Military Personnel
Better Debt Management Procedures and Resolution of Stipend Recoupment Issues Are Needed for Improved Collection of Medical Education Debts Gao ID: GAO-08-612R April 1, 2008Military physicians and other health care professionals are needed to support operational forces during war or other military conflicts and to maintain the well-being of the forces during nonoperational periods. These professionals also provide health care services to military retirees and dependents. The Department of Defense (DOD) acquires its health care professionals primarily through two programs--the Armed Forces Health Professions Scholarship Program and the Financial Assistance Program--with which it recruits and trains military health care providers who fill medical specialty positions. These programs offer participants reimbursement for tuition, books, fees, other education expenses, and a stipend, which is a fixed amount of money given to the participants on a monthly basis, in return for an active duty service obligation. Recruiting and retaining highly qualified health care professionals, however, is becoming more challenging for each of the military services. The added stresses of repeated deployments and the general perceptions of war, along with the potential for health care providers to earn significantly more money outside of DOD, have caused some professionals to choose to separate themselves from military service, even after DOD has paid for all or part of their medical education. Because DOD medical training programs can take years and are a costly investment, DOD is negatively affected both financially and operationally when individuals do not fulfill their active duty obligations. The Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2008 directed the Comptroller General of the United States to report to the congressional defense committees by April 1, 2008, on the number of Health Professions Scholarship Program or Financial Assistance Program participants who do not enter active duty following completion of the program of studies for which they were enrolled, including the extent to which the military services have sought and received reimbursement for stipends or annual grants paid. Accordingly, we examined the extent to which (1) participants in the Health Professions Scholarship Program or Financial Assistance Program fail to enter active duty service, as obligated; (2) DOD has procedures in place to recoup expenditures paid under the Health Professions Scholarship Program or Financial Assistance Program to participants who failed to meet their contractual obligations; and, (3) DOD has specifically sought and received reimbursement for stipends.
Only a small percentage of the participants in the Armed Forces Health Professions Scholarship Program and Financial Assistance Program have failed to complete their education or serve their active duty service obligation. Our analyses of service and DFAS data showed that, for fiscal years 2003 through 2007, fewer than 1 percent (171) of the total number of participants (19,921) withdrew from the programs or, alternatively, graduated but did not go on to active duty service. The most common reasons cited by these participants were voluntary withdrawal from the program, medical disqualification, and academic failure. Upon withdrawal or release from the program, participants are obligated to reimburse the government for all or some portion of their medical education expenses unless relieved of that obligation by their respective service secretary. DOD has procedures in place to recoup medical education expenditures from participants who fail to complete their education or serve their active duty obligation, and many cases we reviewed were processed in a timely manner. However, in some cases, it took more than 5 years from the time recoupment actions on individuals' debts were initiated until the time DFAS established an official debt account and began collection efforts. Until DOD takes steps to clarify the roles and responsibilities for initiating debt recoupment actions, follow established debt collection procedures, and improve communications, its collection of medical education debts will be hindered by confusion and inconsistency. DOD's practice of seeking reimbursement for stipends has changed over time, and the department's efforts to recoup money are diminished by conflicting views among the services and DFAS over DOD's legal authority to recoup stipends. Without a clear determination regarding the recoupability of stipends and communication of this determination to all program participants, DOD is not in a position to ensure that it is collecting all of the money to which it is authorized or collecting reimbursements consistently across the services. Further, program participants do not have full and accurate information regarding DOD's recoupment policies.
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-08-612R, Military Personnel: Better Debt Management Procedures and Resolution of Stipend Recoupment Issues Are Needed for Improved Collection of Medical Education Debts
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Resolution of Stipend Recoupment Issues Are Needed for Improved
Collection of Medical Education Debts' which was released on April 2,
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United States Government Accountability Office:
Washington, DC 20548:
April 1, 2008:
Congressional Committees:
Subject: Military Personnel: Better Debt Management Procedures and
Resolution of Stipend Recoupment Issues Are Needed for Improved
Collection of Medical Education Debts:
Military physicians and other health care professionals are needed to
support operational forces during war or other military conflicts and
to maintain the well-being of the forces during nonoperational periods.
These professionals also provide health care services to military
retirees and dependents. The Department of Defense (DOD) acquires its
health care professionals primarily through two programs--the Armed
Forces Health Professions Scholarship Program and the Financial
Assistance Program--with which it recruits and trains military health
care providers who fill medical specialty positions. These programs
offer participants reimbursement for tuition, books, fees, other
education expenses, and a stipend, which is a fixed amount of money
given to the participants on a monthly basis, in return for an active
duty service obligation. Recruiting and retaining highly qualified
health care professionals, however, is becoming more challenging for
each of the military services. The added stresses of repeated
deployments and the general perceptions of war, along with the
potential for health care providers to earn significantly more money
outside of DOD, have caused some professionals to choose to separate
themselves from military service, even after DOD has paid for all or
part of their medical education. Because DOD medical training programs
can take years and are a costly investment, DOD is negatively affected
both financially and operationally when individuals do not fulfill
their active duty obligations.
