Conditions today 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 significant numbers of military servicemembers: 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 personnel tempo, especially in the Army, Marine Corps, Army National Guard, and Army Reserve, which have provided the bulk of the military servicemembers for operations in Iraq. Additionally, when Hurricanes Katrina and Rita hit the Gulf Coast in August and September 2005, respectively, resulting in possibly the largest natural disaster relief and recovery operations in U.S. history, DOD was called upon to provide extensive search and rescue, evacuation, and medical support. DOD relies on four active components—the Army, Navy, Marine Corps, and Air Force—and four reserve and two National Guard components—the Army National Guard, Army Reserve, Navy Reserve, Marine Corps Reserve, Air National Guard, and Air Force Reserve—to meet its mission. Each year, Congress authorizes an annual year-end authorized personnel level for each component. In fiscal year 2005, the authorized personnel levels for the four active, four reserve, and two National Guard components totaled approximately 2.3 million military servicemembers. In order to meet legislatively mandated authorized personnel levels, DOD must balance accessions and losses. Meeting this authorization requirement is a function of recruiting and retention. The term recruiting refers to the military components’ ability to bring new members into the military to carry out mission-essential tasks in the near term and to begin creating a sufficient pool of entry-level servicemembers to develop into future midlevel and upper-level military leaders. To accomplish this task, active, reserve, and National Guard components set goals for accessions, or new recruits, who will enter basic training each year, and strive to meet their annual goals through their recruiting programs; advertising; and, where needed, financial incentives. The term retention refers to the military services’ ability to retain servicemembers with the necessary skills and experience. Again, the components rely on financial incentives, where needed, to meet their retention goals. The components further delineate their force structure through occupational specialties. These occupational specialties, totaling about 1,500 across DOD in the active, reserve, and National Guard components, represent the jobs that are necessary for the components to meet their specific missions. These occupational specialties cover a variety of jobs, such as infantrymen, dental technicians, personnel clerks, journalists, and air traffic controllers. While DOD’s active, reserve, and National Guard components met most of their aggregate recruiting and retention goals in the past 6 fiscal years, they faced greater recruiting difficulties in fiscal year 2005. With respect to recruiting, most components met overall goals from fiscal years 2000 through 2004, but 5 of the 10 components experienced recruiting difficulties in fiscal year 2005. Most components also met their aggregate retention goals in the past 6 fiscal years, but the Navy experienced retention shortages in fiscal year 2005. We note, however, that the components have taken certain actions that suggest they may be challenged to meet future recruiting and retention goals. The active, reserve, and National Guard components generally met their aggregate recruiting goals for enlisted servicemembers for the past 6 fiscal years, but 5 of the 10 components experienced recruiting difficulties in 2005. DOD’s recruiting data presented in table 1 show that with the exception of the Army, all of the active duty components met their overall recruiting goals. By the end of fiscal year 2005, the Army achieved about 92 percent of its recruiting goal. Table 2 shows that, while DOD’s reserve and National Guard components generally met or exceeded their enlisted aggregate recruiting goals for fiscal years 2000 through 2004, four components missed their recruiting goals in 1 or 2 years during that period by 6 to 20 percent. For example, the Army National Guard achieved 82 percent and 87 percent of its recruiting objectives in fiscal years 2003 and 2004, respectively, and the Air National Guard achieved 87 percent and 94 percent of its recruiting objectives in fiscal years 2001 and 2004, respectively. Additionally, in fiscal year 2000, both the Navy Reserve and Air Force Reserve missed their recruiting goals by 19 percent and 20 percent, respectively. Reserve and National Guard recruiting data through the end of fiscal year 2005 show that the reserve and National Guard components experienced difficulties in meeting their 2005 aggregate recruiting goals. Only the Marine Corps Reserve, achieving 102 percent, and the Air Force Reserve, achieving 113 percent, surpassed their goals. The Army Reserve achieved 84 percent of its overall recruiting goal; the Army National Guard, 80 percent; the Air National Guard, 86 percent; and the Navy Reserve, 88 percent. Appendix II contains more detailed information on components’ recruiting goals and achievements. As with recruiting, the active, reserve, and National Guard components generally met or surpassed their enlisted aggregate retention goals during the past 6 fiscal years, but in fiscal year 2005, 1 of the 10 components experienced retention shortages. DOD’s active components track retention by years of service and first, second, or subsequent enlistments. Table 3 shows that from fiscal years 2000 through 2004, the Army met all of its retention goals and that the 3 remaining active components missed some of their retention goals in 1 or 2 years during that period by at most 8 percent. For example, the Air Force did not meet its goal for second term reenlistments by up to 8 percent during this period. In fact, the Air Force did not meet this goal in 4 of the past 6 fiscal years and missed its goal for career third-term reenlistments in 2000, 2001, and 2002. The Navy did not meet its goal for reenlistments among enlisted servicemembers who have served from 10 to 14 years in 3 of the past 5 fiscal years, and the Marine Corps did not meet its goal for subsequent reenlistments in fiscal year 2003 only. In fiscal year 2005, retention data again show most active components generally met their enlisted aggregate retention goals, with the exception of the Navy. The Navy did not meet its end-of-year retention goals for servicemembers with less than 6 years of service by about 2 percent, and for servicemembers with 6 to 10 years of service by about 8 percent. Appendix III contains more detailed information on active components’ retention goals and achievements. DOD tracks reserve and National Guard components’ retention through attrition rates, a measure of the ratio of people who leave those components in a given year compared to the components’ total authorized personnel levels. These components establish attrition goals, which represent the maximum percentage of the force that they can lose each year and still meet authorized personnel levels. Annual attrition ceilings were originally established in fiscal year 2000 and have remained unchanged for each of the components. Table 4 shows that the reserve and National Guard components were generally at or below their attrition thresholds, thereby meeting their retention goals. Only three components, the Army National Guard, Army Reserve, and Air National Guard exceeded their attrition thresholds during fiscal years 2000 through 2003, and these thresholds were exceeded by about 1 