Military Pay: Hundreds of Battle-Injured GWOT Soldiers Have Struggled to Resolve Military Debts
Published: 2006-04-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As part of the Committee on Government Reform's continuing focus on pay and financial issues affecting Army soldiers deployed in the Global War on Terrorism (GWOT), the requesters were concerned that battle-injured soldiers were not only battling the broken military pay system, but faced blemishes on their credit reports and pursuit by collection agencies from referrals of their Army debts. GAO was asked to determine (1) the extent of debt of separated battle-injured soldiers and deceased Army soldiers who served in the GWOT, (2) the impact of DOD debt collection action on separated battle-injured and deceased soldiers and their families, and (3) ways that Congress could make the process for collecting these debts more soldier friendly.
section_title: What GAO Found
paragraphs: Pay problems rooted in the complex, cumbersome processes used to pay Army soldiers from their initial mobilization through active duty deployment to demobilization have generated military debts. As of September 30, 2005, nearly 1,300 separated Army GWOT soldiers who were injured or killed during combat in Iraq and Afghanistan had incurred over $1.5 million in military debt, including almost 900 battle-injured soldiers with debts of $1.2 million and about 400 soldiers who died in combat with debts of $300,000. As a policy, DOD does not pursue collection of debts of soldiers who were killed in combat. However, hundreds of battle-injured soldiers experienced collection action on their debts. The extent of these debts may be greater due to incomplete reporting. GAO's case studies of 19 battle-injured soldiers showed that collection action on military debts resulted in significant hardships to these soldiers and their families. For example, 16 of the 19 soldiers were unable to pay their basic household expenses; 4 soldiers were unable to obtain loans to purchase a car or house or meet other needs; and 8 soldiers' debts were offset against their income tax refunds. In addition, 16 of the 19 case study soldiers had their debts reported to credit bureaus and 9 soldiers were contacted by private collection agencies. Due to concerns about soldier indebtedness resulting from pay-related problems during deployments, Congress recently gave the Service Secretaries authority to cancel some GWOT soldier debts. Because of restrictions in the law, debts of injured soldiers who separated at different times can be treated differently. For example, soldiers who separated more than 1 year ago are not eligible for debt relief and soldiers who paid their debts are not eligible for refunds. Further, because this authority expires in December 2007, injured soldiers and their families could face bad credit reports, visits from collection agents, and tax refund offsets in the future.

section_title: Letter
paragraphs: The Army continues to mobilize tens of thousands of soldiers each year in  The Army continues to mobilize tens of thousands of soldiers each year in  support of the Global War on Terrorism (GWOT). Thousands of soldiers  support of the Global War on Terrorism (GWOT). Thousands of soldiers  have been injured or killed as a result of hostile fire since the initial  have been injured or killed as a result of hostile fire since the initial  deployments to Afghanistan and Iraq in October 2001. Battle-injured  deployments to Afghanistan and Iraq in October 2001. Battle-injured  soldiers returning to the United States often face the daunting prospect of  soldiers returning to the United States often face the daunting prospect of  adjusting to their postwar lives. Many soldiers are faced with multiple  adjusting to their postwar lives. Many soldiers are faced with multiple  surgeries and months of physical rehabilitation. Oftentimes, these soldiers  surgeries and months of physical rehabilitation. Oftentimes, these soldiers  have to reassess their career goals and seek training to accommodate their  have to reassess their career goals and seek training to accommodate their  new physical limitations upon separation from military service. Because  new physical limitations upon separation from military service. Because  these battle-injured soldiers return to the United States before their unit’s  these battle-injured soldiers return to the United States before their unit’s  mobilization period ends, their duty status is not always appropriately  mobilization period ends, their duty status is not always appropriately  updated and they encounter payroll problems related to the failure by the  updated and they encounter payroll problems related to the failure by the  Army to adjust combat pay (entitlements such as hostile fire pay, hardship  Army to adjust combat pay (entitlements such as hostile fire pay, hardship  duty pay, and family separation pay). Our previous audits have detailed  duty pay, and family separation pay). Our previous audits have detailed  weaknesses in the Army’s systems and processes for providing service- weaknesses in the Army’s systems and processes for providing service- related benefits to Army National Guard and Army Reserve soldiers that   related benefits to Army National Guard and Army Reserve soldiers that   have resulted in both over- and underpayments. The Defense Finance and  Accounting Service (DFAS) is responsible for collecting debts caused by  overpayments and other pay-related problems. The Debt Collection Act of  1982 provides a statutory basis for federal agencies to use appropriate  debt collection tools, such as interest charges, offset, and private  collection agencies. Thus, if debts are not paid before the soldier separates  from military service, DFAS can refer these debts to collection agencies. A  description of the collection process for separated soldier debts is  included in appendix I.
