[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]







 
                         [H.A.S.C. No. 114-144]

            CALIFORNIA NATIONAL GUARD BONUS REPAYMENT ISSUE

                               __________

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON MILITARY PERSONNEL

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                            DECEMBER 7, 2016




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                   SUBCOMMITTEE ON MILITARY PERSONNEL

                    JOSEPH J. HECK, Nevada, Chairman
WALTER B. JONES, North Carolina      SUSAN A. DAVIS, California
JOHN KLINE, Minnesota                ROBERT A. BRADY, Pennsylvania
MIKE COFFMAN, Colorado               NIKI TSONGAS, Massachusetts
THOMAS MacARTHUR, New Jersey, Vice   JACKIE SPEIER, California
    Chair                            TIMOTHY J. WALZ, Minnesota
ELISE M. STEFANIK, New York          BETO O'ROURKE, Texas
PAUL COOK, California
STEPHEN KNIGHT, California
               Dave Giachetti, Professional Staff Member
                Craig Greene, Professional Staff Member
                         Danielle Steitz, Clerk
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                         
                            C O N T E N T S

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                                                                   Page

              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Davis, Hon. Susan A., a Representative from California, Ranking 
  Member, Subcommittee on Military Personnel.....................     2
Heck, Hon. Joseph J., a Representative from Nevada, Chairman, 
  Subcommittee on Military Personnel.............................     1

                               WITNESSES

Baldwin, MG David S., USA, Adjutant General, California National 
  Guard..........................................................     4
Kadavy, LTG Timothy J., USA, Director, Army National Guard, 
  National Guard Bureau..........................................     3
Levine, Hon. Peter, Performing the Duties of Under Secretary of 
  Defense for Personnel and Readiness, accompanied by Alissa M. 
  Starzak, General Counsel, Department of the Army, and Teresa A. 
  McCay, Director, Defense Finance and Accounting Service........    25

                                APPENDIX

Prepared Statements:

    Baldwin, MG David S..........................................    47
    Heck, Hon. Joseph J..........................................    41
    Kadavy, LTG Timothy J........................................    42
    Levine, Hon. Peter...........................................    51

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Ms. Speier...................................................    63

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
            CALIFORNIA NATIONAL GUARD BONUS REPAYMENT ISSUE

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                        Subcommittee on Military Personnel,
                       Washington, DC, Wednesday, December 7, 2016.
    The subcommittee met, pursuant to call, at 2:18 p.m., in 
room 2118, Rayburn House Office Building, Hon. Joseph J. Heck 
(chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM 
      NEVADA, CHAIRMAN, SUBCOMMITTEE ON MILITARY PERSONNEL

    Dr. Heck. I will go ahead and call the Military Personnel 
Subcommittee of the House Armed Services Committee to order. I 
want to welcome everyone to the subcommittee's hearing on the 
``California National Guard Bonus Repayment Issue.'' We are 
here today to hear from the California National Guard, the 
National Guard Bureau, and the Office of the Secretary of 
Defense [OSD], on an issue that we must get right, in fairness 
to not only the California guardsmen that this affected but for 
all service members going forward.
    Compensation, whether it is a bonus for a service agreement 
or a regular pay, is an obligation to our service members and 
their families that they should not have to worry about.
    I find it unacceptable that we would place the additional 
burden of years of concern about the legitimacy of a bonus 
payment, or student loan repayment, on those who volunteer to 
serve. The Armed Services Committee has taken action in the 
2017 National Defense Authorization Act [NDAA] to address this 
issue, and this subcommittee is taking every opportunity to 
thoroughly review and discuss the way forward so that we can 
prevent such a widespread problem or abuse in the future.
    Our purpose today is to gain an understanding from those 
involved on why this happened and what we can do to prevent it 
going forward.
    Before I introduce our panel, let me offer Congresswoman 
Davis an opportunity to make any opening remarks.
    [The prepared statement of Dr. Heck can be found in the 
Appendix on page 41.]

    STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM 
 CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON MILITARY PERSONNEL

    Mrs. Davis. Thank you, Mr. Chairman. And I would also like 
to welcome our witnesses today. I actually regret that we have 
to have this hearing to discuss a major pay issue that impacts 
17,000 soldiers from one State, from my home State of 
California. Were it not for the L.A. Times article in October, 
Congress would not know the extent of this 12-year-old issue, 
nor would the issue have been elevated to the Department of 
Defense [DOD].
    Our understanding after this was first brought to our 
attention in 2010 was that a process was in place to adjudicate 
the issue, but 6 years on, we are still trying to fix it.
    Numerous investigations, audits, and briefings have 
informed us of how we got to this point. My focus today is to 
ensure through the legislation just passed by the House last 
week as part of the 2017 NDAA, and updates from the DOD, that 
we guarantee that those who should keep their bonuses do so, 
and that the systems and controls are in place to prevent an 
incident of this magnitude from happening again.
    While it is important that we perform oversight of the 
process moving forward, it is also critically important that we 
do not forget the service members and their families that have 
been deeply affected by this. Once these families had 
encountered financial hardships, we know it could be truly 
difficult to recover. Even if we return their bonus, we have 
already upended their lives by creating unnecessary emotional 
stress and financial instability.
    Our military families, as we all know, have a tough enough 
time without the added burden of having to repay service-
related debts that they received in good faith.
    On another note, since this is his last hearing with us, I 
want to thank Dr. Heck for his leadership and his dedication to 
serving our troops, our families, and retirees over the past 2 
years as chairman of the subcommittee. It has been a great 
privilege to work with him, and he will be missed.
    Dr. Heck. Thank you, Ms. Davis. Thank you.
    I now ask unanimous consent that non-subcommittee members 
be allowed to participate in today's hearing after all 
subcommittee members have had an opportunity to ask questions.
    Without objection, so ordered.
    We are joined today by two panels. The first from the 
National Guard. The second will be from the Office of Secretary 
of Defense and the Army. We will give each witness an 
opportunity to make opening comments, and each subcommittee 
member an opportunity to question the witnesses. I respectfully 
ask the witnesses to summarize to the greatest extent possible 
the high points of your written testimony in no more than 5 
minutes. Your complete written statements will be entered into 
the hearing record.
    We are joined on panel 1 by Lieutenant General Timothy 
Kadavy, Director of Army National Guard, National Guard Bureau, 
and Major General David Baldwin, Adjutant General of the 
California National Guard.
    General Kadavy, you are recognized for 5 minutes.