percentage point or less. Several factors suggest the components are likely to continue experiencing difficulties in meeting their aggregate recruiting and retention goals in the future. DOD previously reported that over half of today’s youth between the ages of 16 and 21 are not qualified to serve in the military because they fail to meet the military’s entry standards. In addition, all active components are experiencing reduced numbers of applicants in their delayed entry programs. Also, each of the components initiated a stop loss program at various times in the past 6 fiscal years that prevented servicemembers from leaving active duty after they completed their obligations, although the Army, Army National Guard, and Army Reserve are the only components still employing stop loss. Furthermore, the Army Reserve has recalled members of the Individual Ready Reserve. All of the active components are experiencing shrinking numbers of new recruits in their delayed entry programs. According to a DOD official from the Office of the Secretary of Defense, the delayed entry program is viewed as a depository for future soldiers, sailors, and airmen. When prospects sign their contracts, they enter into the pool of applicants awaiting the date that they report to basic training. While in the delayed entry program, the applicants are the responsibility of the recruiter and, as such, are taught basic military protocols and procedures, such as saluting and rank recognition. Applicants generally spend no more than a year in the delayed entry program and no less than 10 days. Before being released from the delayed entry program, applicants are medically qualified, take an initial oath of enlistment, and perform other personal business prior to reporting to basic training. According to the same DOD official, a healthy delayed entry program is imperative to a successful recruiting year. If the active components come in at or near their delayed entry program goals for the year, they can be relatively sure they will achieve their annual recruiting goals. If they fall short of their delayed entry program goals, the components try to make up the shortfalls by sending individuals to basic training as early as the same month in which they sign enlistment papers. Typically, the active components prefer to enter a fiscal year with 35 percent to 65 percent of their coming year’s accession goals, depending on the component, already filled by recruits in the delayed entry program. Figure 1 shows the percentage of new recruits in the delayed entry programs compared to the components’ goals for fiscal years 2003 through 2006. For example, the Army’s goal is to enter each fiscal year with 35 percent of its upcoming annual accession goal already in the delayed entry program. The Army exceeded this goal when it entered fiscal year 2004 with 46 percent of its annual accession goal already in the program. However, it entered fiscal year 2005 with only 25 percent of its accession goal in the program and, as of August 2005, is projected to enter fiscal year 2006 with 4 percent of its accession goal in the program. The Navy, with an annual goal of 65 percent for its delayed entry program, is projected to enter fiscal year 2006 with almost 36 percent of its accession goal in the program. The Marine Corps, with an annual delayed entry program goal of 43 percent, entered fiscal year 2004 well above this goal, with 71 percent of its accession goal in the program, 54 percent in 2005, and a projected 26 percent in fiscal year 2006. Similarly, the Air Force, with a delayed entry program goal of 43 percent, projected to enter fiscal year 2006 with almost 22 percent of its accession goal in the program. The fact that all the active duty components entered fiscal year 2006 with at least 40 percent fewer recruits in their delayed entry programs than desired suggests that the active duty components will likely face recruiting difficulties in fiscal year 2006. Although some components have employed stop loss over the past several years, the Army, Army Reserve, and Army National Guard are the only components currently using it. The stop loss program, according to several Army officials, is used primarily for units that are deployed and is intended to maintain unit cohesion. A DOD official told us that in June 2005, the Army stop loss program affected over 15,000 soldiers, or less than one- tenth of a percent of DOD’s total military force—9,044 active component soldiers, 3,762 reserve soldiers, and 2,480 National Guard soldiers. The active Army and Army Reserve stop loss program takes effect 90 days prior to unit deployment or with official deployment order notification, and remains in effect through the date of redeployment to permanent duty stations, plus a maximum of 90 days. Army headquarters’ officials said that several Army initiatives, such as restructuring and rebalancing the active and reserve component mix, will, over time, eliminate the need for stop loss. Congress has expressed concern that the use of stop loss to meet overall personnel requirements may have a negative impact on recruiting and retention and the public’s perception of the military. Another Army official told us that the attention this program has received in the media may have created some of the negative implications on the public’s perception of military service. Additionally, an Army Reserve official we spoke with stated that when active duty units are affected by stop loss, servicemembers who have not completed their military obligations in those units may be delayed in transitioning from active duty into the reserve or National Guard components, potentially creating more difficulties for these components to meet their recruiting and retention goals. The Army Reserve has also recalled members of the Individual Ready Reserve—which, according to an Army Reserve official, is used to fill personnel shortfalls in active, reserve, and National Guard units—to address recruiting and retention difficulties. All soldiers, whether in an active, reserve, or National Guard component, agree to at least an 8-year service commitment in their initial enlistment contracts. This obligation exists regardless of how much time is to be served in the active, reserve, or National Guard component, or some combination of the active and reserve or National Guard components under the enlistment contract. If the soldier is separated from the active duty Army, reserve, or National Guard component before the 8-year commitment has been completed, the soldier may elect to remain in active duty Army, affiliate with the reserves, or be assigned to the Individual Ready Reserve. In the latter case, servicemembers are subject to recall, if needed. Almost 7,000 soldiers, including about 600 servicemembers who volunteered to serve and about 6,400 others under contractual obligation, have been deployed from the Individual Ready Reserve since 2002. As of August 2005, over 4,000 of these soldiers were still on active duty, serving a maximum of 2 years. All components exceeded authorized personnel levels for some occupational specialties and did not meet others. Specifically, we found certain occupational specialties have been consistently over- or underfilled when compared to their actual personnel authorizations. We believe these consistently overfilled and underfilled occupational specialties raise critical questions. First, what is the cost to the taxpayer to retain thousands more personnel than necessary in consistently overfilled occupational specialties? Second, how