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

Letter

Continuing Pay Problems for Army Soldiers

Continuing pay problems resulted in overpayments and debt for sick and injured GWOT Army soldiers. When Army and medical unit commanders fail to report changes in soldier duty status and location, overpayments of combat-related pay, such as hostile fire pay, hardship duty pay, and family separation pay, continue—sometimes for several months past the time the soldier is eligible to receive this combat-related pay. As illustrated by our case studies, which are discussed in the next section of our testimony, changes in duty status and location occur when soldiers become sick or injured or they do not deploy with their units and when soldiers are injured after deployment or sustain battle injuries and are medically evacuated.

Our investigation into allegations of pay problems related to 37 soldiers assigned to the MRPU at Fort Bragg identified actual overpayments of approximately $218,000 to 232 sick and injured Army National Guard and Reserve soldiers in outpatient status during the period April 2003 through June 2005. These overpayments occurred in part because unit and medical commanders failed to record changes in duty status and location of sick and injured soldiers. Data available during our case studies showed that it took from 14 to 203 days to stop overpayments once a soldier visited the Finance Battalion. As demonstrated in our past reports, finance offices in theater were often unable to start or stop hostile fire pay or hardship duty pay as required because of problems with human capital, processes, and the lack of integrated pay and personnel systems. When overpayments were not detected or they were not detected in a timely manner, the dollar amount of soldier debts continued to increase. Debts that remained unpaid after these soldiers left the service were subject to collection through credit bureau reporting, private collection agencies, and TOP offsets of income tax refunds and other designated federal payments.

Our audit of separated Army GWOT soldier debt identified nearly 1,300 battle-injured soldiers who left the service owing $1.5 million, including almost 900 battle-injured soldiers whose debts totaled about $1.2 million and about 400 soldiers who died in battle whose debts totaled over $300,000. As a policy, DFAS does not pursue collection action on the debts of fallen soldiers. However, Army and DFAS officials told us that under certain circumstances, military debt can be satisfied from the final pay of fallen soldiers. In addition, DFAS may pursue collection of debts of other deceased soldiers. We found that hundreds of separated battle-injured soldiers were pursued for repayment of military debts that occurred through no fault of their own, including 74 soldiers whose debts had been reported to credit bureaus, private collection agencies, and TOP at the time we initiated our audit in June 2005. Although the Debt Collection Act gives DOD authority to use these debt collection tools, in response to our audit, the Army temporarily suspended collection action on debts of battle-injured soldiers until a determination could be made about whether these soldiers’ debts were eligible for relief.

As illustrated in figure 1, Army and DFAS data for fiscal years 2002 through 2005 showed that 73 percent of the debts for the nearly 1,300 separated battle-injured soldiers and soldiers killed in combat related to errors in pay calculations, combat pay errors, and erroneous leave payments during fiscal years 2002 through 2005. The remaining 27 percent of these soldiers’ debts related to repayment of enlistment bonuses (11 percent) where soldiers did not complete the required term of service or they improperly received more than one bonus; payments for tuition and training (6 percent) where soldiers did not complete their training or they did not fulfill service requirements related to their training; and other expenses (8 percent) related to unpaid bills for family medical services, housing and household moves, insurance premiums, travel advances, and loss or damage of government property. The reasons for the remaining debt (2 percent) were not recorded in the Defense Debt Management System.

Figure 1. Dollar Amounts of Battle-Injured and Fallen Soldier Debts by Major Reason.

Other debts relate to provisions in law and DOD business rules in effect at various times. For example, until mid-2005, soldiers were required to repay portions of their enlistment bonus, special pay, and educational benefits and stipends when they failed to fulfill their required terms of service because of early separation as a result of their war injuries. According to DFAS officials, although unit commanders and finance offices are authorized to write off debts for lost and damaged equipment when soldiers who were injured or killed by hostile fire are medically evacuated from the theater of operation, they have not always done so. In addition, unpaid bills for family medical services, housing and household moves, insurance premiums, and outstanding travel advances generate debt. Because Army units and medical facilities have not always prepared or processed changes in orders when a soldier’s duty status or location changed, soldiers do not have the documentation needed to submit vouchers for travel reimbursement. The new WIA Support Team’s standard operating procedures for soldier pay account review require identification and processing of all soldier travel claims.