    STATEMENT OF LTG TIMOTHY J. KADAVY, USA, DIRECTOR, ARMY 
             NATIONAL GUARD, NATIONAL GUARD BUREAU

    General Kadavy. Thank you. Chairman Heck, Ranking Member 
Davis, distinguished members of the subcommittee, thank you for 
the opportunity to discuss the readiness of Army National Guard 
personnel matters.
    On behalf of the Army National Guard, I would like to thank 
you for your support and commitment to our soldiers, their 
families, to our veterans, wounded warriors, and those who have 
made the ultimate sacrifice. For your Army National Guard is 
today mobilized with more than 11,000 soldiers both abroad and 
here at home. Our soldiers are our Nation's and our Army's 
greatest assets, and should be treated that way.
    This subcommittee's interest in recruiting retention 
incentives programs is understandable. In 2008, the California 
National Guard discovered inaccuracies in a number of incentive 
contracts awarded and launched an investigation in 2010.
    The investigation revealed that the California Guard's 
incentive program had been grossly mismanaged, and there were 
instances of fraud which were discovered.
    As a result, California took measures to ensure these 
individuals engaged in the perpetration of fraud were punished. 
In 2011, the California incentive task force identified more 
than 17,000 California Army National Guard cases that were 
potentially linked to the unethical management of the 
incentives program between 2004 and 2011.
    In 2011, the California National Guard, with assistance 
from the National Guard Bureau, established a soldier incentive 
assistance center to assist any California National Guard 
member affected by the mismanagement of the incentives program. 
Every California National Guard soldier impacted received a 
formal written letter to inform them of this option. This 
center will continue to provide assistance to each affected 
soldier.
    As a result of the issues with the California incentives 
program, the Army National Guard took numerous steps to improve 
oversight within our incentives process. In 2010, the chief of 
the National Guard Bureau, then General Craig McKinley, ordered 
a review of all Army National Guard recruiting and retention 
incentives programs across all States, territories, and the 
District of Columbia, which found no systemic fraud.
    In 2012, the Army National Guard completed the fielding of 
the Guard Incentive Management Systems, known as GIMS, to all 
States, territories, and, again, the District of Columbia, 
which now provides a centralized oversight program for bonus 
and incentive payments. In 2016, an external review of the 
Army--by the Army Audit Agency of GIMS, validated its 
effectiveness and found the system substantially improved the 
controls throughout eligibility, monitoring, and payment phases 
of the incentive process. State adjutant generals have provided 
annual statements of assurance since 2012 documenting internal 
controls processes to help prevent similar situations from 
occurring.
    Additionally, based upon reviews and assessments of the 
entire Army National Guard, fraud in the incentives program is 
not a nationwide problem.
    In November 2016, the United States Property and Fiscal 
Officers provided additional assurances while reviewing their 
State incentive programs that there are no issues outside of 
what we know to be normal.
    Currently, Mr. Peter Levine, performing duties as the Under 
Secretary of Defense for Personnel and Readiness, is chairing a 
cross-functional team with the National Guard Bureau, the 
United States Army, the Office of Secretary of Defense general 
counsel, and the Defense Finance and Accounting Service, DFAS. 
This team is leading the effort to expeditiously resolve the 
cases involving the affected California Army National Guard 
members. I understand you will hear from Secretary Levine a 
little bit later this afternoon.
    Secretary of Defense Carter's guidance is to adjudicate all 
cases by July 1, 2017. The National Guard continues to support 
the cross-functional team's process to ensure each soldier's 
case is fairly and equitably reviewed with due process afforded 
to each and every soldier.
    In closing, I assure you that the National Guard has worked 
hard to implement appropriate, effective internal controls 
across the 50 States, the three territories, and the District 
of Columbia, and to prevent similar systemic fraud from 
occurring in the future.
    Thank you, and I look forward to your questions.
    [The prepared statement of General Kadavy can be found in 
the Appendix on page 42.]
    Dr. Heck. Thank you, General.
    General Baldwin, you are recognized for 5 minutes.

