Report to the Subcommittee on 

Defense, Committee on Appropriations, 

House of Representatives 

United States General Accounting Office 

GAO 

November 2003 MILITARY 

PERSONNEL 

DOD Needs More 

Effective Controls to 

Better Assess the 

Progress of the 

Selective 

Reenlistment Bonus 

Program 

GAO-04-86 
www.gao.gov/cgi-bin/getrpt?GAO-04-86.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Derek Stewart 

at (202) 512-5559 or stewartd@gao.gov. 

Highlights of GAO-04-86, a report to the 

Subcommittee on Defense, Committee on 

Appropriations, House of Representatives 

November 2003 

MILITARY PERSONNEL

DOD Needs More Effective Controls to 

Better Assess the Progress of the 

Selective Reenlistment Bonus Program 

Despite congressional concerns about the SRB program, DOD’s May 2003 

report stated that the program is managed carefully, bonuses are offered 

sparingly, and the services need flexibility in administering the program. 

However, DOD’s responses did not thoroughly address four of the five SRB 

program concerns contained in the mandate. As a result, Congress does not 

have sufficient information to determine if the program is being managed 

effectively or efficiently. For example, 

• DOD has not issued replacement program guidance and did not allow 

us to review the guidance that has been drafted. DOD’s report focused 

primarily on criteria for designating occupations as critical, but the 

report did not address an important change—the potential elimination of 

the requirement for conducting annual program reviews. In response to 

our 2002 report, DOD stated that this requirement would be eliminated 

from future program guidance. DOD recently told us that the new 

guidance will require periodic reviews, but neither the frequency nor the 

details of how these reviews would be conducted was explained. 

• DOD conducted a limited evaluation to address the congressional 

concern about how well the services are administering their programs. 

The response consisted largely of program descriptions provided by 

the services. Among other things, DOD did not use a consistent set of 

procedures and metrics to evaluate each of the services’ programs. 

Consequently, it is difficult to identify best practices, or to gain other 

insights into ways in which the effectiveness and efficiency of the 

services’ programs could be improved. 

DOD thoroughly addressed the congressional concern pertaining to the 

advantages and disadvantages of paying SRBs as lump sums. 

SRB Program Budget Growth, Fiscal Years 1997-2005 

a

In-year (or current) estimate. bFiscal year 2004 budget request. cFiscal year 2005 budget estimate. 

The Department of Defense (DOD) 

uses the Selective Reenlistment 

Bonus (SRB) program to reenlist 

military personnel in critical 

specialties. In fiscal years 

1997-2003, the program budget rose 

138 percent, from $308 million to 

$734 million (see fig.). In fiscal year 

2003, the House Appropriations 

Committee directed the Secretary 

of Defense to reassess program 

efficiency and report on five 

concerns: (1) how effective the 

program is in correcting retention 

shortfalls in critical occupations, 

(2) how replacement guidance will 

ensure targeting critical specialties 

that impact readiness, (3) how 

DOD will match program execution 

with appropriated funding, (4) how 

well the services’ processes for 

administering the program work, 

and (5) advantages and 

disadvantages of paying bonuses 

in lump sum payments. The 

committee also directed GAO to 

review and assess DOD’s report. 

GAO recommends that the 

Secretary of Defense direct the 

Undersecretary of Defense for 

Personnel and Readiness to 

(1) retain the requirement for an 

annual review of the SRB program 

and (2) develop a consistent set 

of methodologically sound 

procedures and metrics for 

reviewing the effectiveness and 

efficiency of all aspects of each 

service’s SRB program 

administration. DOD agreed with 

the recommendations. 
Page i GAO-04-86 Military Personnel 

Letter 1

Results in Brief 3

Background 4

DOD’s Report Did Not Thoroughly Address Congressional 

Concerns 7

Conclusions 15

Recommendation for Executive Action 16

Agency Comments 16

Appendix I Scope and Methodology 17 

Appendix II Comments from the Department of Defense 18 

Figure 

Figure 1: SRB Program Budget Growth, Fiscal Years 1997-2005 5

Abbreviations 

DOD Department of Defense 

OMB Office of Management and Budget 

OSD Office of the Under Secretary of Defense 

SRB Selective Reenlistment Bonus 

Contents 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
Page 1 GAO-04-86 Military Personnel 

November 13, 2003 

The Honorable Jerry Lewis 

Chairman 

The Honorable John Murtha 

Ranking Minority Member 

Subcommittee on Defense 

Committee on Appropriations 

House of Representatives 

To meet its total active-duty force requirements, the Department of 

Defense (DOD) must reenlist about 150,000 personnel each year. The 

Selective Reenlistment Bonus (SRB) program is intended to help the 

services increase reenlistments in occupational specialties, such as 

linguists and information technology specialists, that the Secretary of 

Defense deems to be critical. Concerned about missing their overall 

retention goals in the late 1990s, all the services expanded their use of 

SRBs to help retain more enlisted personnel. As a result, the cost of the 

program more than doubled—from $308 million1

 in fiscal 1997 to 

$791 million in fiscal 2002. During the last few years, Congress also 

approved DOD requests for basic pay increases above the rate of inflation 

to address the services’ retention concerns. Despite military pay increases 

and improved overall retention, funding for the services’ SRB budget is 

expected to rise to over $800 million in fiscal year 2005. Moreover, about 

one-third of all current reenlistments receive SRBs. 