Overpayments and Debt Collection Action Have Placed Significant Hardship on Sick and Injured Soldiers and Their Families

Debt collection actions have caused a variety of problems for injured and sick Army GWOT soldiers. Case studies related to both of our reports showed that sick and injured soldiers sometimes went months without paychecks because debt caused by overpayments of combat pay and other errors was offset against their military pay. Work performed for both of our reports also showed that when debts were not paid after the soldiers separated from the service, they were subject to credit bureau reporting and collection agency actions and offsets. Out-of-service debt collection actions created additional hardships on the soldiers by preventing them from paying for basic household expenses, getting loans to buy houses or automobiles or pay off other debt, and sending several of the soldiers into financial crisis. Some battle-injured soldiers forfeited their final separation pay to cover part of their military debt, and they left the service with no funds to cover immediate expenses while facing collection action on their military debt.

Fort Bragg Soldier Case Studies

Case studies developed as part of our Fort Bragg investigation showed that some soldiers and their families had to expend significant time and effort dealing with pay problems and resulting debt while recovering from sickness and injuries. Several soldiers experienced large, unexpected deductions—as much as $1,172 from a single paycheck—for repayment of debt resulting from the Army’s failure to stop hostile fire and hardship duty pay for soldiers who were in Medical Retention status.

As illustrated in table 1, for 9 of the 10 MRPU soldiers in our case studies, it took pay technicians at the Fort Bragg Finance Battalion from 14 to 203 days to stop the overpayments once the soldiers visited the Finance Battalion. The resulting overpayments ranged from $553 to $2,300. The Finance Battalion could not provide documentation for us to determine the amount of time it took to stop overpayments for one of our case study soldiers. The soldiers’ injuries ranged from those inflicted by improvised explosive devices (IED) to post-traumatic stress disorder.

Table 1. Examples of Fort Bragg Soldier Pay Problems Injury from vehicle accident involving an IED crater.

Knee injury, broken leg—undiagnosed for 6 weeks.

Depression – sent to MRPU at Fort Bragg and redeployed to Iraq.

Stroke—medically evacuated to Landstuhl and transferred to Walter Reed and Fort Bragg.

Kidney disease in Iraq, hospitalized at Landstuhl, and then sent to Walter Reed and Fort Bragg.

Experienced heart trouble in Iraq; sent to Fort Bragg.

Contracted legionnaire’s disease in Africa.

Days elapsed equals the number of days between the date the soldier visited Finance and date ineligible pay was stopped.

Estimated overpayments equals hostile fire and hardship duty payments made to a soldier after arrival at Fort Bragg MRPU.

Soldier #6 in the table above, an Army National Guard soldier, suffered a stroke on June 26, 2004, while serving in Iraq. He was medically evacuated and arrived at Fort Bragg in early July 2004. Our investigation revealed that the soldier visited the Fort Bragg Finance Battalion on July 30, 2004, as part of his MRPU processing. Despite following MRPU procedures, this soldier’s hostile fire and hardship duty pay continued until November 5, 2004—approximately 4 months after his initial visit to the Finance Battalion. By this time, the soldier’s overpayments had resulted in debt of $1,300. The Fort Bragg Finance Battalion eventually collected about $972 of this amount from a single paycheck, which was about 50 percent of the soldier’s disposable pay. As a result, the soldier’s wife told us that she had to defer paying some of their bills, including the monthly payment on their second mortgage.

Separated Battle-Injured Soldier Case Studies

Case studies related to our audit of separated battle-injured soldier debt showed that several of these soldiers also had gone without a paycheck for several months while they were in Army medical facilities undergoing treatment for their war injuries because debt caused by overpayments of combat pay and other errors was offset against their military pay. One soldier said he had no money for food while several soldiers told us they received assistance from family members. When these soldiers leave the Army, they generally do not have jobs and many of them face continuing medical treatment for battle injuries, making it difficult to hold a job. Some soldiers told us that their final separation pay was offset to cover their debt and they left the service with no funds to pay immediate expenses.

Because of the lack of income, 16 of the 19 soldiers who contacted us during our audit told us that they had difficulty paying for basic household expenses. The Army’s failure to record separation paperwork in the pay system and other payment errors resulted in over $12,000 of debt for one severely battle-injured soldier who suffered brain damage when his convoy came under attack. Although the soldier’s family expected that he would receive retirement pay when his active Army pay stopped upon his separation, the soldier had no income for several months while the Army attempted to recover his military debt. As a result the soldier’s family was unable to pay household bills, the utilities were shut off, and the soldier’s dependent daughter was sent out of state to live with relatives.