The Conference Report accompanying the National Defense Authorization
Act for Fiscal Year 2008[Footnote 1] directed the Comptroller General
of the United States to report to the congressional defense committees
by April 1, 2008, on the number of Health Professions Scholarship
Program or Financial Assistance Program participants who do not enter
active duty following completion of the program of studies for which
they were enrolled, including the extent to which the military services
have sought and received reimbursement for stipends or annual grants
paid. Accordingly, we examined the extent to which (1) participants in
the Health Professions Scholarship:
Program or Financial Assistance Program fail to enter active duty
service, as obligated; (2) DOD has procedures in place to recoup
expenditures paid under the Health Professions Scholarship Program or
Financial Assistance Program to participants who failed to meet their
contractual obligations; and, (3) DOD has specifically sought and
received reimbursement for stipends.
To address our first objective, we obtained information related to the
programs' authorized levels, goals, accession, and attrition rates.
Using participant separation data from fiscal years 2003 through 2007,
we identified the reasons for participants to separate or fail to serve
their obligation. For our second objective, we interviewed officials
from the Defense Finance and Accounting Service (DFAS); the Offices of
the Surgeons General of the Army and Air Force; the Office of the
Secretary of the Air Force for Manpower and Reserve Affairs; the Air
Reserve Personnel Center, and the Navy's Bureau of Medicine and
Surgery. Additionally, we obtained and reviewed DOD debt collection
procedures, participant separation data from each of the services, and
delinquent account information from DFAS for fiscal years 2003 through
2007. We assessed the reliability of DFAS' data from the Defense Debt
Management System by obtaining information on its management of the
system and any data reliability procedures in place. We determined that
the DFAS' Defense Debt Management System's data were sufficiently
reliable for the purposes of this report. For our last objective, we
obtained legal documentation from DOD and the military services and
interviewed DFAS and service officials to discuss their interpretations
of how the collection of stipends has changed over the years. Further,
we analyzed changes to the statutes concerning DOD's authority to
recoup stipends. We also obtained and reviewed the service agreements
that program participants sign and their disclosure of recoupable
expenses.
We conducted this performance audit from February 2008 through March
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. Further
details on our scope and methodology can be found in enclosure I.
Results in Brief:
Only a small percentage of the participants in the Armed Forces Health
Professions Scholarship Program and Financial Assistance Program have
failed to complete their education or serve their active duty service
obligation. Our analyses of service and DFAS data showed that, for
fiscal years 2003 through 2007, fewer than 1 percent (171) of the total
number of participants (19,921) withdrew from the programs or,
alternatively, graduated but did not go on to active duty service. The
most common reasons cited by these participants were voluntary
withdrawal from the program, medical disqualification, and academic
failure. Upon withdrawal or release from the program, participants are
obligated to reimburse the government for all or some portion of their
medical education expenses unless relieved of that obligation by their
respective service secretary.
DOD has procedures in place to recoup medical education expenditures
from participants who fail to complete their education or serve their
active duty obligation, and many cases we reviewed were processed in a
timely manner. However, in some cases, it took more than 5 years from
the time recoupment actions on individuals' debts were initiated until
the time DFAS established an official debt account and began collection
efforts. Further, we found that confusion exists between the military
services and DFAS as to who bears responsibility for initiating the
debt recoupment actions. DFAS officials told us that they believe the
military services are to make attempts to collect on the debts before
turning them over to DFAS. However, officials from each of the military
services said that they do not attempt to collect any money themselves
because they claim to have neither (1) the debt collection authorities
that DFAS has, nor (2) the resources to dedicate to this task, even if
they had the authority to do so. We also found that DFAS did not always
follow debt collection procedures, as they often accepted Air Force
debt recoupment packages without the necessary transmittal letter,
which is used to track the routing and processing of the debts. In
addition, the military services reported that they would like to know
more about the status of the debts sent to DFAS, but DFAS contended
that it returns to the services the signed and dated transmittal
letters, when they exist, as an indication that the debt has been
officially accepted and is being pursued. Nevertheless, service
officials indicated that they could benefit from more frequent and
clearer communication about the status of the debts and any need to
reconcile DFAS and service data. For example, during the course of our
review, we found that DFAS was pursuing about $6 million in medical
education debt, while service records identified about $8.5 million in
debts. Until DOD takes steps to clarify the roles and responsibilities
for initiating debt recoupment actions, follow established debt
collection procedures, and improve communications, its collection of
medical education debts will be hindered by confusion and
inconsistency.
DOD's practice of seeking reimbursement for stipends has changed over
time, and the department's efforts to recoup money are diminished by
conflicting views among the services and DFAS over DOD's legal
authority to recoup stipends. Recent changes in the laws have resulted
in inconsistent interpretations among the military services and DFAS,
which collects the debts for the services. Accordingly, the agreements
that program participants sign upon accepting DOD's financial
assistance do not consistently state whether stipends are to be
recouped. Without a clear determination regarding the recoupability of
stipends and communication of this determination to all program
participants, DOD is not in a position to ensure that it is collecting
all of the money to which it is authorized or collecting reimbursements
consistently across the services. Further, program participants do not
have full and accurate information regarding DOD's recoupment policies.