To facilitate closer monitoring of the SRB program, congressional defense 

committees requested our 1995 and 2002 reviews of the program. The 

House Appropriations Committee also mandated2

 our current review of 

DOD's recently issued report on the program. In our 2002 report,3

 we 

identified several management and oversight concerns. For example, some 

 1

 All budget information in this report has been converted to constant fiscal year 2004 

dollars, except where noted otherwise. 

2

 House Report (H.R. Rep. 107-532), June 25, 2002, accompanying H.R. 5010, Department of 

Defense Appropriations Bill, 2003. 

3

 U.S. General Accounting Office, Military Personnel: Management and Oversight 

of Selective Reenlistment Bonus Program Needs Improvement, GAO-03-149

(Washington, D.C.: Nov. 25, 2002). 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-04-86 Military Personnel 

services were not using all the criteria they had established for selecting 

occupational specialties to receive bonuses; the numbers of both 

reenlistments and SRB-eligible specialties had grown substantially since 

1998; and critical program guidance canceled in 1996 had not been 

reissued. Among other things, we recommended that DOD conduct annual 

reviews of the services’ SRB programs as required by its directive. In 

concurring with our recommendation, DOD noted that a future DOD 

directive would not require formal annual reviews of the program. Rather, 

these reviews would be accomplished through other means that we 

concluded were very limited in scope. In our 1996 report,4

 we also 

raised concerns about SRB program management and oversight. Our 

recommendations included that DOD (1) provide more explicit guidance 

and criteria for determining SRB skills and (2) monitor the services’ 

adherence to this guidance. DOD did not concur with either of these 

recommendations. 

In a House Report accompanying the Department of Defense fiscal year 

2003 appropriation bill, you expressed concern that DOD guidance and 

oversight of the SRB program was limited and that “a reassessment of the 

program was warranted to ensure it is being managed efficiently.” The 

Committee directed the Secretary of Defense to report back to the 

committee on five concerns and directed us to review and assess the DOD 

report.5

 Those five concerns were (1) effectiveness of the SRB program in 

correcting retention shortfalls in critical occupations, (2) replacement 

program guidance and how that guidance will ensure that the program 

targets only critical specialties that impact readiness, (3) steps DOD 

will take to match program execution with appropriated funding, 

(4) evaluation of the process the services use to administer the program, 

and (5) advantages and disadvantages of paying bonuses as a single lump 

sum payment. DOD issued its report in May 2003.6

 In introductory 

remarks, DOD’s report stated that the services manage their SRB 

programs carefully, offer bonuses sparingly, have management standards 

and practices to conduct a review of each skill receiving a bonus, and do 

 4

 U.S. General Accounting Office, Retention Bonuses: More Direction and Oversight 

Needed, GAO/NSIAD-96-42 (Washington, D.C.: Nov. 24, 1995). 

5

 The Senate Appropriations Committee also directed the Under Secretary of Defense for 

Personnel Readiness to report on other aspects of DOD’s SRB program. 

6

 Department of Defense, Report on Selective Reenlistment Bonus Program: Report 

to the Committees on Appropriations of the United States Senate and House of 

Representatives, Office of the Under Secretary of Defense Personnel and Readiness, 

(Washington, D.C.: May 2003). 
Page 3 GAO-04-86 Military Personnel 

an excellent job tailoring their SRB programs to changing demands for 

specific skills. Also, the need for flexibility in administering the program 

was a theme present throughout DOD’s report. 

In August 2003, we briefed your staff on our preliminary observations 

of DOD’s report. We provide our final assessment in this review. Our 

objective was to determine the extent to which DOD’s report thoroughly 

addressed the five SRB program management concerns raised in the 

congressional mandate. 

To conduct our work, we examined DOD’s mandated report on its SRB 

program, along with supporting documentation from the services and the 

Office of the Secretary of Defense (OSD). We also referred to our 2002 

report and DOD’s comments on that report. We conducted our review and 

assessment from June through September 2003 in accordance with 

generally accepted government auditing standards. Additional information 

on our scope and methodology is presented in appendix I. 