This report responds to your request that we determine (1) the extent to  which Army GWOT battle-injured soldiers who were released from active  duty or killed in combat are having military debts referred to credit  bureaus and collection agencies and (2) the impact of Department of  Defense (DOD) debt collection action on these soldiers and their families.  In addition, because of the added burden that debt collection places on  separated battle-injured soldiers and fallen soldiers and their families, you  asked us to discuss ways that Congress could make the process for  collecting their debts more soldier friendly.
To identify the extent of reported debts of separated battle-injured  soldiers and fallen Army GWOT soldiers, we compared soldier records in  the Army’s Wounded in Action (WIA) Program databases, which contain  information on battle-injured and fallen GWOT soldiers who served in the  Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF)  deployment from October 2001 through September 2005 to DFAS Defense  Debt Management System (DDMS) data on out-of-service debts. We  evaluated the reliability of the WIA databases and DDMS system data and  found these data to be sufficiently reliable for the purposes of our work.  To determine the effect of debt collection action on separated battle- injured soldiers and their families, we invited soldiers to contact us and  discuss their experience with Army debts. We prepared case studies  summarizing our interviews with soldiers or family members. Where we  were unable to independently validate our case study information, we  attributed it to the soldiers and family members. We based our discussion  of ways in which the debt collection process can be made more soldier  friendly on our previous Army pay and travel-related reports; our review of  applicable laws and regulations and DOD and Army policies and  procedures; discussions with key Army, DFAS, DOD, and Treasury  officials; and our interviews of case study soldiers and their families. We  conducted our work from June 2005 through March 2006 in accordance  with generally accepted government auditing standards. A detailed  discussion of our objectives, scope, and methodology is presented in  appendix II.
subsections: section_title: The Army Has Referred Debts of Nearly 1,300 Battle- Injured Soldiers for Collection, and the Number May Be Greater
paragraphs: Our analysis of Army and DFAS data through the end of fiscal year 2005  identified nearly 1,300 separated battle-injured soldiers and soldiers who  were killed in combat who had military debts totaling $1.5 million that  were reported to DFAS for debt collection action. Of the nearly 1,300  soldiers, almost 900 separated battle-injured soldiers had debts totaling  about $1.2 million and about 400 soldiers who died in combat had debts  totaling over $300,000. The actual number of separated battle-injured  soldiers and fallen soldiers who owed military debts may be greater due to  incomplete and inaccurate reporting of some information to the WIA  databases. Overpayment of pay and allowances (entitlements), pay  calculation errors, and erroneous leave payments caused 73 percent of the  reported debts. Remaining debts related to requirements to repay portions  of enlistment bonuses and training due to early separation and/or failure to  fulfill requirements; unpaid expenses for medical services, household  moves, insurance premiums, and travel advances; and lost military  equipment.
Because the Army lacks a centralized automated system that integrates  payroll, personnel, and medical data on its soldiers, the Army and DFAS  formed a Wounded in Action Support Team and created WIA databases  that included soldier personnel, payroll, and medical information using  weekly data calls from five separate Army systems. The Army and DFAS  are using ad hoc work-around processes to research, verify, and correct  incomplete and inaccurate data. These labor-intensive, manual procedures  are necessary due to continuing, uncorrected weaknesses in Army  personnel and payroll systems and the growing number of battle-injured  soldiers whose pay accounts need to be researched and verified to  determine whether overpayments or other problems have resulted in debt.  As a policy, DFAS does not pursue collection of debts of fallen soldiers.  However, DFAS officials told us that military debt may be satisfied from  the final pay and allowances of fallen soldiers and DFAS may pursue  collection of debts of other deceased soldiers.  During the past 2 fiscal  years, the Army pursued hundreds of battle-injured soldiers for collection  of their military debts after they left the service. Collection action begins  with monthly debt notification letters and escalates to credit bureau  reporting and private collection agency and TOP action when there is no  response or debts are not paid.
subsections: section_title: The Army Has Reported Debts of Battle-Injured GWOT Soldiers to Credit Bureaus and Private Collection Agencies
paragraphs: At the time we initiated our audit in June 2005, the Army was taking  collection action on active debts of over 300 battle-injured soldiers. Our  initial analysis of Army and DFAS data as of June 30, 2005, identified 331  battle-injured soldiers, whose military service debts were undergoing  collection action, including at least 74 soldiers whose military debts had  been reported to credit bureaus and to private collection agencies and  TOP. However, in response to our audit, Army and DFAS officials told us  that they had suspended collection action on these soldiers’ debts and  recalled their reports to credit bureaus and their referrals to the  Department of the Treasury for private collection agency and TOP  collection action until a determination could be made as to whether these  soldiers’ debts were eligible for relief.