can DOD components continue to effectively execute their mission with consistently underfilled occupational specialties? However, because DOD lacks information from the components on all over- and underfilled occupational specialties, including reasons why these occupational specialties are over- and underfilled, it cannot address these questions and develop a plan to assist the components in addressing the root causes of its recruiting and retention challenges. Of nearly 1,500 enlisted occupational specialties across DOD, about 19 percent were consistently overfilled and about 41 percent were consistently underfilled from fiscal years 2000 through 2005, as shown in figure 2. In fiscal year 2005 alone, within the occupational specialties that consistently exceeded authorization, there were almost 31,000 more servicemembers in these occupational specialties than authorized. At the same time, DOD was not able to fill over 112,000 positions in consistently underfilled occupational specialties. The percentage of consistently over- and underfilled occupational specialties varies across the components. For example, from fiscal years 2000 through 2005, the percentage of consistently overfilled occupational specialties ranged from 1 percent in the active Navy to 44 percent in the Navy Reserve. Similarly, from fiscal years 2000 through 2005, the percentage of consistently underfilled occupational specialties ranged from 16 percent in the active Army to 65 percent in the active Navy. Table 5 provides information on consistently over- and underfilled occupational specialties for each component. Appendix IV provides more detailed information on the occupational specialties that were consistently over- and underfilled for each component. Our analysis further shows the number of servicemembers that exceeded the authorizations assigned to occupational specialties ranged from just 1 servicemember to almost 6,000 servicemembers. For example, the active Army Reserve Technical Engineer occupational specialty was overfilled by 1 servicemember in fiscal year 2000, and the active Navy Seaman occupational specialty was overfilled by almost 6,000 servicemembers in that same year. Similarly, we found shortages in the number of servicemembers assigned to occupational specialties ranged from just 1 servicemember to over 8,200 servicemembers. For example, the Marine Corps Reserve Parachute Rigger occupational specialty was underfilled by 1 servicemember in fiscal year 2000 and the active Navy Hospital Corpsman occupational specialty was underfilled by over 8,200 servicemembers in that same year. Table 6 presents several reasons provided by component officials to explain why certain occupational specialties have been consistently overfilled. For example, an Air Force Reserve official told us that this component recruited more Tactical Aircraft Avionics Systems personnel than authorized because it is a high-demand, technical occupational specialty that is critical to one of the Air Force Reserve’s missions. As a result, this occupational specialty has been consistently overfilled by about 160 to 240 individuals each year for the past 6 years. Furthermore, we found that the Army’s Cavalry Scout occupational specialty was overfilled by over 200 to almost 1,000 individuals in the past 5 years and an Army official stated that this occupational specialty was anticipated to increase its personnel authorization levels. According to Army projections, the current strength is still 1,700 short of the fiscal year 2007 target. Moreover, several component officials told us that some of their occupational specialties have consistently been overfilled because their components needed to meet legislatively mandated aggregate personnel levels, and to do so, they assigned personnel to occupational specialties that did not necessarily need additional personnel. Table 6 also presents several reasons provided by component officials to explain why certain occupational specialties have been consistently underfilled. For example, component officials told us that extensive training requirements have led the Army’s Special Forces Medical Sergeant, the Army National Guard’s Power-Generation Equipment Repairer, and the Marine Corps’s Counterintelligence Specialist occupational specialties to be consistently underfilled for the last 5 or 6 years. Furthermore, an official in the Army National Guard stated that the occupational specialty, Motor Transport Operator, was consistently underfilled by at least 1,800 to about 4,800 individuals in the past 6 years because the entire nation is short of truck drivers, which poses a recruiting challenge. We believe that consistently over- and underfilled occupational specialties are a systemic problem for DOD that raises questions about the validity of occupational specialty authorizations. The fact that DOD has consistently experienced almost 280 overfilled occupational specialties raises particular questions about affordability. We determined that it cost the federal government about $103,000 annually, on average, to compensate each enlisted active duty servicemember in fiscal year 2004. Accordingly, compensating the almost 31,000 servicemembers who served in occupational specialties that exceeded authorized personnel levels for fiscal year 2005 was costly. Similarly, the consistently underfilled occupational specialties raise the question about the components’ ability to continue to achieve their mission. The fact that over 112,000 positions in consistently underfilled occupational specialties were vacant in fiscal year 2005 raises concerns about whether the authorized personnel levels for these occupational specialties are based on valid requirements. While the active components have started reporting information to DOD on certain occupational specialties, the department currently lacks information on all occupational specialties, which prevents a complete understanding of the components’ recruiting and retention challenges. The Office of the Under Secretary of Defense (OUSD) for Personnel and Readiness directed the active components to report their critical occupational specialties for recruiting, beginning in 2004, in OUSD’s personnel and readiness report—an update provided to the Secretary of Defense each quarter. Table 7 provides the OUSD-defined criteria for occupational specialties that are critical for recruiting. An occupational specialty must meet at least one criterion to be considered critical; the fact that an occupational specialty is underfilled is only one of the criteria. Accordingly, the active components identify and report to OUSD about 10 percent of their occupational specialties that they deem critical for recruiting. For example, in OUSD’s third quarter fiscal year 2005 personnel and readiness report to the Secretary of Defense, the active components reported accessions information on 67 occupational specialties. In addition, the active components reported the reason why the occupational specialties reported were deemed critical, the accession goal for these occupational specialties, and year-to-date accessions achieved. Beginning in 2005, OUSD further directed the active components to report critical occupational specialties for retention as well. Table 7 also provides the OUSD-defined criteria for occupational specialties that are critical for retention. In fiscal year 2005, each of the active components reported 10 occupational specialties, for a total of 40 occupational specialties, which they deemed critical for retention. Again, the