DOD’s May 2003 report on the Selective Reenlistment Bonus (SRB) 

program did not thoroughly address four of the five program concerns 

raised in the congressional mandate. As a result, Congress does not have 

sufficient information to determine if the program is being managed 

effectively and efficiently. In responding to the first concern, DOD’s report 

did not directly address the SRB program’s effectiveness or efficiency in 

correcting shortfalls in critical occupations. Instead, the report discussed 

the general benefits of using bonuses to increase the retention of military 

personnel rather than how well the services are selectively applying 

bonuses to critical occupations. With regard to the second concern, DOD 

has not issued replacement program guidance and did not allow us to 

review the guidance that has been drafted. DOD’s report focused primarily 

on changes that would provide greater flexibility to the services in 

designating occupations as critical. The report did not address an 

important change—the potential elimination of the requirement for 

conducting annual program reviews. In response to our 2002 report, DOD 

stated that this requirement would be eliminated from future program 

guidance. DOD recently told us that the new guidance will require periodic 

reviews, but neither the frequency nor the details of how these reviews 

would be conducted was explained. Although the third concern mandated 

that DOD describe steps that it will take to match program execution with 

appropriated funding, DOD did not describe such steps. Instead, DOD 

stated that the services need execution flexibility and have operated 

consistent with the law and within the overall Military Personnel 

Results in Brief 
Page 4 GAO-04-86 Military Personnel 

appropriation. Our analyses showed that in fiscal years 1999-2002 the 

services spent a combined total of $259 million more than Congress 

appropriated for the SRB program. In responding to the fourth concern, 

regarding an evaluation of how the each service administers its SRB 

program, DOD’s limited assessment consisted primarily of program 

descriptions provided by the services. Because different procedures and 

metrics were used to evaluate the services’ programs, it is difficult to 

identify best practices and other insights into ways in which the 

effectiveness and efficiency of the services’ programs could be improved. 

As mandated in the fifth concern, DOD identified the most salient 

advantages and disadvantages that could result from implementing a lump 

sum payment option for paying retention bonuses. We generally concur 

with DOD’s observations about the positive and negative aspects of using 

lump sum bonuses. 

We are making recommendations to DOD to improve management 

and oversight of the SRB program with more methodologically rigorous 

evaluations. We are recommending that DOD (1) retain the requirement 

for an annual review of the SRB program and (2) develop a consistent 

set of methodologically sound procedures and metrics for reviewing the 

effectiveness and efficiency of all aspects of each service’s SRB program 

administration. DOD agreed with the recommendations. 

Over the past 7 years, DOD has increasingly used the SRB program to 

address retention shortfalls. The program’s budget has grown from 

$308 million in fiscal year 1997 to an estimated $734 million in fiscal year 

2003—a 138 percent increase after the effect of inflation was held constant 

(see fig. 1). The budget is estimated to grow to $803 million in fiscal year 

2005, with most of the projected growth resulting from increases in the 

Air Force SRB program budget. Our 2002 report noted that in fiscal year 

2001 the Air Force extended reenlistment bonuses to 80 percent of 

its specialties. 

Background 
Page 5 GAO-04-86 Military Personnel 

Figure 1: SRB Program Budget Growth, Fiscal Years 1997-2005 

a

In-year (or current) estimate. 

b

Fiscal year 2004 budget request. 

c

Fiscal year 2005 budget estimate. 

In recent years, Congress has appropriated less money than the 

services have requested for the SRB program. Based on our work, in 

fiscal 2003 Congress appropriated $32 million less than DOD requested. 

Congressional committees proposed further SRB budget reductions 

during their reviews of DOD’s fiscal year 2004 budget request. The House 

Appropriations Committee proposed a $44.6-million reduction; the Senate 

Appropriations Committee, a $22-million reduction; and the Senate Armed 

Services Committee, a $46-million reduction. The Senate Armed Services 

Committee additionally noted concerns about proposed SRB program 

budget increases at a time when overall retention rates are robust and the 

benefits of military service are increasing overall. DOD appealed these 

proposed reductions, noting that “the effects of an improving economy 
Page 6 GAO-04-86 Military Personnel 

and the waning emotional patriotic high of the decisive victory in 

Operation Iraqi Freedom will combine to increase pressures on both 

the recruiting and retention programs.” For fiscal year 2004, Congress 

appropriated $697 million for the SRB program, which was a reduction of 

$38.6 million from the amount DOD requested. 

Despite increased use of the SRB program, DOD has cited continued 

retention problems in specialized occupations such as air traffic 

controller, linguist, and information technology specialist. A more 

favorable picture is present with regard to overall retention. All of the 

services reported that they met overall retention goals for fiscal year 2002 

and, with the exception of the Air Force missing its retention goal for 

second term airmen, expect to meet overall retention goals in fiscal year 

2003. Further bolstering these retention expectations are recent survey 

results showing improvements in servicemembers’ attitudes toward 

remaining in the military. For example, the 2002 DOD-wide status of forces 

survey found that the career intent of military personnel had improved 

between 1999 and 2002, rising from 50 to 58 percent. The survey results 

showed that retention attitudes were particularly better for junior enlisted 

(up 11 percent) and junior officers (up 13 percent). In addition, the 2002 

Air Force-wide quality of life survey found that 66 percent of enlisted 

personnel reported they would make the Air Force a career, which is an 

increase from 58 percent, reported in 1997. According to DOD officials, 

the effects of more recent events such as extended deployments and other 

higher operations tempo issues could change servicemembers’ attitudes 

toward remaining in the military. 