We are recommending that the Secretary of Defense take several
measures, first, to help strengthen debt collection procedures among
the services and DFAS, and second, to resolve conflicting
interpretations of the legal authority to recoup stipends, so as to
ensure that DOD can collect all of the money to which it is authorized
and can do so consistently across the services and in a timely manner.
In commenting on a draft of our report, DOD concurred with each of our
recommendations and included estimated completion dates for taking
corrective actions. The department's comments are reprinted in
enclosure II.
Background:
With the end of the draft in 1972, the military services needed a new
means of acquiring active duty physicians. To address this need, the
Uniformed Services Health Profession Revitalization Act of 1972
contained provisions that allowed the secretaries of each military
department to establish and maintain a health professions scholarship
program for their respective department under regulations prescribed by
the Secretary of Defense.[Footnote 2] Under these provisions, DOD
developed the F. Edward Hébert Armed Forces Health Professions
Scholarship Program and Financial Assistance Program, which is the
military services' largest source for physicians.[Footnote 3] While the
Assistant Secretary of Defense for Health Affairs, who reports to the
Under Secretary of Defense for Personnel and Readiness, provides
procedures and standards required to implement both the Health
Professions Scholarship Program and the Financial Assistance Program,
the individual service departments[Footnote 4] are responsible for
managing, funding, and administering their portions of these programs.
Under the Health Professions Scholarship Program, qualified students
receive full medical school tuition and reimbursement for books and
various equipment and fees, as well as a stipend, a fixed amount of
money given to the participants on a monthly basis. In return, after
graduation, program participants incur an 8-year contractual service
obligation. The contractual service obligation consists of two
elements: the active duty obligation and the reserve service
obligation. The active duty obligation is calculated as a 2-year
minimum plus an additional 6 months for every 6-month semester of
educational benefits received. The reserve service obligation is the
portion of the 8-year contractual service obligation remaining after
the participant serves the active duty obligation portion. The
Financial Assistance Program targets health care professionals in
specialty training by offering them an annual grant, monthly stipend,
and reimbursement for books, various equipment, and fees. In return,
they, too, incur a contractual service obligation.
All persons who enroll in either the Health Professions Scholarship
Program or the Financial Assistance Program sign an agreement with
their respective service. While agreements differ by service, they
generally contain a provision requiring the program participant to
agree to reimburse the U. S. government for all costs it incurred, plus
interest, or any portion thereof, as determined by the respective
service secretary in the event that the participant voluntarily or
because of misconduct or other reasons fails to complete the active
duty or alternative service obligations set out in the agreement. While
most of the programs' participants enter active duty at the O-3 pay
grade (that is, as captains in the Army or Air Force and as lieutenants
in the Navy) upon graduation from the program and begin their first
year of graduate medical education in military medical facilities, some
participants do not graduate from the program, and some graduate but
decline to fulfill their active duty obligation for various reasons. If
the participants' resignation is approved and it is determined that
they must repay all or part of their medical education expenses, the
services initiate the debt recoupment paperwork and DFAS records and
manages any delinquent debts assigned to it from the services.
DOD guidance[Footnote 5] limits the total number of participants in the
Health Professions Scholarship Program and Financial Assistance Program
to 5,000 per year--a participant pool that was equally divided among
the services until the beginning of fiscal year 2006. Since that date,
a larger share has been allocated to the Army because of its increased
projected needs. During fiscal years 2003 through 2007, the Army had a
cumulative total of 7,229 program participants, the Navy had 6,248
participants, and the Air Force had 6,444 participants. Table 1 shows
the breakdown of the cumulative program costs for the 5 most recent
fiscal years.
Table 1: Total Health Professions Scholarship Program and Financial
Assistance Program Costs Expended by the Army, Navy, and Air Force for
Fiscal Years 2003-2007 (rounded to the nearest thousand):
Expense item: Tuition;
Army: $223,906,000;
Navy: $215,249,000;
Air Force: $164,971,000.
Expense item: Stipends;
Army: $88,700,000;
Navy: $80,637,000;
Air Force: $108,060,000.
Expense item: Other expenses;
Army: $14,298,000;
Navy: $14,633,000;
Air Force: $32,350,000.
Expense item: Totals;
Army: $326,904,000;
Navy: $310,519,000;
Air Force: $305,381,000.
Source: Army, Navy, and Air Force data.
[End of table]
Number of Participants Who Fail to Graduate or Serve Their Obligation
Is Low:
We found that for fiscal years 2003 through 2007, fewer than 1 percent
of a total of 19,921 participants across each of the military services'
Health Professions Scholarship Program and Financial Assistance Program
failed to graduate or to serve their active duty obligation.
Participants' reasons for quitting the program or not serving ranged
from personal reasons to academic or medical disqualifications.