In addition, three soldiers told us that they were erroneously identified as absent without leave (AWOL) by their units while they were actually in the hospital or receiving outpatient care for their war injuries. The AWOL status for at least two of these soldiers created debt because it appeared that the soldiers received pay when they were not in duty status. At the time these soldiers were listed as AWOL by their Army units, they were actually receiving medical treatment. One soldier was receiving outpatient therapy for her knee injury under the care and direction of an Air Force physician based on an Army medical referral and the other soldier was in a military hospital at Fort Campbell. Debt-related experiences of 19 separated battle-injured soldiers who contacted us included the following.

Sixteen soldiers had their military debts reported to credit bureaus, 9 soldiers had debts turned over to private collection agencies, and 8 soldiers had their income tax refunds withheld under TOP.

Sixteen could not pay their basic household expenses. Four soldiers were unable to obtain loans to purchase homes, meet other needs, or obtain VA educational benefits because of service- related debt on their credit reports.

At least 8 soldiers were owed travel reimbursements at the same time they were being pursued for collection of their service-related debts. Table 2 illustrates examples of the effects of debt collection actions on 10 of our separated Army battle-injured case study soldiers and their families. Debts imposed the greatest hardship on battle-injured soldiers who have had to endure financial problems while they cope with adjusting to physical limitations caused by their injuries.

Table 2.Examples of Battle-Injured Soldier Pay Problems Resulting in Military Debt after Separation DOD-reported debt reason(s)

Payroll and leave payment errors. Also, erroneous Servicemen’s Group Life Insurance (SGLI) and Survivor Benefit Program (SBP) premium billings.

Soldier spent 1-1/2 years on disputes and appeals before multiple debts, errors and unreimbursed travel expense were resolved. Soldier said he deferred purchase of a house because of military debt included on his credit report. The Army debt was the only blot on the soldier’s credit report.

Combat pay and calculation errors, including payment for unused leave. Soldier also was erroneously reported as AWOL while actually receiving treatment in a Department of Veterans Affairs hospital.

Family had no income while debt was recouped. According to a family member, the soldier’s utilities were turned off, and his young daughter was sent to live with relatives out of state.

Paralyzed from waist down.

Combat pay and calculation errors.

Soldier received reduced pay or no net pay over a 4-month period while he was at Walter Reed and his wife and four children were in Germany. The soldier separated from the Army in January 2005 and his debt was not resolved until February 2006. The soldier is still pursuing underpayment of hostile fire pay and combat zone tax exclusion and “unreimbursed” travel expense.

Unearned portion of reserve enlistment bonus because of erroneous AWOL report and overpayment of hardship duty pay.

After the soldier struggled with her Army Reserve unit to resolve AWOL errors, she experienced collection action on other military debt. The soldier told us she was unable to get a $500 loan because of the past due Army debt of $1,079 on her credit report.

Outstanding travel advance error.

Soldier was asked to travel to Fort Polk to brief Stryker Brigade on Iraq experience. He submitted his travel voucher several times, but DFAS lost it and reported a travel advance debt to credit bureaus.

Combat pay and calculation errors.

Chest injury, damage to lung and left arm, in a coma for two weeks, and PTSD.

Soldier, a single parent with four young children, was told that DFAS would audit her $2,030 debt. She said she never heard from DFAS and was unaware she owed a balance of over $500 until the debt appeared on her credit report.

DOD-reported debt reason(s)

Pay calculation errors.

Soldier was contacted by a private collection agency and his 2004 income tax refund was withheld to offset his debt. Soldier said he was unable to obtain a loan to buy land for his house trailer due to military debt on his credit report, and he had to pay a higher interest rate on his car loan.

Unearned portion of reserve enlistment bonus.

Soldier said he was unsuccessful in gaining assistance from Fort Hood to resolve his debt. He was contacted by a private collection agency, and the government took his 2004 tax refund to offset the debt.

Erroneous annual leave payment, repayment of basic training program expense. Also, erroneous SGLI premium billings.

The soldier separated from the Army in October 2004 and said he received a check for about $1,800 for unused leave 10 months later in July 2005. He told us he received his first debt letter in November 2005 but was unable to pay his debt.

Pay calculation errors.

Soldier said she was unable to obtain a loan to purchase a house because of military debt on her credit report. The soldier would have had to pay a higher interest rate because of Army debt, and she could not afford the resulting higher monthly payment on the loan.