Congressionally approved reforms in basic pay implemented during the 

last 3 years were intended in part to address retention problems, 

particularly with mid-grade enlisted personnel. In the 2002 Quadrennial 

Review of Military Compensation,7

 DOD attributed the increased use of 

SRBs in the late 1990s to a growing pay discrepancy between civilians 

and the mid-career enlisted force. For that period, the review noted an 

increased use of bonuses for personnel with 10 to 14 years of service. DOD 

noted that while bonuses are a very important compensation tool, their 

use is intended for specific purposes and for relatively short periods 

of time. According to that review, bonuses are appropriate for use within 

particular skill categories, not as a tool for resolving military and 

 7

 Department of Defense, Report of The Ninth Quadrennial Review of Military 

Compensation, Vol. 1, (Washington, D.C., 2002). 
Page 7 GAO-04-86 Military Personnel 

civilian pay differentials across an entire segment of the force. The 

report noted that widespread pay differentials should be remedied 

through pay table restructuring. Pay table restructuring began in fiscal 

year 2001, and additional military pay adjustments have been approved 

in subsequent budgets. 

DOD’s May 2003 report did not thoroughly address four of the five 

congressional concerns about effective and efficient management of 

the SRB program. First, the report indirectly addressed SRB program 

effectiveness and efficiency by discussing bonuses as a general military 

retention tool instead of the effectiveness and efficiency of the program in 

targeting bonuses to improve retention in selected critical occupations. 

Second, DOD did not permit us to review the draft guidance, but—based 

on DOD’s comments on our 2002 SRB report, excerpts of draft criteria 

contained in DOD’s mandated report, and our discussions with DOD 

officials—the replacement guidance could expand the SRB program by 

giving the services more flexibility in designating occupations as critical 

and either eliminate or weaken the requirement for annual SRB program 

reviews. Third, OSD did not outline steps to match program execution to 

appropriated funding as the mandate required; instead, OSD reiterated the 

need for program-execution flexibility. Fourth, OSD’s evaluation of the 

services’ administration of their SRBs program was limited, relied largely 

on service-provided descriptions, and did not use consistent procedures 

and metrics. Finally, as required by the fifth concern in the mandate, DOD 

identified the most salient advantages and disadvantages resulting from 

paying SRBs as lump sums. 

DOD’s report did not directly discuss how effectively and efficiently each 

service is currently using the SRB program to address retention problems 

in critical occupations. Although the mandate noted, “a reassessment of 

the program is warranted to ensure it is being managed efficiently,” DOD’s 

response to concern one did not provide sufficient detail to document the 

effective and efficient use of the program in awarding SRBs. In response to 

one of the other four congressional concerns, DOD stated that the “intent 

of retention bonuses is to influence personnel inventories in specific 

situations in which less costly methods have proven inadequate or 

impractical.” The report did not, however, document what methods had 

been used previously or the cost-effectiveness of those methods in 

achieving desired retention levels. 

DOD’s Report Did Not 

Thoroughly Address 

Congressional 

Concerns 

DOD Report Indirectly 

Addressed Program 

Effectiveness and 

Efficiency in Correcting 

Retention Shortfalls 
Page 8 GAO-04-86 Military Personnel 

Also absent from the report was a discussion of how key factors influence 

the current use of SRBs. Examples of key factors include the effects of 

changes in the basic pay, overall retention rates, and civilian 

unemployment. For example: 

• Despite increasing basic pay to address the discrepancy between military 

and civilian pay noted in the 2002 Quadrennial Review of Military 

Compensation, the budgets for the SRB program are projected to grow to 

$803 million in fiscal year 2005. In comments received on our preliminary 

observations briefing, DOD officials noted that our use of constant 2004 

dollars in our budget trend analysis did not fully account for the effects of 

the basic pay changes that exceeded the inflation level and thus increased 

the size of individual bonuses. At the same time, future SRB program 

budgets do not show decreases that might be expected as these pay table 

changes address overall military-civilian pay discrepancies and problems 

identified within various pay grades. 

• The report did not address the extent to which recent higher levels of 

overall retention offer opportunities for reducing the number of 

occupations eligible for SRBs or the bonus amounts8

 awarded for 

reenlistment. DOD officials have noted that all of the services met or 

exceeded their aggregate retention goals in fiscal year 2002 and that strong 

overall retention is expected to continue. However, they cited retention 

shortfalls in some occupational specialties as areas of concern. Although a 

generally positive aggregate retention climate might present DOD with 

opportunities to curtail use of its SRB program, the report did not discuss 

under what conditions reductions in the program might or might not be 

appropriate at this time. 