We independently confirmed the recall of credit bureau reporting and  Treasury referrals with those entities. DFAS records as of September 30,  2005, showed that of the $1.5 million in military service debts incurred by  the nearly 1,300 battle-injured and fallen soldiers identified in our analysis,  debts totaling almost $959,000 were written off, waived, or cancelled,  including debts of fallen soldiers; debts totaling about $124,000 were paid;  and debts totaling $420,000 remained open. In addition, at the end of our  audit, the Army and DFAS advised us that waivers had been approved for  active debts of 202 of the 331 separated battle-injured soldiers’ debts that  were being pursued for collection when we initiated our audit in June  2005.
section_title: The Number and Dollar Amount of Separated Battle-Injured Soldier and Fallen Soldier Debts Increased from Fiscal Years 2002 through 2005
paragraphs: While many soldiers had only one or two debts, other soldiers had three or  more debts. The nearly 1,300 separated battle-injured soldiers and fallen  soldiers identified in our analysis had a total of 2,324 debts. Debts for  these soldiers grew from 404 debts totaling $128,230 at the end of fiscal  year 2002 to 2,324 debts totaling over $1.5 million at the end of fiscal year  2005.
As shown in table 1, the number of debts generally has increased each  fiscal year as more soldiers have been deployed and Army payroll  problems remained unresolved. More than 40 percent of these soldier  debts totaling over half of the $1.5 million were incurred during fiscal year  2005.
Previously, we reported that most soldier payroll problems related to  Army National Guard and Army Reserve soldiers. Our analysis of military  service debts of the nearly 1,300 separated Army battle-injured soldiers  and fallen soldiers showed that for the first 4 years of the GWOT  deployment, 661 (51 percent) of the debts related to active component  Army soldiers, 346 (about 27 percent) of the debts related to Army  National Guard soldiers, and 248 (about 19 percent) of the debts related to  Army Reserve soldiers. The field units that reported debts for the  remaining 35 Army soldiers (about 3 percent) did not identify these  soldiers by component. Table 2 shows the relative number and amount of  debts by component.
Because Congress passed legislation that permitted the Secretary of  Defense to cancel up to $2,500 in individual soldier debt during Desert  Shield/Desert Storm, your offices asked us to determine the dollar amount  of debts of separated battle-injured and fallen soldiers by incremental  thresholds. Our analysis of the amounts of debt reported for separated  battle-injured soldiers and fallen soldiers who served in OIF and OEF  during fiscal years 2002 through 2005 showed that about 82 percent of  these soldiers had debts that totaled $1,500 or less and the vast majority,  about 90 percent of the soldiers, had debts that totaled $2,500 or less.  While making this comparison, it is appropriate that debt relief is  adjudicated prudently in consideration of individual circumstances. Table  3 shows the stratification of battle-injured and fallen soldier debt in $500  increments up to $3,500 and total amounts over $3,500.
Ninety soldiers had debts that totaled more than $3,500, including original  soldier debts that ranged from $3,528 to $34,124. Sixty-seven of these  soldiers had debts that totaled less than $10,000, 16 soldiers had debts  totaling between $10,000 and $20,000, and 7 soldiers had debts that totaled  more than $20,000.
section_title: Most Military Debts Relate to Pay Errors
paragraphs: Consistent with our case studies, which are discussed in the next section,  DOD data showed that most of the debts of the nearly 1,300 soldiers who  were injured or killed in combat related to errors in pay calculations and  overpayment of combat pay entitlements and erroneous payments for  unused leave. As illustrated in figure 1, Army and DFAS data for fiscal  years 2002 through 2005 showed that 73 percent of the debts for the nearly  1,300 separated battle-injured soldiers and fallen soldiers related to errors  in pay calculations, entitlement errors, and erroneous leave payments  during fiscal years 2002 through 2005. The remaining 27 percent of these  soldiers’ debts related to repayment of enlistment bonuses (11 percent)  where soldiers did not complete the required term of service or they  improperly received more than one bonus; payments for tuition and  training (6 percent) where soldiers did not complete their training or they  did not fulfill service requirements related to their training; and other  expenses (8 percent) related to unpaid bills for medical services, housing  and household moves, insurance premiums, travel advances, and loss or  damage of government property. The reasons for the remaining debt (2  percent) were not recorded in DDMS.
