Military Pay
Hundreds of Battle-Injured GWOT Soldiers Have Struggled to Resolve Military Debts Gao ID: GAO-06-494 April 27, 2006As part of the Committee on Government Reform's continuing focus on pay and financial issues affecting Army soldiers deployed in the Global War on Terrorism (GWOT), the requesters were concerned that battle-injured soldiers were not only battling the broken military pay system, but faced blemishes on their credit reports and pursuit by collection agencies from referrals of their Army debts. GAO was asked to determine (1) the extent of debt of separated battle-injured soldiers and deceased Army soldiers who served in the GWOT, (2) the impact of DOD debt collection action on separated battle-injured and deceased soldiers and their families, and (3) ways that Congress could make the process for collecting these debts more soldier friendly.
Pay problems rooted in the complex, cumbersome processes used to pay Army soldiers from their initial mobilization through active duty deployment to demobilization have generated military debts. As of September 30, 2005, nearly 1,300 separated Army GWOT soldiers who were injured or killed during combat in Iraq and Afghanistan had incurred over $1.5 million in military debt, including almost 900 battle-injured soldiers with debts of $1.2 million and about 400 soldiers who died in combat with debts of $300,000. As a policy, DOD does not pursue collection of debts of soldiers who were killed in combat. However, hundreds of battle-injured soldiers experienced collection action on their debts. The extent of these debts may be greater due to incomplete reporting. GAO's case studies of 19 battle-injured soldiers showed that collection action on military debts resulted in significant hardships to these soldiers and their families. For example, 16 of the 19 soldiers were unable to pay their basic household expenses; 4 soldiers were unable to obtain loans to purchase a car or house or meet other needs; and 8 soldiers' debts were offset against their income tax refunds. In addition, 16 of the 19 case study soldiers had their debts reported to credit bureaus and 9 soldiers were contacted by private collection agencies. Due to concerns about soldier indebtedness resulting from pay-related problems during deployments, Congress recently gave the Service Secretaries authority to cancel some GWOT soldier debts. Because of restrictions in the law, debts of injured soldiers who separated at different times can be treated differently. For example, soldiers who separated more than 1 year ago are not eligible for debt relief and soldiers who paid their debts are not eligible for refunds. Further, because this authority expires in December 2007, injured soldiers and their families could face bad credit reports, visits from collection agents, and tax refund offsets in the future.
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Director: Team: Phone:GAO-06-494, Military Pay: Hundreds of Battle-Injured GWOT Soldiers Have Struggled to Resolve Military Debts
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United States Government Accountability Office:
GAO:
Report to Congressional Requesters:
April 2006:
Military Pay:
Hundreds of Battle-Injured GWOT Soldiers Have Struggled to Resolve
Military Debts:
GAO-06-494:
GAO Highlights:
Highlights of GAO-06-494, a report to congressional requesters.
Why GAO Did This Study:
As part of the Committee on Government Reform‘s continuing focus on pay
and financial issues affecting Army soldiers deployed in the Global War
on Terrorism (GWOT), the requesters were concerned that battle-injured
soldiers were not only battling the broken military pay system, but
faced blemishes on their credit reports and pursuit by collection
agencies from referrals of their Army debts. GAO was asked to
determine (1) the extent of debt of separated battle-injured soldiers
and deceased Army soldiers who served in the GWOT, (2) the impact of
DOD debt collection action on separated battle-injured and deceased
soldiers and their families, and (3) ways that Congress could make the
process for collecting these debts more soldier friendly.
What GAO Found:
Pay problems rooted in the complex, cumbersome processes used to pay
Army soldiers from their initial mobilization through active duty
deployment to demobilization have generated military debts. As of
September 30, 2005, nearly 1,300 separated Army GWOT soldiers who were
injured or killed during combat in Iraq and Afghanistan had incurred
over $1.5 million in military debt, including almost 900 battle-injured
soldiers with debts of $1.2 million and about 400 soldiers who died in
combat with debts of $300,000. As a policy, DOD does not pursue
collection of debts of soldiers who were killed in combat. However,
hundreds of battle-injured soldiers experienced collection action on
their debts. The extent of these debts may be greater due to
incomplete reporting. GAO‘s case studies of 19 battle-injured soldiers
showed that collection action on military debts resulted in significant
hardships to these soldiers and their families. For example, 16 of the
19 soldiers were unable to pay their basic household expenses; 4
soldiers were unable to obtain loans to purchase a car or house or meet
other needs; and 8 soldiers‘ debts were offset against their income tax
refunds. In addition, 16 of the 19 case study soldiers had their debts
reported to credit bureaus and 9 soldiers were contacted by private
collection agencies. The table below illustrates the experience of 4
case study soldiers.
Table: Case Study of the Impact of Injured Soldier Pay Problems
Resulting in Debt:
Soldier: Army Reserve Staff Sgt.
Injury: Lost right leg below the knee. Debt: $2,231;
Impact of Debt on Soldier and Family: This soldier spent 1-1/2 years on
disputes and appeals before multiple debts and errors were resolved.
Army debt, the only blot on the soldier‘s credit report, prevented him
from obtaining a loan to purchase a house.
Soldier: National Guard Staff Sgt.
Injury: Brain damage and post traumatic stress. Debt: $12,662;
Impact of Debt on Soldier and Family: Failure to record this soldier‘s
separation in the pay system resulted in forfeiture of 3-month‘s pay
while the Army attempted to recover his debt. As a result, the
soldier‘s utilities were turned off and his family was separated.
Soldier: Active Army Staff Sgt.
Injury: Paralyzed from the waist down. Debt: $14,959;
Impact of Debt on Soldier and Family: This soldier received a reduced
paycheck or no net pay during the last 4 months he was in the Army. He
separated from the Army in January 2005 and his debt was not resolved
until February 2006.
Soldier: Army Reserve Specialist
Injury: Inoperable shrapnel in knee.
Debt: $1,575;
Impact of Debt on Soldier and Family: This soldier was erroneously
listed as absent without leave (AWOL) when she was actually being
treated for her war injury. The AWOL error caused a pay-related debt.
The soldier was unable to get a $500 loan to pay off her credit card
balance due to Army debt on her credit report.
Source: GAO Analysis.
[End of Table]
Due to concerns about soldier indebtedness resulting from pay-related
problems during deployments, Congress recently gave the Service
Secretaries authority to cancel some GWOT soldier debts. Because of
restrictions in the law, debts of injured soldiers who separated at
different times can be treated differently. For example, soldiers who
separated more than 1 year ago are not eligible for debt relief and
soldiers who paid their debts are not eligible for refunds. Further,
because this authority expires in December 2007, injured soldiers and
their families could face bad credit reports, visits from collection
agents, and tax refund offsets in the future.