• Despite noting a relationship between civilian unemployment rates 

and military retention, DOD’s report did not indicate whether civilian 

unemployment—which is at a 9-year high—might result in the need for 

fewer SRBs being offered and possibly at lower bonus levels. One study 

cited in DOD’s report noted that there is a relationship between higher 

unemployment rates and improved overall military retention. In part of its 

answer to concern three, DOD noted that changes in the economy and 

labor market drive changes in actual reenlistment rates. Just as periods of 

relatively lower civilian unemployment might suggest the need for greater 

 8

 Total bonus amounts are determined by multiplying (1) the servicemember’s current 

monthly basic pay by (2) the number of additional years of obligated service and by (3) a 

bonus multiple that can range from 0.5 to 15. The bonus multiples are determined by each 

service for all specialties they deem critical. Under current SRB program authority, the 

services are allowed to pay reenlistment bonuses of up to $60,000, though some services 

have set lower maximums. 
Page 9 GAO-04-86 Military Personnel 

use of the SRB program, periods of relatively higher unemployment might 

conversely suggest less need for SRBs. Despite civilian unemployment 

being at its highest rate in several years, the SRB program budget is 

projected to increase in fiscal year 2005. 

Instead of directly addressing program effectiveness and efficiency, 

the 2003 report discussed the general benefits of using bonuses to 

retain military personnel. DOD’s report cited numerous studies that 

demonstrated or postulated this effect. However, findings from some 

studies may not be readily generalized to the way that the SRB program 

is currently managed or to the economic conditions that currently exist. 

More specifically, some studies used outdated retention data obtained in 

the mid-1970s or were performed in a very different retention environment 

(e.g., the increase in force size during the 1980s and the large draw-down 

of military forces in the 1990s). Even given our concerns about some of the 

findings, we believe DOD presented sufficient support for its conclusion 

that bonuses can be effective in promoting retention. A largely 

unaddressed, but more pertinent issue is how effectively and efficiently 

DOD applied this tool to improve retention in critical occupations under 

recent and current economic conditions. 

DOD did not permit us to review the draft guidance9

 that will replace the 

current DOD directive and the DOD instruction canceled in 1996. Our 

findings for this concern are based on DOD’s comments on our 2002 SRB 

report, excerpts of draft criteria contained in DOD’s mandated report, and 

our discussions with DOD officials. Changes to the guidance could lower 

the threshold required for designating occupations as critical and may 

eliminate or weaken the requirement for formal annual reviews of the 

SRB program. 

DOD’s planned changes to the replacement guidance could provide the 

services with greater flexibility for designating a specialty as critical but 

could weaken the controls for targeting the specialties receiving SRBs 

by lowering the threshold required for making such a designation. The 

 9

 Issuance of DOD Directive 1304.21; Policy on Enlistment, Accession of Officers in 

Critical Skills, Selective Reenlistment, and Critical Skills Retention Bonuses for Active 

Members; and DOD Instruction 1304.22, Administration of Enlistment, Accession of 

Officers in Critical Skills, Selective Reenlistment, and Critical Skills Retention Bonuses 

for Active Members; are expected in fall 2003 instead of August 2003 as had been specified 

in DOD’s report. 

Replacement Program 

Guidance Not Issued but 

Proposed Changes Could 

Weaken Controls for 

Targeting SRBs 
Page 10 GAO-04-86 Military Personnel 

canceled 1996 instruction required the services to consider five criteria10

before designating a specialty critical and making it eligible for SRBs, 

but DOD’s 2003 report stated that the revised program instruction would 

require occupations to meet a lower threshold—meeting “at least” one of 

five criteria. For the period since 1996 when the instruction was canceled, 

our 2002 report found that, in some cases, the services had already been 

using only one of the five criteria to designate occupations for inclusion in 

the program. This allowed the services to define broadly what constituted 

a critical occupation and included more occupations than would have 

likely qualified if all five criteria had been considered. 

DOD’s planned changes could also eliminate or weaken the requirement 

for formal annual reviews of the SRB program and thereby weaken the 

ability of Congress and DOD to monitor the program and ensure that it 

targets only critical specialties. To implement the SRB program, DOD 

Directive 1304.21 assigns specific responsibilities for administering the 

program to the OSD and to the service Secretaries. According to this 

directive, the Assistant Secretary of Defense for Force Management 

Policy, under the Under Secretary of Defense for Personnel and 

Readiness, is responsible for annually reviewing and evaluating the 

services’ enlisted personnel bonus programs in conjunction with the 

annual budget cycle. These reviews are to include an assessment of the 

criteria used for designating critical military specialties. As a result of 

these reviews, the OSD is to make the revisions needed to attain specific 

policy objectives. Our 2002 report found that DOD had not conducted any 

of the required annual program reviews since 1991. In its response to our 

2002 SRB report, DOD stated that it plans to eliminate those requirements 

from the replacement guidance. More recently, a DOD official stated that 

the new guidance will require periodic reviews, but neither the frequency 

nor the details of how these reviews would be conducted was explained. 