active components reported the reason why the occupational specialties reported were deemed critical; the retention goal; number of personnel retained to date; and the number of servicemembers authorized and assigned, or the fill rate, for each occupational specialty reported. These 40 occupational specialties, however, represent only 6 percent of the 625 total active duty occupational specialties. Collectively, the critical occupational specialties (such as Army Infantrymen and Marine Corps Counter Intelligence Specialists) that the active components report on represent at most 16 percent of the 625 active duty occupational specialties. Therefore, OUSD is not receiving information on at least 84 percent of active duty occupational specialties. Furthermore, the reserve and National Guard components are not required to report to OUSD any information on their combined 859 occupational specialties. This means that OUSD receives fill rate information on less than 3 percent of all occupational specialties. In July 2005, DOD issued Directive 1304.20 that requires the components to meet aggregate and occupational-specialty-specific authorized personnel levels. However, this directive does not include any reporting requirements and therefore does not specifically require the components to report on over- and underfilled occupational specialties. Until all components are required to provide complete information on all over- and underfilled occupational specialties, including reasons why these occupational specialties are over- and underfilled, and DOD determines if the new directive is having its desired effect, the department cannot develop an effective plan to assist the components in addressing the root causes of recruiting and retention challenges. Moreover, DOD is not in the position to assess the economic impact on the taxpayer of thousands of consistently overfilled occupational specialties or determine whether it can continue to effectively execute the mission requirements with consistently underfilled occupational specialties. DOD’s components spend hundreds of millions of dollars each year on programs to enhance their recruiting and retention efforts; however, the department lacks the information needed to determine whether financial incentives are targeted most effectively. Budgets for these programs— recruiting, advertising, and financial incentives—have fluctuated over the last 6 fiscal years. Specifically, in fiscal year 2005, five components increased their recruiter forces and three components revised their advertising programs. Additionally, various components increased enlistment and reenlistment bonuses to enhance recruiting and retention for specific occupational specialties. However, because OUSD does not require the components to fully justify the financial incentives paid to servicemembers in all occupational specialties, DOD lacks the information needed to ensure that funding spent on recruiting and retention is appropriately and effectively targeted to occupational specialties for which the components have the greatest need or to determine if other types of corrective action are needed. In fact, our analysis shows that components offered some of these incentives to servicemembers in consistently overfilled occupational specialties. Budget data for fiscal years 2000 through 2006 show that DOD’s recruiting programs, advertising, and financial incentive budgets fluctuated from $1.7 billion to $2.1 billion during those years, and that DOD spent a total of $9.9 billion on these programs over the first 5 years. Fiscal years 2005 and 2006 budget estimates for these programs total $1.7 billion and $1.8 billion, respectively. DOD’s overall annual expenditures for recruiting programs fluctuated from approximately $631.6 million to $800.7 million from fiscal years 2000 to 2004, and budgeted estimates of recruiting expenditures for fiscal year 2005 were $639.5 million, and for fiscal year 2006, $726.2 million. These recruiting expenditures cover essential items for recruiting commands and stations throughout the United States, including meals, lodging, and travel of applicants; recruiter expenses; vehicle operation and maintenance; office spaces; and other incidental expenses. Figure 3 shows actual recruiting expenditures for fiscal years 2000 through 2004 and budgeted recruiting expenditures for fiscal years 2005 and 2006. DOD’s annual advertising expenditures fluctuated from approximately $506.6 million to $663.0 million from fiscal years 2000 to 2004, and budgeted advertising expenditures for fiscal year 2005 were $570.7 million, and for fiscal year 2006, $543.9 million—a decrease of almost $27 million. Figure 4 shows actual advertising expenditures for fiscal years 2000 through 2004 and budgeted advertising expenditures for fiscal years 2005 and 2006. DOD’s annual expenditures for enlistment bonuses—targeted to new recruits—fluctuated from approximately $162.1 million to $301.2 million from fiscal years 2000 to 2004, and budgeted enlistment bonus expenditures for fiscal year 2005 were $149.3 million, and for fiscal year 2006, $175.0 million. Figure 5 shows actual enlistment bonus expenditures for fiscal years 2000 through 2004 and budgeted enlistment bonus expenditures for fiscal years 2005 and 2006. DOD’s total expenditures for selective reenlistment bonuses—targeted to servicemembers already in the military who reenlist for an additional number of years—fluctuated from approximately $420.5 million to $551.6 million from fiscal years 2000 to 2004, and budgeted reenlistment bonus expenditures for fiscal years 2005 and 2006 were $346.1 million and $387.7 million, respectively. Our analysis of actual expenditures for reenlistment bonuses in fiscal year 2005 for the active Navy, Marine Corps, and Air Force officials, show their expenditures to be within $13.5 million, $4.8 million, and $11.0 million of their budgeted amounts, respectively. However, it is significant to note that the active Army component spent approximately $426.0 million on reenlistment bonuses in fiscal year 2005, or almost eight times more than its budgeted amount of $54.3 million, to meet its retention goals. Figure 6 shows actual selective reenlistment bonus expenditures for fiscal years 2000 through 2004 and budgeted selective reenlistment bonus expenditures for fiscal years 2005 and 2006. While the actual number of recruiters fluctuated for all components from fiscal year 2000 through fiscal year 2005, five components—the Army, Army Reserve, Air Force, Air National Guard, and Army National Guard— increased their numbers of recruiters between fiscal years 2004 and 2005. Table 8 shows that the Army added almost 1,300 recruiters for a total of 6,262 recruiters, and the Army Reserve added over 450 recruiters for a total of 1,296 recruiters from September 2004 through June 2005. The Air Force and Air National Guard also increased their number of recruiters, from 1,480 to 1,487, and from 373 to 376, respectively. Of all the components, the Army National Guard has shown the greatest increase in its recruiter force—increasing the total number of recruiters from 2,702 in fiscal year 2004 to 4,448 in fiscal year 2005. In fiscal year 2005, the Army, Army Reserve, and Army National Guard made specific adjustments to their advertising programs. A primary focus of their recent advertising efforts has shifted to the “influencers,” those individuals who play a pivotal role in a potential recruit’s decision to join the military, including parents, teachers, coaches, other school