What GAO Recommends:
DOD concurred with GAO‘s report. Matters that Congress should consider
to make debt relief more soldier friendly include strengthening the
DOD‘s authority to provide uniform debt relief to injured GWOT soldiers
and exempting these soldiers from credit bureau reporting and private
collection agency and tax refund offset actions.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory D. Kutz at (202)
512-7455 or kutzg@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
The Army Has Referred Debts of Nearly 1,300 Battle-Injured Soldiers for
Collection, and the Number May Be Greater:
Debt Collection Action Has Placed Significant Hardship on Many Battle-
Injured Soldiers and Their Families:
Opportunities Exist for Congress to Legislate a More Soldier-Friendly
Process for Collecting GWOT Debts:
Conclusions:
Matters for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Background:
Appendix II: Objectives, Scope, and Methodology:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Number and Dollar Amount of Military Debts Incurred by
Separated Battle-Injured Soldiers and Fallen Army GWOT Soldiers by
Fiscal Year:
Table 2: Number and Amount of Separated Battle-Injured Soldier and
Fallen Soldier Debts by Army Component for Fiscal Years 2002 through
2005:
Table 3: Stratification of Separated Battle-Injured and Fallen Soldier
Debts by Dollar Amount:
Table 4: Examples of Battle-Injured Soldier Pay Problems Resulting in
Debt:
Figures:
Figure 1: Dollar Amount of Battle-Injured and Fallen Soldier Debts by
Major Reason:
Figure 2: Out of-Service Debt Collection Process for WIA and Fallen
Soldiers:
Abbreviations:
AWOL: Absent without leave:
CFR: Code of Federal Regulations:
DDMS: Defense Debt Management System:
DFAS: Defense Finance and Accounting Service:
DOD: Department of Defense:
FMS: Financial Management Service:
GWOT: Global War on Terrorism:
OEF: Operation Enduring Freedom:
OIF: Operation Iraqi Freedom:
TOP: Treasury Offset Program:
USC: United States Code:
WIA: Wounded-in-Action:
United States Government Accountability Office: Washington, DC 20548:
April 27, 2006:
The Honorable Tom Davis:
Chairman:
Committee on Government Reform:
House of Representatives:
The Honorable Christopher Shays:
Chairman:
Subcommittee on National Security, Emerging Threats and
International Relations Committee on Government Reform:
House of
Representatives:
The Honorable Todd Platts:
Chairman:
Subcommittee on Government Management, Finance and
Accountability Committee on Government Reform:
House of Representatives:
The Honorable C. A. Dutch Ruppersberger:
House of Representatives:
The Army continues to mobilize tens of thousands of soldiers each year
in support of the Global War on Terrorism (GWOT). Thousands of soldiers
have been injured or killed as a result of hostile fire since the
initial deployments to Afghanistan and Iraq in October 2001. Battle-
injured soldiers returning to the United States often face the daunting
prospect of adjusting to their postwar lives. Many soldiers are faced
with multiple surgeries and months of physical rehabilitation.
Oftentimes, these soldiers have to reassess their career goals and seek
training to accommodate their new physical limitations upon separation
from military service. Because these battle-injured soldiers return to
the United States before their unit's mobilization period ends, their
duty status is not always appropriately updated and they encounter
payroll problems related to the failure by the Army to adjust combat
pay (entitlements such as hostile fire pay, hardship duty pay, and
family separation pay). Our previous audits have detailed weaknesses in
the Army's systems and processes for providing service-related benefits
to Army National Guard and Army Reserve soldiers that have resulted in
both over-and underpayments.[Footnote 1] The Defense Finance and
Accounting Service (DFAS) is responsible for collecting debts caused by
overpayments and other pay-related problems. The Debt Collection Act of
1982[Footnote 2] provides a statutory basis for federal agencies to use
appropriate debt collection tools, such as interest charges, offset,
and private collection agencies. Thus, if debts are not paid before the
soldier separates from military service, DFAS can refer these debts to
collection agencies. A description of the collection process for
separated soldier debts is included in appendix I.
This report responds to your request that we determine (1) the extent
to which Army GWOT battle-injured soldiers who were released from
active duty or killed[Footnote 3] in combat are having military debts
referred to credit bureaus and collection agencies and (2) the impact
of Department of Defense (DOD) debt collection action on these soldiers
and their families. In addition, because of the added burden that debt
collection places on separated battle-injured soldiers and fallen
soldiers and their families, you asked us to discuss ways that Congress
could make the process for collecting their debts more soldier
friendly.
To identify the extent of reported debts of separated battle-injured
soldiers and fallen Army GWOT soldiers, we compared soldier records in
the Army's Wounded in Action (WIA) Program[Footnote 4] databases, which
contain information on battle-injured and fallen GWOT soldiers who
served in the Operation Iraqi Freedom (OIF) and Operation Enduring
Freedom (OEF) deployment from October 2001 through September
2005[Footnote 5] to DFAS Defense Debt Management System (DDMS) data on
out-of-service debts.[Footnote 6] We evaluated the reliability of the
WIA databases and DDMS system data and found these data to be
sufficiently reliable for the purposes of our work. To determine the
effect of debt collection action on separated battle-injured soldiers
and their families, we invited soldiers to contact us and discuss their
experience with Army debts. We prepared case studies summarizing our
interviews with soldiers or family members. Where we were unable to
independently validate our case study information, we attributed it to
the soldiers and family members. We based our discussion of ways in
which the debt collection process can be made more soldier friendly on
our previous Army pay and travel-related reports; our review of
applicable laws and regulations and DOD and Army policies and
procedures; discussions with key Army, DFAS, DOD, and Treasury
officials; and our interviews of case study soldiers and their
families. We conducted our work from June 2005 through March 2006 in
accordance with generally accepted government auditing standards. A
detailed discussion of our objectives, scope, and methodology is
presented in appendix II.
Results in Brief:
Army and DFAS data as of September 30, 2005, showed that nearly 1,300
Army GWOT battle-injured soldiers who left the service or were killed
in combat had military debts totaling $1.5 million during the first 4
years of the OIF/OEF deployment.[Footnote 7] Within this total, almost
900 battle-injured soldiers had debts totaling about $1.2 million and
about 400 soldiers who died in battle had debts totaling over $300,000.
The actual number of separated battle-injured soldiers and fallen
soldiers reported for debt collection may be greater due to inaccurate
or incomplete information on these soldiers.[Footnote 8] As a policy,
DFAS does not pursue collection action on the debts of fallen soldiers.
However, according to DFAS officials, military debt can be satisfied
from the final pay of fallen soldiers,[Footnote 9] and DFAS may pursue
collection action on other deceased soldiers. DFAS records as of
September 30, 2005, showed that of the $1.5 million in military service
debts incurred by the nearly 1,300 battle-injured and fallen soldiers
identified in our analysis, debts totaling almost $959,000 were written
off, waived, or cancelled, including debts of fallen soldiers; debts
totaling about $124,000 were paid; and debts totaling $420,000 remained
open.
We found that hundreds of separated battle-injured soldiers were
pursued for collection of military debts incurred through no fault of
their own, including 74 soldiers whose debts had been reported to
credit bureaus, private collection agencies, and the Treasury Offset
Program (TOP) at the time we initiated our audit.[Footnote 10]
Overpayment of pay and allowances (entitlements), pay calculation
errors, and erroneous leave payments caused 73 percent of the reported
debts. Remaining debts related to requirements to repay portions of
enlistment bonuses and training due to early separation and/or failure
to fulfill requirements; unpaid expenses for medical services,
household moves, insurance premiums, and travel advances;[Footnote 11]
and lost or damaged military equipment.
Debt collection actions have placed significant hardship on separated
GWOT battle-injured soldiers and their families. When these soldiers
leave the Army, they generally do not have jobs and many of them face
continuing medical treatment for battle injuries, making it difficult
to hold a job. Our case studies showed that some battle-injured
soldiers forfeited their final separation pay to cover part of their
military debt and they left the service with no funds to cover
immediate expenses while facing collection action on their remaining
debt. Due to their lack of income, 16 of our 19 case study soldiers
told us that they had difficulty paying for basic household expenses.
For example, the Army's failure to record separation paperwork in the
pay system and other payment errors resulted in over $12,000 of debt
for one severely battle-injured soldier. Although the soldier's family
expected that he would receive retirement pay when his active Army pay
stopped upon his separation, the soldier had no income for several
months while the Army attempted to recover his military debt. As a
result, the soldier's family was unable to pay household bills, the
utilities were shut off, and the soldier's dependent daughter was sent
out of state to live with relatives. In addition, three soldiers told
us that they were erroneously listed as absent without leave (AWOL) by
their units while they actually were in the hospital or receiving
outpatient care for their war injuries. The AWOL status for at least
two of these soldiers created debt because it appeared that the
soldiers received pay while they were not in duty status when, in fact,
the soldiers were receiving medical treatment for their war injuries.
When these soldiers did not respond to formal debt notification or pay
their debts, many of their debts were reported to credit bureaus,
private collection agencies, and TOP.