In its report to Congress, DOD maintained that much of the SRB program 

oversight takes place during ongoing internal service program budget 

reviews. In contrast, we concluded in our 2002 report that those program 

budget reviews were limited in scope and did not provide the detailed 

evaluation needed to ensure the program was being implemented as 

 10 The canceled instruction required the services to identify critical specialties by 

providing a balanced evaluation of five factors: (1) serious understaffing in adjacent 

years, (2) persistent shortages in total career staffing, (3) high replacement costs, (4) the 

arduousness or unattractiveness of the work, and (5) whether the specialty is essential to 

the accomplishment of defense missions. 
Page 11 GAO-04-86 Military Personnel 

intended. A more in-depth discussion of the current limited oversight is 

provided when we discuss DOD’s response to the fourth concern. 

In contrast to the previously mentioned changes, DOD’s report noted 

some steps that we believe could strengthen controls on the SRB program. 

According to the report, the new SRB program instruction will (1) require 

the services to establish parameters to define “critical shortages” and 

(2) base those requirements on factors such as the potential impact of a 

shortage on mission accomplishment. In addition, DOD has recently 

established a working group that has been tasked with developing a 

“common understanding and definition of critical skills.” Previously, we 

found that DOD had not clearly defined the criteria the services were to 

use in designating critical occupations since the SRB program instruction 

was canceled in 1996. 

Contrary to the mandate, DOD’s 2003 report did not outline steps that 

it will take to match program execution with appropriated funding. 

Instead, DOD stated that the services need execution flexibility and have 

operated consistent with the law and within the overall Military Personnel 

appropriation. Our trend analysis in current year dollars showed that the 

services spent a combined total of $259 million more than Congress 

appropriated for the SRB program in fiscal years 1999-2002. DOD’s use 

of this flexibility has resulted in the services overspending their SRB 

budgets by as much as $111 million in a single year—fiscal year 2001. 

More recently, two of the services stayed within their appropriated 

budgets. In fiscal year 2002, the Air Force and Marine Corps spent, 

respectively, $26 million and $4 million less than their fiscal year 2002 SRB 

appropriation. However, the Army and Navy exceeded their appropriated 

SRB budgets by $38 million and $21 million, respectively. 

DOD noted that the services can reallocate funds within the Military 

Personnel appropriation without seeking congressional authority. In the 

report, DOD did not agree with the congressional concern that program 

expenditures needed to match funding levels appropriated specifically for 

the SRB program. Rather, DOD maintained that monies were available 

from other parts of the Military Personnel appropriation if a service 

needed additional SRB funding in a fiscal year. DOD’s response noted that 

budget submission timelines require reenlistment forecasts up to 2 years 

prior to execution and that intervening changes in the economy and labor 

market can add uncertainty and drive changes in actual reenlistment rates. 

Using the services in-year, or current estimates—created during the year 

of program execution—we found that the services had exceeded their 

DOD Report Outlined 

No New Steps to Match 

Program Execution 

with Appropriations 
Page 12 GAO-04-86 Military Personnel 

fiscal year 1999-2002 estimates for the number of expected SRB 

reenlistments by a combined total of 32,466 personnel. Furthermore, our 

current trend analysis on their budget justifications showed that for the 

Army and Navy, reallocation or reprogramming of funds had become a 

reoccurring pattern of activity. In our 2002 report, we concluded that 

better OSD program oversight and management would have required the 

services to justify their need to exceed appropriations during fiscal years 

1997-2001. 

DOD’s limited evaluation of the services’ SRB programs relied primarily 

on program descriptions provided by the services. The report presented 

different issues for each service and used inconsistent procedures and 

metrics to reach conclusions about each service’s program administration 

effectiveness and efficiency. Absent was a discussion of key performance 

indicators, the means used to verify and validate the measured values, and 

other characteristics such as those GAO identified in its report assessing 

agency annual performance plans.11 The absence of a consistent, explicit 

methodology made it difficult to determine (1) best practices that might 

be applied from one service to another and (2) other insights that could 

result in each service more effectively and efficiently administering its 

SRB program. 

Although OSD assembled a multi-service panel to discuss the evaluation, 

DOD’s response consisted largely of program descriptions that the 

services supplied. Each service made statements about the effectiveness 

of its program but provided insufficient documentation to support those 

statements. OSD conducted its last comprehensive review of the SRB 

program in 1991. As noted earlier in our assessment of DOD’s response 

to the second concern, DOD stated that it intends to eliminate the 

requirement to perform detailed annual program reviews when its 

replacement program directive is issued. 

In introductory comments to the 2003 report, DOD stated that the SRB 

program is evaluated annually within the context of three Planning, 

Programming, and Budgeting System activities. In our 2002 report, we 

found that those reviews, conducted by the DOD Comptroller and the 

 11 U.S. General Accounting Office, The Results Act: An Evaluator’s Guide to Assessing 

Agency Annual Performance Plans, GAO/GGD-10.1.20 (Washington, D.C.: Apr. 1998). 

Evaluation of Services’ 

Processes for 

Administering the 

Program Was Limited 
Page 13 GAO-04-86 Military Personnel 

Office of Management and Budget (OMB), and the testimony provided to 

Congress were limited. 