officials, and extended family members. For example, the Army focused efforts on using its recruiting Web site as a vehicle to provide video testimonials of soldiers explaining, in their own words, what it means to be a soldier and why others should enlist. The Army and Army Reserve increased support to local recruiters through more public affairs efforts and by encouraging command support of their Special Recruiter Assistance Program. This program offers soldiers who have served in Operation Iraqi Freedom or Operation Enduring Freedom the opportunity to return to their hometowns and assist the local recruiters in gaining high school graduate leads and enlistments. Army officials stated that this program not only improves the number of contacts it makes, but it also provides interested individuals with a different perspective on operations overseas, which can assist in counteracting some of the negative information potential recruits receive from the media or influencers. The Army National Guard refocused its advertising by standardizing the appearance of its storefront recruiting offices to increase recognition and opening career centers in locations that provided it greater market exposure and access to the target populations. Additionally, the Army National Guard initiated a new “American Soldier” campaign that refines its message since September 11, 2001, and reflects the new realities of a prolonged recruiting and retention environment. DOD components also made adjustments to their financial incentives—the most costly of the three tools—to improve their ability to recruit and retain servicemembers. Over the last fiscal year, DOD made changes to existing financial incentives and introduced new financial incentives. For example, DOD expanded the pool of servicemembers who are eligible to receive a selective reenlistment bonus. Selective reenlistment bonuses are designed to provide a financial incentive for an adequate number of qualified mid- career enlisted members to reenlist in designated “critical” occupational specialties where retention levels are insufficient to sustain current or projected levels necessary for a component to accomplish its mission. The statutory authority for this bonus was amended in the Fiscal Year 2004 Authorization Act to allow the Secretary of Defense to waive the critical skill requirement for members who reenlist or extend an enlistment while serving in Afghanistan, Iraq, or Kuwait in support of Operations Enduring Freedom and Iraqi Freedom. In addition, in February 2005, DOD announced a new retention bonus for Special Operations Forces servicemembers (Army Special Forces, Navy SEALs, Air Force pararescue, plus a few other occupational specialties) who decide to remain in the military beyond 19 years of service. The largest bonus, $150,000, may be provided to eligible servicemembers who sign up for an additional 6 years of service. Eligible servicemembers who sign up for shorter extensions may qualify for smaller bonuses; servicemembers who extend for 1 additional year, for example, receive $8,000. Individual components also implemented changes over the last fiscal year. Specifically, to address recruiting, the active Army component implemented a minimum $5,000 bonus for all qualified recruits—generally based on graduation from high school and their scores on the Armed Forces Qualification Test—who enlist for 3 or more years in any military occupational specialty. Additionally, qualified recruits with bachelor’s degrees who enlist for 2 or more years in any occupational specialty may now receive bonuses up to $8,000; previously there were no bonuses for recruits with those educational qualifications. The Army also increased its maximum enlistment bonus amount, from $10,000 up to $14,000, for applicants who enlist for 3 or more years into certain occupational specialties, such as Cannon Crewmember, Cavalry Scout, and Crypto- Linguist Analyst. To address retention, the active Army, Navy, and Air Force components implemented the Critical Skills Retention Bonus program and the Assignment Incentive Pay program. The Critical Skills Retention Bonus program allows the components to target reenlistment bonuses at certain occupational specialties that have been identified as critical. The bonus is adjusted to meet current operational needs. For example, in fiscal year 2004, the Army offered the Critical Skills Retention Bonus to soldiers who were serving in special operations occupational specialties. In fiscal year 2005, the Army granted eligibility to 11 additional occupational specialties. These occupational specialties included recruiters, unmanned aerial vehicle operators, psychological operations specialists, and explosive ordnance disposal specialists. The Assignment Incentive Pay program, which provides up to $1,500 a month for enlisted servicemembers, was approved by the Under Secretary of Defense for implementation by the Navy, Air Force, and Army in early 2005. Assignment Incentive Pay is used to encourage servicemembers to volunteer for difficult-to-fill occupational specialties or assignments in less desirable locations. For example, for personnel in special operations occupational specialties to qualify for this pay, servicemembers must have more than 25 years of service, be designated by the Special Operations Command combatant commander as “operators,” and remain on active duty for an additional minimum of 12 months. The Army also implemented a Life Cycle Unit Bonus program designed to encourage servicemembers to commit to hard-to-fill occupational specialties in targeted units in fiscal year 2005. Army officials stated that this may help them address shortages of soldiers assigned to units at certain locations. When the program began, soldiers received up to $15,000 if they reenlisted and agreed to serve in certain units stationed at Fort Campbell, Kentucky; Fort Bliss and Fort Hood, Texas; and Fort Lewis, Washington. During fiscal year 2005, the Army Reserve and Army National Guard also increased some of their incentives to address recruiting and retention efforts. In fiscal year 2005, the Army allowed the reserve and National Guard components to increase their prior service enlistment bonus from $8,000 up to $15,000. Additionally, the bonus amount for a new recruit with no prior military experience increased from $8,000 to $10,000. Although we found that the components regularly offered financial incentives to servicemembers in consistently underfilled occupational specialties, we also found that each of the active duty components provided enlistment bonuses, selective reenlistment bonuses, or both to servicemembers in consistently overfilled occupational specialties. DOD only requires the components to provide general justifications for their financial incentives in their budget documents and does not require the components to specifically provide justifications for these incentives for noncritical occupational specialties, which make up at least 84 percent of all occupational specialties. Table 9 shows the number of consistently overfilled active component occupational specialties in which servicemembers received enlistment bonuses, selective reenlistment bonuses, or both, from fiscal years 2000 through 2005. The number of consistently overfilled occupational specialties in which servicemembers received enlistment bonuses, selective reenlistment bonuses, or both for 5 or 6 years is relatively low when compared to the total number of occupational specialties. However, the number of overfilled occupational