The U.S. Army is responsible for land-based military operations and is the largest and oldest established branch of the U.S. military. For fiscal year 2011, Congress appropriated $52.5 billion to the “Military Personnel, Army” appropriation, which is a 1-year appropriation available for the pay, benefits, incentives, allowances, housing, subsistence, travel, and training primarily for active duty servicemembers.the Under Secretary of Defense Comptroller/Chief Financial Officer (DOD Comptroller), provides accounting, disbursing, and financial reporting services to the Army. According to DFAS-IN, of the $52.5 billion in fiscal year 2011 military personnel appropriations, nearly 800,000 active duty Army servicemembers received nearly $47 billion in pay and allowances. The DOD Comptroller’s Office sets DOD financial management policy, including policy on military pay, which is included in DOD’s Financial Management Regulation (FMR), Volume 7A, Military Pay Policy and Procedures – Active Duty and Reserve Pay. FMR, Volume 7A provides guidance on basic pay calculations; special pays, including pay of medical and dental officers, pay for hostile fire or imminent danger, and pay for foreign language proficiency; bonuses; allowances; allotments; tax withholding; and leave. FMR, Volume 7A also sets the policy on the effect of court-martial sentences on pay and allowances. The Office of the Assistant Secretary of the Army for Manpower and Reserve Affairs is responsible for setting the strategic direction and providing overall supervision for manpower, personnel, and Reserve Component affairs of the Army and also is responsible for the Army’s manpower policy and human resources, among other things. In order to fulfill these responsibilities, Manpower and Reserve Affairs relies on the Deputy Chief of Staff, Army G-1, for advice and assistance. The Army G-1 Resources Division’s Compensation and Entitlement Branch is responsible for active, reserve, and retired military compensation. The branch develops legislative proposals and policy directives for all forms of pay and allowances and represents the Army on the Per Diem, Travel and Transportation Allowance Committee of the Military Advisory Panel as well as numerous DOD working groups, including Basic Allowance for Subsistence, Basic Allowance for Housing, Special and Incentive Pays, Travel Reengineering, and Debt Avoidance. The Army Human Resources Command supports Army G-1 in the management of all military personnel by serving as the functional proponent for military personnel management and personnel systems. The Army Human Resources Command is responsible for providing DFAS-IN with accurate and timely information regarding changes in individual military member status necessary to maintain military payroll accounts. DFAS-IN is responsible for processing the Army’s military payroll using DJMS-AC. DFAS-IN and its Military Pay Operations (Mil Pay Ops) staff rely on numerous Army military personnel records generated by the Army Reception Battalion installation personnel offices, Defense Military Pay Offices (DMPO), Army Finance Offices, Army Human Resources Command, and unit commanders to establish and update active duty military pay accounts in DJMS-AC. The Army Financial Management Command under the Assistant Secretary of the Army for Financial Management and Comptroller provides finance support and liaison to Army commands, installations, and tactical units and to DFAS on matters pertaining to the adequacy of finance policies, systems, and reporting requirements. To provide payroll support to the vast number of active Army servicemembers, DFAS-IN has 38 DMPOs within the United States, and the Army has finance offices overseas that provide pay services to military personnel in designated geographical areas. Military pay starts once a master military payroll account is established in DJMS-AC. Army active duty military personnel are to receive pay and allowances based on their grade and time in service; location; and whether they are married, have dependents, or are performing special duties. The Army’s active duty servicemembers may elect to be paid once a month—at the end of the month—or twice a month—at midmonth and at the end of the month. DJMS-AC consolidates servicemember pay information into one monthly Leave and Earnings Statement for each member’s pay account. In addition to basic pay, military members may also be eligible for cash recruitment or retention incentives (that is, bonuses). Any necessary pay change after the pay account is set up is to be initiated by the appropriate officials throughout the Army. These changes generally relate to promotions, special duty pay, incentive pay, Permanent Change of Station assignments, Temporary Change of Station assignments, and changes in dependents. DFAS-IN makes payments of basic pay and allowances to Army active duty servicemembers using