There are two primary mechanisms in law to forgive soldier debt,
including (1) authority to waive debts that result from payroll,
travel, and other payment and allowance errors[Footnote 12] and (2)
authority for remission (forgiveness) of debts involving issues of
hardship or fairness.[Footnote 13] The Fiscal Year 2006 National
Defense Authorization Act[Footnote 14] broadened remission authority to
include debts of officers and any soldiers no longer on active duty for
up to 1 year. However, the remission authority in the act does not
cover soldiers who were released from active duty more than 1 year ago
and the waiver authority does not cover cancellation of debts due to
error after the applicable 3-year statute of limitations. As a result,
the debt relief provisions in the act do not apply to debts of battle-
injured soldiers who separated from the service during fiscal years
2002 through at least the first part of fiscal year 2005. In addition,
the debt relief provisions in the 2006 authorization act do not contain
a provision granting the Service Secretaries authority to refund any
amount of indebtedness previously paid by the soldier. Further, the
expanded authority under the act will terminate in December 2007,
thereby making it possible that some battle-injured and fallen soldier
debts may be subject to collection through credit bureau reporting and
private collection agency and TOP actions in the future.
Our past reports included over 80 recommendations to address Army
payroll problems, including timely recording of changes in soldier duty
status and processing related payroll changes. The Army and DFAS have
taken a number of actions to address these problems and help prevent
them from occurring in the future. Correcting these problems, many of
which cause service-related debt, is the best solution to pay-related
debt problems and thus, we are making no new recommendations in this
report. DOD concurred with our report. This report also presents
several matters for congressional consideration if Congress wishes to
make the process for collecting military debts more soldier friendly
and help ensure that debt relief for injured GWOT soldiers is handled
equitably.
The Army Has Referred Debts of Nearly 1,300 Battle-Injured Soldiers for
Collection, and the Number May Be Greater:
Our analysis of Army and DFAS data through the end of fiscal year 2005
identified nearly 1,300 separated battle-injured soldiers[Footnote 15]
and soldiers who were killed in combat who had military debts totaling
$1.5 million that were reported to DFAS for debt collection action. Of
the nearly 1,300 soldiers, almost 900 separated battle-injured soldiers
had debts totaling about $1.2 million and about 400 soldiers who died
in combat had debts totaling over $300,000. The actual number of
separated battle-injured soldiers and fallen soldiers who owed military
debts may be greater due to incomplete and inaccurate reporting of some
information to the WIA databases.[Footnote 16] Overpayment of pay and
allowances (entitlements), pay calculation errors, and erroneous leave
payments caused 73 percent of the reported debts. Remaining debts
related to requirements to repay portions of enlistment bonuses and
training due to early separation and/or failure to fulfill
requirements; unpaid expenses for medical services, household moves,
insurance premiums, and travel advances; and lost military equipment.
Because the Army lacks a centralized automated system that integrates
payroll, personnel, and medical data on its soldiers, the Army and DFAS
formed a Wounded in Action Support Team and created WIA databases that
included soldier personnel, payroll, and medical information using
weekly data calls from five separate Army systems.[Footnote 17] The
Army and DFAS are using ad hoc work-around processes to research,
verify, and correct incomplete and inaccurate data. These labor-
intensive, manual procedures are necessary due to continuing,
uncorrected weaknesses in Army personnel and payroll systems and the
growing number of battle-injured soldiers whose pay accounts need to be
researched and verified to determine whether overpayments or other
problems have resulted in debt. As a policy, DFAS does not pursue
collection of debts of fallen soldiers. However, DFAS officials told us
that military debt may be satisfied from the final pay and allowances
of fallen soldiers[Footnote 18] and DFAS may pursue collection of debts
of other deceased soldiers. During the past 2 fiscal years, the Army
pursued hundreds of battle-injured soldiers for collection of their
military debts after they left the service. Collection action begins
with monthly debt notification letters and escalates to credit bureau
reporting and private collection agency and TOP action when there is no
response or debts are not paid.
The Army Has Reported Debts of Battle-Injured GWOT Soldiers to Credit
Bureaus and Private Collection Agencies:
At the time we initiated our audit in June 2005, the Army was taking
collection action on active debts of over 300 battle-injured soldiers.
Our initial analysis of Army and DFAS data as of June 30, 2005,
identified 331 battle-injured soldiers, whose military service debts
were undergoing collection action, including at least 74 soldiers whose
military debts had been reported to credit bureaus and to private
collection agencies and TOP. However, in response to our audit, Army
and DFAS officials told us that they had suspended collection action on
these soldiers' debts and recalled their reports to credit bureaus and
their referrals to the Department of the Treasury for private
collection agency and TOP collection action until a determination could
be made as to whether these soldiers' debts were eligible for relief.
We independently confirmed the recall of credit bureau reporting and
Treasury referrals with those entities. DFAS records as of September
30, 2005, showed that of the $1.5 million in military service debts
incurred by the nearly 1,300 battle-injured and fallen soldiers
identified in our analysis, debts totaling almost $959,000 were written
off, waived, or cancelled, including debts of fallen soldiers; debts
totaling about $124,000 were paid; and debts totaling $420,000 remained
open. In addition, at the end of our audit, the Army and DFAS advised
us that waivers had been approved for active debts of 202 of the 331
separated battle-injured soldiers' debts that were being pursued for
collection when we initiated our audit in June 2005.
The Number and Dollar Amount of Separated Battle-Injured Soldier and
Fallen Soldier Debts Increased from Fiscal Years 2002 through 2005:
While many soldiers had only one or two debts, other soldiers had three
or more debts. The nearly 1,300 separated battle-injured soldiers and
fallen soldiers identified in our analysis had a total of 2,324 debts.
Debts for these soldiers grew from 404 debts totaling $128,230 at the
end of fiscal year 2002 to 2,324 debts totaling over $1.5 million at
the end of fiscal year 2005.
As shown in table 1, the number of debts generally has increased each
fiscal year as more soldiers have been deployed and Army payroll
problems remained unresolved. More than 40 percent of these soldier
debts totaling over half of the $1.5 million were incurred during
fiscal year 2005.
Table 1: Number and Dollar Amount of Military Debts Incurred by
Separated Battle-Injured Soldiers and Fallen Army GWOT Soldiers by
Fiscal Year:
Fiscal year: 2002;
Number of debts: 404;
Percentage of debts: 17;
Original debt amount: $128,230;
Percentage of total amount: 8.
Fiscal year: 2003;
Number of debts: 279;
Percentage of debts: 12;
Original debt amount: 139,689;
Percentage of total amount: 9.
Fiscal year: 2004;
Number of debts: 640;
Percentage of debts: 28;
Original debt amount: 384,006;
Percentage of total amount: 26.
Fiscal year: 2005;
Number of debts: 1,001;
Percentage of debts: 43;
Original debt amount: 850,685;
Percentage of total amount: 57.
Total:
Number of debts: 2,324;
Percentage of debts: 100;
Original debt amount: $1,502,610;
Percentage of total amount: 100.
Source: GAO analysis.
[End of table]
Previously, we reported that most soldier payroll problems related to
Army National Guard and Army Reserve soldiers. Our analysis of military
service debts of the nearly 1,300 separated Army battle-injured
soldiers and fallen soldiers showed that for the first 4 years of the
GWOT deployment, 661 (51 percent) of the debts related to active
component Army soldiers, 346 (about 27 percent) of the debts related to
Army National Guard soldiers, and 248 (about 19 percent) of the debts
related to Army Reserve soldiers. The field units that reported debts
for the remaining 35 Army soldiers (about 3 percent) did not identify
these soldiers by component. Table 2 shows the relative number and
amount of debts by component.
Table 2: Number and Amount of Separated Battle-Injured Soldier and
Fallen Soldier Debts by Army Component for Fiscal Years 2002 through
2005:
Army component:
Active Army;
Number of soldiers: 661;
Percentage of soldiers: 51;
Original debt amount: $ 869,140;
Percentage of debt: 58.
Army component:
National Guard;
Number of soldiers: 346;
Percentage of soldiers: 27;
Original debt amount: 295,461;
Percentage of debt: 19.