specialties for which bonuses were authorized in a particular year can be considerably higher. Table 10 shows the number of all overfilled occupational specialties in which servicemembers received either an enlistment or selective reenlistment bonus for fiscal years 2000 through 2005. For example, in 2003, 278 out of all 625 active duty occupational specialties, or 44 percent, were overfilled, and servicemembers in these occupational specialties received enlistment or selective reenlistment bonuses. Component officials provided reasons why they offered enlistment and selective reenlistment bonuses to servicemembers in overfilled occupational specialties. Specifically, an Army official explained that they will target their bonuses to servicemembers at specific pay grades that are actually underfilled, even if the occupational specialty as a whole may be overfilled. Additionally, an official we spoke with stated that the requirement to meet legislatively mandated aggregate personnel levels results in, at times, offering bonuses to servicemembers who will serve in overfilled specialties, simply to meet their overall mandated personnel levels. Because enlistment and selective reenlistment bonuses generally range from a few thousand dollars up to $60,000, providing these bonuses to servicemembers in overfilled occupational specialties can be quite costly. While OUSD requires components to report incentives given to servicemembers in critical occupational specialties, it does not require the components to provide fully transparent rationales for incentives it provides to servicemembers in noncritical occupational specialties, which as we have stated, make up at least 84 percent of the components’ total occupational specialties. Some of these noncritical occupational specialties have been consistently overfilled in the past 6 fiscal years. By not requiring the components to fully justify their rationale for providing incentives to servicemembers in the consistently over- and underfilled occupational specialties, OUSD lacks the information needed to provide assurance to the Secretary of Defense and Congress that the amount of funding spent on recruiting and retention efforts is appropriately and effectively targeted to occupational specialties for which the components have the greatest need. Although DOD has reported that the components have generally met overall recruiting and retention goals for the past several years, meeting these goals in the aggregate can disguise the true challenges behind the components’ ability to recruit and retain servicemembers in the occupational specialities needed to fulfill their mission requirements. The fact that several occupational specialties have been consistently overfilled raises critical questions about affordability and whether the department is using its recruiting and retention resources most effectively. Similarly, DOD’s consistently underfilled occupational specialties raise concerns as to how the department can meet operational demands with what appear to be chronic shortages in certain occupational specialties. This latter issue is particularly relevant given the stresses on the force from prolonged operations in Iraq; the Global War on Terrorism; and most recently, significant disaster relief efforts in the Gulf Coast region. DOD is not in a position to develop a comprehensive recruiting and retention plan to address these and other issues because it lacks complete information from the 10 components on the occupational specialties that are over- or underfilled and the reasons why these conditions exist. Moreover, without this information, the department is not in a position to effectively communicate its true recruiting and retention challenges to Congress. Recently, Congress has provided increasing amounts of funding to assist DOD’s recruiting and retention efforts. While some components have used this funding to increase financial incentives to address both aggregate and occupational-specialty-specific recruiting and retention challenges, these increases in incentives are costly. Given the fiscally constrained environment we are facing now and in years to come, DOD can no longer afford to take a “business as usual” approach to managing its force. In some cases, DOD’s components have provided financial incentives to servicemembers in occupational specialties that are overfilled. While there may be valid reasons for providing these incentives to some servicemembers in these occupational specialities, DOD does not require the components to fully justify their decisions on financial incentives, which restricts the department’s ability to provide assurance to the Secretary of Defense, Congress, and the taxpayer that the increasing funding spent on recruiting and retention is appropriately and effectively targeted to occupational specialties for which components have the greatest need. To provide greater understanding of the recruiting and retention issues and improve the department’s oversight for these issues, we recommend that the Secretary of Defense direct the Under Secretary of Defense for Personnel and Readiness, in concert with the Assistant Secretary of Defense for Reserve Affairs, to take the following two actions: Require the 10 components to report annually on all (not just critical) over- and underfilled occupational specialties, provide an analysis of why occupational specialties are over- and report annually on and justify their use of enlistment and reenlistment bonuses provided to servicemembers in occupational specialties that exceed their authorized personnel levels. Develop a management action plan that will help the components to identify and address the root causes of their recruiting and retention challenges. In written comments on a draft of this report, DOD partially concurred with our two recommendations. DOD’s comments are included in this report as appendix V. DOD partially concurred with our first recommendation to require the ten components to report annually to the Office of the Under Secretary of Defense for Personnel and Readiness on all over- and underfilled occupational specialties; provide an analysis of why specific occupational specialties are over- and underfilled; and report annually on and justify their use of enlistment and reenlistment bonuses provided to servicemembers in occupational specialties that exceed their authorized personnel levels. DOD stated that it already has visibility over occupational specialties deemed most critical for retention, which it captures through the Balanced Scorecard process. However, as we note in this report, the occupational specialties that the components report as critical for recruitment or retention account for only a small percentage of the total number of occupational specialties—at most only 16 percent of all occupational specialties are reported as critical. Therefore, the department does not have visibility over at least 84 percent of its occupational specialties. DOD asserted that our definition of over- and underfilled occupational specialties (those that were over- or under their authorized levels by one or more individuals) is unreasonably strict. However, as we note in this report, we established this definition because we found that DOD lacks common criteria that define thresholds for over- and underfilled occupational specialties. In prior work, we determined that it costs the federal government about $103,000 annually, on average, to compensate each enlisted active duty servicemember in fiscal year 2004; thus we believe each individual serving in an occupational specialty that is over the authorized personnel level represents a significant cost to the government. For example, we found about 8,400 active duty servicemembers serving in consistently overfilled occupational specialties in 2005. If we apply the 2004 average compensation amount to the 8,400 servicemembers, the additional cost to the taxpayer would be about $870 million. In addition, the taxpayer bears the unnecessary costs of supporting over 22,000 servicemembers in consistently overfilled occupational specialties in the reserve and National Guard components. DOD also provided in its response an example of an overfilled occupational specialty, and its rationale that this occupational specialty was overfilled as a function of ramping up to meet a future strength requirement. Our report acknowledges this and other reasons the components provided for over- and underfilled occupational specialties. We believe that this example underscores the need for our recommendation that the components provide an analysis of why occupational specialties are over- or underfilled. Without this type of analysis, OSD is not in a position to assess the extent to which all specialties are over- or underfilled, determine if the overfilled and underfilled positions are justified, and identify any needed corrective action. Also, DOD agreed with the need to closely manage financial incentive programs. However, we believe that DOD needs sufficient information from the components to determine if the reasons for offering bonuses to individuals in consistently overfilled occupational specialties are, indeed, justified. We continue to be concerned that all financial incentives may not be justified. Currently, the components are not required to provide fully transparent rationales for bonuses they provide to servicemembers in noncritical occupational specialties, which as we have stated earlier, make up at least 84 percent of the components total occupational specialties. Without greater transparency over the use of financial incentives, the department cannot truly know if funding spent on recruiting and retention efforts is appropriately and effectively targeted to occupational specialties for which the components have the greatest need. DOD partially concurred with our second recommendation to develop a management action plan that will help the components to identify and address the root causes of their recruiting and retention challenges. In response, DOD noted that its Enlisted Personnel Management Plan (EPMP), formally established by DOD Directive 1304.20 in July 2005, substantially achieves this recommendation. We believe DOD is moving in the right direction in addressing recruiting and retention challenges and, in this report, we acknowledge that DOD issued directive 1304.20 that requires the components to meet aggregate and occupational specialty specific authorized personnel levels. However, this plan cited in DOD’s comments did not exist at the time we conducted our audit work and we believe DOD needs to continue to move forward to establish this plan. DOD also stated that it has already laid the framework for this type of plan through monthly reviews of other reports and quarterly reviews of its Balanced Scorecard reports. DOD claimed these omissions in our draft report result in an incomplete description of management controls. We disagree since as stated earlier, the EPMP did not exist at the time we conducted our audit work and furthermore, we do acknowledge in this report that the department receives quarterly updates of critical occupational specialties through the Office of the Under Secretary of Defense’s personnel and readiness report. Nevertheless, we continue to believe that these updates do not provide OSD with full transparency and oversight since these quarterly updates do not include information on at least 84 percent of active duty occupational specialties or any of the combined 859 occupational specialties of the reserve and National Guard components. We are sending copies of this report to interested congressional members; the Secretaries of Defense, the Army, the Navy and the Air Force; the Commandant of the Marine Corps; and the Chiefs of the National Guard Bureau, the Army Reserve, the Army National Guard, the Air Force Reserve, the Air National Guard, the Navy Reserve, and the Marine Corps Reserve. We will also make copies available to others upon request. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov. Should you or your staff have any questions regarding this report, please contact me at (202) 512-5559 or stewartd@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 members who made key contributions to this report are listed in appendix VI. To conduct this body of work, we examined Department of Defense (DOD) policies, regulations, and directives related to recruiting and retention of military servicemembers. We also reviewed recruiting and retention reports and briefings issued by GAO, DOD, the military services, the Congressional Research Service, the Congressional Budget Office, and research organizations such as RAND. Furthermore, we analyzed individual components’ databases containing recruiting and retention data on active, reserve, and National Guard servicemembers. In the course of our work, we contacted and visited the organizations and offices listed in table 11. To determine the extent to which the active duty, reserve, and National Guard components met their aggregate recruiting and retention goals, we compared accession and reenlistment goals to their actual figures for fiscal years 2000 through 2005. Additionally, through interviews with agency officials, we obtained data on the extent to which the components have instituted stop loss in some units, recalled members of the Individual Ready Reserve, and recruited new enlistees into their delayed entry programs. To determine the extent to which the components have met their authorized personnel levels for specific occupational specialties, we obtained data from the components on the number of servicemembers authorized and assigned for each occupational specialty as of September 30 for fiscal years 2000 through 2004 and June 30 for fiscal year 2005. We calculated the fill rate for each occupational specialty by dividing the number of servicemembers assigned to the occupational specialty by the authorization. We then counted the number of years that each occupational specialty in each component was over- or underfilled. Because most of the components have not identified acceptable thresholds for over- and underfilled occupational specialties, we used the strictest interpretation of these terms. In our analysis, if a component had one person more than its authorization, we considered the occupational specialty to be overfilled. Similiarly, if a component had one person less than its authorization, we considered the occupational specialty to be underfilled. If an occupational specialty was overfilled for at least 5 of the 6 years, we considered the occupational specialty “consistently” overfilled. Similarly, if an occupational specialty was underfilled for at least 5 of the 6 years, we considered the occupational specialty “consistently” underfilled. Some occupational specialties have changed over the 6-year period of our analyses. In these cases, we combined the original and new occupational specialties. For example, in the Army, the occupational specialty for Divers changed the identifier from 00B to 21D in 2004. We combined