According to DFAS officials, while unit commanders and finance offices  are authorized to write off debts for lost and damaged equipment when  soldiers who were injured or killed by hostile fire are medically evacuated  from the theater of operation, they have not always done so. In addition,  because Army units and medical facilities have not always prepared or  processed changes in orders when soldier duty status changed, soldiers do  not have required documentation needed to submit a voucher for travel  reimbursement. Because the travel system is not integrated with the  payroll and debt management systems, neither DFAS nor the Army could  tell us the amount of soldier debt that could potentially be offset by travel  reimbursements owed to soldiers. The new WIA Support Team’s standard  operating procedures for soldier pay account review require identification  and processing of all soldier travel claims.
section_title: Debt Collection Action Has Placed Significant Hardship on Many Battle - Injured Soldiers and Their Families
paragraphs: Debt collection actions have caused a variety of problems for separated  GWOT battle-injured soldiers. When these soldiers leave the Army, they  generally do not have jobs and many of them face continuing medical  treatment for battle injuries, making it difficult to hold a job. If these  soldiers have military debt that has been identified, their final separation  pay may be offset to cover the debt and they may leave the service with no  funds to pay immediate expenses. Due to the lack of income, 16 of the 19  soldiers we interviewed told us that they had difficulty paying for basic  household expenses. In addition, 3 soldiers told us that they were  erroneously identified as AWOL by their units while they were actually in  the hospital or receiving outpatient care for their war injuries. The AWOL  status for at least 2 of these soldiers created debt because it appeared that  the soldiers received pay when they were not in duty status. At the time  these soldiers were listed as AWOL by their Army units, they were actually  receiving medical treatment. One soldier was receiving outpatient therapy  for her knee injury under the care and direction of an Air Force physician  based on an Army medical referral and the other soldier was in a military  hospital at Fort Campbell. Debt-related experiences of 19 separated battle- injured soldiers who contacted us included the following.
Sixteen soldiers had their military debts reported to credit bureaus, 9  soldiers had debts turned over to private collection agencies, and 8  soldiers had their income tax refunds withheld under TOP.
Sixteen could not pay their basic household expenses.    Four soldiers were unable to obtain loans to purchase a home, meet other  needs, or obtain VA educational benefits due to service-related debt on  their credit reports.
At least 8 soldiers were owed travel reimbursements at the same time they  were being pursued for collection of their service-related debts.
The Army’s failure to record separation paperwork in the pay system and  other payment errors resulted in over $12,000 of debt for one severely  battle-injured soldier. Although the soldier’s family expected that he would  receive retirement pay when his Army pay stopped upon his separation,  the soldier had no income for several months while the Army attempted to  recover his military debt. As a result, his family was unable to pay  household bills, the utilities were shut off, and the soldier’s dependent  daughter was sent out of state to live with relatives. In addition, although  the soldier had been receiving treatment at an Army medical center and a  VA polytrauma center over a 5-month period, the day the soldier was  released to go home, his Army unit called his wife to ask why he was not  reporting for duty—an indication that his Army unit had considered him to  be AWOL.
Table 4 illustrates examples of the effects of debt collection actions on  selected separated Army battle-injured soldiers and their families based on  our case studies. Five soldiers and family members told us that they had  contacted their unit finance offices multiple times for assistance in  resolving their pay and debt problems. However, the soldiers said that  finance personnel either did not get back to them as promised or the  finance personnel they spoke with said they could not help them with their  problems. DFAS and Army officials we spoke with acknowledged that  finance office personnel at some locations lacked the knowledge needed  to accurately input transactions to soldier pay accounts. DFAS officials  told us they recently initiated actions to train finance office personnel at  several locations. Debts imposed the greatest hardship on battle-injured  soldiers who have had to endure financial problems while they cope with  adjusting to physical limitations due to their injuries.
The following case summaries provide additional details of selected  soldier debt experiences. The first soldier, case study #1, battled for 1-1/2  years after he separated from the service to resolve his debts and obtain a  reimbursement related to travel expense during his deployment.
Soldier Engages in 1-1/2 Year Battle to Resolve Debts  An Army Reserve Staff Sergeant who lost his leg in a roadside bomb explosion near the  town of Ramadi, Iraq, on July 14, 2003, found himself involved in a lengthy effort to  resolve pay-related debts after he separated from the Army in August 2004. The  Sergeant’s Army debt was the only unpaid debt on his credit report. The first problem  occurred in August 2004, when the Army failed to terminate the soldier’s active duty pay  after he separated from military service, resulting in an overpayment of $2,728. Because  the soldier was still owed his final separation pay of $2,230, this amount was used to  offset his debt, reducing it to $498. The Army also incorrectly billed the soldier for several  months of Servicemen’s Group Life Insurance (SGLI) premiums, which should have  ceased when the soldier left the service. In attempting to correct the SGLI billings, the  soldier’s account was mistakenly reactivated in the pay system because a Fort Belvoir  finance clerk did not know how to handle this transaction. As a result, the system then  generated an erroneous pay check to the soldier totaling $1,733, increasing his debt to  $2,231. According to the soldier, around the same time, in January 2005, an Army  headquarters official contacted him to say his debt had been resolved, leading the soldier  to believe that the $1,733 payment was the result of his pay audit and possibly included  his unpaid travel reimbursement. However, shortly thereafter, the soldier began receiving  debt collection letters from DFAS for the $2,231 debt, which also appeared on his credit  report. The soldier appealed this debt and requested a waiver, but was turned down due  to a ruling that he should have known that he was not entitled to another pay check once  he had been out of the service for 4 months. Because lenders view unpaid federal debts  as a significant problem, the soldier and his wife decided to forego applying for a loan to  purchase a house until his Army debt was resolved.
