Military Personnel: Army Needs to Focus on Cost-Effective Use of Financial Incentives and Quality Standards in Managing Force Growth
Published: 2009-05-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: To ease the pace of overseas deployments, the President announced a plan in 2007 to grow the Army's end strength by about 7 percent by 2013. GAO was asked to evaluate the Army's management of this growth. Specifically, GAO determined the extent to which the Army has (1) made progress in growing the force, (2) awarded cost-effective bonuses to attract and retain enlistees, (3) maintained the quality of its enlisted force, and (4) directed growth in its officer force to areas of need and determined whether trade-offs it has made to alleviate shortages will have long-term effects. GAO reviewed the Army's growth plans, bonuses, waivers, and officer promotions, and interviewed Defense and Army officials.
section_title: What GAO Found
paragraphs: Although the Army's Grow the Force plan originally called for growth to be completed by fiscal year 2013, the Army had met 99 percent of this growth goal by the end of fiscal year 2008. Since fiscal year 2005, when none of the Army components met recruiting goals, all have made steady progress. To achieve this growth, the Army substantially increased its number of recruiters and its funding of incentives. In addition, the active Army and Army Reserve exceeded their retention goals from fiscal years 2005 through 2008; the Army National Guard exceeded its goals in fiscal years 2006 and 2008 and achieved retention within the allowable margin in fiscal years 2005 and 2007. While the Army has increased its expenditures for bonuses by almost 75 percent since fiscal year 2005, it has not used available research to set bonuses at dollar amounts that are most cost-effective. Although a substantial body of research exists on how to cost-effectively use recruiting resources, the Army has not used this research to calculate bonus amounts. During GAO's review, Army officials stated that the main proof of success of the bonus program was that the Army had met its goals for accessions and retention. Also, because Defense guidance allows the Army to offer bonuses to enlistees in any occupation, the Army has been able to award and often has awarded bonuses to occupations that are not considered priority. Further, because each component makes decisions on bonuses independently, the amounts of bonuses awarded by different components vary widely. Since GAO completed its audit work, the Army states, however, that it has been reducing the numbers and amounts of bonuses offered enlistees. In fiscal years 2005 through 2008, the Army did not consistently meet quality goals for new recruits, as measured by the percentage who have high-school diplomas and who score in the upper half on the Armed Forces Qualification Test. The Army implemented some new programs to increase the market of eligible recruits, such as programs for overweight individuals or those without high-school diplomas. In addition, the Army has continued to use conduct waivers for candidates who fall short of entrance standards for reasons such as prior criminal misconduct. Existing analyses have shown that recruits with conduct waivers perform similarly to those without conduct waivers-- although they are more likely to be separated for adverse reasons; the Army lacks data on the cost of enlisting persons who require conduct waivers. The Army is experiencing shortages of captains, majors, and lieutenant colonels and projects that these shortages will continue. The Army has offered bonuses to captains; however, it has not offered incentives to majors or lieutenant colonels because those ranks are not considered to have retention problems. While the Army has research focused on incentive packages, this research has not been directed at calculating the most cost-effective bonus amounts. Also, the Army has no method of determining whether actions it has taken that deviate from congressional benchmarks will have any effect on the future Army officer corps.

section_title: Letter
paragraphs: The Overseas Contingency Operation has dramatically increased the scale  of U.S. military operations and has accelerated the pace of operations for  soldiers who must deploy to Iraq and Afghanistan. To help alleviate the  burden on those most seriously affected by these deployments, the  President announced a plan in January 2007 to grow the Army’s end  strength by 65,000 active-duty; approximately 8,200 Army National Guard;  and approximately 1,000 Army Reserve personnel by fiscal year 2013.  These planned increases represent about a 7 percent increase in the total  size of the Army, from approximately 1.04 million personnel to a growth  goal of over 1.11 million personnel. In 2008, however, recognizing the  intensified demands on Army forces and the stress associated with their  long deployments, the Army decided to accelerate this planned growth and  complete it by fiscal year 2010. As the Army has increased its forces, it has  been faced with the added challenge of doing so in a difficult recruiting  environment, partly due to the long and repeated deployments expected of  Army servicemembers. To meet this challenge and to successfully target  youth who are qualified for service, the Army has invested heavily in  recruiting and bonuses. However, the nation is now faced with difficult  economic circumstances that are straining government resources. In this  context, all agencies, including the Department of Defense (DOD), will  need to rethink the way they do business and demonstrate the best  possible stewardship of federal funds.
Given the extraordinary demands now being placed on the Army, you  asked us to examine the Army’s ability to manage its planned growth in  personnel and meet its future personnel needs. This report addresses the  following questions. To what extent is the Army (1) making progress in  growing the force, (2) awarding cost-effective bonuses to attract and  retain enlistees in occupations of greatest need, (3) maintaining the quality  of its enlisted force, and (4) directing the growth in its officer force to  areas of need and determining whether short-term trade-offs it has made  to alleviate shortages will have any long-term effects on its officer corps?
To assess the Army’s progress in growing the force, we reviewed its actual  and projected end strength under both the original and the accelerated  Army growth plans. We also analyzed recruiting and retention data from  the Office of the Secretary of Defense (OSD) for active Army, Army  Reserve, and Army National Guard servicemembers. To assess the extent  to which the Army is awarding cost-effective bonuses to attract and retain  enlistees in occupations of greatest need, we reviewed Army data on  occupations with personnel shortages and observed the Army’s processes  for allocating bonuses. To assess the efforts that the Army is making to  maintain the quality of its enlisted personnel, we analyzed data from OSD  on educational credentials and aptitude test scores for these personnel,  and we collected data from the U.S. Army Recruiting Command and the  National Guard Bureau on enlistees who were accepted into the Army  with waivers—permission to join the service despite a formerly  disqualifying factor such as prior misconduct. We also reviewed the  Army’s and the RAND Corporation’s analyses of the outcomes for soldiers  who had received waivers. In addition, we collected information on the  Army programs designed to widen the market of eligible recruits. To  assess the extent to which the Army is directing its growth to areas of  need in its officer corps, we reviewed data on the shortages that exist  within the officer corps and collected information on the bonus programs  and other incentives used by the Army to address officer shortages. To  understand the Army’s efforts to maintain the appropriate rank structure  and experience levels of its officer corps, we collected information on the  officer evaluation process and reviewed data on officer promotions from  the U.S. Army Human Resources Command. The data we reviewed for  each of our research objectives generally covered fiscal years 2005  through 2008; however, our analysis of enlistment waivers was limited to  fiscal year 2008 due to limitations in waiver data from previous years, such  as the system’s failure to capture some waivers and the overcounting of  other waivers.Except in the case of the enlistment waiver data, we found  the data for fiscal years 2005 through 2008 to be sufficiently reliable for the  purposes of this report. In addition to analyzing available data and  documents, we interviewed officials from the Office of the Under  Secretary of Defense for Personnel and Readiness and various  organizations within the Army, including the Army’s Office of the Chief of  Staff for Programs, the Army Office of the Deputy Chief of Staff for  Personnel, the Army Budget Office, and the Office of the Assistant  Secretary of the Army for Manpower and Reserve Affairs. Additionally, we  visited and interviewed officials from the U.S. Army Accessions Command,  U.S. Army Cadet Command, U.S. Army Recruiting Command, U.S. Army  Human Resources Command, U.S. Army Reserve Command, and National  Guard Bureau Headquarters. We conducted this performance audit from  February 2008 to March 2009 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. More  information on our scope and methodology is available in appendix I.
subsections: section_title: Background
paragraphs: DOD-wide, military personnel costs make up 23 percent of defense  spending. According to GAO estimates, in fiscal year 2000 the average  compensation for an active-duty soldier in terms of cash and noncash  benefits and deferred benefits such as healthcare in retirement was  $101,537. In fiscal year 2007, it cost about $125,000 a year to compensate  an active-duty soldier, a rise of about 23 percent.The Army must annually  recruit and retain more than twice the number of uniformed personnel  needed by any other military service, and it has budgeted approximately  $51.8 billion for military personnel in fiscal year 2009. Each fiscal year, the  Army determines its quantity goals—the number of uniformed personnel it  must recruit into the active Army, the Army Reserve, and the Army  National Guard—based on the difference between the congressionally  authorized end strength for each of these components and the projected  number of currently serving personnel expected to continue their military  service through the end of the fiscal year. In addition, requirements  specific to the military services’ officer corps set out in law—specifically  the Defense Officer Personnel Management Act—guide the Army’s  management of these personnel.For example, the act sets the upper limit  on the number of officers that the Army may have at any given time, and  Senate Report No. 96-375 describes benchmarks for officer promotion  rates.  Congressional reports accompanying the Defense Officer Personnel  Management Act also contain information intended to guide management  of the officer corps.