We analyzed both service and DFAS data for the number of individuals
who failed to graduate or who did not serve their active duty
obligation, along with the reasons for their withdrawal. Our analyses
showed that, for fiscal years 2003 through 2007, a total of 171
individuals--51 from the Army, 48 from the Navy, and 72 from the Air
Force--either did not complete their education or failed to serve their
obligation. Each of these totals comprises about 1 percent of its
respective service's total participants for the same time frame. These
individuals failed to complete the programs for a variety of reasons.
Table 2 shows the reasons given for separation for these 171
individuals.
Table 2: Reasons for Individuals' Withdrawals from the Health
Professions Scholarship Program and the Financial Assistance Program--
Fiscal Years 2003-2007:
Reason: Voluntary withdrawal;
Number of occurrences: 44.
Reason: Medical disqualification;
Number of occurrences: 29.
Reason: Academic failure;
Number of occurrences: 20.
Reason: Declaration of homosexual orientation;
Number of occurrences: 15.
Reason: Noncompliance/misconduct;
Number of occurrences: 15.
Reason: Personal/hardship;
Number of occurrences: 12.
Reason: Declaration of conscientious objector status;
Number of occurrences: 8.
Reason: Gender identity disorder;
Number of occurrences: 1.
Reason: Security clearance denial;
Number of occurrences: 1.
Reason: Unknown;
Number of occurrences: 26.
Total:
Number of occurrences: 171.
Source: DOD case files.
Note: We were not able to confirm reasons for withdrawals in all cases
because detailed files were not available at the time of our review.
[End of table]
When participants resign from the program, they must give the reason
for their separation, and a decision is made as to whether to accept
their resignation and whether or not they will be obligated to repay
their medical educational expenses. When recoupment of medical
education expenses is determined to be necessary, the services initiate
their debt recoupment paperwork.
DOD Has Procedures in Place to Recoup Expenses, but Procedural
Weaknesses Are Hindering Implementation:
DOD has established procedures to recoup medical education expenditures
from participants who fail to complete their education or to serve
their active duty service obligation; however, our analyses revealed
weaknesses in the collection, management, and monitoring of these
debts, such as significant delays in the collection of some accounts.
Specifically, confusion exists with regard to the roles and
responsibilities for the initiation of debt recoupment actions, and we
found that DFAS had not been fully adhering to established debt
collection procedures. Further, once DFAS accepts and records debt
recoupment packages, little communication occurs between DFAS and the
services concerning the status of the recoupment efforts. DFAS is
currently pursuing about $6 million in medical education debt that
resulted from participants leaving the program or choosing not to
fulfill their service obligation for the years we reviewed.
While the services transferred many complete and properly constructed
debt recoupment packages to DFAS in a timely manner, several years
passed in other cases before DFAS initiated any recovery. The Under
Secretary of Defense (Comptroller) is responsible for establishing
uniform DOD financial management policies, principles, and procedures
and has issued a financial management regulation that addresses these
matters. Even though DOD's regulation[Footnote 6] clearly states what
items the services are to include in debt packages that are transferred
to DFAS, we found several examples of debt packages that were returned
from DFAS to the services multiple times because they were incomplete
or improperly constructed, which resulted in significant delays in the
process. For example, the Army prepared the debt recoupment paperwork
for one case in July 2003, but did not send a complete and properly
constructed debt package to DFAS until February 2008. Thus, no
collections occurred for a 5-year period on a $17,000 debt.
Additionally, the Army began the paperwork on a $221,000 debt beginning
in January 2005, but the Army still had not sent DFAS a complete and
proper debt package at the time of our review. According to DFAS
officials, it is not uncommon for large time gaps to elapse while DFAS
waits for the services to complete required documentation or properly
prepare the packages after DFAS has rejected them as incomplete. Such
rejections and returns can occur multiple times on a single case. For
example, DFAS initially rejected a Navy case in November 2005 because
the debt amount was missing from the documentation, and so DFAS sent it
back to the Navy. DFAS rejected the package a second time in May 2006
because the package did not include an appropriation code or breakdown
of the debt and again sent it back to the Navy. DFAS subsequently
rejected the package a third time in May 2007 for the same reasons and
a fourth time in February 2008, stating in the latter case that it
could not recoup stipend amounts that the Navy had included in the
package. Army and Navy officials confirmed that they were unaware of
instructions for preparing debt recoupment paperwork and were unsure of
the content and format that DFAS expects in the debt packages.
Roles and responsibilities between DFAS and the military services for
initiating debt recoupment actions are not clear. According to DFAS
officials, the services are supposed not only to issue the initial
bill, invoice, notice, or demand for payment letter, but also to
attempt collecting on the debt and to take appropriate follow-up action
before transferring the debt. However, responsible officials from the
Army, Navy, and Air Force all told us that they do not attempt any
initial collection of funds because they have neither (1) the debt
collection authorities that DFAS has, nor (2) the resources to dedicate
to this task, even if they had the authority to do so. As a result, the
military services have been preparing the initial debt recoupment
packages, and DFAS has been collecting the debts.