   STATEMENT OF MG DAVID S. BALDWIN, USA, ADJUTANT GENERAL, 
                   CALIFORNIA NATIONAL GUARD

    General Baldwin. Thank you, Mr. Chair, and Ranking Member 
Davis, and the members of the committee. I do appreciate very 
much you taking up this important issue to be able to help our 
soldiers.
    As General Kadavy mentioned, in 2010, a whistleblower and a 
very astute auditor uncovered signs of potential fraud within 
our incentives programs in the California National Guard. That 
resulted in a fairly broad investigation by the Federal 
Department of Justice that went through the course of 3 years. 
The Governor relieved my predecessor in March of 2011, and 
recalled me from Afghanistan in April of that year in order to 
take charge of the disorganization and with a mandate of 
cleaning up this and some other challenges.
    I immediately ordered a full investigation on our side into 
this matter to do a couple of things: One is, I wanted to see 
if there are any other cases of fraud that were out there that 
the Federal Government had not begun to investigate or picked 
up on.
    The second was to hold leaders accountable to find out why 
did this happen and what--what were the problems. We found that 
there was a complete lack of internal controls, so we 
instituted an internal control system in order to prevent these 
problems from happening again, and then we held the leaders 
accountable that failed to provide the proper oversight or 
create a command climate.
    In that, we punished within the California National Guard 
61 people, including firing 4 general officers and 2 full 
colonels. The Feds prosecuted 44 soldiers. Some of those 
prosecutions continue to go on, and several people were put in 
jail for the fraud that they had committed.
    But as General Kadavy mentioned, we also recognized that 
there were a lot of soldiers that got caught up in this that, 
through no fault of their own, had taken money from the Federal 
Government that they were not necessarily due or couldn't 
document why they did deserve that money. So we established the 
Soldier Assistance Task Force in 2011 in order to address those 
problems.
    Because of the fact that we had found a 91 percent error 
rate in the initial audits that we had done, we were compelled 
to review every record. There were 17,000 soldiers and about 
30,000 records. We were able to get through about 12,000 of the 
records. Of the 12,000, we found 4,000 soldiers that we were 
able to help keep their money to the tune of about $39 million, 
because they had minor errors or problems in their contracts. 
And I am very proud of the work that our task force did in 
order to help those soldiers keep the money that they, in fact, 
deserved.
    Of the remaining soldiers, there were 1,400, only 1,400, 
that we actually sent to recoupment. Those were soldiers that 
did not contact our task force for assistance, but also we 
determined had problems that were probably insurmountable, and 
we couldn't support an appeal.
    We submitted another 1,200 soldiers that did contact us for 
appeal, because we felt that they--even though there were 
problems in their contracts or maybe they may not have met the 
letter of their contract, we felt that they had served 
honorably and should be able to keep their money. Of those, 400 
cases were adjudicated by either the National Guard Board--
Bureau or the Army Board for the Correction of Military 
Records. So 400 soldiers were able to win their appeals, and 
they were able to keep about $4 million between those 400 
soldiers.
    Another 400 soldiers, even with our endorsement to help 
them keep their money, unfortunately, lost their appeal and 
have not gotten their money back. They lost about $3.3 million 
amongst them. And then, finally, there are 400 cases that are 
remaining.
    We are very encouraged today by the actions of the Congress 
and the legislation that has gone into the NDAA that we think 
goes a very long way to help address some of the problems that 
we face, and the frustrations that we face in trying to help 
our soldiers get through this. We are also very encouraged by 
the actions that Secretary Carter and his team at OSD have 
taken in order to increase the bandwidth to be able to 
adjudicate cases quickly, fairly, and with standards that err 
on the side of honoring the soldiers and their service and 
helping them keep their money.
    And, again, thank you very much for the opportunity to 
discuss this today.
    [The prepared statement of General Baldwin can be found in 
the Appendix on page 47.]
    Dr. Heck. Thank you, General Baldwin.
    So, first, my first question is for General Kadavy. 
Concerning the key recommendations and the U.S. Army Audit 
Agency's [AAA's] follow-up review that was issued in May of 
this year, they noted that while NGB [National Guard Bureau] 
had made progress in implementing many of the control 
procedures outlined in their prior audit, that not all of the 