these two occupational specialties by summing the entries for each year and retaining it in our data set as one entry. In those cases where we could not determine how to merge occupational specialties, we retained the original data in our data set. To analyze the steps DOD and the components have taken to address their recruiting and retention difficulties, we interviewed key DOD officials from each component, including headquarters and recruiting commands, to obtain an understanding of recruiter, advertising, and incentive programs as well as overall recruiting and retention difficulties. We determined, through a review of DOD budget justifications for fiscal years 2000 through 2006, the associated costs of these programs. We also interviewed Office of the Secretary of Defense officials to understand overall DOD policies and future direction for reviewing recruiting and retention goals. We obtained and reviewed various accession plans, incentive programs, and marketing initiatives. To determine the extent to which personnel in consistently overfilled occupational specialties received bonuses, we obtained data from the active components on the occupational specialties for which servicemembers were qualified to receive enlistment or reenlistment bonuses in fiscal years 2000 through 2004 and for fiscal year 2005 as of June 30. We compared the occupational specialties for which servicemembers received bonuses to those occupational specialties that we found to be consistently overfilled, as well as those that were overfilled in any year. We limited our analysis to the active components because the reserve components tend to provide enlistment and reenlistment bonuses geographically. All dollar amounts were adjusted for inflation using the gross domestic product price index published by the Bureau of Economic Analysis. To determine the reliability of data obtained for this report, we interviewed personnel from each component knowledgeable about the data sources we used, inquiring about their methods for ensuring that the data were accurate. We reviewed available data for inconsistencies and, when applicable, followed up with personnel to assess data validity and reliability. We determined that the data were sufficiently reliable to answer our objectives. We conducted our work from January 2005 through October 2005 in accordance with generally accepted government auditing standards. Tables 12 and 13 show the active, Reserve, and National Guard components’ recruiting achievements for fiscal years 2000 through 2005. The Air Force introduced new metrics—Average Career Length and Cumulative Continuation Rates—in July 2005 to more accurately measure enlisted retention patterns. The tables presented in appendix IV show each component’s consistently over- and underfilled occupational specialties for fiscal year 2000 through June 2005. Derek Stewart, (202) 512-5559 (stewartd@gao.gov) In addition to the individual named above, David E. Moser, Assistant Director; Michael A. Brown II; Jonathan Clark; Alissa H. Czyz; James A. Driggins; Joseph J. Faley; Neil D. Feldman; Ronald L. Fleshman; Shvetal Khanna; Marie A. Mak; Maewanda L. Michael-Jackson; Christopher R. Miller; Hilary L. Murrish; Brian D. Pegram; James W. Pearce; and Terry L. Richardson made key contributions to this report.

Summary: The Department of Defense (DOD) must recruit and retain hundreds of thousands of servicemembers each year to carry out its missions, including providing support in connection with events such as Hurricanes Katrina and Rita. In addition to meeting legislatively mandated aggregate personnel levels, each military component must also meet its authorized personnel requirements for each occupational specialty. DOD reports that over half of today's youth cannot meet the military's entry standards for education, aptitude, health, moral character, or other requirements, making recruiting a significant challenge. GAO, under the Comptroller General's authority (1) assessed the extent to which DOD's active, reserve, and National Guard components met their enlisted aggregate recruiting and retention goals; (2) assessed the extent to which the components met their authorized personnel levels for enlisted occupational specialties; and (3) analyzed the steps DOD has taken to address recruiting and retention challenges. DOD's active, reserve, and National Guard components met most aggregate recruiting and retention goals for enlisted personnel from fiscal years (FY) 2000-2004. However, for FY 2005, 5 of 10 components--the Army, Army Reserve, Army National Guard, Air National Guard, and Navy Reserve--missed their recruiting goals by 8 to 20 percent. Most of the components met their aggregate retention goals for FY 2000-2004, but the Navy experienced shortages in FY 2005 of up to 8 percent. Also, factors such as the shrinking numbers of new recruits in delayed entry programs and the use of stop loss, which delays servicemembers from leaving active duty, indicate that the components may experience future recruiting challenges. All components exceeded authorized personnel levels for some occupational specialties and did not meet others. Specifically, GAO found that 19 percent of DOD's 1,484 occupational specialties were consistently overfilled and 41 percent were consistently underfilled from FY 2000-2005. While the components offered reasons why occupational specialties may be over- or underfilled, GAO believes that consistently over- and underfilled occupational specialties are a systemic problem for DOD that raises two critical questions. First, what is the cost to the taxpayer to retain thousands more personnel than necessary in consistently overfilled occupational specialties? Second, how can DOD components continue to effectively execute their mission with consistently underfilled occupational specialties? In FY 2005, almost 31,000 more servicemembers than authorized served in occupational specialties that have been consistently overfilled. GAO determined that it costs the federal government about $103,000 annually, on average, to compensate each enlisted active duty servicemember in FY 2004. In contrast, DOD was unable to fill over 112,000 positions in consistently underfilled occupational specialties, raising concerns about the validity of the authorized personnel levels. DOD requires the active components to report on critical occupational specialties for recruiting and retention, which amounts to at most 16 percent of their 625 specialties. However, DOD does not require them to report on their noncritical occupational specialties, and does not require the reserve or National Guard components to report on any of their 859 specialties. Consequently, DOD does not have the necessary information to develop an effective plan to address the root causes of the components' recruiting and retention challenges. DOD has taken steps to enhance recruiting and retention, but lacks information on financial incentives provided for certain occupational specialties. GAO found that the components offered financial incentives to servicemembers in consistently overfilled occupational specialties. However, because DOD only requires the components to provide minimal justification for their use of financial incentives, it lacks the information needed to provide assurance to the Secretary of Defense, Congress, and the taxpayer that the increasing amount of funding spent on recruiting and retention is appropriately and effectively targeted to occupational specialties for which the components have the greatest need.