According to DFAS officials, it took about 6 months to research changes in the soldier’s  duty status and pay the soldier’s travel reimbursement. Because the soldier had not been  issued any orders after his initial deployment, DFAS had to work with the Army to prepare  and backdate military orders for each change of status from the time the soldier was  medically evacuated to Landstuhl Regional Medical Center in Germany, transferred to  Walter Reed Army Medical Center, in Washington, D.C., and entered into the Medical  Retention Program. In addition, we learned that the soldier also received erroneous  monthly billings for Survivor Benefit Program (SBP) premiums—even though he and his  wife had declined participation in writing, as required, when he separated. The monthly  SBP billings continued because Walter Reed had not forwarded the soldier’s paperwork to  the SBP program office at DFAS Cleveland. In December 2005, the soldier’s second,  more detailed request for debt waiver was accepted. In addition, his travel voucher was  approved and he received his contingency travel reimbursement of $2,727—an amount  that exceeded his debt by almost $500. However, the soldier’s SBP program election was  not properly canceled because a change was made to only one of two codes that needed  to be changed in the system. As a result, the soldier’s final debt was not corrected until  February 2006—1-1/2 years after he separated.
Case study #2 involved a seriously injured Army National Guard soldier  who went without pay for several months when his separation paperwork  was not entered in the pay and personnel systems.
Brain-Damaged Soldier Goes without Pay Due to Error  This Army National Guard Staff Sergeant was injured 3 months after being deployed to  Iraq, when his Humvee was hit by another truck during an attack on December 11, 2004.  The soldier suffered a crushed jaw and severe head injuries, resulting in permanent brain  damage. The soldier was sent to Walter Reed Army Medical Center in Washington, D.C.,  where he remained in a coma for over 3 months. On March 28, 2005, he was transferred  to the Richmond VA Medical Center for care in their polytrauma rehabilitation center. On  April 28, 2005, the soldier was sent home on convalescent leave before he returned to  Walter Reed for further surgery. The soldier was released to go home in May 2005,  pending separation from the service. On the day he was released from Walter Reed and  sent home, the soldier’s wife got a call from his Army unit asking why her husband was  not reporting to active duty—an indication that the soldier’s unit believed him to be AWOL.
Although the soldier had been through medical board evaluations and was supposed to be  retired effective July 23, 2005, his separation paperwork was not entered in the pay and  personnel systems. The soldier was rated 80 percent disabled and his family expected to  receive disability benefit income of over $3,000 per month. When the sergeant suddenly  received no income in October 2005, he learned that he owed the Army a debt of $6,400  and that the paperwork to start his disability benefits had not been processed. About this  time, a finance clerk noted that the sergeant had not been paid for his unused leave.  Because the finance clerk did not know how to post the leave payment transaction, the  clerk put the soldier back on active duty, resulting in an additional overpayment of $6,101,  and increasing his debt to $12,501. According to a family member, the soldier’s family was  without income and could not pay for basic household expenses. As a result, the family’s  utilities were cut off and the soldier’s 11-year-old daughter was sent out of state to live  with relatives. After receiving a call from the soldier’s family member in mid-October 2005,  we alerted Army headquarters to the soldier’s debt pay and debt problems. The Army took  immediate action to research the soldier’s pay account. On January 25, 2006, DOD  approved a waiver of $12,662 debt, and DFAS refunded $2,355 in debt previously  withheld from the soldier’s pay.
An Army Reserve soldier, case study #4, was faced with debt due to an  erroneous AWOL report while she was receiving treatment at a private  health facility under direction of an Air Force physician.