internal controls had been put into place. Can you please give 
us an update as to where NGB is in implementing the final 
recommended controls as put forward by the AAA?
    General Kadavy. Yes, Chairman. Thanks for the question.
    Dr. Heck. Can I just ask you to pull that microphone 
directly, kind of like a rock star.
    General Kadavy. Okay. So there were 15 initial 
recommendations, of which the 2016 Army Auditing Agency follow-
up reported that all 15 initial recommendations were being 
implemented, and then they recommended 4 new additional 
recommendations, of which 1 will be fully implemented by the 
end of this calendar year, by the end of month in December, and 
the other 3 will be implemented by the end of this fiscal year. 
It is about running software and updating systems to get at 
that. Particularly, it is related to officer bonuses and Army 
medical recruitment of experts to make sure we are tracking 
their contracts as we do with all others.
    Dr. Heck. Great. And I would ask that you keep this 
subcommittee apprised of the progress in implementing those 
final four controls.
    General Kadavy. We will, Chairman.
    Dr. Heck. And while you noted in your testimony that there 
was no systemic fraud across the National Guard, has there been 
a review to look at whether or not there is widespread 
administrative errors? And General Baldwin mentioned 91 percent 
error rate in what they reviewed in California. So while there 
may not be criminal fraud taking place, what about the 
administrative errors that might be more common across the 
National Guard enterprise?
    General Kadavy. So, Chairman, the Chief, National Guard 
Bureau at the time, General Craig McKinley, asked us to do a 
survey of the other 53 States, territories, and the District of 
Columbia, which began late 2010 and completed 2011. And we did 
identify some--some systemic problems, particularly related to 
lack of oversight, no separations of duties, inadequate 
training, outdated regulations, lack of manpower, and no 
overall tracking. But it said no widespread fraud.
    So we were already working on the GIMS system, and we 
believe GIMS accounted for most of that, as done--as shown 
through the Army Auditing Agency's follow-on recommendations 
and where we are at. And I can just give you a quick update.
    So on average, we do about 16,000 incentive contracts 
between 2011 and 2015, the latest year, 2016. We do about 1,200 
recoupments on average for normal processes, which is about 7 
percent. And you listen to some of the errors that were 
previously, and we have cut that down significantly. And the 
majority of those recoupments are for contractual issues, when 
a soldier leaves before the end of their enlistment.
    Dr. Heck. Thank you.
    General Baldwin, you listed some of the other numbers of 
individuals that were either disciplined or charged. Certainly, 
we have only heard in the open media about the one NCO 
[noncommissioned officer] that seemed to bear the brunt. Can 
you, again, just list, for the record, the numbers of 
individuals other than that one NCO, who was incarcerated, 
whether it be administrative reprimand, or other disciplinary 
procedures?
    General Baldwin. Yes, Mr. Chairman. I will start with the 
cases that were prosecuted by either the Feds, or, in some 
cases, some district attorneys took up the fraud cases. That 
was 44 soldiers in total. Of those, 26 were prosecuted and 
found guilty and convicted. There was another 15 or so that are 
pending prosecution, is still ongoing, and then the remainder 
cases were either dismissed, which is just a handful. I think 
it was only four that were dismissed or acquitted.
    And then on our side within the military, we have two 
options. We can do UCMJ [Uniform Code of Military Justice] 
action, which can include up to and including courts-martial or 
administrative action. We initiated courts-martial on seven 
personnel. It was six officers and one enlisted soldier. Those 
cases were dismissed by the military judge, either for lack of 
jurisdiction, or for lack of evidence.
    But we did go after 61 people, both on the receiving side, 
so people that we had evidence that had committed fraud but 
didn't rise to the threshold that one of the civilian 
prosecutors would take--would apply the resources to take the 
case, so we took the case. And then there were also many, many 
cases of people that were in the chain of command that we 
couldn't prove had committed fraud, but as I mentioned before, 
were lax in their oversight or established a poor command 
climate that we took action against.
    The most common action we took against the senior leaders 
was to give a formal reprimand and fire them. And that, again, 
included four general officers and two colonels.
    Dr. Heck. And of all the cases that you found scattered 
across the California Guard, did it seem like these were cases 