Army component: Army Reserves;
Number of soldiers: 248;
Percentage of soldiers: 19;
Original debt amount: 236,799;
Percentage of debt: 16.
Army component: Unidentified;
Number of soldiers: 35;
Percentage of soldiers: 3;
Original debt amount: 101,210;
Percentage of debt: 7.
Total:
Number of soldiers: 1,290;
Percentage of soldiers: 100;
Original debt amount: $1,502,610;
Percentage of debt: 100.
Source: GAO analysis.
[End of table]
Because Congress passed legislation[Footnote 19] that permitted the
Secretary of Defense to cancel up to $2,500 in individual soldier debt
during Desert Shield/Desert Storm, your offices asked us to determine
the dollar amount of debts of separated battle-injured and fallen
soldiers by incremental thresholds. Our analysis of the amounts of debt
reported for separated battle-injured soldiers and fallen soldiers who
served in OIF and OEF during fiscal years 2002 through 2005 showed that
about 82 percent of these soldiers had debts that totaled $1,500 or
less and the vast majority, about 90 percent of the soldiers, had debts
that totaled $2,500 or less. While making this comparison, it is
appropriate that debt relief is adjudicated prudently in consideration
of individual circumstances. Table 3 shows the stratification of battle-
injured and fallen soldier debt in $500 increments up to $3,500 and
total amounts over $3,500.
Table 3: Stratification of Separated Battle-Injured and Fallen Soldier
Debts by Dollar Amount:
Dollar range of soldier debts: $1 - $500;
Number of soldiers: 763 [A];
Cumulative percentage of soldiers: 59 [A].
Dollar range of soldier debts: $501 - $1,000;
Number of soldiers: 190;
Cumulative percentage of soldiers: 74.
Dollar range of soldier debts: $1,001 - $1,500;
Number of soldiers: 108;
Cumulative percentage of soldiers: 82.
Dollar range of soldier debts: $1,501 - $2,000;
Number of soldiers: 45;
Cumulative percentage of soldiers: 86.
Dollar range of soldier debts: $2,001 - $2,500;
Number of soldiers: 49;
Cumulative percentage of soldiers: 90.
Dollar range of soldier debts: $2,501 - $3,000;
Number of soldiers: 30;
Cumulative percentage of soldiers: 92.
Dollar range of soldier debts: $3,001 - $3,500;
Number of soldiers: 15;
Cumulative percentage of soldiers: 93.
Dollar range of soldier debts: Over $3,500;
Number of soldiers: 90;
Cumulative percentage of soldiers: 7.
Total:
Number of soldiers: 1,290;
Cumulative percentage of soldiers: 100.
Source: GAO.
[A] Under the $225 collection threshold, 526 of the 763 soldiers (41
percent) had debts that were subject to write-off.
[End of table]
Ninety soldiers had debts that totaled more than $3,500, including
original soldier debts that ranged from $3,528 to $34,124. Sixty-seven
of these soldiers had debts that totaled less than $10,000, 16 soldiers
had debts totaling between $10,000 and $20,000, and 7 soldiers had
debts that totaled more than $20,000.
Most Military Debts Relate to Pay Errors:
Consistent with our case studies, which are discussed in the next
section, DOD data showed that most of the debts of the nearly 1,300
soldiers who were injured or killed in combat related to errors in pay
calculations and overpayment of combat pay entitlements and erroneous
payments for unused leave. As illustrated in figure 1, Army and DFAS
data for fiscal years 2002 through 2005 showed that 73 percent of the
debts for the nearly 1,300 separated battle-injured soldiers and fallen
soldiers related to errors in pay calculations, entitlement errors, and
erroneous leave payments during fiscal years 2002 through 2005. The
remaining 27 percent of these soldiers' debts related to repayment of
enlistment bonuses (11 percent) where soldiers did not complete the
required term of service or they improperly received more than one
bonus; payments for tuition and training (6 percent) where soldiers did
not complete their training or they did not fulfill service
requirements related to their training; and other expenses (8 percent)
related to unpaid bills for medical services, housing and household
moves, insurance premiums, travel advances,[Footnote 20] and loss or
damage of government property. The reasons for the remaining debt (2
percent) were not recorded in DDMS.
Figure 1: Dollar Amount of Battle-Injured and Fallen Soldier Debts by
Major Reason:
[See PDF for image]
Source: GAO Analysis.
[End of figure]
According to DFAS officials, while unit commanders and finance offices
are authorized to write off debts for lost and damaged equipment when
soldiers who were injured or killed by hostile fire are medically
evacuated from the theater of operation, they have not always done so.
In addition, because Army units and medical facilities have not always
prepared or processed changes in orders when soldier duty status
changed, soldiers do not have required documentation needed to submit a
voucher for travel reimbursement. Because the travel system is not
integrated with the payroll and debt management systems, neither DFAS
nor the Army could tell us the amount of soldier debt that could
potentially be offset by travel reimbursements owed to soldiers. The
new WIA Support Team's standard operating procedures for soldier pay
account review require identification and processing of all soldier
travel claims.
Debt Collection Action Has Placed Significant Hardship on Many Battle -
Injured Soldiers and Their Families:
Debt collection actions have caused a variety of problems for separated
GWOT battle-injured soldiers. When these soldiers leave the Army, they
generally do not have jobs and many of them face continuing medical
treatment for battle injuries, making it difficult to hold a job. If
these soldiers have military debt that has been identified, their final
separation pay may be offset to cover the debt and they may leave the
service with no funds to pay immediate expenses. Due to the lack of
income, 16 of the 19 soldiers we interviewed told us that they had
difficulty paying for basic household expenses. In addition, 3 soldiers
told us that they were erroneously identified as AWOL by their units
while they were actually in the hospital or receiving outpatient care
for their war injuries. The AWOL status for at least 2 of these
soldiers created debt because it appeared that the soldiers received
pay when they were not in duty status. At the time these soldiers were
listed as AWOL by their Army units, they were actually receiving
medical treatment. One soldier was receiving outpatient therapy for her
knee injury under the care and direction of an Air Force physician
based on an Army medical referral and the other soldier was in a
military hospital at Fort Campbell. Debt-related experiences of 19
separated battle-injured soldiers who contacted us included the
following.
* Sixteen soldiers had their military debts reported to credit bureaus,
9 soldiers had debts turned over to private collection agencies, and 8
soldiers had their income tax refunds withheld under TOP.
* Sixteen could not pay their basic household expenses.
* Four soldiers were unable to obtain loans to purchase a home, meet
other needs, or obtain VA educational benefits due to service-related
debt on their credit reports.
* At least 8 soldiers were owed travel reimbursements at the same time
they were being pursued for collection of their service-related debts.
The Army's failure to record separation paperwork in the pay system and
other payment errors resulted in over $12,000 of debt for one severely
battle-injured soldier. Although the soldier's family expected that he
would receive retirement pay when his Army pay stopped upon his
separation, the soldier had no income for several months while the Army
attempted to recover his military debt. As a result, his family was
unable to pay household bills, the utilities were shut off, and the
soldier's dependent daughter was sent out of state to live with
relatives. In addition, although the soldier had been receiving
treatment at an Army medical center and a VA polytrauma center over a 5-
month period, the day the soldier was released to go home, his Army
unit called his wife to ask why he was not reporting for duty--an
indication that his Army unit had considered him to be AWOL.
Table 4 illustrates examples of the effects of debt collection actions
on selected separated Army battle-injured soldiers and their families
based on our case studies. Five soldiers and family members told us
that they had contacted their unit finance offices multiple times for
assistance in resolving their pay and debt problems. However, the
soldiers said that finance personnel either did not get back to them as
promised or the finance personnel they spoke with said they could not
help them with their problems. DFAS and Army officials we spoke with
acknowledged that finance office personnel at some locations lacked the
knowledge needed to accurately input transactions to soldier pay
accounts. DFAS officials told us they recently initiated actions to
train finance office personnel at several locations. Debts imposed the
greatest hardship on battle-injured soldiers who have had to endure
financial problems while they cope with adjusting to physical
limitations due to their injuries.