• When the services prepare budget submissions for the SRB program, they 

discuss the small sample of occupations included in their justification 

books. As we noted in our 2002 report, the DOD Comptroller stated that 

the budget submissions are not detailed programmatic evaluations. 

• DOD’s 2003 report also cited OMB reviews as part of an evaluation of the 

programs. During the preparation of our 2002 report, OMB officials told us 

that their reviews were limited and did not constitute a detailed 

assessment of the services’ programs. 

• DOD’s 2003 report stated that the services’ out-year budgets were carefully 

reviewed during congressional testimony. It is our view that congressional 

testimony does not represent a detailed programmatic review of a program 

this complex. For example, in March 11, 2003, DOD’s testimony before the 

Military Personnel Subcommittee of the Senate Armed Services 

Committee12 included very limited statements about the SRB program. 

DOD’s report listed some positive steps that the services have proposed to 

administer the SRB program more effectively and efficiently. For example, 

the Navy and Army are validating and improving the models used to 

manage their SRB programs, and the Air Force has created a new bonus 

review board to keep its leaders apprised of how the SRB program is 

functioning. At the time of our review, the services were just starting to 

implement these steps to improve their programs, and there was no data 

to determine how effective and efficient these efforts are. 

 12 Department of Defense, Prepared Statement of the Honorable David S. C. Chu, Under 

Secretary of Defense (Personnel and Readiness), Before the Military Personnel 

Subcommittee, Senate Armed Services Committee (Washington, D.C.: Mar. 11, 2003). 
Page 14 GAO-04-86 Military Personnel 

DOD identified the most salient advantages and disadvantages resulting 

from implementing a lump sum payment method for paying retention 

bonuses.13 We generally concur with DOD’s observations about the 

positive and negative aspects of using lump sum bonuses. DOD’s report 

cited a 1985 GAO study14 that found lump sum payments had three main 

advantages: more cost-effective, better visibility to Congress, and more 

adaptable to budget cuts than paying bonuses incrementally. The 2003 

DOD report cited another important consideration in awarding bonuses 

in lump sum payments. Because enlisted personnel prefer “up-front” 

payments and are willing to receive less money initially than more money 

offered in the future, we believe that the federal government could reenlist 

more personnel for the same amount of money if bonuses were paid in a 

lump sum. 

DOD cited several disadvantages to using a lump sum payment option. For 

example, there are significant up-front costs associated with paying both 

lump sum SRB payments in the implementation year and completing the 

anniversary payments for SRBs awarded previously. The first year of 

change would require the largest budget increase, and each subsequent 

transition year would become less costly. The implementation of a lump 

sum SRB program could become cost neutral over the long term if 

bonuses paid in a lump sum eliminated the need for equal amounts of 

anniversary payments in succeeding years. It could even save money if 

sufficient reenlistees were attracted with less money because up-front 

compensation—even if less—is more attractive than compensation 

promised in the future. 

DOD’s report addressed other potential disadvantages of using a lump sum 

payment method. These include the possibility that a recipient will fail to 

stay in the military for the full reenlistment period after receiving a bonus 

and the problem associated with recouping all or part of bonus amounts 

from personnel who do not complete their obligated term of service. 

Despite these disadvantages, our 1985 report stated our support for the 

use of lump sum retention bonuses. The Marine Corps began using the 

lump sum payment option for its SRB program in fiscal year 2001 and is 

 13 The Army, Navy and Air Force currently pay 50 percent of the reenlistment bonus 

up front, and they pay the remaining 50 percent in equal installments over the term 

of reenlistment. 

14 U.S. General Accounting Office, Navy Management and Use of the Selective 

Reenlistment Bonus Program, GAO/NSIAD-85-143 (Washington, D.C.: Sept. 9, 1985). 

DOD Report Identified 

Advantages and 

Disadvantages of 

Using a Lump Sum 

Payment Option 
Page 15 GAO-04-86 Military Personnel 

the only service currently using this payment method. In February 2004, 

the Marine Corps expects to have preliminary results from an evaluation 

of its use of lump sum payments. 

Although not required by the mandate to do so, DOD and the services 

could have made the response to concern five more informative for 

Congress by identifying alternative strategies for implementing the lump 

sum option and estimating the costs of each strategy for each service. For 

example, one strategy might be to phase in the lump sum payment option. 

Phasing in lump sum payments could provide DOD with increased 

program administration flexibility and decreased budgetary problems 

caused by switching from installment payments in a single year. 