whether--it was up to one individual in a particular unit, or 
did there seem to be collusion? Like, was this a ring of 
individuals of all the folks that you mentioned that were 
actually doing this on purpose, or just happened in units apart 
from some type of organized activity?
    General Baldwin. So it was state--it was statewide. It was 
across nearly every unit. And where there were cases of actual 
fraud, it was a bilateral arrangement between the master 
sergeant that ended up going to prison and the soldier that was 
receiving the money. And in those cases, either we or the 
Federal Government were able to prove and show evidence that 
there had been collusion where the incentive was offered and 
one or both parties admitted that they shouldn't be doing it, 
and it violates the rules of regulations, and they did it 
anyway.
    Dr. Heck. And just real quick, you mentioned there were 
1,400 cases that had insurmountable problems. Can you give an 
example of what some of those might have been that prevented 
them from going forward on appeal?
    General Baldwin. Sure. Most common would be people that 
failed to serve the term of their contract egregiously, not 
falling short just by a few days or months, but by years. 
People that enlisted and never showed up to basic training. 
People that we had to throw out for methamphetamine use, 
incarcerations, those types of problems that are not compatible 
with military service.
    Dr. Heck. And problems that would happen regardless of 
component, regardless of the California National Guard, things 
that are not isolated just to issues within the California 
Guard?
    General Baldwin. That is correct.
    Dr. Heck. And then my last question, you said 400 of the 
cases you reviewed had lost their appeal or their appeal was 
not approved; is there another step, or is that the end of the 
line for those individuals?
    General Baldwin. I would defer that question to the second 
panel. But our request, which we think they are going to honor, 
is to go back and relook at those cases, because the Secretary 
is applying new standards, and we are hopeful that many of 
those people would make it through the process now, too.
    Dr. Heck. Thank you.
    Mrs. Davis.
    Mrs. Davis. Thank you, Mr. Chairman. Actually, I was going 
to ask about that as well in terms of those that you actually, 
in your words, endorsed but did not make it through the 
process, so we will deal with that later.
    You know, one of the things I wanted to just ask you about, 
because in your written testimony, you stated that Congress 
should establish a streamlined adjudication process to 
distinguish between those soldiers who, through no fault of 
their own, got involved in this, and then others who had failed 
to meet the condition.
    But the California Guard control those records. Is that 
correct? I mean, that you had control over those records?
    General Baldwin. Yes, ma'am. We would control the initial 
contract, but then it would go to the United States Property 
and Fiscal Accounting Officer, who is a representative of the 
National Guard Bureau in each State, who would actually 
formally make the payment. So the payment threshold to get 
approved was by California guardsmen; the payment was made by 
the Federal representative.
    Mrs. Davis. Okay. But the incentive assistance center, 
could they make those--that judgment?
    General Baldwin. The authority to--we didn't--we at the 
State level do not have the authority to forgive any debts, and 
we don't have the authority for any of the waivers. They reside 
at the National Guard Bureau level, at General Kadavy's level 
now.
    And then, further, if cases are not able to get approved 
for a waiver at the National Guard Bureau level, the recourse 
is to go to the Army Board for Correction of Military Records. 
My authority, as the adjutant general, was very, very limited 
to help soldiers. And the 4,000 soldiers we did help were cases 
where they may have been just missing one signature or some 
initials on an otherwise good contract, and that was many of 
the errors.
    Mrs. Davis. Had that been different, had you had more 
authorities--because I--it kept feeling like everybody was 
passing the buck a little bit. And I am wondering what you see. 
What is ideal? Because as we look at some of the cases, I 
really was struck by the long-lasting impact this was having on 
our military families.
    General Baldwin. So if we had had the authority, we could 
have--we would have been able to act more quickly. Because by 
the time we were making an endorsement, instead, it would have 
been an approval. But I think the way the system is set up now 
is appropriate. It is appropriate for the Federal Government to 
withhold that authority from the States, because after all, it 
is the Federal Government's money.
    In addition, the other substantive changes, the National 
Guard GIMS system that General Kadavy and the chairman were 
