for a commissioned officer
(other than a commissioned warrant officer) is limited to the highest
rate of enlisted pay, plus hostile fire/imminent danger pay for each
month during any part of which an officer served in a combat zone or
while hospitalized as a result of service there.
[20] The offices with PFM policy responsibility in the services include
the Army's Community and Family Support Center Directorate, Navy's
Office of the Deputy Chief of Naval Operations (Manpower and
Personnel), Air Force's Office of the Deputy Assistant Secretary of the
Air Force for Force Management and Personnel's Assistant Deputy for
Family Programs, and the Marine Corps Community Services.
[21] See Office of the Deputy Under Secretary of Defense (Military
Community and Family Policy), Initial Assessment and Follow-on Plan for
the Department of Defense Financial Readiness Campaign (May 27, 2004).
[22] DOD's 27 Campaign partners are Air Force Aid Society, Army
Emergency Relief Society, Association of Military Banks of America,
Better Business Bureau, Consumer Federation of America, Defense Credit
Union Council, Department of Labor, Department of the Treasury,
Employee Benefits Research Institute and American Savings Education
Council, Federal Citizen's Information Center, Federal Deposit
Insurance Corporation, Federal Reserve Board, Federal Trade Commission,
Freddie Mac, InCharge Institute of America, Jump$tart Coalition for
Personal Financial Literacy, Moneywise with Kelvin Boston, National
Association of Federal Credit Unions, National Endowment for Financial
Education, National Foundation for Credit Counseling, National Military
Family Association, Navy and Marine Corps Relief Society, North
American Securities Administrators Association, Securities and Exchange
Commission, Social Security Administration, U.S. Department of
Agriculture Cooperative State Research Education and Extension Service,
and Women's Institute for Financial Education.
[23] DOD's March 2003 survey sample consisted of 34,929 individuals
identified by stratified random sampling procedures. DOD reported that
completed surveys were received from 10,828 respondents, which resulted
in an overall weighted response rate for eligibles, corrected for non-
proportional sampling of 35 percent.
[24] Findings from our focus groups do not represent the population of
servicemembers and therefore are not generalizable.
[25] 37 U.S.C. 427.
[26] See GAO, DOD Systems Modernization: Management of Integrated
Military Human Capital Program Needs Additional Improvement, GAO-05-189
(Washington, D.C.: Feb. 11, 2005) and GAO, Military Pay: Army National
Guard Personnel Mobilized to Active Duty Experienced Significant Pay
Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003). We have found
serious problems in DOD's systems supporting military personnel and
pay, noting that they were error prone and required manual data
reconciliation, correction, and entry across nonintegrated systems.
While we noted that a significant system enhancement project is under
way to improve military pay, it is likely the department will continue
to operate with existing system constraints for several more years.
[27] See GAO-04-911.
[28] Army regulation 37-104-4, Military Pay and Allowances Policy and
Procedures Active Component (Sept. 30, 1994).
[29] Military Pay Procedures Manual, January 1995, Section 4.3.32.25,
Family Separation Allowance.
[30] An Army finance official at Fort Bragg, North Carolina, provided
local guidance, which stated that his installation was allowed to
obtain substantiating documents for family separation allowance before
the servicemember's departure.
[31] See Defense Finance and Accounting Service-DEM 7073-1, Chapter 27,
Family Separation Allowance (Jan. 15, 1998).
[32] An April 2003 message from the Air Force Accounting and Finance
Office requested the change in its current business practice of paying
family separation allowance to servicemembers at the completion of a
deployment or temporary duty of 30 days or more. It further stated that
the Air Force agreed with the Army's and Navy's approaches as to the
purpose of the allowance--i.e., to defray additional costs incurred
because of the forced separation and should be paid to the
servicemembers during temporary duty, which includes deployment.