Additionally, we found an example where DFAS had not been adhering to
established debt recoupment procedures. The DOD Financial Management
Regulation requires the military services to prepare and submit a debt
transmittal letter to DFAS to process the delinquent debts. Use of the
transmittal letter helps to control the transmission of debt cases and
to identify all attached debt case files by name, social security
number, and monetary amount. Once DFAS accepts the debt and records it
in its Defense Debt Management System, a copy of the transmittal letter
is returned to the service with an effective date of transfer listed on
it. DFAS officials said that this transmittal letter is an important
part of the package and that without it, packages would be rejected.
However, they noted that since the Air Force debt packages come from an
office co-located with DFAS in the same building, DFAS officials often
accepted hand-carried Air Force debt packages without transmittal
letters. The informality of this practice increases the potential for
errors in transferring and tracking these debt packages between DFAS
and the Air Force.
In addition, both DFAS and service officials explained that little
communication occurs between them concerning the status of the
recoupment effort after DFAS accepts and records a debt package in its
Defense Debt Management System. Officials from each of the military
services said that they would like to know more about the status of the
debts sent to DFAS. However, DFAS officials stated that they send
signed and dated transmittal letters, when they exist, back to the
services and contended that this action fulfilled their purpose.
Nevertheless, service officials indicated that they could benefit from
more frequent and clearer communication.
To correlate the amount of debt established and sought by the services
and DFAS, we compared the services' data regarding individuals who did
not complete the program or failed to serve their active duty
obligation for fiscal years 2003 through 2007 against the data DFAS
extracted from its Defense Debt Management System. Table 3 shows the
differences between the service and DFAS data.
Table 3: Number of Individuals and Debts Owed, as Reported by the
Military Services and DFAS (rounded to the nearest thousand):
Service: Army;
Services' data: $3,696,000 (48 individuals);
DFAS' data: $2,161,000 (41 individuals).
Service: Navy;
Services' data: $2,263,000 (39 individuals);
DFAS' data: $407,000 (10 individuals).
Service: Air Force;
Services' data: $2,594,000 (57 individuals);
DFAS' data: $3,252,000 (57 individuals).
Service: Totals;
Services' data: $8,553,000 (144 individuals);
DFAS' data: $5,820,000 (108 individuals).
Source: Army, Navy, Air Force, and DFAS data.
[End of table]
As table 3 shows, the data provided by the services indicate that there
is about $8.5 million in debts, while the DFAS data indicate that there
is approximately $6 million of delinquent medical education debt
recorded in its system for accounts initiated during fiscal years 2003
through 2007. Similarly, the data provided by the services identified
144 individuals who owed debts, while the data maintained by DFAS
identified only 108 individuals. Our efforts to reconcile the data
revealed multiple reasons why differences existed between the two data
sets, but in actuality, the differences for almost all of the cases
could be explained. Many of the differences can be explained by the
following three reasons and are consistent with issues we have
previously discussed. First, we found that the service data contained a
number of debts that had been paid in full and had therefore been
purged from the DFAS database. Second, we found cases that the services
had initiated and that DFAS had rejected and sent back to the services,
most often because the recoupment package was either incomplete or
improperly prepared, and therefore they had not yet been recorded in
the DFAS system. Third, we found cases for which the services had
prepared debt recoupment packages they had only recently sent to DFAS,
where the packages had not yet been reviewed and accepted and were
therefore not yet recorded in the DFAS system. This was especially true
for the Navy, from which 17 individuals' debt packages had just arrived
at DFAS at the time of our review. Additionally, the Navy list included
11 more individuals who had separated from the program as far back as
2004, but whose debt packages had just been completed and had not yet
been sent to DFAS for review. Complicating our review of the DFAS
records was the fact that some of its files had inadvertently been sent
to the Federal Center for storage in preparation for DFAS' upcoming
move to Indianapolis. Taking these and other factors into account, we
developed a reconciled list that, we believe, reflects a more realistic
snapshot of the status of recoupment for the time frame we examined.
Our reconciled list indicates that there were actually 51 Army, 48
Navy, and 72 Air Force individuals, for a total of 171 individuals, who
account for approximately $10 million of medical education debt either
already collected or currently in the process of recoupment, as shown
in table 4.
Table 4: Reconciled Medical Education Debts for Fiscal Years 2003-2007
and Average Debt Amount per Individual (rounded to the nearest
thousand):
Reconciled debt amounts;
Army (51 individuals): $3,840,000;
Navy (48 individuals): $2,595,000;
Air Force (72 individuals): $3,684,000;
Total (171 individuals): $10,119,000.
Average debt;
Army (51 individuals): $75,000;
Navy (48 individuals): $54,000;
Air Force (72 individuals): $51,000;
Total (171 individuals): $59,000.
Source: GAO analysis of DFAS, Army, Navy, and Air Force data.
Totals may include stipend amounts.
[End of table]
Until DOD takes steps to clarify roles and responsibilities, follow
existing regulations, and develop better communication procedures, its
collection of medical education debts will be hindered by confusion and
inconsistency.
Unresolved Questions Exist as to DOD's Authority to Recoup Stipends:
DFAS and the military services are not in agreement as to whether
stipends paid under the Health Professions Scholarship Program or the
Financial Assistance Program can be recouped from those who fail to
complete either the program or their active duty service obligation.