just discussing earlier has been a very elegant solution to 
help correct a huge, huge amount of administrative errors and 
neck it down to a very small number of administrative errors.
    And when you have a small administrative error rate, it is 
a lot easier to root out fraud, because you don't have to sift 
through tons and tons of documents.
    So I think the authorities are where they need to be. I am 
very encouraged that OSD has increased the bandwidth to be able 
to adjudicate cases. And under General Kadavy's watch, before 
he got in, it used to take 9 months to get an exception to 
policy approved. At his level, they now knock them out in 6 
weeks. So that is hugely helpful.
    Mrs. Davis. General Kadavy, would you want to comment on 
that in terms of how you see the system working now, and I 
guess why we didn't change it before?
    General Kadavy. Well, I can just speak to the exceptions to 
policy, which I have authority for, because they were written 
in Army National Guard policy. So I--I can do an exception to 
policy on skill, different, you know, infantrymen to an armored 
crewman, and from one unit to another, if they re-enlisted for 
a specific bonus to a unit.
    I would say just the sheer magnitude of the--the overall 
problem, I would think, caught us off guard. It took us a while 
to get back to apply the resources to adjudicate them faster.
    But, you know, it is--we follow the policy and directives. 
And right now, the only thing I have the ability to is to do 
exceptions to policy, as General Baldwin said, then it moves 
forward to ABCMR [Army Board for the Correction of Military 
Records].
    I would like to just--you know, to talk about GIMS just a 
little bit more. It does. It identifies through electronic 
searches in the database, which we didn't have prior to 2011. 
So it checks all those administrative data that is required to 
ensure that a soldier is eligible. So it does that, and it also 
tracks during an entire period. So when a soldier maybe changes 
an MOS [military occupational specialty], it flags and sends, 
you know, a message to the administrative officer or NCO, who 
then takes action, you know, if it was a directed change, then 
we do an exception to policy in a timely process.
    I think many of the things that are impacting what happened 
in California between 2004 and 2011, and then looking at the 
current investigation and work that they are--the California 
task force has been doing, I think today, we don't see those 
types of issues anymore. Thank you.
    Mrs. Davis. Okay. Thank you, Mr. Chairman. I would just 
follow up, and maybe someone else can ask about what other 
assistance we are providing. I know there was an issue around 
credit ratings, and I think we were trying to fix that issue as 
well.
    But, again, I am concerned about how this impacted 
families, and if there's been sufficient outreach to know that 
there is help, there is support there, and we hope that they 
get it. Thank you.
    General Kadavy. I will leave the majority of that comment 
to the next panel. I will just say from my perspective, we have 
had overwhelming support, partnership, from the Office of the 
Secretary of Defense, DOD, Army. Everybody wants to get this 
right for the soldiers.
    Mrs. Davis. Thank you.
    Dr. Heck. Mr. Cook.
    Mr. Cook. Thank you, Mr. Chairman.
    I want to thank the generals who are testifying today.
    And, you know, this goes back a long ways. I was the chair 
of the Veterans Committee, and Senator Denham, at the time, had 
the Senate Committee, and it brings back the memories, and I 
think part of it when we did this was just the shock of what 
was happening.
    And, of course, General Baldwin, I am very, very happy with 
what you have done since you have taken over. So this is not an 
inquisition against you or anything else. And we have had a 
conversation, and where I am coming from is going to be the 
same thing over and over again. And I am not so worried about 
the officers so much as the troops.
    We have--everybody that's been in the military knows that 
we have--everybody always says, ``recruiters.'' And because you 
put your life in the--the hands of the recruiters. You trust 
them. You trust the Army. You trust the National Guard. You 
trust whatever service. And people, once they do that, it is 
like you are giving them your entire life.
    So my problems, which I would like you to talk about, are 
on some of these cases where there have been troops that, 
through no fault of their own, are suffering the consequences. 
And maybe I am wrong, but it sounds like we are nitpicking, 
particularly where some of these people don't have the economic 
means to repay these things or what. We have got it--you know, 
it is our fault. Now, I use that word collectively on behalf of 
all officers that are in positions of authority, we betrayed 
the trust of the troops, and there is no excuse for that.