electronic funds transfer from DJMS-AC. DFAS-IN’s Disbursing Office uses the Army’s disbursing system to send electronic payments to the Federal Reserve Banks, which in turn distribute payments to each servicemember’s bank account. DFAS-IN and its DMPOs are to update Army active duty military pay records in DJMS-AC based on changes in the soldier’s status. These updates generally correct over- and underpayments caused by delay of For active duty soldiers, document submissions and transaction errors. underpayments are generally adjusted in the next pay check, while overpayments result in a deduction to the soldier’s pay. For Army soldiers who have left the service, DFAS establishes an out-of-service debt and uses the Defense Debt Management System (DDMS) to manage the debt collection process.collecting debts related to military pay issues as well as debts related to lost or damaged property and other unpaid obligations and fees. Federal statutes governing claims of the U.S. government authorize DOD to use certain debt collection tools, such as interest charges, offset, and private DFAS is responsible for collection contractors.separates from military service, DFAS can refer these debts to private collection contractors. Army Regulation (AR) 37-104-4, Military Pay and Allowances Policy, dated June 8, 2005, provides detailed policy provisions on specific pay and allowances as well as guidance on pay stoppages, adjustments, debt collection action, and use of the UCFRs. The Compensation and Entitlement Branch works with DFAS-IN to research and resolve soldier pay issues, process adjustments to pay, and take debt collection action. The DMPOs and Army Finance Offices provide UCFRs containing monthly military payroll data generated by DJMS-AC to unit commanders as a compensating control for verifying payroll accuracy. The UCFR provides the unit commander a summary of a soldier’s monthly pay account status. AR 37-104-4 requires unit commanders to review the UCFR on a monthly basis and promptly report any discrepancies to their local DMPO. In addition, when the Army Financial Management Command, the Compensation and Entitlement Branch, DMPOs, or DFAS-IN’s Mil Pay Ops suspect irregularities in pay or potential fraud, they research the details and document the specifics of the pay issue and may refer the matter to the Army’s Criminal Investigation Division (CID) for further investigation. CID is the Army’s primary criminal investigative organization. Army CID’s primary mission is to investigate serious crime, as defined in AR 195-2, Criminal Investigation Activities. Commensurate with authorities in AR 195-2, CID special agents collect, analyze, and disseminate criminal intelligence; conduct protective service operations; provide forensic laboratory support; and maintain Army criminal records. CID also investigates less serious crimes, such as military pay-related and travel reimbursement irregularities, as needed, to enforce Army law or regulations. To assess the effectiveness of the design of the process for unit commander review of monthly payroll disbursements as a compensating control for assuring active duty Army payroll accuracy, we compared related processes and systems to applicable internal control standards, as well as applicable laws and regulations, and DOD, DFAS, and Army policies and procedures. Specifically, we reviewed the design of Army and DFAS-IN processes for reviewing and correcting military payroll data based on requirements in AR 37-104-4, Military Pay and Allowances Policy, and related guidance and DFAS-IN’s Standard Operating Procedures for the Unit Commander Finance Report (May 4, 2009). We also reviewed DFAS-IN’s Field Services Division procedures for ensuring the accuracy of data on UCFR submissions. For October 2011 to March 2012, we obtained the monthly summary of unit commander UCFR submissions to DMPOs that are forwarded to DFAS-IN and used DFAS- IN’s criteria of no later than the 10th of the month for review and submission of UCFRs to determine the number of UCFRs that were submitted on time, submitted late, or not submitted at all. In addition, we interviewed DFAS Debt and Claims Management, DFAS-IN Mil Pay Ops, and DMPO officials and Army Financial Management Command, Army G- 1, and Army CID officials to gain an understanding of their systems, processes, and controls. To determine ways in which UCFR information, if properly designed, could act as a compensating control for assuring payroll accuracy, we analyzed payroll errors that led to out-of-service debt, over- and underpayments, unauthorized payments, and Army CID fraud investigations. We reviewed debt information maintained by DFAS on former military servicemembers (referred to as out-of-service debts by DFAS) to identify military pay-related debts and determine the types of pay and allowances that resulted in these debts to identify the underlying causes.