Table 4: Examples of Battle-Injured Soldier Pay Problems Resulting in
Debt:
Soldier: #1 Staff Sergeant, Army Reserve;
Type of injury: Lost right leg, below the knee;
Debt amount: $2,231;
DOD-reported debt reason(s): Payroll and leave payment errors. Soldier
also had erroneous Servicemen's Group Life Insurance (SGLI) and
Survivor Benefit Program (SBP) premium billings;
Impact on soldiers and family members: Soldier spent 1-1/2 years on
disputes and appeals after leaving the service before multiple debts,
errors, and unreimbursed travel expense were resolved. Soldier said he
deferred purchase of a house due to military debt included on his
credit report. The Army debt was the only blot on the soldier's credit
report.
Soldier: #2 Staff Sergeant, Army National Guard;
Type of injury: Brain damage, in a coma for 3 months, and post-
traumatic stress disorder (PTSD);
Debt amount: $12,662;
DOD-reported debt reason(s): Pay and entitlement errors, including
payment for unused leave. Soldier also was erroneously listed as AWOL
while actually receiving treatment in a VA hospital;
Impact on soldiers and family members: Family had no income while debt
was recouped. According to a family member, the soldier's utilities
were turned off, and his young daughter was sent to live with relatives
out of state.
Soldier: #3 Staff Sergeant, Active Component;
Type of injury: Paralyzed from the waist down;
Debt amount: $14,959;
DOD-reported debt reason(s): Pay and entitlement errors;
Impact on soldiers and family members: Soldier received reduced pay or
no net pay over a 4-month period while he was at Walter Reed and his
wife and four children were in Germany. The soldier separated from the
Army in January 2005 and his debt was not resolved until February 2006.
The soldier is still pursuing underpayment of hostile fire pay and
combat zone tax exclusion and "unreimbursed" travel expense.
Soldier: #4 Specialist, Army Reserves;
Type of injury: Inoperable shrapnel in knee;
Debt amount: $1,575;
DOD-reported debt reason(s): Unearned portion of reserve enlistment
bonus due to erroneous AWOL report and overpayment of hardship duty
pay;
Impact on soldiers and family members: After the soldier struggled with
her Army Reserve unit to resolve AWOL errors, she experienced
collection action on other military debt. The soldier told us she was
unable to get a $500 loan because her military debt stayed on her
credit report.
Soldier: #5 Sergeant, Active Component;
Type of injury: Leg injury;
Debt amount: $563;
DOD-reported debt reason(s): Outstanding travel advance error;
Impact on soldiers and family members: Soldier was asked to travel to
Fort Polk to brief Stryker Brigade on Iraq experience. He submitted his
travel voucher several times, but DFAS lost it and reported a travel
advance debt to credit bureaus.
Soldier: #6 Corporal, Active Component;
Type of injury: Chest injury, damage to lung and left arm, in a coma
for 2 weeks, and PTSD;
Debt amount: $2,030;
DOD-reported debt reason(s): Pay and entitlement errors;
Impact on soldiers and family members: Soldier, a single parent with
four young children, was told that DFAS would audit her $2,030 debt.
She said she never heard from them and was unaware she owed a balance
of over $500 until the debt appeared on her credit report.
Soldier: #7 Sergeant, Active Component;
Type of injury: Leg injury from mortar, shrapnel and gun shot wounds.
Limited use of right leg;
Debt amount: $6,472;
DOD-reported debt reason(s): Pay calculation errors;
Impact on soldiers and family members: Soldier was contacted by a
private collection agency and his 2004 income tax refund was withheld
to offset his debt. Soldier said he was unable to obtain a loan to buy
land for his house trailer due to military debt on his credit report,
and he had to pay a higher interest rate on his car loan.
Soldier: #8 Private First Class, Army Reserve;
Type of injury: Shoulder injury;
Debt amount: $3,716;
DOD-reported debt reason(s): Unearned portion of reserve enlistment
bonus;
Impact on soldiers and family members: Soldier said he was unsuccessful
in gaining assistance from Ft. Hood to resolve his debt. He was
contacted by a private collection agency and the government took his
2004 tax refund to offset the debt.
Soldier: #9 Staff Sergeant, Army National Guard;
Type of injury: Nerve damage in wrists and head and shoulder injury;
Debt amount: $3,434;
DOD-reported debt reason(s): Erroneous annual leave payment, repayment
of basic training program expense. Soldier also had erroneous SGLI
premium billings;
Impact on soldiers and family members: The soldier separated from the
Army in October 2004 and said he received a check for about $1,800 for
unused leave 10 months later in July 2005. He told us he received his
first debt letter in November 2005 but was unable to pay his debt.
Soldier: #10 Specialist, Active Component;
Type of injury: Loss of hearing and PTSD;
Debt amount: $476;
DOD-reported debt reason(s): Pay calculation errors;
Impact on soldiers and family members: Soldier said she was unable to
obtain a loan to purchase a house due to military debt on her credit
report. The soldier would have had to pay a higher interest rate due to
Army debt, and she could not afford the resulting higher monthly
payment on the loan.
Source: GAO.
[End of table]
The following case summaries provide additional details of selected
soldier debt experiences. The first soldier, case study #1, battled for
1-1/2 years after he separated from the service to resolve his debts
and obtain a reimbursement related to travel expense during his
deployment.
Case Study 1: Soldier Engages in 1-1/2 Year Battle to Resolve Debts:
An Army Reserve Staff Sergeant who lost his leg in a roadside bomb
explosion near the town of Ramadi, Iraq, on July 14, 2003, found
himself involved in a lengthy effort to resolve pay-related debts after
he separated from the Army in August 2004. The Sergeant's Army debt was
the only unpaid debt on his credit report. The first problem occurred
in August 2004, when the Army failed to terminate the soldier's active
duty pay after he separated from military service, resulting in an
overpayment of $2,728. Because the soldier was still owed his final
separation pay of $2,230, this amount was used to offset his debt,
reducing it to $498. The Army also incorrectly billed the soldier for
several months of Servicemen's Group Life Insurance (SGLI) premiums,
which should have ceased when the soldier left the service. In
attempting to correct the SGLI billings, the soldier's account was
mistakenly reactivated in the pay system because a Fort Belvoir finance
clerk did not know how to handle this transaction. As a result, the
system then generated an erroneous pay check to the soldier totaling
$1,733, increasing his debt to $2,231. According to the soldier, around
the same time, in January 2005, an Army headquarters official contacted
him to say his debt had been resolved, leading the soldier to believe
that the $1,733 payment was the result of his pay audit and possibly
included his unpaid travel reimbursement. However, shortly thereafter,
the soldier began receiving debt collection letters from DFAS for the
$2,231 debt, which also appeared on his credit report. The soldier
appealed this debt and requested a waiver, but was turned down due to a
ruling that he should have known that he was not entitled to another
pay check once he had been out of the service for 4 months. Because
lenders view unpaid federal debts as a significant problem, the soldier
and his wife decided to forego applying for a loan to purchase a house
until his Army debt was resolved.
According to DFAS officials, it took about 6 months to research changes
in the soldier's duty status and pay the soldier's travel
reimbursement. Because the soldier had not been issued any orders after
his initial deployment, DFAS had to work with the Army to prepare and
backdate military orders for each change of status from the time the
soldier was medically evacuated to Landstuhl Regional Medical Center in
Germany, transferred to Walter Reed Army Medical Center, in Washington,
D.C., and entered into the Medical Retention Program. In addition, we
learned that the soldier also received erroneous monthly billings for
Survivor Benefit Program (SBP) premiums-even though he and his wife had
declined participation in writing, as required, when he separated. The
monthly SBP billings continued because Walter Reed had not forwarded
the soldier's paperwork to the SBP program office at DFAS Cleveland. In
December 2005, the soldier's second, more detailed request for debt
waiver was accepted. In addition, his travel voucher was approved and
he received his contingency travel reimbursement of $2,727-an amount
that exceeded his debt by almost $500. However, the soldier's SBP
program election was not properly canceled because a change was made to
only one of two codes that needed to be changed in the system. As a
result, the soldier's final debt was not corrected until February 2006-
1-1/2 years after he separated.