Five soldiers and family members told us that they had contacted their unit finance offices multiple times for assistance in resolving their pay and debt problems. However, the soldiers said that finance personnel either did not get back to them as promised or the finance personnel they spoke with said they could not help them with their problems. DFAS and Army officials we spoke with acknowledged that finance office personnel at some locations lacked the knowledge needed to accurately input transactions to soldier pay accounts. DFAS officials told us they recently initiated actions to train Army finance office personnel at several locations.

DOD Actions to Address Pay and Travel Reimbursement Problems

Our past reports included over 80 recommendations for improvements in human capital, processes, and systems to address pay and travel problems. Preventing these problems from occurring in the first place is the best solution. Efforts to fundamentally reengineer the current system into an integrated pay and personnel system have fallen far short of expectations. DOD and the Army have taken a number of actions to improve human capital and correct process weaknesses. For example, the Army and DFAS have created a WIA database of personnel, payroll, and medical data on soldiers who were sick, injured, or killed in combat. This database provides useful information for identifying and resolving soldier pay and debt problems. The Army and DFAS have also issued standard operating procedures and initiated training and oversight activities at several Army field locations. In addition, the Army established a formal Ombudsman Office in May 2005 to assist Army Guard and Reserve soldiers in resolving a variety of pay and travel problems. Over the past few months, DFAS has deployed staff to several field locations to train the finance staff on the processing of pay transactions. Although these actions are positive, they primarily represent workarounds and substantial human efforts to overcome the error-prone, labor-intensive system that exists today.

Opportunities for a More Soldier-Friendly Debt Collection Process

Our analysis of debt relief authority in the National Defense Authorization Act for Fiscal Year 2006 identified additional opportunities to alleviate the burden that military debt and collection action places on sick and injured soldiers. For example, the act could be clarified to make debt relief available to soldiers regardless of when they separated from active duty. Currently, soldiers who separated from the Army more than 1 year ago are not eligible to obtain debt relief, and soldiers who paid debts are not eligible for refunds.

Case studies included in both of our recent reports showed that some battle-injured soldiers did not receive debt notification letters until 8 to 10 months after they separated from the Army. One battle-injured soldier who separated in October 2004 told us that he received his debt notification letter in November 2005—more than 1 year after he separated from the Army. All but three of our case study battle-injured soldiers separated from the Army more than 1 year ago, and these soldiers’ eligibility for debt relief under the act has already expired. Another non-battle-injured soldier included in our Fort Bragg investigation who separated from the Army National Guard in June 2005, received his debt notification letter at the end of March 2006—10 months after he separated from the service— stating that his debt would be reported to credit bureaus, if not paid within 30 days and to private collection agencies if not paid within 60 days.

Further, the current debt relief authority is not permanent; it will expire on December 31, 2007.

Our report on debts of battle-injured soldiers raises a number of matters for congressional consideration with regard to expanding debt relief authority in current law, including providing uniform debt relief to injured GWOT soldiers and exempting these soldiers from credit bureau reporting and private collection agency and TOP action. Our report on MRPU soldier overpayments recommends that DOD follow up with the 22 MRPUs that were not part of our investigation to determine the extent of overpayments at those locations and ensure appropriate corrective action is taken.

Concluding Comments

Our most recent work shows that wounded soldiers continue to struggle with a broken pay system. These pay problems have resulted in significant frustration for injured soldiers and their families. In addition, we found instances of soldiers injured fighting the GWOT being referred to credit reporting agencies and collection agents. This is especially problematic for injured soldiers who are facing other difficult challenges. Although DOD has taken action to improve the military pay system, most of the progress to date represents workarounds and human efforts to overcome what remains today as a fundamentally flawed system. Absent a successful reengineering of the current pay system, problems for soldiers will continue. Consistent oversight by Congress will be needed to ensure that DOD provides our soldiers with the world class military pay system that they deserve.

Mr. Chairman and Members of the Committee, this concludes my statement. I would be pleased to answer any questions that you or other members of the committee may have at this time.

Contacts and Acknowledgments

For further information about this testimony, please contact Gregory D. Kutz at (202) 512-7455 or kutzg@gao.gov. Major contributors to this testimony include Gary Bianchi, Mary Ellen Chervenic, Dennis Fauber, Gayle Fischer, Jason Kelly, Renee McElveen, Richard Newbold, and John Ryan. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony.

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