The practice of recouping stipends has undergone changes over the
years, and the Health Professions Scholarship Program and Financial
Assistance Program service agreements that individuals sign upon
accepting DOD's financial assistance do not consistently state whether
stipends are to be recouped.
DFAS officials told us that until mid-2007, they were collecting
stipend amounts as part of debt recoupment accounts. They said that at
about that time, however, they were advised that the issue of stipend
recoupment had been reviewed by the DFAS General Counsel, Army
attorneys, and an Office of the Secretary of Defense attorney, all of
whom had concluded that stipends could not be recouped, based on
section 2005 of Title 10 of the U.S. Code[Footnote 7], which addresses
active duty agreement and reimbursement requirements for people
receiving advanced education assistance. Since these attorneys decided
that stipends were not recoupable, DFAS started rejecting debt packages
sent from the services if the packages included stipend amounts,
sending with the rejections a standard cover sheet explaining this
position. Officials we spoke with from each of the services confirmed
that the issue of stipend recoupment has been confusing, that there
seems to have been a change in the practice of recouping stipends
within the past year, and that the change has caused many recoupment
packages to be rejected by DFAS.
We discussed the confusion over the current legal status of the stipend
recoupment issue with an Air Force legal official during the course of
our review. He confirmed that differing interpretations of the laws
existed and mentioned that a number of revisions and amendments had
been made to the laws over the past 25 years. He explained that Air
Force officials had again reviewed the statutes and determined that the
amendments in the 2006 National Defense Authorization Act had made
stipends recoupable. The Air Force currently holds that stipends are
recoupable, based on section 303a (e) of Title 37 of the U.S. Code,
which addresses repayment of bonuses and other benefits.[Footnote 8]
Additionally, we reviewed a number of Army, Navy, and Air Force service
agreements and discussed them with officials to determine whether they
specifically mentioned stipends as part of the medical education costs
that could be recouped. We determined that, in all but one agreement we
examined, stipends were not explicitly addressed. They generally
contain a provision that follows a standard format requiring a program
participant to agree to repay the government for all costs incurred,
plus interest, or any portion thereof, as determined by the respective
service secretary, in the event that the participant voluntarily or
because of misconduct or other reasons fails to complete the active
duty or alternative service obligations set forth in the agreement. In
most of the agreements we reviewed, no specific references were made to
stipends. The Air Force official informed us that the fiscal year 2008
Air Force Health Professions Scholarship Program and Financial
Assistance Program service agreements will contain language reflecting
the 2006 change to the law that, in their opinion, allows stipends to
be considered a recoupable medical education cost.
As a result of these inconsistencies regarding the eligibility of the
stipend for recoupment, DOD is not in a position to ensure that it is
collecting all of the money to which it is authorized or collecting
reimbursements consistently across the services. Furthermore, program
participants do not have full and accurate information about DOD
recoupment policies.
Conclusions:
Although nearly all participants in the Armed Forces Health Professions
Scholarship Program and Financial Assistance Program complete their
medical education and serve their required active duty service, there
are a number of cases where this does not happen. Because of the time
required to educate and train medical personnel and the financial
investment that DOD makes in these individuals, their loss further
exacerbates the challenges DOD faces in its ability to fill critically
needed medical positions. Even though DOD can seek recoupment of the
money spent on these students, its ability to actually collect that
money is complicated by noncompliance with internal regulations, the
lack of a system to routinely monitor and follow up on these debts, and
legal questions. Until DOD takes steps to clarify roles and
responsibilities, follow established debt recoupment procedures,
develop better communication procedures, determine the legality of
stipend recoupment, and clarify that determination to the military
services and program participants, its collection of medical education
debts will be hindered by confusion and inconsistency.
Recommendations for Executive Action:
To help strengthen debt collection procedures, we recommend that the
Secretary of Defense direct:
* the Under Secretary of Defense, Comptroller, and the service
secretaries to clarify the roles and responsibilities of DFAS and the
services for initiating the debt recoupment collection process and
revise the DOD Financial Management Regulation as necessary;
* the Director, Defense Finance and Accounting Service, to follow the
established regulation requiring transmittal letters as part of debt
recoupment packages transferred from the military services; and,
* the Director, Defense Finance and Accounting Service, to establish a
procedure to periodically communicate with the services the status of
debt recoupment packages that DFAS has officially accepted and
established within its Defense Debt Management System so that any
discrepancies among the services' records can be reconciled in a timely
manner.
To provide greater assurance that the correct legal sums of money are
recouped from program participants who do not fulfill their active duty
service obligations and to fully disclose debt collection expectations,
we recommend that the Secretary of Defense direct:
* the Under Secretary of Defense for Personnel and Readiness, in
coordination with the Under Secretary of Defense, Comptroller, the
Assistant Secretary of Defense for Health Affairs, and DOD General
Counsel, to review and determine whether stipends are legally eligible
for recoupment and clearly communicate this determination to the
services and DFAS; and,
* the Assistant Secretary of Defense for Health Affairs and the service
secretaries to determine whether specific language needs to be included
in program participants' service agreements in order to accurately
reflect the policy regarding recoupable expenses, once that
determination is made, and include specific language in the agreements
if found to be necessary.