[End of Study]
Case study #2 involved a seriously injured Army National Guard soldier
who went without pay for several months when his separation paperwork
was not entered in the pay and personnel systems.
Case Study 2: Brain-Damaged Soldier Goes without Pay Due to Error:
This Army National Guard Staff Sergeant was injured 3 months after
being deployed to Iraq, when his Humvee was hit by another truck during
an attack on December 11, 2004. The soldier suffered a crushed jaw and
severe head injuries, resulting in permanent brain damage. The soldier
was sent to Walter Reed Army Medical Center in Washington, D.C., where
he remained in a coma for over 3 months. On March 28, 2005, he was
transferred to the Richmond VA Medical Center for care in their
polytrauma rehabilitation center. On April 28, 2005, the soldier was
sent home on convalescent leave before he returned to Walter Reed for
further surgery. The soldier was released to go home in May 2005,
pending separation from the service. On the day he was released from
Walter Reed and sent home, the soldier's wife got a call from his Army
unit asking why her husband was not reporting to active duty-an
indication that the soldier's unit believed him to be AWOL.
Although the soldier had been through medical board evaluations and was
supposed to be retired effective July 23, 2005, his separation
paperwork was not entered in the pay and personnel systems. The soldier
was rated 80 percent disabled and his family expected to receive
disability benefit income of over $3,000 per month. When the sergeant
suddenly received no income in October 2005, he learned that he owed
the Army a debt of $6,400 and that the paperwork to start his
disability benefits had not been processed. About this time, a finance
clerk noted that the sergeant had not been paid for his unused leave.
Because the finance clerk did not know how to post the leave payment
transaction, the clerk put the soldier back on active duty, resulting
in an additional overpayment of $6,101, and increasing his debt to
$12,501. According to a family member, the soldier's family was without
income and could not pay for basic household expenses. As a result, the
family's utilities were cut off and the soldier's 11-year-old daughter
was sent out of state to live with relatives. After receiving a call
from the soldier's family member in mid-October 2005, we alerted Army
headquarters to the soldier's debt pay and debt problems. The Army took
immediate action to research the soldier's pay account. On January 25,
2006, DOD approved a waiver of $12,662 debt, and DFAS refunded $2,355
in debt previously withheld from the soldier's pay.
[End of Study]
An Army Reserve soldier, case study #3, was faced with debt due to an
erroneous AWOL report while she was receiving treatment at a private
health facility under direction of an Air Force physician.
Case Study 3: Soldier Finds Debt Is Due to Erroneous AWOL Report During
Rehabilitation:
An Army Reserve Specialist was injured during a mortar attack on the
outskirts of Baghdad on March 23, 2003, and was awarded a Purple Heart.
The soldier underwent a total of six surgeries at a field hospital and
military hospitals in Kuwait, Spain, and Germany--none of which were
successful in removing shrapnel from her knee. She was then flown to a
military hospital in Baltimore, Maryland, and in early April 2003, she
was sent to a military hospital at Keesler Air Force Base, in Biloxi,
Mississippi, for treatment. At Keesler, the soldier was given the
choice of receiving rehabilitative treatment at the Keesler medical
facility or at a rehabilitation center near her home in Leakesville,
Mississippi. There were no Army facilities near Keesler, and the
soldier was told she would have to rent an apartment nearby and pay for
it herself. As a result, the soldier decided to return home to begin
her rehabilitation sessions at a private facility approved by Keesler.
The soldier was required to travel to the Keesler AFB Orthopedic Center
(a 2-hour round trip) every 2 weeks to be examined by the referring Air
Force physician. The soldier told us the Air Force doctor released her
in July 2003, noting that she had completed her rehabilitation
treatment. The soldier was medically discharged from her Army Reserve
unit on November 18, 2003.
The soldier learned she had a military debt of $1,575, including $975
related to a requirement to repay the unearned portion of her
enlistment bonus when a collection agent contacted her in January 2004--
2 months after she had separated from the Army. As a result of this
contact, the soldier learned that her Army unit had lost track of her
and had reported her as AWOL while she was being treated for her battle
injuries. However, the soldier told us that in April 2003, when she
arrived at Keesler, she had made several unsuccessful attempts to let
her unit Sergeant know her duty status and whereabouts. When her calls
were returned in July 2003, she was told to report to Fort Stewart,
Georgia, and to remain there until her unit returned from Iraq and was
demobilized. The soldier told us she did as ordered and was placed in
Medical Hold status at Fort Stewart. Although the soldier told us she
traveled to her unit in Brookhaven, Mississippi, on two occasions in an
effort to document that she was not AWOL because she was at an approved
medical facility during the time in question, she was unsuccessful
because the collection agent continued to call her. As of the end of
July 2004, DFAS records showed the soldier's debt totaled $1,575,
including $975 related to the unearned portion of her enlistment bonus
and $600 in overpayment of her hardship duty pay. Although DFAS had
recalled this debt from the soldier's credit report in July 2005, as of
October 2005 this debt still showed on her credit report. We confirmed
that DFAS recalled the debt from the soldier's credit report a second
time. However, in March 2006, the debt reappeared on the soldier's
credit report. The soldier told us that she was unable to get a loan
for $500 to pay off her credit card balance because the military debt
kept showing up on her credit report. At the end of our field work, the
Army advised that the reappearance of military debt on the soldier's
credit report was due to errors made by both DFAS and the credit
bureau.
[End of Study]
Our past four reports[Footnote 21] have discussed numerous problems
related to Army pay and travel reimbursements and made over 80
recommendations for correcting weaknesses in human capital, processes,
and systems that caused these problems. Effective action to address pay
and travel reimbursement problems will also help prevent the occurrence
of military debts.
Opportunities Exist for Congress to Legislate a More Soldier-Friendly
Process for Collecting GWOT Debts:
As a result of concern regarding the indebtedness of soldiers resulting
from pay-related problems during deployments, Congress on occasion has
provided authority to the Secretary of Defense to cancel such debts.
For example, in the Department of Defense Appropriation Acts for fiscal
years 1992 through 1996,[Footnote 22] the Secretary was given authority
to cancel military debt up to $2,500 owed by soldiers or former
soldiers so long as the indebtedness was incurred in connection with
Operation Desert Shield/Desert Storm. Further, these appropriation acts
authorized the Secretary to provide refunds to soldiers who had
satisfied their debts.
Facing similar concerns with military debts incurred by GWOT soldiers,
Congress recently gave the Secretary authority, in the National Defense
Authorization Act for Fiscal Year 2006, to cancel debts occurring on or
after October 7, 2001, the date designated as the beginning of the OIF/
OEF deployment. However, unlike the authority granted to provide debt
relief for Operation Desert Shield/Desert Storm, the Secretary's
discretion under the fiscal year 2006 authorization act is generally
more limited. For example, the Secretary was not given authority to
issue refunds and he can not uniformly provide debt relief to all GWOT
soldiers. Rather, the Secretary may only cancel debts of soldiers who
are (1) on active duty or in active status; (2) within 1 year of an
honorable discharge; or (3) within 1 year of active release from active
status in a Reserve component. Additionally, the Secretary's authority
under the fiscal year 2006 authorization act terminates on December 31,
2007, and a more narrow statutory cancellation authority will be
revived.[Footnote 23]
There are two primary mechanisms in law to forgive soldier debt,
including (1) authority to waive debts that result from payroll,
travel, and other payment and allowance errors[Footnote 24] and (2)
authority for remission (forgiveness) of debts involving hardship or
fairness.[Footnote 25] The Fiscal Year 2006 National Defense
Authorization Act broadened remission authority to include debts of
officers and any soldiers no longer on active duty for up to 1 year.