Since 2004, two major Army initiatives—one to restructure the Army and  another to expand its size—have influenced the Army’s needs for both  enlisted and officer personnel.
In 2004, the Army began its multiyear modular force restructuring,  sometimes referred to as “Army Modularity,” which involves the total  redesign of the operational Army. It was initiated, in part, to support  current operations in Iraq and Afghanistan. The foundation of modular  restructuring is the creation of new, standardized, modular units that  change the Army’s division-based force structure to a structure in which  smaller, more numerous brigade formations are embedded within  significant support elements. These new modular Brigade Combat Teams  and Multi-Functional Support Brigades are designed to be self-sufficient,  stand-alone units that are more rapidly deployable and better able to  conduct joint and expeditionary combat and support operations than were  their larger division-based predecessors. These units, along with  Functional Support Brigades and modular Headquarters Units, comprise  the Army’s new modular force. In most cases, modular brigades require a  different personnel skill level mix than did the brigades they replace.  In January 2007, the President announced an initiative—called Grow the  Force—intended to expand the size of the Army in order to meet strategic  demands and help reduce stress on the force. Subsequently, in October  2007, the Chief of Staff of the Army announced a plan to accelerate the  original Grow the Force completion date from fiscal year 2013 to fiscal  year 2010. The original plan called for an increase in active Army end  strength of 65,000 personnel, bringing it to 547,400; an increase in Army  National Guard end strength of approximately 8,200 personnel, bringing it  to 358,200; and an increase in Army Reserve end strength of approximately  1,000, bringing it to 206,000. The accelerated plan calls for the active Army  and the Army National Guard to achieve their target end strengths by fiscal  year 2010—3 years earlier than initially planned; the accelerated plan does  not affect the Army Reserve’s timeline. As we have previously reported,  based on the original timeline, the Army’s preliminary cost estimate  indicated that expanding the Army would require approximately   $70.2 billion from fiscal year 2007 through fiscal year 2013 for military  personnel, operations and maintenance, procurement, and military  construction costs.The Army also anticipates that it will need additional  supplemental funding to meet the accelerated timeline.
The Army has control over some but not all of the factors that affect  recruiting. For example, to increase the number of recruits, the Army may  choose to increase the size of its recruiting force or to use incentives, such  as enlistment bonuses or educational benefits. However, according to the  Congressional Budget Office, the combination of the duration of ongoing  operations, the length and frequency of deployments, and the generally  difficult nature of deployments has led to some concerns about the  continuing effects of these factors on recruiting and retaining the force.Additionally, as we have previously reported, recent conditions present  some of the most difficult recruiting and retention challenges DOD has  experienced in recent history. Since the September 11, 2001, terrorist  attacks on the United States, DOD has launched three major military  operations requiring the deployment of significant numbers of military  servicemembers. These are Operation Noble Eagle, which covers military  operations related to homeland security; Operation Enduring Freedom,  which includes ongoing military operations in Afghanistan and certain  other countries; and Operation Iraqi Freedom, which includes ongoing  military operations in Iraq. These military operations have greatly  increased the rate at which personnel have been deployed, especially in  the active Army, Army National Guard, Army Reserve, and the Marine  Corps, which have provided the bulk of the military servicemembers for  operations in Iraq. On the other hand, the recent downturn in the   U.S. economy may increase potential recruits’ interest in military service,  as DOD has historically found that more youth are willing to consider  military service during periods of high unemployment. While  unemployment rates in the United States dropped from 2003 through  2007—falling from 6 percent in 2003 to 4.6 percent in 2007—as of   January 2009, the unemployment rates had risen to 7.6 percent.
section_title: The Army Is Well Ahead of Schedule in Growing the Force
paragraphs: By the end of fiscal year 2008, the Army had almost reached its overall  growth goal, although the original Grow the Force plan called for the  growth to be completed by 2013. The Army decided to accelerate this  planned growth and complete it by fiscal year 2010. In fiscal year 2008, two  Army components—the active Army and the Army National Guard— exceeded their fiscal year 2008 growth goals under the accelerated growth  plan. All Army components have made progress in meeting their recruiting  goals since fiscal year 2005, when none of them met recruiting goals. In  2008, all components exceeded their recruiting goals. The active Army and  the Army Reserve also exceeded their retention goals each year from fiscal  year 2005 through fiscal year 2008. The Army National Guard exceeded its  goals in fiscal years 2006 and 2008 and fell within the allowable margin of  variance for meeting its goals in the other 2 fiscal years.
subsections: section_title: The Army Has Almost Met Its Overall Growth Goal, and Two Components Have Exceeded Their Annual Goals under the Accelerated Growth Plan
paragraphs: By the end of fiscal year 2008, the Army as a whole had met 99 percent of  its overall growth goal, whereas it had initially planned to complete the  growth by fiscal year 2013 under the original Grow the Force plan and by  2010 under the accelerated plan. Specifically, the Army’s total end strength  at the end of fiscal year 2008 stood at 1,101,020 personnel, and its final  end-strength goal under the Grow the Force plan is 1,111,600 personnel.
Under the Army’s accelerated growth plan, the goal for the active Army  was to reach an end strength of 547,400 personnel by the end of fiscal year  2010; the active Army ended fiscal year 2008 with a total of 543,645  personnel (see table 1). As table 1 also shows, the active Army exceeded  its 2008 goals under both the original and the accelerated growth plans. At  the end of fiscal year 2008, the active Army needed to grow only by an  additional 3,755 to reach its overall end-strength goal of 547,400 personnel.  Officials said that at this rate of growth, the active Army is well on track to  reach its overall end strength goal by fiscal year 2010.
The Army National Guard has also had success in growing well ahead of  the schedule. By the end of fiscal year 2008, the National Guard had met  100.6 percent of its overall growth goal. As shown in table 1, the goal for  the Army National Guard was to reach an end strength of 358,200  personnel by the end of fiscal year 2010 under the accelerated growth  plan; however, the Army National Guard ended fiscal year 2008 with a  total of 360,351 personnel. Army National Guard officials attributed their  ability to exceed growth goals to their successes with recruiting and  retaining personnel.
The Army Reserve is not subject to the accelerated plan, but the original  plan called on it to grow to 206,000 personnel by the end of fiscal year  2013. By the end of fiscal year 2008, the Army Reserve had met  approximately 96 percent of this goal, with an end strength of 197,024. As  shown in table 1, the Army Reserve increased its number of personnel by  approximately 7,000 by the end of fiscal year 2008, but it still fell slightly  short of its 2008 end strength goal of 198,268. Army Reserve officials  acknowledged that the Army Reserve has struggled in meeting its annual  end-strength goal. They told us that despite the Army’s need to accelerate  the growth in personnel in order to reduce the burden of frequent and  lengthy deployments, the Army Reserve was not included in the  acceleration plans because of the difficulties it was experiencing in  meeting its end-strength goals.
section_title: Army Components Have Made Progress in Meeting Their Recruiting Goals Since 2005
paragraphs: The Army manages its overall end strength by setting goals for recruiting  new personnel and retaining existing personnel. Since fiscal year 2005,  when all Army components fell short of their recruiting goals, the  components have made progress toward meeting their annual recruiting  goals. To help accomplish this, they have increased the size of their  recruiting force. As shown in table 2, the active Army met approximately  92 percent of its recruiting goal in fiscal year 2005, while the Army  National Guard met approximately 80 percent of its goal and the Army  Reserve met approximately 84 percent of its goal. Since fiscal year 2005,  all three components have made steady progress toward meeting their  recruiting goals. As shown in table 2, the active Army exceeded its annual  goal of 80,000 new recruits from fiscal years 2006 through 2008. The Army  National Guard met more than 95 percent of its goal in both fiscal years  2006 and 2007 and exceeded its goal in fiscal year 2008. The Army Reserve  met approximately 95 percent of its goal in fiscal year 2006 and exceeded  its goal in both fiscal years 2007 and 2008.