Soldier Finds Debt Is Due to Erroneous AWOL Report During Rehabilitation  An Army Reserve Specialist was injured during a mortar attack on the outskirts of  Baghdad on March 23, 2003, and was awarded a Purple Heart. The soldier underwent a  total of six surgeries at a field hospital and military hospitals in Kuwait, Spain, and  Germany—none of which were successful in removing shrapnel from her knee. She was  then flown to a military hospital in Baltimore, Maryland, and in early April 2003, she was  sent to a military hospital at Keesler Air Force Base, in Biloxi, Mississippi, for treatment. At  Keesler, the soldier was given the choice of receiving rehabilitative treatment at the  Keesler medical facility or at a rehabilitation center near her home in Leakesville,  Mississippi. There were no Army facilities near Keesler, and the soldier was told she  would have to rent an apartment nearby and pay for it herself. As a result, the soldier  decided to return home to begin her rehabilitation sessions at a private facility approved  by Keesler. The soldier was required to travel to the Keesler AFB Orthopedic Center (a 2- hour round trip) every 2 weeks to be examined by the referring Air Force physician. The  soldier told us the Air Force doctor released her in July 2003, noting that she had  completed her rehabilitation treatment. The soldier was medically discharged from her  Army Reserve unit on November 18, 2003.
The soldier learned she had a military debt of $1,575, including $975 related to a  requirement to repay the unearned portion of her enlistment bonus when a collection  agent contacted her in January 2004—2 months after she had separated from the Army.  As a result of this contact, the soldier learned that her Army unit had lost track of her and  had reported her as AWOL while she was being treated for her battle injuries. However,  the soldier told us that in April 2003, when she arrived at Keesler, she had made several  unsuccessful attempts to let her unit Sergeant know her duty status and whereabouts.  When her calls were returned in July 2003, she was told to report to Fort Stewart,  Georgia, and to remain there until her unit returned from Iraq and was demobilized. The  soldier told us she did as ordered and was placed in Medical Hold status at Fort Stewart.  Although the soldier told us she traveled to her unit in Brookhaven, Mississippi, on two  occasions in an effort to document that she was not AWOL because she was at an  approved medical facility during the time in question, she was unsuccessful because the  collection agent continued to call her. As of the end of July 2004, DFAS records showed  the soldier’s debt totaled $1,575, including $975 related to the unearned portion of her  enlistment bonus and $600 in overpayment of her hardship duty pay. Although DFAS had  recalled this debt from the soldier’s credit report in July 2005, as of October 2005 this debt  still showed on her credit report. We confirmed that DFAS recalled the debt from the  soldier’s credit report a second time. However, in March 2006, the debt reappeared on the  soldier’s credit report. The soldier told us that she was unable to get a loan for $500 to pay  off her credit card balance because the military debt kept showing up on her credit report.  At the end of our field work, the Army advised that the reappearance of military debt on  the soldier’s credit report was due to errors made by both DFAS and the credit bureau.
Our past four reports have discussed numerous problems related to Army  pay and travel reimbursements and made over 80 recommendations for  correcting weaknesses in human capital, processes, and systems that  caused these problems. Effective action to address pay and travel  reimbursement problems will also help prevent the occurrence of military  debts.
section_title: Opportunities Exist for Congress to Legislate a More Soldier-Friendly Process for Collecting GWOT Debts
paragraphs: As a result of concern regarding the indebtedness of soldiers resulting  from pay-related problems during deployments, Congress on occasion has  provided authority to the Secretary of Defense to cancel such debts. For  example, in the Department of Defense Appropriation Acts for fiscal years  1992 through 1996, the Secretary was given authority to cancel military  debt up to $2,500 owed by soldiers or former soldiers so long as the  indebtedness was incurred in connection with Operation Desert  Shield/Desert Storm. Further, these appropriation acts authorized the  Secretary to provide refunds to soldiers who had satisfied their debts.
Facing similar concerns with military debts incurred by GWOT soldiers,  Congress recently gave the Secretary authority, in the National Defense  Authorization Act for Fiscal Year 2006, to cancel debts occurring on or  after October 7, 2001, the date designated as the beginning of the OIF/OEF  deployment. However, unlike the authority granted to provide debt relief  for Operation Desert Shield/Desert Storm, the Secretary’s discretion under  the fiscal year 2006 authorization act is generally more limited. For  example, the Secretary was not given authority to issue refunds and he can  not uniformly provide debt relief to all GWOT soldiers. Rather, the  Secretary may only cancel debts of soldiers who are (1) on active duty or  in active status; (2) within 1 year of an honorable discharge; or (3) within 1  year of active release from active status in a Reserve component.  Additionally, the Secretary’s authority under the fiscal year 2006  authorization act terminates on December 31, 2007, and a more narrow  statutory cancellation authority will be revived.