Agency Comments and Our Evaluation:
In commenting on a draft of our report, DOD concurred with each of our
recommendations and included estimated completion dates for taking
corrective actions. The department's comments are reprinted in their
entirety in enclosure II.
We are sending copies of this report to the Secretary of Defense; the
Secretaries of the Army, Navy, and Air Force; and the Director of the
Defense Finance and Accounting Service. We will also make copies
available to others on request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Should you or your staff have any questions on the matters discussed in
this report, please contact me at (202) 512-3604 or farrellb@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this letter. GAO staff who
made key contributions to this report are listed in enclosure III.
Signed by:
Brenda S. Farrell:
Director, Defense Capabilities and Management:
Enclosures - 3:
List of Congressional Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
United States House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States House of Representatives:
[End of correspondence]
Enclosure 1:
Scope and Methodology:
To address our objectives, we obtained and reviewed available
documents, laws, regulations, and other information related to the
Armed Forces Health Professions Scholarship Program and Financial
Assistance Program.
We interviewed officials within the TRICARE Management Activity, the
Defense Finance and Accounting Service, the Offices of the Surgeons
General of the Army and Air Force, the Office of the Secretary of the
Air Force for Manpower and Reserve Affairs, the Air Reserve Personnel
Center, and the Navy's Bureau of Medicine and Surgery.
To determine the extent to which the participants of the Health
Professions Scholarship Program and Financial Assistance Program fail
to enter active duty service as obligated, we obtained both accession
and attrition information from the military services along with reasons
for disenrollment.
Initially, we discussed the programs with a TRICARE Management Activity
official since this office manages the execution of policy issued by
the Assistant Secretary of Defense for Health Affairs in the
administration of all DOD medical and dental programs. From this
office, we obtained various statutory authority documentation, DOD
guidance, directives, and policy memorandum citations, overall program
participant goals and actual fill rates for fiscal years 2003 through
2007 and by corps (medical, dental, nurse, or allied health).
Each of the military services provided data of the participants who,
for fiscal years 2003 through 2007, had failed to complete their
medical education or did not fulfill their active duty service
obligation after their graduation and now had a medical education
related debt to DOD. Additionally, they also provided specific reasons
why these participants separated from the program or failed to fulfill
their active duty service obligations. From this information we
compiled a summary of the most common reasons for separation.
To determine the extent to which DOD has procedures in place to recoup
expenditures paid to Health Professions Scholarship Program or
Financial Assistance Program participants who fail to fulfill the
active duty obligation, we obtained statutes and legal opinions along
with DOD, the Defense Finance and Accounting Service, and each
service's regulations or instructions on recoupment procedures.
We also used GAO's Internal Control Management and Evaluation Tool
(GAO-01-1008G), to identify important communication procedures.
Adherence to these standards, while not required, provides a
systematic, organized, and structured approach to assessing an agency's
internal control structure. Additionally, we obtained data from the
Defense Finance and Accounting Service's Defense Debt Management System
of all participants for fiscal years 2003 through 2007 for whom it had
a medical education related debt established in the automated system.
Using this information and the data that the military services had
provided earlier, we used a case-by-case analysis to reconcile the data
and explain the differences between the two sets of data in order to
identify weaknesses in the internal control procedures for reporting
and managing the collection of delinquent medical education debts. We
assessed the reliability of the Defense Finance and Accounting
Service's data from the Defense Debt Management System by obtaining
information on the management of the system and any data reliability
procedures in place. We determined that the Defense Finance and
Accounting Services' Debt Management System's data were sufficiently
reliable for the purposes of this report.
To determine the extent to which the DOD has, specifically, sought and
received reimbursement for stipends, we obtained legal documentation
from DOD and the military services and discussed their interpretations
of how the collection of stipends has changed over the years. Further,
we analyzed changes to the statutes concerning DOD's authority to
recoup stipends. Additionally, we obtained and reviewed the service
agreements that program participants sign and their disclosure of
recoupable expenses.
We conducted this performance audit from February 2008 through March
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit.
[End of enclosure 1]
Enclosure 2:
Comments from the Department of Defense:
The Assistant Secretary Of Defense:
Health Affairs:
Washington, DC 20301-1200:
March 28, 2008:
Ms. Brenda S. Farrell:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Ms. Farrell:
This is the Department of Defense response to the Government
Accountability Office (GAO) draft report, "Military Personnel: Better
Debt Management Procedures and Resolution of Stipend Recoupment Issues
Are Needed for Improved Collection of Medical Education Debts," dated
March 24, 2008 (GAO Code 351130/GAO-08-612R). We concur with the
recommendations of the report.
My points of contact on this audit are Mr. Richard Franco (functional)
at (703) 681”4321 and Mr. Gunther Zimmerman (Audit Liaison) at (703)
681-4360.