In working toward achieving its recruiting goals, the Army increased its  number of recruiters from 10,271 in fiscal year 2005 to 13,428 in fiscal year  2008, a total increase of more than 30 percent. The number of recruiters  also grew within each Army component during this period. For example,  the number of recruiters in the active Army grew from 5,454 in fiscal year  2005 to 6,589 in fiscal year 2008, an increase of more than 20 percent. The  number of recruiters in the Army Reserve grew by more than 50 percent  between fiscal years 2005 and 2008 (from 1,117 to 1,739). For the Army  National Guard, the number of recruiters grew by approximately   38 percent during that period (from 3,700 to 5,100) (see fig. 1).
section_title: Army Components Met Their Retention Goals in Recent Years
paragraphs: Despite concerns that the increased length and frequency of deployments  could cause soldiers to leave the Army, the Army components met their  retention goals between fiscal years 2005 and 2008. The active Army uses  soldiers’ reenlistments as a measure of retention. The active Army  exceeded its retention goals at each experience level every year from  fiscal years 2005 through 2008 (see table 3).
Like the active Army, the Army Reserve and the Army National Guard  were successful in retaining personnel each year from fiscal years 2005  through 2008. Both of these components use attrition rates—the number  of losses from a component during a given period compared to the  component’s average end strength during that period—as a measure of  retention, striving to keep attrition below an established maximum rate, or  ceiling. However, DOD allows a 2 percentage point margin of variance  from the established ceiling in assessing whether or not attrition goals  have been met. As table 4 shows, the attrition rate for the Army Reserve  remained at rates below the ceiling each year from fiscal years 2005  through 2008. The Army National Guard had attrition rates above the  ceiling in fiscal years 2005 and 2007, but the rates during these 2 years fell  to within the 2 percentage point margin of variance allowed by DOD. The  Army National Guard also succeeded in keeping attrition rates below the  ceiling in fiscal years 2006 and 2008 (thus exceeding its goals).
Army officials attributed the generally high retention rates among enlisted  personnel to their strong commitment to the mission and their pride in the  military service. Also, several Army officials said that the ongoing conflicts  in Iraq and Afghanistan provide soldiers with opportunities to take  advantage of their training and to put their combat skills to use, thus  increasing satisfaction with their Army careers. Focus groups conducted  with soldiers returning from 15-month combat tours and their families  from December 2007 through February 2008 also found that soldiers and  their family members expressed great pride in their service, and soldiers  indicated that they were doing what they had originally joined the Army to  do.
At the same time, deployments that are too long or too frequent may start  having an adverse effect on retention, as pressure on personnel and their  families increases. Participants in the focus groups reported that 15-month  deployments are too long and 12-month dwell time is too short to fully  integrate with family and prepare for the next deployment. Top Army  leaders acknowledge the strain on soldiers and families, and the Army has  recently reduced deployments to 12 months, followed by 12 months at  home for active-duty soldiers. Officials we interviewed said that the  accelerated rate of growth in Army end strength is helping them move  toward the goal of shorter deployments and longer dwell time.
section_title: The Army Has Dramatically Increased Bonus Expenditures but Does Not Use Available Research to Calculate the Most Cost-Effective Bonus Amounts
paragraphs: Since fiscal year 2005—the last year in which the Army failed to meet its  end-strength mission—it has dramatically increased expenditures for  enlistment and reenlistment bonuses. However, while the Army has  completed or contracted for extensive analysis of the effectiveness of  various recruiting tools, it has not integrated the results of its research to  calculate the most cost-effective bonus amounts. That is, the Army cannot  determine whether or not it is paying more in bonuses than it needs to pay.  Also, these bonuses are not always targeted as precisely as they could be.  The Army’s process for determining whether to award a bonus to a  specific occupational specialty is based on a number of factors, including  whether the Army is having difficulty recruiting for and needs to fill  training slots for the specialty and whether the occupation’s fill rates  indicate shortages. (Fill rates are the rates at which occupational  specialties are filled in relation to the existing number of vacancies.) The  Army’s current system results in (1) soldiers in occupations of varying  priority or responsibility sometimes getting the same bonus amounts;   (2) all soldiers who are eligible for and apply for reenlistment while they  are in Iraq, Afghanistan, and Kuwait receiving bonuses, regardless of their  occupational specialties; and (3) soldiers in the same occupational  specialties getting different bonus amounts depending on which  component they join. After we had completed our audit work, OSD and  the Army reported that the worsening U.S. economy had resulted in their  ability to decrease bonus amounts and the numbers of occupations offered  bonuses. In March 2009, they stated that in this fiscal year, they had  contracted for analyses to be done on the effectiveness of cash incentives  and on bonus prediction models.
subsections: section_title: The Army Has Substantially Increased Its Expenditures on Bonuses
paragraphs: In fiscal year 2005, the Army’s total enlistment and reenlistment bonus  expenditures stood at approximately $1.2 billion; in fiscal year 2008, they  had increased by almost 75 percent, to approximately $2.0 billion. Bonus  expenditures also grew within each of the Army’s components.
subsections: section_title: Active Army
paragraphs: As figure 2 shows, the active Army spent $165.9 million on enlistment  bonuses in fiscal year 2005; by fiscal year 2008, it had almost tripled its  enlistment bonus expenditures, spending approximately $466.7 million.  The active Army also spent $505.6 million on reenlistment bonuses in  fiscal year 2005; by fiscal year 2008, it had increased these expenditures by  more than 35 percent, to $689.9 million.
The Army Reserve has also significantly increased its spending on bonuses  to soldiers since fiscal year 2005. As figure 3 shows, the Army Reserve  spent $59.6 million on enlistment bonuses in fiscal year 2005. By fiscal year  2008, it had almost tripled this amount, to $169.7 million. Additionally, the  Army Reserve spent $63.9 million on reenlistment bonuses in fiscal year  2005, nearly doubling its fiscal year 2008 expenditures, to $121 million.
The Army National Guard almost tripled its spending on enlistment  bonuses from $141.8 million in fiscal year 2005 to $392.1 million in fiscal  year 2008. It also increased total reenlistment bonus expenditures from  $235.1 million in fiscal year 2005 to $375.8 million in fiscal year 2007,  before curtailing reenlistment bonus spending for fiscal year 2008 (see   fig. 4).
Army officials stated that the use of incentives, such as bonuses, is an  integral part of a comprehensive recruiting and retention strategy. OSD  officials said that the increase in bonus expenditures over the past several  years has been necessary to overcome a recruiting environment made  difficult by factors such as the declining propensity of youth to enter the  military service, the decreasing number of youth who meet the Army’s  entrance standards, and the reality of recruiting during a time of overseas  military conflicts. Up until now the Army has been able to dramatically  increase the amounts it spends on enlistment and reenlistment bonuses.  However, the current level of bonus expenditures may prove difficult to  sustain in the tighter fiscal environment expected in the next several years.  Also, rising unemployment rates in the civilian sector may make it easier  to attract recruits and retain soldiers.
section_title: The Army Has Not Used Research to Calculate What Bonus Amounts Would Be Most Cost- Effective
paragraphs: While the Army has conducted extensive research on the use of cash and  other incentives such as choice of branch or graduate school, this research  has been focused on comparing different incentive plans. It has not been  directed at determining the most cost-effective bonus amounts. The Army  therefore cannot determine whether or not it is paying more than it needs  to pay in enlistment and retention bonuses. DOD Directive 1304.21  establishes policies for administering enlistment and reenlistment bonuses  for military servicemembers, and DOD Instruction 1304.29 provides  guidance on implementing these policies. These directives state that  bonuses should be used in situations in which less costly methods have  proven inadequate or impractical. DOD Directive 1304.21 further states  that it is wasteful to authorize the use of financial incentives when less  costly but equally effective incentives are available. In determining what  bonus amounts to offer active-duty enlistees, the Army has established  seven different amount levels based on the occupation that the enlistee  would fill. (See table 10 in app. II for a listing of the bonus amounts.)  Bonus levels 1 through 7, as defined by the U.S. Army Recruiting  Command, have been adjusted over the years. The current amounts range  from $2,000 to $35,000, depending on the bonus level under which an  occupation falls and the length of the enlistment contract signed by the  recruit. For example, a recruit who enters the active Army in a level 3  occupational specialty and signs a 2-year contract would receive an  enlistment bonus of $3,000. A recruit who enters the active Army in a level  1 occupational specialty—the highest bonus category—and signs a 6-year  contract would receive an enlistment bonus of $35,000.