Overall, our analysis of DOD’s May 2003 congressionally mandated report 

on the SRB program showed that DOD’s report did not provide sufficient 

information to enable Congress to determine whether the program is being 

managed effectively and efficiently. With one exception, DOD’s report did 

not thoroughly address congressional concerns about the effective and 

efficient management of the SRB program. Of DOD’s responses to the five 

congressional concerns, three were incomplete or nonresponsive—those 

regarding program effectiveness and efficiency in correcting retention 

shortfalls in critical occupations, DOD actions to match program 

execution with appropriations, and DOD’s evaluation of the services’ 

program administration. A fourth response—regarding replacement 

program guidance—did not provide information essential for us to make 

an independent determination as to the response’s adequacy. DOD directly 

and fully addressed one of mandated concerns—the advantages and 

disadvantages of lump sum bonus payments. Although the SRB program is 

expected to grow to over $800 million in fiscal year 2005, the report did 

not address factors that may have reduced the services’ retention 

concerns and could reduce SRB program cost. Underlying many of these 

shortcomings is a lack of empirically based information caused by DOD’s 

limited reviews of the SRB and inconsistent use of evaluation procedures 

and metrics. DOD’s possible elimination of the requirement for a detailed 

annual review and continued reliance on service-specific procedures 

and metrics could further weaken Congress’s ability to monitor the 

SRB program. 

Conclusions 
Page 16 GAO-04-86 Military Personnel 

To assist Congress in its efforts to monitor the management of the SRB 

program and to ensure that DOD is effectively and efficiently targeting 

retention bonuses to critical occupations, we recommend that the 

Secretary of Defense direct the Office of the Under Secretary of 

Defense for Personnel and Readiness to (1) retain the requirement for 

an annual review of the SRB program and (2) develop a consistent set 

of methodologically sound procedures and metrics for reviewing the 

effectiveness and efficiency of all aspects of each service’s SRB 

program administration. 

In written comments on a draft of this report, DOD concurred with 

our recommendations. DOD further stated that, with regard to our 

recommendation to develop review procedures and metrics, it would 

(1) conduct research to develop meaningful metrics for reviewing the 

effectiveness and efficiency of all aspects of each service’s administration 

of the SRB program and (2) implement those metrics so that they are 

consistent with DOD’s Human Resource Strategy Plan. DOD’s comments 

are reprinted in their entirety in appendix II. 

We are sending copies of this report to the Secretary of Defense. We will 

also make copies available to appropriate congressional committees and 

to other interested parties on request. In addition, the report will be 

available at no charge at the GAO Web site at http://www.gao.gov. 

If you or your staff have questions about this report, please call me 

at (202) 512-5559. Key staff members contributing to this report were 

Jack E. Edwards, Kurt A. Burgeson, Nancy L. Benco, and M. Jane Hunt. 

Derek B. Stewart 

Director, Defense Capabilities and Management 

Recommendation for 

Executive Action 

Agency Comments 
Appendix I: Scope and Methodology 

Page 17 GAO-04-86 Military Personnel 

We reviewed the Department of Defense’s (DOD) May 2003 

congressionally mandated report and documents used in the preparation 

of that report. That information was supplemented with prior Selective 

Reenlistment Bonus (SRB) program guidance, budget request 

documentation, and other information gathered during our 2002 review of 

the SRB program. To assess the adequacy and accuracy of the information 

contained in DOD’s report, we obtained and reviewed documentation used 

by the Office of the Secretary of Defense (OSD) to support its responses. 

For example, we reviewed the eight studies cited in DOD’s response to 

concern one in the mandate. In addition, we reviewed information 

provided by each of the services, as well as past GAO and DOD reports on 

the SRB program. We compared findings from these past reports to DOD’s 

mandated responses to assess the validity of what was presented. We 

updated the program budget analysis from our 2002 review using budget 

data contained in DOD’s Military Personnel budget justification books 

prepared for Congress. We sought to review updated SRB program 

guidance, but DOD indicated that these pre-decisional documents would 

not be released until the final versions had been approved. 

We met with DOD officials to update information obtained during our 2002 

review of the SRB program. Interviews were primarily conducted with 

officials in the Office of the Under Secretary of Defense for Personnel and 

Readiness because these officials were the primary authors of DOD’s 

report. We also met with personnel responsible for administering the 

services’ SRB programs. We obtained updated retention data contained in 

prepared statements used by DOD during congressional hearings. We also 

reviewed the results of DOD’s 2002 status of forces survey and the Air 

Force’s 2002 quality of life survey. 

We conducted our review from June through September 2003 in 

accordance with generally accepted government auditing standards. 

Appendix I: Scope and Methodology 
Appendix II: Comments from the Department 

of Defense 

Page 18 GAO-04-86 Military Personnel 

Appendix II: Comments from the Department 

of Defense 
Appendix II: Comments from the Department 

of Defense 

Page 19 GAO-04-86 Military Personnel 

Now on p. 16. 

Now on p. 16. 

(350389) 
The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal 

government for the American people. GAO examines the use of public funds; 

evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed 

oversight, policy, and funding decisions. GAO’s commitment to good government 

is reflected in its core values of accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site 

daily. The list contains links to the full-text document files. To have GAO e-mail 

this list to you every afternoon, go to www.gao.gov and select “Subscribe to e-mail 

alerts” under the “Order GAO Products” heading. 

The first copy of each printed report is free. Additional copies are $2 each. A 

check or money order should be made out to the Superintendent of Documents. 

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a 

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs