Military Pay: Military Debts Present Significant Hardships to Hundreds of Sick and Injured GWOT Soldiers
Published: 2006-04-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In light of GAO's past four reports and testimonies on Army military pay and travel pay for soldiers who have served in the Global War on Terrorism (GWOT), GAO was asked to determine if weaknesses in Army processes for initiating and terminating active duty pay might result in erroneous payments and debt, including (1) overpayments to soldiers in the Fort Brag Medical Retention Processing Unit (MRPU)--1 of 23 MRPUs--and (2) overpayments and other errors that resulted in debt collection action against battle-injured soldiers who were released from active duty. GAO also was asked to develop case studies to illustrate the effects of these problems on soldiers and their families and to determine ways that Congress could make the debt collection process more soldier friendly.
section_title: What GAO Found
paragraphs: Continuing pay problems resulted in overpayments and debt for sick and injured Army soldiers serving in GWOT. As with GAO's prior work, these pay problems resulted in significant frustration and financial problems for the soldiers and their families. Our audit of separated Army GWOT soldier debt identified nearly 1,300 separated battle-injured soldiers and soldiers who were killed in combat during the first 4 years of GWOT deployment who had incurred a total of $1.5 million in debt as of September 30, 2005. DOD has authority to write off debts of deceased soldiers and generally does not pursue collection action on the debts of soldiers who were killed in action. However, we found that hundreds of battle-injured soldiers were pursued for repayment of military debts through no fault of their own, including at least 74 soldiers whose debts had been reported to credit bureaus and private collection agencies at the time we initiated our audit in June 2005. Although the Debt Collection Act gives DOD authority to use these debt collection tools, in response to our audit, the Army temporarily suspended collection action on debts of battle-injured soldiers until a determination could be made about whether these soldiers' debts were eligible for relief. In addition our investigation of pay problems related to Army National Guard and Reserve soldiers assigned to the Fort Bragg MRPU identified overpayments of approximately $218,000 related to 232 sick and injured soldiers. Many sick and injured Fort Bragg soldiers faced garnishment of wages and other debt collection action resulting from their pay errors. Congress recently gave the Department of Defense (DOD) authority to cancel some GWOT soldier debts. Because of restrictions in the law, debts of injured soldiers who separated at different times can be treated differently, and soldiers who paid their debts are not eligible for refunds. Also, because this authority expires in December 2007, soldiers and their families could face bad credit reports and visits from collection agencies in the future.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our recent work on Army  military pay. This testimony, which is the fifth in a series of reports and  related testimonies to this committee, is part of a continuing body of work  related to military and travel pay for soldiers who have served in the  Global War on Terrorism (GWOT) since the terrorist attacks of September  11, 2001. Our previous work identified hundreds of Army National Guard  and Reserve soldiers who experienced substantial pay and travel  reimbursement problems caused primarily by ongoing challenges in the  areas of human capital, processes, and automated systems. Our recent  work, which is presented in two reports that the committee is releasing  today, presents two more examples of the overall result of a broken  military pay system.
Collection action on military debt has affected GWOT soldiers from all  Army components—Active, National Guard, and Reserve—and involves  soldiers who were injured or killed in combat as well as soldiers who  suffered from sickness and nonbattle injuries. Our Fort Bragg investigation  looked into allegations that there were overpayments made to sick and  injured in-service soldiers who were in Medical Retention outpatient  status. The Fort Bragg Medical Retention Processing Unit (MRPU) is 1 of  23 Army MRPUs. Once overpayments are identified, they result in debt,  which must be repaid to the government. Our audit of soldier debt focused  on GWOT soldiers who were injured in battle and had separated from the  service and soldiers who were killed in combat and owed military debt  related to overpayments and other errors. We performed our Fort Bragg  investigation from August 2005 through March 2006 in accordance with  quality standards for investigations established by the President’s Council  on Integrity and Efficiency. We performed our soldier debt audit from  June 2005 through March 2006 in accordance with generally accepted  government auditing standards.
The Debt Collection Act of 1982 provides a statutory basis for federal  agencies to use appropriate debt collection tools, such as interest charges,  offset, and private collection agencies. Collection action on military debts  consists of pay offset for soldiers who are still in the service and escalates  to collection through debt notification letters, credit bureau reporting, and  private collection agency action when soldiers have left the service and  have not paid their military debts. Debts of separated soldiers may also be  collected through offsets against federal income tax refunds; retirement  pay; and federally administered benefits payments, such as Social Security  Administration benefits. These offsets are handled by the Department of  the Treasury Offset Program, referred to as TOP.
Today, I will summarize the results of our recent work with respect to the  (1) overpayments made to Army National Guard and Reserve soldiers at  the MRPU at Fort Bragg and the extent and reported causes of debt for  battle-injured Army soldiers who have left the service and (2) the effects of  overpayments and debt-related problems for case study soldiers and their  families. Debt collection action presents the most serious hardships on  injured soldiers who face physical limitations and continuing medical  treatment. I will also discuss the Army’s actions to address pay and debt  management problems and how current debt relief authority can be made  more soldier-friendly.
subsections: section_title: Continuing Pay Problems for Army Soldiers
paragraphs: Continuing pay problems resulted in overpayments and debt for sick and  injured GWOT Army soldiers. When Army and medical unit commanders  fail to report changes in soldier duty status and location, overpayments of  combat-related pay, such as hostile fire pay, hardship duty pay, and family  separation pay, continue—sometimes for several months past the time the  soldier is eligible to receive this combat-related pay. As illustrated by our  case studies, which are discussed in the next section of our testimony,  changes in duty status and location occur when soldiers become sick or  injured or they do not deploy with their units and when soldiers are  injured after deployment or sustain battle injuries and are medically  evacuated.
Our investigation into allegations of pay problems related to 37 soldiers  assigned to the MRPU at Fort Bragg identified actual overpayments of  approximately $218,000 to 232 sick and injured Army National Guard and  Reserve soldiers in outpatient status during the period April 2003 through  June 2005. These overpayments occurred in part because unit and medical  commanders failed to record changes in duty status and location of sick  and injured soldiers. Data available during our case studies showed that it  took from 14 to 203 days to stop overpayments once a soldier visited the  Finance Battalion. As demonstrated in our past reports, finance offices in  theater were often unable to start or stop hostile fire pay or hardship duty  pay as required because of problems with human capital, processes, and  the lack of integrated pay and personnel systems. When overpayments  were not detected or they were not detected in a timely manner, the dollar  amount of soldier debts continued to increase. Debts that remained unpaid  after these soldiers left the service were subject to collection through  credit bureau reporting, private collection agencies, and TOP offsets of  income tax refunds and other designated federal payments.
Our audit of separated Army GWOT soldier debt identified nearly 1,300  battle-injured soldiers who left the service owing $1.5 million, including  almost 900 battle-injured soldiers whose debts totaled about $1.2 million  and about 400 soldiers who died in battle whose debts totaled over  $300,000. As a policy, DFAS does not pursue collection action on the debts  of fallen soldiers. However, Army and DFAS officials told us that under  certain circumstances, military debt can be satisfied from the final pay of  fallen soldiers. In addition, DFAS may pursue collection of debts of other  deceased soldiers. We found that hundreds of separated battle-injured  soldiers were pursued for repayment of military debts that occurred  through no fault of their own, including 74 soldiers whose debts had been  reported to credit bureaus, private collection agencies, and TOP at the  time we initiated our audit in June 2005. Although the Debt Collection Act  gives DOD authority to use these debt collection tools, in response to our  audit, the Army temporarily suspended collection action on debts of  battle-injured soldiers until a determination could be made about whether  these soldiers’ debts were eligible for relief.
As illustrated in figure 1, Army and DFAS data for fiscal years 2002  through 2005 showed that 73 percent of the debts for the nearly 1,300  separated battle-injured soldiers and soldiers killed in combat related to  errors in pay calculations, combat pay errors, and erroneous leave  payments during fiscal years 2002 through 2005. The remaining 27 percent  of these soldiers’ debts related to repayment of enlistment bonuses (11  percent) where soldiers did not complete the required term of service or  they improperly received more than one bonus; payments for tuition and  training (6 percent) where soldiers did not complete their training or they  did not fulfill service requirements related to their training; and other  expenses (8 percent) related to unpaid bills for family medical services,  housing and household moves, insurance premiums, travel advances, and  loss or damage of government property. The reasons for the remaining  debt (2 percent) were not recorded in the Defense Debt Management  System.
Figure 1. Dollar Amounts of Battle-Injured and Fallen Soldier Debts by Major  Reason.
Other debts relate to provisions in law and DOD business rules in effect at  various times. For example, until mid-2005, soldiers were required to repay  portions of their enlistment bonus, special pay, and educational benefits  and stipends when they failed to fulfill their required terms of service  because of early separation as a result of their war injuries. According to  DFAS officials, although unit commanders and finance offices are  authorized to write off debts for lost and damaged equipment when  soldiers who were injured or killed by hostile fire are medically evacuated  from the theater of operation, they have not always done so. In addition,  unpaid bills for family medical services, housing and household moves,  insurance premiums, and outstanding travel advances generate debt.  Because Army units and medical facilities have not always prepared or  processed changes in orders when a soldier’s duty status or location  changed, soldiers do not have the documentation needed to submit  vouchers for travel reimbursement. The new WIA Support Team’s  standard operating procedures for soldier pay account review require  identification and processing of all soldier travel claims.
section_title: Overpayments and Debt Collection Action Have Placed Significant Hardship on Sick and Injured Soldiers and Their Families
paragraphs: Debt collection actions have caused a variety of problems for injured and  sick Army GWOT soldiers. Case studies related to both of our reports  showed that sick and injured soldiers sometimes went months without  paychecks because debt caused by overpayments of combat pay and other  errors was offset against their military pay. Work performed for both of  our reports also showed that when debts were not paid after the soldiers  separated from the service, they were subject to credit bureau reporting  and collection agency actions and offsets. Out-of-service debt collection  actions created additional hardships on the soldiers by preventing them  from paying for basic household expenses, getting loans to buy houses or  automobiles or pay off other debt, and sending several of the soldiers into  financial crisis. Some battle-injured soldiers forfeited their final separation  pay to cover part of their military debt, and they left the service with no  funds to cover immediate expenses while facing collection action on their  military debt.
subsections: section_title: Fort Bragg Soldier Case Studies
paragraphs: Case studies developed as part of our Fort Bragg investigation showed  that some soldiers and their families had to expend significant time and  effort dealing with pay problems and resulting debt while recovering from  sickness and injuries. Several soldiers experienced large, unexpected  deductions—as much as $1,172 from a single paycheck—for repayment of  debt resulting from the Army’s failure to stop hostile fire and hardship  duty pay for soldiers who were in Medical Retention status.
As illustrated in table 1, for 9 of the 10 MRPU soldiers in our case studies,  it took pay technicians at the Fort Bragg Finance Battalion from 14 to 203  days to stop the overpayments once the soldiers visited the Finance  Battalion. The resulting overpayments ranged from $553 to $2,300. The  Finance Battalion could not provide documentation for us to determine  the amount of time it took to stop overpayments for one of our case study  soldiers. The soldiers’ injuries ranged from those inflicted by improvised  explosive devices (IED) to post-traumatic stress disorder.
Table 1. Examples of Fort Bragg Soldier Pay Problems   Injury from vehicle  accident involving an  IED crater.
Knee injury, broken  leg—undiagnosed for  6 weeks.
Depression – sent to  MRPU at Fort Bragg  and redeployed to  Iraq.
Stroke—medically  evacuated to  Landstuhl and  transferred to Walter  Reed and Fort Bragg.
Kidney disease in Iraq,  hospitalized at  Landstuhl, and then  sent to Walter Reed  and Fort Bragg.
Experienced heart  trouble in Iraq; sent to  Fort Bragg.
Contracted  legionnaire’s disease  in Africa.
Days elapsed equals the number of days between the date the soldier visited Finance and date  ineligible pay was stopped.
Estimated overpayments equals hostile fire and hardship duty payments made to a soldier after  arrival at Fort Bragg MRPU.
Soldier #6 in the table above, an Army National Guard soldier, suffered a  stroke on June 26, 2004, while serving in Iraq. He was medically evacuated  and arrived at Fort Bragg in early July 2004. Our investigation revealed  that the soldier visited the Fort Bragg Finance Battalion on July 30, 2004,  as part of his MRPU processing. Despite following MRPU procedures, this  soldier’s hostile fire and hardship duty pay continued until November 5,  2004—approximately 4 months after his initial visit to the Finance  Battalion. By this time, the soldier’s overpayments had resulted in debt of  $1,300. The Fort Bragg Finance Battalion eventually collected about $972  of this amount from a single paycheck, which was about 50 percent of the  soldier’s disposable pay. As a result, the soldier’s wife told us that she had  to defer paying some of their bills, including the monthly payment on their  second mortgage.
section_title: Separated Battle-Injured Soldier Case Studies
paragraphs: Case studies related to our audit of separated battle-injured soldier debt  showed that several of these soldiers also had gone without a paycheck  for several months while they were in Army medical facilities undergoing  treatment for their war injuries because debt caused by overpayments of  combat pay and other errors was offset against their military pay. One  soldier said he had no money for food while several soldiers told us they  received assistance from family members. When these soldiers leave the  Army, they generally do not have jobs and many of them face continuing  medical treatment for battle injuries, making it difficult to hold a job.  Some soldiers told us that their final separation pay was offset to cover  their debt and they left the service with no funds to pay immediate  expenses.
Because of the lack of income, 16 of the 19 soldiers who contacted us  during our audit told us that they had difficulty paying for basic household  expenses. The Army’s failure to record separation paperwork in the pay  system and other payment errors resulted in over $12,000 of debt for one  severely battle-injured soldier who suffered brain damage when his  convoy came under attack. Although the soldier’s family expected that he  would receive retirement pay when his active Army pay stopped upon his  separation, the soldier had no income for several months while the Army  attempted to recover his military debt. As a result the soldier’s family was  unable to pay household bills, the utilities were shut off, and the soldier’s  dependent daughter was sent out of state to live with relatives.
In addition, three soldiers told us that they were erroneously identified as  absent without leave (AWOL) by their units while they were actually in the  hospital or receiving outpatient care for their war injuries. The AWOL  status for at least two of these soldiers created debt because it appeared  that the soldiers received pay when they were not in duty status. At the  time these soldiers were listed as AWOL by their Army units, they were  actually receiving medical treatment. One soldier was receiving outpatient  therapy for her knee injury under the care and direction of an Air Force  physician based on an Army medical referral and the other soldier was in a  military hospital at Fort Campbell. Debt-related experiences of 19  separated battle-injured soldiers who contacted us included the following.
Sixteen soldiers had their military debts reported to credit bureaus, 9  soldiers had debts turned over to private collection agencies, and 8  soldiers had their income tax refunds withheld under TOP.
Sixteen could not pay their basic household expenses.    Four soldiers were unable to obtain loans to purchase homes, meet  other needs, or obtain VA educational benefits because of service- related debt on their credit reports.
At least 8 soldiers were owed travel reimbursements at the same time  they were being pursued for collection of their service-related debts.  Table 2 illustrates examples of the effects of debt collection actions on  10 of our separated Army battle-injured case study soldiers and their  families. Debts imposed the greatest hardship on battle-injured soldiers  who have had to endure financial problems while they cope with  adjusting to physical limitations caused by their injuries.