Although a substantial body of research exists on how analysts can  estimate the extent to which enlistment and reenlistment rates for  particular segments of the force are likely to be affected by alternative  uses of resources, the Army has not integrated this research into its  decisionmaking process in setting the most cost-effective bonus  amounts. Accordingly, officials told us that the Army is not able to  determine whether it is paying more than it needs to and therefore getting  a cost-effective return on its investment. In light of the tighter fiscal  environment expected in the next few years, it will become more  important to determine whether it is paying bonuses to persons who  would have joined or stayed in the Army without them. In fact, after we  had completed our audit work, the Army stated that in fiscal year 2009, it  had begun to decrease the number of occupational specialties that receive  bonuses and the amounts spent for this purpose.
section_title: The Army’s Process Leads to Cases in which Occupations of Different Priority Levels Receive Similar Bonuses and Bonuses Vary by Component
paragraphs: To determine the occupational specialties for which active-duty enlistees  should be offered enlistment bonuses, the Army has formed an Enlisted  Incentives Review Board—made up of officials from the Army Office of  the Deputy Chief of Staff, the U.S. Army Recruiting Command, and the U.S.  Army Human Resources Command—which meets four times a year.  Occupational fill rates, or the percentages of an occupation’s positions  that are filled, are a major factor in the board’s determination of whether  to offer enlistment bonuses for a particular occupational specialty.  However, other factors are also considered, such as the Army’s future  planned growth, decreases in the need for an occupational specialty, the  success of any previously offered bonuses in attracting the required  numbers of enlistees, and the availability of training slots. The Army has a  list of priority occupations that is compiled by field commanders when  they assess their units’ personnel needs, but given the various factors  considered by the Enlisted Incentives Review Board, situations arise in  which some priority occupations do not receive bonuses or in which  different occupations with varying degrees of responsibility are awarded  the same amount. For example, of the 35 occupational specialties on the  Army’s priority list, 9 were not designated to receive enlistment bonuses at  the time of the June 2008 Enlisted Incentives Review Board meeting.  However, at the same meeting the Enlisted Incentives Review Board  identified 52 nonpriority occupational specialties that would be offered  some level of bonus. (See table 11 in app. II for a list of occupational  specialties that were selected to receive bonuses.)
The board’s system for determining enlistment bonuses also sometimes  results in cases in which occupations with varying degrees of  responsibility receive the same bonus. For example, in June 2008, Food  Service Specialists were eligible to receive the same bonus as Explosive  Ordnance Disposal Specialists, even though the Explosive Ordnance  Disposal Specialist was listed as a priority occupational specialty and was  tasked with more dangerous responsibilities. Similarly, Infantrymen, an  occupational specialty listed by the Army as a priority specialty, received  the same level of enlistment bonus as Army band musicians. Army officials  told us that these decisions were based on factors such as the difficulty of  recruiting for some occupations and the availability of training slots for  them. DOD guidance allows the services to grant bonuses to occupations  that the services have not deemed “priority” but that are experiencing  shortages or for which total accession objectives have not been met.
Like enlistment bonuses, reenlistment bonuses are not always targeted at  priority occupational specialties. For example, in fiscal years 2007 and  2008, the active Army awarded tax-free reenlistment bonuses of up to  $15,000 to all soldiers, regardless of occupational specialty, who were  deployed to Afghanistan, Iraq, and Kuwait while they were in theater.  Army officials reported that in fiscal year 2007, 15,984 soldiers received  these reenlistment bonuses, which averaged $10,700. As of April 2008,  4,483 soldiers had received these bonuses during fiscal year 2008; the  average 2008 bonus was $12,700. Army officials linked these tax-free  reenlistment bonuses to the Army’s ability to attain high levels of  retention. For example, they reported that recently deployed units or units  currently deployed to Iraq, Afghanistan, and Kuwait have reenlistment  rates at 110 to 120 percent of their yearly goals.
Furthermore, because the Army’s components manage their enlistment  bonus programs separately, soldiers in the same occupations might  receive bonuses of different amounts, depending on the component in  which they serve. One prominent difference among the bonuses offered by  Army components is the difference between what is offered to an active- duty enlistee and an enlistee who enters under the National Guard’s Active  First incentive program. All Active First recruits get a bonus of at least  $20,000 if they sign up for 2 years in the active Army; $30,000 if they sign  up for 3 years; and $40,000 if they sign up for 4 years. Because all Active  First enlistees are eligible for bonuses, an enlistee in a specific  occupational specialty may find that he or she is eligible for a bonus for  joining the Active First program but not eligible for a bonus for joining the  active Army. According to data provided by the U.S. Army Recruiting  Command, such differences in bonuses offered by the Army’s three  components resulted in a divergence in the average dollar amount of  bonus per enlistee in fiscal year 2008. As table 5 shows, bonuses ranged  from $18,304 for an active-duty enlistee to $36,966 for an enlistee in the  National Guard’s Active First Program.
section_title: The Army Has Fallen Short of Its Quality Goals and Has Taken Steps to Expand Its Recruiting Market
paragraphs: The Army components have not consistently met their quality goals for the  percentage of new recruits who have high-school diplomas and who  score in the upper half on the AFQT. The Army estimates that only 3 out of  10 youth aged 17 to 24 are qualified to join the Army without a waiver,  even including those who have low educational credentials or low  aptitude. This has led the Army to experiment with some initiatives to  expand its recruiting market to individuals who before now might have  been considered ineligible for service, for example recruits who do not  meet standard entrance requirements for reasons such as body fat and age  requirements. While its programs to expand the recruiting market appear  promising, the Army has not yet had time to collect long-term data on the  performance of individuals admitted through these programs.
subsections: section_title: Army Components Have Not Consistently Met Quality Benchmarks for Recruits with High-School Diplomas and Scores on the Upper Half on the AFQT
paragraphs: In fiscal years 2005 through 2008, the Army components did not  consistently meet the quality benchmarks set for the services by DOD.  Historically, DOD has used two primary measures to identify quality  recruits: possession of a high-school diploma and a score in the upper half  on the AFQT. These benchmarks require that at least 90 percent of recruits  each year have a high-school diploma, at least 60 percent score in the  upper half on the AFQT, and no more than 4 percent score in the bottom  30 percent on the AFQT. In fiscal year 2005, none of the Army’s  components met DOD’s 90 percent benchmark for recruits with high- school diplomas (see table 6). The active Army and the Army Reserve met  the benchmark for 60 percent of enlistees scoring in the upper half on the  AFQT, but the Army National Guard did not. Since fiscal year 2005, only  the active Army has met the benchmark for 60 percent of its recruits  scoring in the upper half on the AFQT. The Army National Guard has  consistently met the high-school diploma benchmark since fiscal year  2005, while the active Army and the Army Reserve have not. In fiscal years  2006 through 2008, 91 percent of the Army National Guard’s recruits had  high-school diplomas.
All three components have met DOD’s benchmark that no more than   4 percent of enlistees score in the bottom 30th percentile on the AFQT,  with one exception: in fiscal year 2005, 5 percent of the Army National  Guard’s recruits were in this category.
section_title: The Army Has Implemented Initiatives to Expand Its Recruiting Market
paragraphs: Given the challenges the Army faces in meeting DOD quality benchmarks  and because the Army estimates that only about 3 out of 10 youth aged 17  to 24—including those who have low educational credentials or low  aptitude—do not need a waiver to join the Army, it has recently  introduced initiatives to assess the quality of potential recruits by other  measures and to expand its traditional market for recruiting. The Army  currently estimates that of the approximately 32 million young people in  the United States aged 17 to 24, only 9.7 million (or approximately 3 out of  10) are qualified without requiring a waiver for medical conditions,  conduct issues, or administrative reasons such as the number of  dependents. However, the Army emphasizes that some of these fall into a  category subject to a DOD percentage cap restriction for enlistment  because they have AFQT percentile scores below 31 or lack high-school  diplomas. Therefore, the Army estimates that only about 2 out of 10, or  6.2 million, can be considered fully qualified and eligible to enlist at any  given time (see fig. 5). Each year, the Army tries to recruit approximately  176,000 of these individuals, meaning that the Army needs almost   3 percent of this population to enlist.
Individuals fall outside of the Army’s target market for recruiting for a  variety of reasons, including physical factors (such as body fat) or  educational factors (such as not having a high-school diploma). To help  meet its recruiting goals, however, the Army has targeted its efforts to  some individuals who do not fully meet its entrance criteria, especially  those who are over the body fat limit, do not possess high-school  diplomas, or are ages 41 and 42 but fully qualified otherwise.
The Army has implemented four initiatives to expand its recruiting  market. One of these focuses on overweight individuals. The Army has  traditionally rejected individuals whose body fat exceeds a prescribed  limit, but it has now begun to admit individuals who, although their body  fat exceeds the limit, have other characteristics that have been found to be  predictors of success in the Army. To screen for these characteristics, the  Army has developed an Assessment of Recruit Motivation and Strength  test, which assesses an individual’s physical fitness and motivation and  identifies promising individuals who would otherwise have been denied  entry. The Army has also implemented a second and third program to  target individuals without high-school diplomas. In 2005, the Army  implemented a Tier Two Attrition Screen, used to screen individuals  without high-school diplomas for characteristics such as motivation and  mental and physical fitness—indicators linked to relatively low rates of  attrition. In addition to the Tier Two Attrition Screen, the Army  Preparatory School was opened in August 2008 to help promising  individuals without high-school diplomas earn General Educational  Development (GED) certificates in 4 weeks and to prepare them for basic  training. The school is open to youth without high-school diplomas who  have scored in the upper half on the AFQT, who need no other waivers,  and who have passed the Tier Two Attrition Screen. The Army also  implemented a fourth initiative to expand the recruiting market by  increasing the maximum recruitment age from 40 to 42. According to the  Army, individuals in this category often bring a range of experiences that  can benefit both the Army and their fellow soldiers. This expansion of the  pool provides a larger segment of the population with a chance to serve.
As table 7 shows, the active Army and the Army Reserve have accessed  several thousand recruits through these initiatives to expand its recruiting  market. However, many of the recruits who entered through these  programs have not yet completed their first enlistment terms, and the  Army is still evaluating each program’s long-term impact and effectiveness.
The Army has accessed nearly 1,000 recruits in fiscal year 2008 as a result  of the Assessment of Recruit Motivation and Strength program, and the  Army Reserve has accessed 366. Initial findings from this program indicate  that females who exceeded the body fat standards but were allowed to  enlist as a result of passing the Assessment of Recruit Motivation and  Strength test had attrition rates similar to those of fully qualified females;  attrition among males who exceeded the body fat standards but passed the  test was slightly higher compared to the attrition of fully qualified males.  However, these recruits had not completed their terms of enlistment at the  time of the study, and the Army plans to conduct analyses with a larger  number of subjects in the future. In fiscal year 2008, the Army accessed  6,580 soldiers for the active Army and nearly 1,000 for the Army Reserve  through the Tier Two Attrition Screen, and initial program evaluation  results show that these recruits had attrition rates higher than those with  high-school diplomas but lower than those with GEDs. However, because  this initiative was first implemented in 2005, the Army has not yet gathered  sufficient data to prove the long-term success of this program in predicting  recruits’ attrition behavior. From August 2008, when the Army Preparatory  School first opened, to the end of fiscal year 2008, the Army also reported  graduating and accessing 362 new recruits in the active Army and 41 new  recruits in the Army Reserve entering through this program, but  performance in the long term has yet to be assessed.
section_title: The Army Has Continued to Grant Conduct Waivers for New Recruits and Analyzes the Outcomes of Recruits Entering with Conduct Waivers
paragraphs: The Army has continued to grant conduct waivers to recruits who do not  meet some of the Army’s entrance standards for reasons such as prior  criminal misconduct. In fiscal year 2008, approximately 12 percent of new  recruits admitted by the active Army had conduct waivers, compared with  approximately 6 percent in the Army Reserve and 3 percent in the Army  National Guard. According to the Army, enlistment waivers offer  opportunities to individuals who have the potential to be good soldiers but  who may not otherwise have been given a chance to serve. Some officials  also acknowledged that waivers are necessary, given the Army’s efforts to  grow and the ongoing challenges in the recruiting environment.
Through fiscal year 2008, the Army granted conduct waivers for various  types of offenses: felonies, serious or minor misdemeanors, and serious  or minor traffic offenses. Army data show that waivers for serious  misdemeanors comprise the largest category of conduct waivers granted  by all components in fiscal year 2008, followed by waivers for felonies for  the active Army and the Army Reserve and by waivers for minor traffic  offenses for the Army National Guard. Waivers for felonies—the most  serious type of offense that may qualify for a waiver—comprised  approximately 13 percent of all conduct waivers for the active Army,   14 percent for the Army Reserve, and 10 percent for the Army National  Guard. We reviewed the files of all of those personnel accessed by the  active Army or Army Reserve in fiscal year 2007 with waivers for felony  convictions. Appendix III provides examples of the felonies committed by  these recruits. Overall, however, the percentage of recruits entering with  felony waivers was small. For example, recruits with felony waivers  comprised less than 1 percent of overall accessions to the active Army and  less than 2 percent of overall accessions to the Army Reserve and the  Army National Guard.
In fiscal year 2006, the Army began to collect and analyze data on the  performance outcomes of recruits with conduct waivers. DOD Instruction  1304.26 states that the underlying purpose of moral character standards is  to minimize the enlistment of persons who are likely to become  disciplinary cases. Initial analyses conducted by the Army and the RAND  Corporation have shown that, while those with conduct waivers tend to  perform as well as those without conduct waivers, they are more likely to  be separated for adverse reasons, such as behavioral issues.All of these  studies, however, examined accessions with waivers from fiscal years  2002 through 2007, years when, according to Army officials, the waiver  data were subject to certain data reliability problems, including the  overcounting of conduct waivers and the miscoding of some  misdemeanors as felonies. Since that time, the Army has made  improvements to the waiver data, and results of any forthcoming studies  should provide a more reliable assessment of the conduct waiver  population.
At the Army’s request, in 2009, RAND will assess whether the presence of  soldiers with waivers adversely affects the behavior of other members of  their units. In addition, RAND plans to update its analysis of how recruits  with conduct waivers are performing. An Army official told us that the  Army’s own analyses and the work undertaken by RAND provide a  comprehensive view of the Army’s waiver policies and a mechanism for  identifying the need for any changes. According to Army officials, the  administrative cost of the waiver review process is “negligible.” They  added that the primary cost metric used to measure the return on  investment for enlistees with waivers is comparing the attrition rates of  those with waivers to the rates of those without waivers. They stated that  in 2006, the Army found that there were no significant differences in  attrition rates between these two groups. However, Army officials also  acknowledge that the findings regarding the performance of those with  and without conduct waivers are “mixed.” As stated earlier, the Army has  found evidence that some enlistees who entered the Army in fiscal year  2007 were more likely to be separated early for adverse reasons. Because  the waiver process involves several different administrative layers, the  cost of this process may be found to be more than originally estimated.  Also, because research results on the performance of enlistees with and  without conduct waivers are not definitive, the issue of whether granting  these waivers is cost-effective is not yet clear. Completed and planned  work on waivers does not consider the costs associated with the Army’s  separation of soldiers who were granted conduct waivers and were later  separated early for adverse reasons. Studying these issues is important,  given that the recruiting and training of individuals involves substantial  expenditures on the part of the Army. After our audit work was  complete, Army officials told us that in February 2009, the Army Audit  Agency had begun a study of waiver policy.
section_title: The Army Lacks Support to Gauge the Effect on the Officer Corps of Its Actions to Alleviate Shortages
paragraphs: In part as a result of the increased demand for officers created by Grow  the Force and Army Modularity efforts, the Army is faced with shortages  of captains, majors, and lieutenant colonels. To find ways to address these  shortages, the Army contracted a study to predict the appeal to junior  officers of different incentive packages. This study compared incentive  packages that ranged in cost-per-person from $14,000 to $165,000. Despite  this research, it is not clear how the package ultimately offered to Army  officers represented the most cost-effective one from the standpoint of the  Army or whether the Army could have achieved the same results with less  money. Also to alleviate shortages in its officer force, the Army has  recently promoted officers at above-average rates, reduced time-in-service  requirements for promotion, and suspended a performance indicator for  its junior officers that it had previously used to identify the best- performing officers relative to their peers. These actions have had an  immediate effect on alleviating some of the shortages, but the Army has  not yet assessed whether the short-term measures it has taken will have  long-term effects on its officer corps in the future.
subsections: section_title: The Army Has Experienced Shortages of Captains, Majors, and Lieutenant Colonels
paragraphs: The Army’s efforts to grow the force have exacerbated preexisting  shortages in the officer corps, and the Army projects that some shortages  will continue until fiscal year 2018. At the end of fiscal year 2008, the Army  had a shortage of 1,208 captains; 3,112 majors; and 529 lieutenant colonels.  The Army had an excess of captains in fiscal year 2005, but since then it  has fallen short of its requirements for captains. The Army has had a  shortage of majors since at least 2003, and this shortage more than  doubled from fiscal years 2003 through 2008. Likewise, there has been a  shortage of lieutenant colonels since at least 2003. According to Army  officials, shortages have grown because the Army’s modular structure  requires more midlevel officers per brigade, and the Army has increased  its requirements for officers in general as part of its Grow the Force  initiative. (See fig. 6 for the numbers of Army requirements for captains,  majors, and lieutenant colonels compared with the numbers of these  officers the Army had in its operating strength from fiscal years 2003  through 2013.)
As figure 6 shows, the Army projects the shortages of captains, majors,  and lieutenant colonels to continue. Our analysis of these projections  shows that by fiscal year 2012, the supply of captains will have caught up  with the demand. The shortage of majors, however, is projected to remain  more severe and to continue beyond 2013 with no significant change in the  operating strength of majors, despite growing authorizations. According to  projections, the shortage of lieutenant colonels will have lessened but also  will continue through the end of fiscal year 2013.
Aside from the general shortage of officers at these two ranks, officers are  in short supply in particular career areas. When the rate at which a career  area, or branch, is filled falls below 85 percent, the Army considers the  branch to have a critical shortage. On the basis of calculations performed  on Army data, Army officials believe that there are several areas where the  Army does not have enough officers to meet current demand, including  transportation, military intelligence, foreign area expertise, and the special  branches. (See app. IV for a list of branches with fill rates below   85 percent.)
section_title: The Army Has Offered Incentives to Address Critical Shortages of Midlevel Officers but Lacks Data to Assess Their Effectiveness
paragraphs: The Army initiated an incentive program for captains and continues to  offer incentives to cadets just prior to their commissioning. DOD Directive  1304.21 states that bonuses should be awarded only when less costly  methods have proven inadequate or impractical and, similarly, that it is  wasteful to authorize the use of financial incentives when less costly but  equally effective methods are available. In order to fill immediate needs for  captains, the Army offered a “menu of incentives” to 23,053 captains in  branches with fill rates below 90 percent who began service as officers  between 1999 and 2005. From September 2007 until March 2008—phase  one of this program—the Army offered these captains a choice of five  incentives in return for taking on extended service obligations: (1) a cash  bonus of up to $35,000; (2) a graduate education; (3) a choice of branch;  (4) a choice of location; or (5) military school. In phase two, from April  2008 until November 2008, the Army did not offer captains the choice of  branch or choice of location, and it limited the military school option to  language training. Captains were offered these incentives in exchange for  committing to at least 3 additional years of active-duty service. Of the  15,317 captains who accepted one of these incentives, 94.6 percent chose  the cash bonus (see table 8). According to the most recent Army estimate,  the cash bonus has cost the Army $443.5 million; based on that estimate,  the average bonus was $30,488.
Although 15,317 captains have taken advantage of one of these incentives,  the Army did not collect data that would allow it to determine the most  cost-effective amount for the cash bonus. Also, despite the requirement to  use less costly measures first, the Army did not determine whether  offering less costly measures—for example, offering the menu of  incentives without the cash bonus option or the choice of graduate  school—would have similar results. Before selecting this incentive  package, the Army contracted with Chadwick, Martin, and Bailey in 2006  to explore different options. The contractor conducted an online  questionnaire involving about 2,000 officers who had entered the Army in  2003, 2004, and 2005. The questionnaire asked the officers to choose  among different incentive packages, which included incentives that ranged  in cost from $14,000 per person to $165,000 person. The incentive costing  the least involved offering the officer his or her branch or functional area  of choice, and the incentive costing the most involved offering the officer a  choice of graduate school and a degree from a list of options. While the  study predicted the likely results of the Army’s offering of different  incentive packages, it did not recommend a package that represented the  most cost-effective use of Army resources, and it is not clear how the  Army selected the incentive package it ultimately offered its officers.  Because the Army did not use such data to determine which incentives  would be most cost-effective, it cannot provide evidence that its policy is  in line with DOD Directive 1304.21. Without such data, the Army cannot  determine how best to allocate the money it spends on incentives to  achieve maximum effect.
The Army has also attempted to alleviate what it expects to be a future  demand for captains and majors by offering a precommissioning incentive  to cadets at the United States Military Academy and in the Reserve Officer  Training Corps. Under this incentive program, in return for a commitment  to at least 3 additional years of service, cadets are offered (1) a chance to  attend graduate school, (2) a choice of branch, or (3) a choice of location.  This program did not include the option of a cash bonus but did offer  cadets a graduate school education, which the Chadwick, Martin, and  Bailey study had estimated would cost $165,000 per person, the most  expensive of the incentives examined. When cadets are first  commissioned, they are obligated to serve 3 to 5 years, depending on  whether they were accessed through the Military Academy, the Reserve  Officer Training Corps, or the Officer Candidate Schools. By adding   3 years to their initial obligations, officers who participate in this program  will be required to stay in the Army until they have been captains for  several years. Some, particularly if they choose the graduate school  option, will become majors before completing their service obligations.  Army officials have stated that participation in this precommissioning  program to date has been promising; they believe the program will  significantly increase the retention of officers at the rank of captain and  beyond and close the future gap without the need for additional retention  incentives for officers. According to the Army’s calculations, the program  will increase the percentage of officers accessed in 2007 and 2008 who will  complete 8 years of service from 47 percent to 66 percent. Table 9  provides information on the number of officers who participated in the  precommissioning incentive program.
As of November 2008, the Army had not implemented any programs  specifically targeted at majors or lieutenant colonels. An Army official  stated that the Army has not offered incentives to majors or lieutenant  colonels because officials do not believe there is a retention problem with  majors or lieutenant colonels.
section_title: The Army Has Not Yet Assessed the Effects on Its Officer Corps of Short- Term Actions to Alleviate Shortages
paragraphs: In addition to offering incentive programs, the Army has been promoting  officers at faster-than-recommended rates and reducing time-in-service  requirements. However, the Army has not yet determined whether these  actions will have a negative effect on its future officer corps. Because the  Army operates in a closed system, it can only promote from within; this  limits the actions the Army can take and makes it important to identify  trends that may need to be addressed as early as possible. House Report  96-1462 on the Defense Officer Personnel Management Act describes the  complexity of the promotion system and emphasizes that any change to  one variable affects the others. The report concludes that in order to  maintain a high-quality officer corps, changes to the system must be made  very carefully. While the Army provided data regarding the quality of  officers at the time of their accession—such as a bachelor’s degree or  Scholastic Aptitude Test score—the Army had no data that could  demonstrate whether the performance of its officers had changed over  time or whether actions it had taken, such as promoting at higher rates,  would have an effect on the officer corps in the future.
Since 1992, in order to meet the increased demand for officers, the Army  has dramatically increased its promotion rates for officers, exceeding the  benchmarks set forth in 1980 in Senate Report No. 96-375, which  accompanied the Defense Officer Personnel Management Act. In order to  maintain the rank structure outlined in the act and simultaneously provide  officers with rewarding career tracks, the established promotion rates  (which are lower as officers proceed up the ranks)—as well as the   “up-or-out” system—guide the Army in promoting the best-qualified  officers to higher ranks, with the understanding that some fully qualified  officers will not be promoted. The Secretary of the Army issues guidance  defining what the Army considers to be important experience, and the  Deputy Chief of Staff for Personnel determines which officers are to be  considered for promotion. The Army promotes only officers who have  been determined by promotion boards to be fully qualified to serve at the  next higher rank.
The Army expects to continue this practice of promoting officers at  certain ranks at rates higher than recommended benchmarks through  fiscal year 2010. Figure 8 shows comparisons between promotion rates  established in Senate Report No. 96-375 and the Army’s actual or expected  promotion rates in fiscal years 2004-2010 for captains, majors, lieutenant  colonels, and colonels.