However, the remission authority in the act does not cover soldiers who
were released from active duty more than 1 year ago and the waiver
authority does not cover cancellation of debts due to error after the
applicable 3-year statute of limitations. In addition, unlike waivers,
soldiers who paid debts are not eligible for refunds under the
remission statute. Further, the debt relief eligibility period for the
three case study soldiers who separated in June 2005 will expire in the
next few months.
Our case studies showed that some battle-injured soldiers did not
receive debt notification letters until 8 to 10 months after they
separated from the Army. One soldier who separated in October 2004 told
us that he received his debt notification letter in November 2005--more
than 1 year after he separated from the Army. All but three of our case
study soldiers separated from the Army more than 1 year ago and these
soldiers' eligibility for debt relief under the fiscal year 2006
authorization act has already expired. Further, the debt relief
eligibility period for the three case study soldiers who separated in
June 2005 will expire in the next few months.
Conclusions:
Since the OIF/OEF deployment in October 2001, separated, battle-injured
Army soldiers have faced considerable hardships related to collection
action on their military service debts through no fault of their own,
including forfeiture of separation pay and tax refunds; credit bureau
reporting; and action by private collection agencies. The best solution
to this problem is for DOD to prevent debts for these soldiers from
happening in the first place, and our past reports have included
numerous recommendations for correcting weaknesses in Army payroll
systems and processes. Over the past year, DOD and the Army have taken
a number of actions to identify and relieve debts of separated battle-
injured GWOT soldiers, and Congress has enacted broader authority for
relief of some soldier debts. There are additional actions available to
Congress if it wishes to make debt relief more soldier friendly.
Because of a restriction in the current law, injured Army GWOT soldiers
who separated from the service at different times have been treated
differently, which raises questions of equity. Some of these soldiers
may obtain debt relief, while others may not. Further, there is no
current authority to issue refunds to battle-injured soldiers who
previously paid debts that are now eligible for relief. Because the
current debt relief authority expires on December 31, 2007, injured
soldiers and their families who have GWOT-incurred military debts could
face the prospect of bad credit reports, visits by collection agencies,
and offsets of their tax refunds if the authority is not available
throughout the OIF/OEF deployment and a reasonable period after the
deployment ends.
Matters for Congressional Consideration:
There are several matters that Congress should consider if it wishes to
strengthen the Secretary's authority to provide debt relief so that it
can be applied uniformly for all GWOT-incurred debt. First, Congress
could consider legislation to grant DOD the following authorities.
* Give the Service Secretaries authority to make debt relief available
to all injured GWOT soldiers regardless of when they separate from
active duty.
* Give the Service Secretaries authority to provide refunds to soldiers
who have paid debts incurred while in an active status.
* Ensure that the Secretary of Defense has authority to cancel GWOT-
incurred debt throughout, and a reasonable period following, the
deployment and thus, can exempt injured soldiers from debt collection
action through credit bureau reporting and private collection agency
and TOP action.
Second, we suggest that Congress consider directing the Secretary of
Defense to take the following actions, as appropriate, in concert with
any changes to debt relief provisions in law.
* Take immediate action to make debt relief policy applicable to all
GWOT soldiers who sustain battle injuries or are killed in combat-
related actions.
* Identify the military debts of battle-injured soldiers that were
previously paid and were not subject to remission or waiver and issue
refunds.
Agency Comments and Our Evaluation:
We provided a draft of our report to DOD for comment. In oral comments
received from the Office of the Secretary of Defense, the department
concurred with our report.
We are sending copies of this letter to interested congressional
committees; the Secretary of Defense; the Deputy Under Secretary of
Defense for Personnel and Readiness; the Under Secretary of Defense
Comptroller; the Secretary of the Army; the Director of the Defense
Finance and Accounting Service; and the Director of the Office of
Management and Budget. We will make copies available to others upon
request.
Please contact Gregory D. Kutz at (202) 512-7455 or kutzg@gao.gov, if
you or your staffs have any questions concerning this report. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. Major contributors to
this report are acknowledged in appendix III.
Signed by:
Gregory D. Kutz:
Managing Director Forensic Audits and Special Investigations:
[End of section]
Appendix I: Background:
The Federal Claims Collection Act of 1966, the Debt Collection Act of
1982, the Debt Collection Improvement Act of 1996,[Footnote 26] and
related federal regulations provide for collection of debts owed to the
federal government, including the debts of battle-injured soldiers who
had separated from the Army and fallen Army soldiers[Footnote 27] who
served in the Global War on Terrorism. These laws and related federal
regulations[Footnote 28] establish authority for the Department of
Defense (DOD) and the Department of the Treasury to engage in federal
debt collection actions.
Out-of-service soldier debts occur when a soldier has separated from
the service and is not receiving salary or other payments from the
department that can be offset to collect debt owed to a defense agency
or military service. DOD is authorized to write off debts of fallen
soldiers; however, it may pursue collection of other deceased soldiers'
debts.[Footnote 29] Out-of-service debts arise from a large number of
circumstances, including overpayments of pay and allowances
(entitlements), such as hostile fire pay, hazardous duty pay, and
family separation pay; travel advances for which expense vouchers have
not been submitted; indebtedness related to public use of the DOD
facilities or services, such as family medical services; and loss or
damage of government property. Figure 2 illustrates the out-of-service
debt collection process, including DOD actions and Department of the
Treasury debt collection actions.
Figure 2: Out of-Service Debt Collection Process for WIA and Fallen
Soldiers:
[See PDF for image]
Source: GAO analysis.
Note: Process actions are noted as the day on which a particular action
begins. In some cases there are intervening days to assess fees or
prepare paperwork before the next step in the process begins. Debts of
fallen soldiers are written off on Day 1 of this process; however,
collection action may proceed against the estates of other deceased
soldiers, depending on individual circumstances.
[End of figure]
[End of section]
Appendix II: Objectives, Scope, and Methodology:
The purpose of our audit was to determine the (1) extent to which Army
soldiers serving in the Global War on Terrorism (GWOT) who were injured
or killed by hostile fire and were released from active duty are having
debts referred to credit bureaus and collection agencies and (2) the
impact of Department of Defense (DOD) debt collection action on these
soldiers and their families. You also asked us to discuss ways that
Congress could make the process for collecting out-of-service debts
more soldier friendly.
To determine the extent of debt related to Army soldiers who served in
Operation Iraqi Freedom and Operation Enduring Freedom and sustained
battle injuries and left the service or were killed in action, we
compared Army Wounded in Action and Killed in Action databases
(referred to collectively in this report as WIA databases) maintained
by the Defense Finance and Accounting Service (DFAS) Wounded-in-Action
Support Team and compared the soldier records in these databases with
debt records in the Defense Debt Management System (DDMS) for out-of-
service personnel. Soldier records are identified by soldier name and
social security number in both the WIA databases and DDMS. The data
used in our audit covered fiscal years 2002 through 2005--the first 4
years of the Operation Iraqi Freedom and Operation Enduring Freedom
deployments.
We assessed the reliability of data obtained from the WIA databases and
the DDMS systems by obtaining an understanding of the processes used to
collect and report the data, verifying control totals of data extracted
and used for file comparisons, validating the computer program used to
perform the file comparison, asking systems officials to complete our
data reliability questionnaire, and analyzing selected transaction data
for accuracy. We also considered findings and recommendations related
to payroll problems and unidentified soldier debt in our previous
audits[Footnote 30] and our recent Fort Bragg investigation.[Footnote
31] DFAS and the Army have implemented procedures for reviewing and
correcting soldier status and pay account information in the WIA
databases and DDMS data is subjected to periodic DOD audits.
To determine the impact of debt collection actions on Army battle-
injured and fallen soldiers and their families, we reached out to WIA
soldiers and invited soldiers to contact us and share their experience.
We focused on soldiers whose debts had been reported to credit bureaus
and collection agencies. We were contacted by 19 separated battle-
injured Army GWOT soldiers. We used the experiences of these soldiers
to illustrate the hardships posed by debt collection action on battle-
injured soldiers and their families. For all of the soldiers with debt
problems who contacted us, we worked with the Army and DFAS to help
resolve their debts. Where we were unable to independently validate our
case study information, we attributed it to the soldiers and family
members. We analyzed the DDMS data to confirm management assertions
that DFAS does not pursue collection of debts of fallen soldiers.