There are two primary mechanisms in law to forgive soldier debt,  including (1) authority to waive debts that result from payroll, travel, and  other payment and allowance errors and (2) authority for remission  (forgiveness) of debts involving hardship or fairness. The Fiscal Year  2006 National Defense Authorization Act broadened remission authority to  include debts of officers and any soldiers no longer on active duty for up  to 1 year. However, the remission authority in the act does not cover  soldiers who were released from active duty more than 1 year ago and the  waiver authority does not cover cancellation of debts due to error after the  applicable 3-year statute of limitations. In addition, unlike waivers,  soldiers who paid debts are not eligible for refunds under the remission  statute. Further, the debt relief eligibility period for the three case study  soldiers who separated in June 2005 will expire in the next few months.
Our case studies showed that some battle-injured soldiers did not receive  debt notification letters until 8 to 10 months after they separated from the  Army. One soldier who separated in October 2004 told us that he received  his debt notification letter in November 2005—more than 1 year after he  separated from the Army. All but three of our case study soldiers  separated from the Army more than 1 year ago and these soldiers’  eligibility for debt relief under the fiscal year 2006 authorization act has  already expired. Further, the debt relief eligibility period for the three case  study soldiers who separated in June 2005 will expire in the next few  months.
section_title: Conclusions
paragraphs: Since the OIF/OEF deployment in October 2001, separated, battle-injured  Army soldiers have faced considerable hardships related to collection  action on their military service debts through no fault of their own,  including forfeiture of separation pay and tax refunds; credit bureau  reporting; and action by private collection agencies. The best solution to  this problem is for DOD to prevent debts for these soldiers from  happening in the first place, and our past reports have included numerous  recommendations for correcting weaknesses in Army payroll systems and  processes. Over the past year, DOD and the Army have taken a number of  actions to identify and relieve debts of separated battle-injured GWOT  soldiers, and Congress has enacted broader authority for relief of some  soldier debts. There are additional actions available to Congress if it  wishes to make debt relief more soldier friendly. Because of a restriction  in the current law, injured Army GWOT soldiers who separated from the  service at different times have been treated differently, which raises  questions of equity. Some of these soldiers may obtain debt relief, while  others may not. Further, there is no current authority to issue refunds to  battle-injured soldiers who previously paid debts that are now eligible for  relief. Because the current debt relief authority expires on December 31,  2007, injured soldiers and their families who have GWOT-incurred military  debts could face the prospect of bad credit reports, visits by collection  agencies, and offsets of their tax refunds if the authority is not available  throughout the OIF/OEF deployment and a reasonable period after the  deployment ends.
section_title: Matters for Congressional Consideration
paragraphs: There are several matters that Congress should consider if it wishes to  strengthen the Secretary’s authority to provide debt relief so that it can be  applied uniformly for all GWOT-incurred debt. First, Congress could  consider legislation to grant DOD the following authorities.
Give the Service Secretaries authority to make debt relief available to all  injured GWOT soldiers regardless of when they separate from active duty.
Give the Service Secretaries authority to provide refunds to soldiers who  have paid debts incurred while in an active status.
Ensure that the Secretary of Defense has authority to cancel GWOT- incurred debt throughout, and a reasonable period following, the  deployment and thus, can exempt injured soldiers from debt collection  action through credit bureau reporting and private collection agency and  TOP action.
Second, we suggest that Congress consider directing the Secretary of  Defense to take the following actions, as appropriate, in concert with any  changes to debt relief provisions in law.
Take immediate action to make debt relief policy applicable to all GWOT  soldiers who sustain battle injuries or are killed in combat-related actions.
Identify the military debts of battle-injured soldiers that were previously  paid and were not subject to remission or waiver and issue refunds.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of our report to DOD for comment.  In oral comments  received from the Office of the Secretary of Defense, the department  concurred with our report.
We are sending copies of this letter to interested congressional  committees; the Secretary of Defense; the Deputy Under Secretary of  Defense for Personnel and Readiness; the Under Secretary of Defense  Comptroller; the Secretary of the Army; the Director of the Defense  Finance and Accounting Service; and the Director of the Office of  Management and Budget. We will make copies available to others upon  request.
Please contact Gregory D. Kutz at (202) 512-7455 or kutzg@gao.gov, if you  or your staffs have any questions concerning this report. Contact points  for our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Major contributors to this report are  acknowledged in appendix III.
section_title: Appendix I: Background
paragraphs: The Federal Claims Collection Act of 1966, the Debt Collection Act of  1982, the Debt Collection Improvement Act of 1996, and related federal  regulations provide for collection of debts owed to the federal  government, including the debts of battle-injured soldiers who had  separated from the Army and fallen Army soldiers who served in the  Global War on Terrorism. These laws and related federal regulations  establish authority for the Department of Defense (DOD) and the  Department of the Treasury to engage in federal debt collection actions.