Table 2.Examples of Battle-Injured Soldier Pay Problems Resulting in Military Debt after Separation  DOD-reported debt reason(s)
Payroll and leave payment  errors. Also, erroneous  Servicemen’s Group Life  Insurance (SGLI) and Survivor  Benefit Program (SBP)  premium billings.
Soldier spent 1-1/2 years on disputes and  appeals before multiple debts, errors and  unreimbursed travel expense were resolved.  Soldier said he deferred purchase of a  house because of military debt included on  his credit report. The Army debt was the only  blot on the soldier’s credit report.
Combat pay and calculation  errors, including payment for  unused leave. Soldier also was  erroneously reported as AWOL  while actually receiving  treatment in a Department of  Veterans Affairs hospital.
Family had no income while debt was  recouped. According to a family member,  the soldier’s utilities were turned off, and his  young daughter was sent to live with  relatives out of state.
Paralyzed from waist  down.
Combat pay and calculation  errors.
Soldier received reduced pay or no net pay  over a 4-month period while he was at  Walter Reed and his wife and four children  were in Germany. The soldier separated  from the Army in January 2005 and his debt  was not resolved until February 2006. The  soldier is still pursuing underpayment of  hostile fire pay and combat zone tax  exclusion and “unreimbursed” travel  expense.
Unearned portion of reserve  enlistment bonus because of  erroneous AWOL report and  overpayment of hardship duty  pay.
After the soldier struggled with her Army  Reserve unit to resolve AWOL errors, she  experienced collection action on other  military debt. The soldier told us she was  unable to get a $500 loan because of the  past due Army debt of $1,079 on her credit  report.
Outstanding travel advance  error.
Soldier was asked to travel to Fort Polk to  brief Stryker Brigade on Iraq experience. He  submitted his travel voucher several times,  but DFAS lost it and reported a travel  advance debt to credit bureaus.
Combat pay and calculation  errors.
Chest injury, damage  to lung and left arm,  in a coma for two  weeks, and PTSD.
Soldier, a single parent with four young  children, was told that DFAS would audit her  $2,030 debt. She said she never heard from  DFAS and was unaware she owed a  balance of over $500 until the debt appeared  on her credit report.
DOD-reported debt reason(s)
Pay calculation errors.
Soldier was contacted by a private collection  agency and his 2004 income tax refund was  withheld to offset his debt. Soldier said he  was unable to obtain a loan to buy land for  his house trailer due to military debt on his  credit report, and he had to pay a higher  interest rate on his car loan.
Unearned portion of reserve  enlistment bonus.
Soldier said he was unsuccessful in gaining  assistance from Fort Hood to resolve his  debt. He was contacted by a private  collection agency, and the government took  his 2004 tax refund to offset the debt.
Erroneous annual leave  payment, repayment of basic  training program expense. Also,  erroneous SGLI premium  billings.
The soldier separated from the Army in  October 2004 and said he received a check  for about $1,800 for unused leave 10  months later in July 2005. He told us he  received his first debt letter in November  2005 but was unable to pay his debt.
Pay calculation errors.
Soldier said she was unable to obtain a loan  to purchase a house because of military  debt on her credit report. The soldier would  have had to pay a higher interest rate  because of Army debt, and she could not  afford the resulting higher monthly payment  on the loan.
Five soldiers and family members told us that they had contacted their  unit finance offices multiple times for assistance in resolving their pay and  debt problems. However, the soldiers said that finance personnel either  did not get back to them as promised or the finance personnel they spoke  with said they could not help them with their problems. DFAS and Army  officials we spoke with acknowledged that finance office personnel at  some locations lacked the knowledge needed to accurately input  transactions to soldier pay accounts. DFAS officials told us they recently  initiated actions to train Army finance office personnel at several  locations.
section_title: DOD Actions to Address Pay and Travel Reimbursement Problems
paragraphs: Our past reports included over 80 recommendations for improvements in  human capital, processes, and systems to address pay and travel problems.  Preventing these problems from occurring in the first place is the best  solution. Efforts to fundamentally reengineer the current system into an  integrated pay and personnel system have fallen far short of expectations.  DOD and the Army have taken a number of actions to improve human  capital and correct process weaknesses. For example, the Army and DFAS  have created a WIA database of personnel, payroll, and medical data on  soldiers who were sick, injured, or killed in combat. This database  provides useful information for identifying and resolving soldier pay and  debt problems. The Army and DFAS have also issued standard operating  procedures and initiated training and oversight activities at several Army  field locations. In addition, the Army established a formal Ombudsman  Office in May 2005 to assist Army Guard and Reserve soldiers in resolving  a variety of pay and travel problems. Over the past few months, DFAS has  deployed staff to several field locations to train the finance staff on the  processing of pay transactions. Although these actions are positive, they  primarily represent workarounds and substantial human efforts to  overcome the error-prone, labor-intensive system that exists today.
section_title: Opportunities for a More Soldier-Friendly Debt Collection Process
paragraphs: Our analysis of debt relief authority in the National Defense Authorization  Act for Fiscal Year 2006 identified additional opportunities to alleviate the  burden that military debt and collection action places on sick and injured  soldiers. For example, the act could be clarified to make debt relief  available to soldiers regardless of when they separated from active duty.  Currently, soldiers who separated from the Army more than 1 year ago are  not eligible to obtain debt relief, and soldiers who paid debts are not  eligible for refunds.
Case studies included in both of our recent reports showed that some  battle-injured soldiers did not receive debt notification letters until 8 to 10  months after they separated from the Army. One battle-injured soldier who  separated in October 2004 told us that he received his debt notification  letter in November 2005—more than 1 year after he separated from the  Army. All but three of our case study battle-injured soldiers separated  from the Army more than 1 year ago, and these soldiers’ eligibility for debt  relief under the act has already expired. Another non-battle-injured soldier  included in our Fort Bragg investigation who separated from the Army  National Guard in June 2005, received his debt notification letter at the  end of March 2006—10 months after he separated from the service— stating that his debt would be reported to credit bureaus, if not paid within  30 days and to private collection agencies if not paid within 60 days.
Further, the current debt relief authority is not permanent; it will expire on  December 31, 2007.
Our report on debts of battle-injured soldiers raises a number of matters  for congressional consideration with regard to expanding debt relief  authority in current law, including providing uniform debt relief to injured  GWOT soldiers and exempting these soldiers from credit bureau reporting  and private collection agency and TOP action. Our report on MRPU soldier  overpayments recommends that DOD follow up with the 22 MRPUs that  were not part of our investigation to determine the extent of overpayments  at those locations and ensure appropriate corrective action is taken.
section_title: Concluding Comments
paragraphs: Our most recent work shows that wounded soldiers continue to struggle  with a broken pay system. These pay problems have resulted in significant  frustration for injured soldiers and their families. In addition, we found  instances of soldiers injured fighting the GWOT being referred to credit  reporting agencies and collection agents. This is especially problematic for  injured soldiers who are facing other difficult challenges. Although DOD  has taken action to improve the military pay system, most of the progress  to date represents workarounds and human efforts to overcome what  remains today as a fundamentally flawed system. Absent a successful  reengineering of the current pay system, problems for soldiers will  continue. Consistent oversight by Congress will be needed to ensure that  DOD provides our soldiers with the world class military pay system that  they deserve.
Mr. Chairman and Members of the Committee, this concludes my  statement. I would be pleased to answer any questions that you or other  members of the committee may have at this time.
section_title: Contacts and Acknowledgments
paragraphs: For further information about this testimony, please contact Gregory D.  Kutz at (202) 512-7455 or kutzg@gao.gov. Major contributors to this  testimony include Gary Bianchi, Mary Ellen Chervenic, Dennis Fauber,  Gayle Fischer, Jason Kelly, Renee McElveen, Richard Newbold, and John  Ryan. Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this testimony.
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