Sincerely,
Signed by [illegible], for:
S. Ward Casscells, MD:
Enclosure: As stated:
GAO Draft Report Dated March 24, 2008:
GAO-08-612R (GAO CODE 351130):
"Military Personnel: Better Debt Management Procedures and Resolution of
Stipend and Stipend Recoupment Issues are Needed for Improved
Collection of Medical Education Debts"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense. Comptroller, and the service
Secretaries to clarify the roles and responsibilities of the Defense
Finance and Accounting Service (DFAS) and the services for initiating
the debt recoupment collection processes and revise the DOD Financial
Management Regulation as necessary.
DOD Response: Concur. The Deputy Chief Financial Officer (DCFO) will
clarify the roles and responsibilities of the DFAS and the Services for
initiating the debt recoupment collection process and revise the DOD
Financial management Regulation, Volume 5, Chapter 29. "Collection of
Out-of-Service Debts," as necessary. Estimated completion date is June
30, 2008.
Recommendation 2: The GAO recommends that the Secretary of Defense
direct the Director of DFAS to follow the established regulation
requiring transmittal letters as part of debt recoupment packages
transferred From the military services;
DOD Response: Concur. During the audit, it was discovered that
transmittal letters were not required for debt packages that were hand
carried from the Air Reserve Personnel Center (ARPC) to the DFAS
technician. The DCFO will direct the Director, DFAS to issue policy
memorandum advising ARPC that a transmittal letter must accompany all
debt recoupment packages. Estimated completion date is April 4. 2008.
Recommendation 3: The GAO recommends that the Secretary of Defense
direct the Director of DFAS to establish a procedure to periodically
communicate with the services the status of debt recoupment packages
that DFAS has officially accepted and established within its Debt
Management System so that any discrepancies among the services' records
can be reconciled in a timely manner.
DOD Response: Concur. The DCFO will direct the Director, DFAS to
periodically communicate with the Services the status of debt
recoupment packages that DFAS has officially accepted and established
within its Debt Management System so that any discrepancies among the
Service's records can be reconciled in a timely manner. Estimated
completion date is April 4, 2008.
Recommendation 4: The GAO recommends that the Under Secretary of
Defense for Personnel and Readiness, in coordination with the Under
Secretary of Defense, Comptroller, the Assistant Secretary of Defense
for Health Affairs, and DOD General Counsel, to review and determine
whether stipends are legally eligible for recoupment and clearly
communicate this determination to the services and DFAS
DOD Response: Concur. This issue will he referred to the appropriate
legal counsel offices for review by 01 April 2008.
Recommendation 5: The GAO recommends that the Assistant Secretary of
Defense for Health Affairs and the service secretaries to determine
whether specific language needs to be included in program participants'
service agreements in order to accurately reflect the policy regarding
recoupable expenses, once that determination is made. and include
specific language in the agreements if found to be necessary.
DOD Response: Concur, pending outcome of DOD response to Recommendation
4.
[End of enclosure 2]
Enclosure 3:
GAO Contacts and Staff Acknowledgments:
GAO Contact:
Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov:
Acknowledgments:
In addition to the individual named above, David Moser (Assistant
Director), Rebecca Beale, Janine Cantin, Nicole Harms, Terry
Richardson, Cheryl Weissman, and Matthew Young made key contributions
to this report.
[End of enclosure 3]
Footnotes:
[1] H.R. Conf. Rep. No. 110-477, at 928 (2007).
[2] Pub. L. No. 92-426, §2121 (1972), codified at 10 U.S.C. §§2120-
2127.
[3] The scholarship program also sponsors students of dentistry,
optometry, and nursing, for example.
[4] The Navy's medical department supports both the Navy and the Marine
Corps.
[5] DOD Directive 6000.12, Health Services Operations and Readiness
(Apr. 29, 1996).
[6] DOD 7000.14-R, Volume 5, Chapter 29, August 2003.
[7] This law allows service secretaries to require a person to enter
into a written agreement, as a condition to receiving assistance, in
which the person agrees to, among other things, be subject to the
repayment provisions of 37 U.S.C. 303a (e) in the event that the person
does not fulfill the obligations specified in the agreement. Prior to
an amendment in the National Defense Authorization Act for Fiscal Year
2006, 10 U.S.C. §2005 did not make reference to 37 U.S.C. 303a (e) but
required the person to agree to repay a portion of the total "cost of
advanced education." Section 2005 contains a provision that exempts
stipends under the Health Professions Scholarship Program from the
definition of "cost of advanced education" for purposes of that
section.
[8] The Air Force believes stipends are recoupable under 37 U.S.C.
§303a(e), as recently amended by section 687 of the National Defense
Authorization Act for Fiscal Year 2006, which states that a member of
the uniformed services who receives a "bonus or similar benefit" that
is subject to the condition that the member continue to satisfy certain
eligibility requirements shall repay to the United States an amount
equal to the unearned portion of the bonus or similar benefit if the
member fails to satisfy the requirements, except in certain
circumstances authorized by the Secretary concerned. It further states
that the term "bonus or similar benefit" means a bonus, incentive pay,
special pay, or similar payment, or an educational benefit or stipend,
paid to a member of the uniformed services under a provision of law
that refers to the repayment requirements of this subsection.
[End of section]
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