Out-of-service soldier debts occur when a soldier has separated from the  service and is not receiving salary or other payments from the department  that can be offset to collect debt owed to a defense agency or military  service. DOD is authorized to write off debts of fallen soldiers; however, it  may pursue collection of other deceased soldiers’ debts. Out-of-service  debts arise from a large number of circumstances, including overpayments  of pay and allowances (entitlements), such as hostile fire pay, hazardous  duty pay, and family separation pay; travel advances for which expense  vouchers have not been submitted; indebtedness related to public use of  the DOD facilities or services, such as family medical services; and loss or  damage of government property. Figure 2 illustrates the out-of-service  debt collection process, including DOD actions and Department of the  Treasury debt collection actions.
section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: The purpose of our audit was to determine the (1) extent to which Army  soldiers serving in the Global War on Terrorism (GWOT) who were injured  or killed by hostile fire and were released from active duty are having  debts referred to credit bureaus and collection agencies and (2) the impact  of Department of Defense (DOD) debt collection action on these soldiers  and their families. You also asked us to discuss ways that Congress could  make the process for collecting out-of-service debts more soldier friendly.
To determine the extent of debt related to Army soldiers who served in  Operation Iraqi Freedom and Operation Enduring Freedom and sustained  battle injuries and left the service or were killed in action, we compared  Army Wounded in Action and Killed in Action databases (referred to  collectively in this report as WIA databases) maintained by the Defense  Finance and Accounting Service (DFAS) Wounded-in-Action Support  Team and compared the soldier records in these databases with debt  records in the Defense Debt Management System (DDMS) for out-of- service personnel. Soldier records are identified by soldier name and  social security number in both the WIA databases and DDMS. The data  used in our audit covered fiscal years 2002 through 2005—the first 4 years  of the Operation Iraqi Freedom and Operation Enduring Freedom  deployments.
We assessed the reliability of data obtained from the WIA databases and  the DDMS systems by obtaining an understanding of the processes used to  collect and report the data, verifying control totals of data extracted and  used for file comparisons, validating the computer program used to  perform the file comparison, asking systems officials to complete our data  reliability questionnaire, and analyzing selected transaction data for  accuracy. We also considered findings and recommendations related to  payroll problems and unidentified soldier debt in our previous audits and  our recent Fort Bragg investigation. DFAS and the Army have  implemented procedures for reviewing and correcting soldier status and  pay account information in the WIA databases and DDMS data is subjected  to periodic DOD audits.
To determine the impact of debt collection actions on Army battle-injured  and fallen soldiers and their families, we reached out to WIA soldiers and  invited soldiers to contact us and share their experience. We focused on  soldiers whose debts had been reported to credit bureaus and collection  agencies. We were contacted by 19 separated battle-injured Army GWOT  soldiers. We used the experiences of these soldiers to illustrate the  hardships posed by debt collection action on battle-injured soldiers and  their families. For all of the soldiers with debt problems who contacted us,  we worked with the Army and DFAS to help resolve their debts. Where we  were unable to independently validate our case study information, we  attributed it to the soldiers and family members. We analyzed the DDMS  data to confirm management assertions that DFAS does not pursue  collection of debts of fallen soldiers.
To determine ways that Congress could help make the debt collection  process more soldier friendly, we considered debt relief provisions in  current law, DOD and Army policy, and the experience of soldiers who  contacted us as well as information obtained for case studies included in  our prior reports. We reviewed federal laws and regulations and DOD and  Army policies and procedures related to debt collection and relief of debt.
We met with Army, DFAS, and DOD officials to discuss their efforts to  identify and resolve soldier debt. We also met with Department of the  Treasury Financial Management Service (FMS) officials about their  processes for collecting Army soldier debt referred by DFAS. In addition,  we obtained independent confirmation from credit bureaus and FMS that  DFAS had recalled credit bureau reporting and private collection agency  and Treasury Offset Program referrals for WIA soldiers for active debt  cases. On April 5, 2006, we requested comments on a draft of this report.   We worked closely with the Army and DFAS to ensure the accuracy of the  factual information in our report.  We received oral comments from the  Office of the Secretary of Defense on April 21, 2006, and have summarized  those comments in the Agency Comments and Our Evaluation section of  this report. We conducted our work from June 2005 through March 2006 in  accordance with generally accepted government auditing standards.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: Staff making key contributions to this report include Stephen P. Donahue,  Dennis B. Fauber, Gayle L. Fischer, Danielle Free, Gloria  Hernandezsaunders, Wilfred B. Holloway, John B. Ledford, Barbara C.  Lewis, Renee McElveen, Richard C. Newbold, John P. Ryan, and Barry  Shillito.