While promoting at these high rates, the Army has reduced the time that it  requires officers to remain at certain ranks before they are promoted. For  example, as of November 2008, the Army was promoting officers to the  rank of captain after they had served 3 years and 2 months as lieutenants,  while the other services were promoting officers to captain or the  equivalent rank only after they had served for 4 or more years. Likewise,  as of November 2008, the Army had reduced its time-in-service  requirement for promotion to major to 9 years of service, while the other  services were requiring between 9 years, 8 months; and 10 years, 2 months  of service. While shortening its time-in-service requirements for promotion  to captain, the Under Secretary of Defense suspended the requirement that  first lieutenants serve 2 years before being promoted to captain,  shortening the requirement to 18 months. For all other promotions, the  Army’s requirements are within those established in Title 10 of the United  States Code, which call for officers to serve 18 months as second  lieutenants and 3 years at the rank of captain, major, and lieutenant  colonel before being considered for promotion.
In addition to reductions in the standard time-in-service requirements for  promotion, early promotions for majors and lieutenant colonels are on the  rise. Early promotions are given to officers who, although they have less  time in service than the officers identified to be considered for promotion  in a particular year, are judged to be clearly better choices for promotion.  Early promotions do not increase the number of officers promoted; rather,  the Army draws from officers having 1 fewer year of experience to select  candidates for promotion. From fiscal years 2006 through 2008, early  promotions to major rose from 7.5 percent to 12.5 percent. Likewise, from  fiscal years 2006 through 2008, early promotions to lieutenant colonel rose  from 7.4 percent to 14.8 percent. The Defense Officer Personnel  Management Act requires authorization by the Deputy Secretary of  Defense if early promotions account for over 10 percent of promotions,  and the Army has acquired this authorization. The act also requires that  early promotions not exceed 15 percent of all promotions, and the Army  has stayed within this benchmark. Early promotions to lieutenant colonel  are moving more majors up the ranks faster. However, although this helps  to prevent shortages of lieutenant colonels, it exacerbates the shortage of  majors.
As House Report 96-1462 stated, officer management is a complex system,  and any changes must be made carefully. While the Army moves away  from the legislative benchmarks and changes previous standards to meet  the current demands for officers, it has not yet assessed the long-term  effect of these actions on the officer corps. As a result, the Army is missing  critical data to inform its decisions and to allow it to identify and address  any trends in the officer corps while taking appropriate force-shaping  actions.
section_title: Conclusions
paragraphs: The Army has been successful in finding innovative ways to meet its goals  for increasing end strength. However, its expenditures for bonuses and  incentives have not been as effectively targeted as they could be. While the  Army has access to various studies and data, it is not clear that the Army  has used this information to set the most cost-effective bonus amounts.  For example, although its expenditures for enlistment and reenlistment  bonuses have grown by about 75 percent, the Army does not know  whether these bonuses are set at amounts that are sufficient to meet its  enlistment and reenlistment goals and at the same time do not result in  excessive payments to achieve these results. Initial results of the effect of  admitting individuals who do not meet the Army’s standard eligibility  requirements appear positive, and the Army has begun efforts to analyze  the performance outcomes of recruits with conduct waivers. While the  studies conducted by the Army, including the one it has contracted out to  RAND, may provide useful information on the performance of those  admitted with conduct waivers during a certain period of time, it will be  important for the Army to continue monitoring this population closely,  including assessing the cost-effectiveness of investing in those who require  conduct waivers in order to determine whether it is making prudent use of  its valuable resources in recruiting and training these individuals and  whether any modifications to its waiver policies are needed. This is  especially the case given that, even though data show that recruits with  conduct waivers are strong performers, other evidence indicates that they  are more likely to exhibit disciplinary problems and to be separated for  adverse reasons than those who do not need conduct waivers.
Faced with a wartime environment, restructuring efforts that result in the  need for additional officers, and a system for developing leaders that  requires years of forward planning, the Army has been required to  promote officers at a much faster rate than it has in the past and to offer  new incentives to retain officers. While there is no easy solution to the  shortage of midlevel officers, there are trade-offs involved with each  action to alleviate the shortage. Without using research that will allow the  Army to assess the cost-effectiveness of its new incentives and the metrics  to identify trends to help shape the force appropriately, the Army will not  be in a position to make informed decisions about the choices it makes  and the risks it assumes as it manages the future officer force.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense direct the Secretary of the  Army to take the following four actions:    To enhance its existing processes to recruit and retain sufficient numbers  of enlisted personnel and to avoid making excessive payments to achieve  desired results, build on currently available analyses that will enable the  Army to set cost-effective enlistment and reenlistment bonuses.
To enable the most efficient use of recruiting resources, collect data on  the cost-effectiveness of the Army’s conduct waiver polices—including  costs associated with the waiver review and approval process and with  future separations of soldiers with conduct waivers for adverse reasons— and use these data to inform the Army’s waiver policies.
Should the Army decide to offer incentives to officers in the future, build  on currently available analyses that will enable the Army, with the  direction and assistance of the Secretary of Defense, to set cost-effective  bonus amounts and other incentives.
To enable the Army to make informed decisions regarding the  management of its officer corps over time, track—and if necessary  correct—any effects that its actions to alleviate shortages may have on the  officer corps, particularly in cases in which the Army has deviated from  benchmarks established in the Defense Officer Personnel Management  Act.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided the Department of Defense with a draft of this report for  review and comment. In response to our draft, DOD concurred with the  first three recommendations and partially concurred with the fourth.  Regarding our recommendation that the Army conduct further study on  the cost-effectiveness of enlistment and reenlistment bonuses, DOD stated  that in February 2009, it had contracted for a study that will cover all the  military services and is entitled “Recruiting and Retention Effectiveness of  Cash Incentives.” DOD expects to receive the first draft of this study in  June 2009. Regarding our recommendation that the Army collect and use  data on the cost-effectiveness of its waiver policies, DOD stated that the  Army Audit Agency had begun an audit in February 2009 of the Army  components’ granting of enlistment waivers. In response to our  recommendation that the Army consider the cost-effectiveness of any  future incentives offered to its officer corps, DOD concurred, stating that  DOD requires the military services to provide a detailed business case  before it grants the services the authority to employ a retention bonus. In  response to our recommendation that the Army track the effects of its  short-term actions to alleviate shortages on its officer corps, DOD partially  concurred, stating that the DOPMA guidelines are not intended to serve as  fixed mandates. We agree and state this in our report. However, we  continue to believe that if these guidelines are no longer valid, the Army  should monitor the effect of not maintaining these benchmarks in  managing its future officer corps. DOD’s comments in their entirety appear  in appendix V.
We are sending copies of this report to the appropriate congressional  committees.  This report will be available at no charge on GAO’s Web site  at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3604 or by e-mail at farrellb@gao.gov.  Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report.  GAO staff who made major contributions to the  report are listed in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess the Army’s progress in growing the force and identify strategies  that the Army has used to accomplish this progress, we obtained and  analyzed data on the actual and proposed end strength for the Army as a  whole, as well as for each component. Specifically, we reviewed the  Army’s original and accelerated Grow the Force plans to identify proposed  end strength numbers for each fiscal year of the plans. For the original  plan, this included fiscal years 2007 through 2013; for the accelerated plan,  this included fiscal years 2007 through 2010. We obtained information  from the Army’s Office of the Deputy Chief of Staff for Programs on the  actual end strength that the Army had achieved in fiscal years 2007 and  2008 and compared the proposed end strength to the actual end strength  achieved. Further, to describe the extent to which the active Army, the  Army National Guard, and the Army Reserve have met their target  recruiting and retention goals for fiscal years 2005 through 2008, we  obtained data on these metrics from the Office of the Undersecretary of  Defense for Personnel and Readiness.
To determine the extent to which the Army is directing the growth in its  enlisted force to areas of most critical need, we obtained data from the  Army’s Office of the Assistant Secretary of the Army, Financial  Management and Comptroller, on how much the components spent on  enlistment and reenlistment bonuses given to Army recruits and soldiers  for fiscal years 2005 through 2008. To determine how the Army identifies  priority occupational specialties and which ones should be awarded  bonuses, we interviewed officials from the U.S. Army Human Resources  Command; the U.S. Army Recruiting Command; and the Army’s Office of  the Deputy Chief of Staff for Personnel, Enlisted Career Systems Division.  We also observed two working sessions of the Enlisted Incentives Review  Board. We reviewed data provided by the members of that Board, as well  as other documents showing fill rates, recruiting goals, and bonus levels  for the various enlisted occupational specialties.