To determine ways that Congress could help make the debt collection
process more soldier friendly, we considered debt relief provisions in
current law, DOD and Army policy, and the experience of soldiers who
contacted us as well as information obtained for case studies included
in our prior reports.[Footnote 32] We reviewed federal laws and
regulations and DOD and Army policies and procedures related to debt
collection and relief of debt.
We met with Army, DFAS, and DOD officials to discuss their efforts to
identify and resolve soldier debt. We also met with Department of the
Treasury Financial Management Service (FMS) officials about their
processes for collecting Army soldier debt referred by DFAS. In
addition, we obtained independent confirmation from credit bureaus and
FMS that DFAS had recalled credit bureau reporting and private
collection agency and Treasury Offset Program referrals for WIA
soldiers for active debt cases. On April 5, 2006, we requested comments
on a draft of this report. We worked closely with the Army and DFAS to
ensure the accuracy of the factual information in our report. We
received oral comments from the Office of the Secretary of Defense on
April 21, 2006, and have summarized those comments in the Agency
Comments and Our Evaluation section of this report. We conducted our
work from June 2005 through March 2006 in accordance with generally
accepted government auditing standards.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Gregory D. Kutz, 202-512-7455:
Acknowledgments:
Staff making key contributions to this report include Stephen P.
Donahue, Dennis B. Fauber, Gayle L. Fischer, Danielle Free, Gloria
Hernandezsaunders, Wilfred B. Holloway, John B. Ledford, Barbara C.
Lewis, Renee McElveen, Richard C. Newbold, John P. Ryan, and Barry
Shillito.
[End of Section]
FOOTNOTES
[1] GAO, Military Pay: Inadequate Controls for Stopping Overpayments of
Hostile Fire and Hardship Duty Pay to Over 200 Sick or Injured Army
National Guard and Army Reserve Soldiers Assigned to Fort Bragg, GAO-06-
384R (Washington, D.C.: Apr. 27, 2006); Military Pay: Gaps in Pay and
Benefits Create Financial Hardships for Injured Army National Guard and
Reserve Soldiers, GAO-05-125 and GAO-05-322T (Washington, D.C.: Feb.
17, 2005); Army National Guard: Inefficient, Error-Prone Process
Results in Travel Reimbursement Problems for Mobilized Soldiers, GAO-05-
79 (Washington, D.C.: Jan. 31, 2005) and GAO-05-400T (Washington, D.C.:
Mar. 16, 2005); Military Pay: Army Reserve Soldiers Mobilized to Active
Duty Experienced Significant Pay Problems, GAO-04-990T (Washington,
D.C.: July 20, 2004) and GAO-04-911 (Washington, D.C.: Aug. 20, 2004);
and Military Pay: Army National Guard Personnel Mobilized to Active
Duty Experienced Significant Pay Problems, GAO-04-413T (Washington,
D.C.: Jan. 28, 2004) and GAO-04-89 (Washington, D.C.: Nov. 13, 2003).
[2] Pub. L. No. 97-365, 96 Stat. 1749 (1982).
[3] The Army refers to soldiers who were killed by hostile fire as
fallen soldiers.
[4] During February 2005, DFAS and the Army established the Wounded in
Action Support Team for WIA pay account management and initiated action
to create a centrally managed corporate database, with decentralized
pay account management.
[5] The Army's WIA databases include pay account and medical status
information on OEF and OIF soldiers who were injured and killed in
combat and soldiers who experienced disease and nonbattle injuries.
[6] Out-of-service soldier debts occur when a soldier has separated
from the service and is not receiving salary or other payments from the
department that can be offset to collect debt owed to a defense agency
or military service.
[7] As of September 30, 2005, the universe of soldiers in the WIA
databases used for our comparison to out-of-service debts totaled
11,142 soldiers, including 9,682 battle-injured soldiers and 1,460
soldiers who died as a result of combat injuries.
[8] As of September 30, 2005, there were some problems with unreported
information on battle-injured and fallen soldiers. In addition, the WIA
databases of battle-injured and fallen soldiers contained some
incomplete or incorrect information, including type of injury and
social security numbers, which are key to identifying soldiers as
battle injured and matching battle-injured and fallen soldier records
to out-of-service debt. However, for purposes of our audit, we have
concluded that the effect of these errors is not material.
[9] Circumstances in which debt can be offset against a deceased
soldier's final pay include normal adjustments to collect outstanding
advance pay, minimal overpayments within the current month, and other
outstanding debt, such as debt related to non-sufficient fund checks.
[10] Under TOP, delinquent out-of-service soldier debts may be offset
against Internal Revenue Service tax refunds, federal retirement
payments, or specific approved federal benefit payments due to the
debtor, such as Social Security Administration benefits payments.
[11] In accordance with § 301-71.305, Federal Travel Regulations,
federal employees are required to account for outstanding travel
advances when they file a travel claim. Any unused amount of a travel
advance is required to be repaid.
[12] 10 U.S.C. § 2774 and 32 U.S.C. § 716.
[13] 10 U.S.C. §§ 4837, 6161, and 9837.
[14] Pub. L. No. 109-163, § 683, 119 Stat. 3136, 3322 (2006).
[15] As of September 30, 2005, the universe of soldiers in the WIA
databases used for our comparison to out-of-service debts totaled
11,142 soldiers, including 9,682 battle-injured soldiers and 1,460
soldiers who died as a result of combat injuries.
[16] The Army's WIA databases capture data on all injured, sick, and
deceased GWOT soldiers for pay and debt account management purposes.
[17] The five Army systems are the Joint Personnel Tracking and
Accountability, Patient Accountability Real-time Reporting Tracking,
Medical Operational Data System, Patient Tracking Module, and
Electronic Military Personnel Office systems.
[18] Circumstances in which debt can be offset against a deceased
soldier's final pay include normal adjustments to collect outstanding
advance pay, minimal overpayments within the current month, and other
outstanding debt, such as debt related to non-sufficient fund checks.
[19] Department of Defense Appropriation Act, Pub. L. No. 102-172, §
8138, 105 Stat. 1150, 1212 (1991).
[20] In accordance with 41 C.F.R. § 301-71.305, federal employees are
required to account for outstanding travel advances when they file a
travel claim. Any unused amount of a travel advance is required to be
repaid.
[21] Pursuant to 10 U.S.C. § 1448, SBP is a mandatory program unless
both the soldier and his/her spouse, after being fully briefed on the
program, decline participation in writing.
[22] Pub. L. No. 102-172, § 8138, 105 Stat. 1212 (1991); Pub. L. No.
102-396, § 9100, 106 Stat. 1926 (1992); Pub. L. No. 103-139, § 8071,
107 Stat. 1457 (1993); Pub. L. No. 103-335, § 8060, 108 Stat. 2633
(1994); Pub. L. No. 104-61, § 8052, 109 Stat. 662 (1995).
[23] Under the more narrow statute, the Secretary will only be able to
cancel an enlisted soldier's debts existing before or at the time of
the soldier's discharge.
[24] 10 U.S.C. § 2774 and 32 U.S.C. § 716.
[25] 10 U.S.C. §§ 4837, 6161, and 9837.
[26] Pub. L. No. 89-508, 80 Stat. 308 (1966); Pub. L. No. 97-365, 96
Stat. 1749 (1982); and Pub. L. No. 104-134, 110 Stat. 1321-1358 (1966).
[27] Army soldiers discussed in this report include Active Component,
Army National Guard, and Army Reserve soldiers.
[28] 31 C.F.R. Parts 900-904, Federal Claims Collection Standards
(2005) and 31 C.F.R. Part 285, Debt Collection Authorities under the
Debt Collection Improvement Act (2005).
[29] 31 C.F.R. 903.3 (a)(1).
[30] See footnote 1.
[31] GAO-06-348R.
[32] See footnotes 1 and 3.
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