[33] Allowing the government to keep the allowance until the end of the
deployment is contrary to the purpose of the allowance, which is to
compensate servicemembers for the added monthly expenses incurred due
to being involuntarily separated from their families. In addition,
allowing servicemembers to choose to wait until the end of a deployment
to receive a catch-up, lump sum amount of family separation allowance
is probably not a prudent financial decision because interim payments
could have been invested, for example, in the government-sponsored
Savings Deposit Program. This program guarantees servicemembers that
they will receive a 10 percent return on money deposited in the program
during their deployment. According to DOD's Financial Management
Regulation, Volume 7A, Chapter 51, members of the armed forces serving
outside the United States or its possessions under arduous conditions
(as determined by the Secretary of Defense) in connection with a
designated contingency operation are authorized to make deposits of
unallocated current pay and allowances and earn interest under this
program. Amounts up to $10,000 (including accrued interest) can be
deposited with interest accrual at the rate of 10 percent per year.
[34] Pub. L. No. 103-62, (Aug. 3, 1993). See GAO, The Results Act: An
Evaluator's Guide to Assessing Agency Annual Performance Plans,
GAO/GGD- 10.1.20 (Washington, D.C.: Apr. 1, 1998) for 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 on assessing an agency's annual performance plans.
[35] DOD Instruction 1342.17, Personal Financial Management for Service
Members (Nov. 12, 2004).
[36] See GAO-03-1004.
[37] Memorandum for Army Chief of Staff regarding: Proposed Weekly
Summary Item--Financial Readiness Training for First Term Soldiers
(Nov. 23, 1998).
[38] See GAO-03-1004.
[39] The new DOD Instruction 1342.17, dated November 2004, states that
"within 3 months after arriving at the first permanent duty station, a
servicemember shall demonstrate a basic understanding of pay and
entitlements, banking and allotments, checkbook management, budgeting
and saving (to include the thrift savings plan), insurance, credit
management, car buying, permanent change of station moves and
information on obtaining counseling or assistance on financial
matters." The instruction, however, does not specify how this is to be
measured. It simply says that such an understanding means to comprehend
the underlying principles of a subject and apply them to everyday life
situations.
[40] See GAO-04-911.
[41] Our work focused on active duty servicemembers, with the exception
of DOD active duty surveys where the survey population included
reservists serving on active duty assignments for at least 6 months.
The Related GAO Products section at the end of this report lists
several products that focus on reservists and their compensation,
benefits, and pay-related problems that result from deployment.
[42] Bolling Air Force Base, Washington, D.C., did not have high
deployment rates; however, Air Force officials suggested we visit this
installation to quickly obtain information on the financial condition
of junior enlisted servicemembers in an area with a high cost of
living.
[43] 50 U.S.C. App. § 501.
[44] According to the Federal Trade Commission, Military Sentinel is a
joint initiative with DOD that aims to improve consumer protection for
servicemembers. Military Sentinel is designed to centralize the online
collection of consumer complaints from DOD and military communities,
which is intended to, among other things, help target law enforcement
actions.
[45] Over the years, we found serious problems in DOD's systems
supporting military personnel and pay. We noted that the systems were
error prone and required manual data reconciliation, correction, and
entry across nonintegrated systems. While we noted that a significant
system enhancement project is under way to improve military pay, it is
likely the department will continue to operate with existing system
constraints for several more years. See GAO-05-189 and GAO-04-89.
[46] In this engagement, we assessed (1) the extent deployment impacts
the financial condition of active duty servicemembers and their
families, (2) whether DOD has an oversight framework for evaluating
military programs designed to assist both deployed and non-deployed
servicemembers in managing their personal finances, and (3) the extent
junior enlisted servicemembers receive required PFM training.
[47] Pub. L. No. 103-62 (Aug. 3, 1993).
[48] See GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-0021.3.1 (Washington, D.C.: November 1999).
[49] See GAO-05-93SP.
[50] N=number of installations out of a possible 13, where the theme
was cited.
[51] See http://www.dodpfm.org.
[52] Office of the Deputy Under Secretary of Defense (Military
Community and Family Policy), Initial Assessment and Follow-on Plan for
the Department of Defense Financial Readiness Campaign (May 27, 2004).
[53] See DOD Instruction 1342.17, Personal Financial Management for
Service Members (Nov. 12, 2004).
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