To determine the extent to which the Army is maintaining the quality of its  enlisted force, we obtained and reviewed data describing the extent to  which the active Army, the Army National Guard, and the Army Reserve  had met DOD’s quality benchmarks for fiscal years 2005 through 2008. We  also reviewed the estimates made by the Army and others to determine the  size of the target recruiting market and discussed the Army’s methodology  in applying the conclusions reached with knowledgeable Army officials.  We also obtained data on active Army and Army Reserve programs to  expand the youth target market population from the U.S. Army Recruiting  Command. Additionally, we obtained information on the numbers and  types of enlistment waivers granted by the active Army, the Army Reserve,  and the Army National Guard in fiscal years 2005 through 2008. Types of  enlistment waivers include conduct waivers, drug and alcohol waivers,  administrative waivers, and medical waivers. The U.S. Army Recruiting  Command provided data on waivers granted to recruits enlisting into the  active Army and the Army Reserve. The National Guard Bureau provided  data on waivers granted to recruits enlisting into the Army National Guard.  However, the U.S. Army Accessions Command holds responsibility for  maintaining these data for all components, and waiver information stored  in the U.S. Army Accessions Command’s database originates and is  entered at Military Entrance Processing Stations. After interviewing  relevant officials from the U.S. Army Recruiting Command, we determined  that the waiver data from fiscal years 2005 through 2007 had limitations  that precluded us from presenting these data in our report. Among the  problems cited by officials were the data system’s failure to capture all  waivers for recruits with multiple waivers, the overcounting of other  waivers, and the miscoding of some misdemeanors as felonies. We  determined that the Army had adequately addressed these problems for  the fiscal year 2008 waiver data, and we found this year’s data to be  sufficiently reliable for the purposes of our report. To obtain information  on the performance of recruits with and without enlistment waivers, we  (1) reviewed the Army’s 2007 and 2008 studies of the performance of the  conduct waiver population and obtained additional information about  these studies’ findings and methodology through interviews with relevant  Army officials and (2) reviewed RAND’s 2008 study of the performance of  recruits with waivers and obtained additional information on RAND’s  ongoing and planned efforts in the area of conduct waivers from relevant  RAND and Army officials. We also reviewed DOD and Army policies  pertaining to enlistment waivers— specifically the Office of the  Undersecretary of Defense for Personnel and Readiness’ June 2008  Directive-Type Memorandum 08-018 on enlistment waivers and Army  Regulation 601-210, “Personnel Procurement: Active and Reserve  Components Enlistment Program” (June 7, 2007).
To assess the extent to which the Army is directing the growth in its  officer force to areas of need and the extent to which it has determined  whether short-term tradeoffs to alleviate shortages will have long-term  effects on its officer corps, we analyzed various data related to officer  demand, strength levels, promotions, and retention. We reviewed the  Defense Officer Personnel Management Act of 1980, Senate Report   No. 96-375, House Report No. 96-1462, and corresponding provisions of  Title 10 of the U.S. Code in order to ascertain legislated benchmarks for  officer strength, promotion rates, and options available to the Army to  address shortages. We obtained data on officer authorizations and strength  levels, as well as information on programs to address officer shortages  from the Army’s Office of the Deputy Chief of Staff for Personnel. We  compared authorizations and strength levels to identify shortages in  specific ranks and specific branches. We analyzed existing and projected  trends in officer demand and supply for fiscal years 2003-13. We reviewed  documentation and reports on incentive programs for captains and cadets  prior to their commissioning. Additionally, we talked to Army officials  about their intent behind these programs. Furthermore, we received  information on actual promotion rates from the Army’s Office of the  Deputy Chief of Staff for Personnel, which we compared to the promotion  benchmarks in Senate Report No. 96-375.
The data we reviewed for each of our research objectives generally  covered fiscal years 2005 through 2008; however, our analysis of  enlistment waivers was limited to fiscal year 2008 due to limitations in  waiver data from previous years, such as the system’s failure to capture  some waivers and the overcounting of other waivers. Except in the case of  the enlistment waiver data, we found the data for fiscal years 2005 through  2008 to be sufficiently reliable for the purposes of this report. We  interviewed officials and, where appropriate, obtained documentation at  the following locations:  Office of the Secretary of Defense    Office of the Undersecretary of Defense for Personnel and Readiness    Defense Manpower Data Center   Army National Guard    Assistant Secretary of the Army for Financial Management and    Office of Economic and Manpower Analysis, United States Military    Office of the Assistant Secretary of the Army for Manpower and Reserve    Office of the Deputy Chief of Staff for Personnel    Office of the Chief of Staff for Programs    U.S. Army Accessions Command    U.S. Army Cadet Command    U.S. Army Human Resources Command    U.S. Army Recruiting Command    U.S. Army Reserve Command    Congressional Budget Office    Congressional Research Service We conducted this performance audit from February 2008 through March  2009 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.
section_title: Appendix II: Enlistment Bonuses for Active Duty Soldiers
paragraphs: Table 10 shows the amounts of enlistment bonuses offered to active-duty  Army soldiers at the time of the Army’s June 2008 Enlisted Incentives  Review Board’s meeting.
Table 11 shows occupational specialties that were determined to qualify  for bonuses at the June 2008 meeting of the Enlisted Incentives Review  Board.
section_title: Appendix III: GAO Review of Felony Waivers
paragraphs: Through the end of fiscal year 2008, the Army granted conduct waivers to  some enlistees who had histories of felony charges, and it has a multi-step  review process in place to make these determinations. In fiscal year 2008,  a fairly small number of individuals were admitted into the Army with a  felony waiver. Specifically, 1,048 recruits with felony waivers entered the  active Army in fiscal year 2008 (or less than 2 percent of overall  accessions). The number of recruits entering the Army Reserve and the  Army National Guard with felony waivers in fiscal year 2008 stood at 196  and 128, respectively, or less than 1 percent of these components’ overall  accessions for that year. While the Army grants felony waivers in some  cases, officials said that the Army does not admit serious criminals who  may pose harm to others and to the Army’s larger mission. According to  Army documents, the Army does not consider applicants convicted of the  most serious felonies, such as murder, sexually violent crimes, domestic  violence, and drug dealing, as well as alcoholism and drug dependency.  The Army also excludes individuals on probation or parole, in  confinement, awaiting criminal charges, and ordered to enter the military  in lieu of (or as a result of) being prosecuted.
Army officials said that the Army’s waiver approval process is designed so  that only the most deserving candidates are awarded waivers. In assessing  an individual for a conduct waiver, the Army uses the “whole person  concept,” considering factors such as employment stability, success in  school, accomplishments in the community, references from others in the  community who have come to know the applicant, and signs of remorse  and changed behavior since the incident occurred. The process involves a  series of steps and multiple layers of review. Each individual’s waiver  request is typically reviewed at 6 different levels for misdemeanors and  traffic offenses and at 10 different levels for felonies. All felony waivers  and certain serious misdemeanor waivers must be approved at the level of  the Deputy Commanding General of the U.S. Army Recruiting Command  for active Army and Army Reserve recruits and at the level of the Director  of the Army National Guard for Army National Guard recruits.
The Army reported that the top five offenses that receive felony waivers  are burglary, narcotics and drug charges, aggravated assault, larceny, and  unlawful breaking or entering. Our review of the waiver files for all those  accessed by the active Army or Army Reserve in fiscal year 2007 with  waivers for felony convictions identified examples within each of these  categories. Table 12 provides examples of the various offenses that we  found in reviewing the waiver files.
According to the Army, waivers will always be considered in the  enlistment process because a one-time incident may not accurately reflect  the true character of a person whom the Army ultimately decides to admit.  Officials told us that those applying for conduct waivers are strong  candidates whose qualifications are high enough to motivate the Army to  undertake this rigorous process on their behalf. However, some of the  waiver files that we reviewed showed that the waiver applicants did not  have high school diplomas or had fairly low AFQT scores.
section_title: Appendix IV: Critical Shortages of Officers by Rank and Branch
paragraphs: The table below shows fiscal year 2008 fill rates, or rates at which specific  officer career areas, or branches, are currently filled, as well as the  numbers of unfilled positions in those career areas. The Army considers a  career area to be experiencing a shortage if it has a fill rate below   85 percent.
section_title: Appendix V: Comments from the Department of Defense
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
paragraphs: Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov.
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact above, David Moser, Assistant Director, Natalya  Barden, Catherine Brown, Renee Brown, Tim Carr, Brandon Hunt, Joanne  Landesman, Julia Matta, Lonnie McAllister, Charles Perdue, Terry  Richardson, Bev Schladt, and Rajneesh Verma made key contributions to  this report.