    And, so, obviously, I am hearing how we are going to change 
this, and I still don't have a warm and fuzzy feeling about 
that is being done. I don't want it to be too bureaucratic. And 
after saying that, I do want to comment, once again, our Guard 
is so, so important not just to California, but to all the 
operations that we are doing. And everybody on this committee 
knows the exercises in Europe and the commitments and the op 
plans and everything else. We have got to get this right.
    So, once again, I am going to ask a very broad question, 
and--well, in fact, I am going to skip, because I have been 
ranting and raving, and I do want to yield my time to 
Congressman Denham before it runs out. But, eventually, if you 
could comment on the trust issue over and over again.
    Jeff, sorry I talked so long.
    Mr. Denham. Thank you, Colonel Cook. And he and I, while we 
served in the State legislature together, chair of the Senate 
Veterans Committee, Assembly Veterans Committee on his behalf, 
we did work on this issue. I would say that the difference that 
he and I may have is the difference in how we both--how we 
first got into the military.
    I was 17. I signed a contract that was put in front of me. 
In fact, at 17, you have to take it home to your mom to have 
her sign it as well. So for the military to take the position 
that the soldier is guilty and must prove, a decade later, that 
there was some fault of their own--I mean, we still continue to 
have conversations that you have got to still carry your yellow 
shot records around from decades before because it is not an 
automated system.
    So to presume that the soldier is guilty and, therefore, 
responsible for a decade-old contract that they signed in good 
faith and put their life on the line, to me, is--to me, it is a 
big black mark on our Department of Defense's record.
    And I only have a short amount of time, but I would ask you 
to just respond to both of our statements.
    General Baldwin. Congressman, first, I want to thank both 
you and Congressman Cook for your leadership role in addressing 
this, and being very aggressive about it. And we really 
appreciate the support. And our soldiers, airmen, and families 
appreciate both of you very, very much.
    I would agree wholeheartedly, Congressman Cook, that we do 
have a problem that we are going to have to re-establish trust 
with our soldiers, with their families, and with potential 
recruits. I am very encouraged by--as I mentioned before, by 
the actions that the Congress have taken. I think that they go 
a long way to address some of the issues that you just brought 
up, Congressman Denham, and the steps, again, that OSD are 
taking in order to be able to show that soldiers--we are going 
to trust the soldiers up front. And if we have a problem with 
it, the burden is on us to prove that the soldier did something 
wrong, rather than the soldier having to prove from their 
innocence that they are innocent.
    Dr. Heck. Thank you. The gentleman's time has expired.
    Mr. Walz.
    Mr. Walz. Thank you, Mr. Chairman. And I would like to take 
a moment, too, to thank you. General Heck's service and 
integrity and effectiveness to this--not just to this 
committee, but to our veterans and our citizens. It is 
something I am proud to have stood beside you as you did it. 
Oftentimes around here, we talk about my good friend. I 
certainly mean it this time. And it is--you have set an example 
of how we understand that our services here are for those 
that--that we are charged to look out for and our veterans. So 
I want to thank you, sir, for that.
    Thank you both for being here. And I was just discussing 
with the gentlelady from California. General Baldwin, you made 
a case of this, and I think we are trying to get at it. And I 
think the two gentlemen here obviously know this issue very 
well. But having been involved with this, both receiving 
bonuses and being part of a group that gives them--also being 
there when pay errors are made, when I would have to tell my 
soldiers, you knew you were divorced; you weren't to get that 
BAQ [Basic Allowance for Quarters], and kept it anyway, so you 
are going to have to pay it back, because that is the way 
things work.
    I know this is a touchy subject, because when somebody gets 
paid, all the issues that the ranking member put out is, this 
has huge impacts on families. It has huge impacts as it goes 
down the line. Just a couple of questions.
    General Baldwin, you talked about this, where people got 
bonuses. Did I hear you right, even before they went to basic 
training, they got paid?
    General Baldwin. Yes, Congressman.
    Mr. Walz. How did that happen? Because I am thinking back 
to me. $1,500 bonus, I completed basic and AIT [Advanced 
Individual Training], I got $750; 2 years later, I got $375. On 
the fourth year, I got $375. That kept me in. When did that 
change, or how does that authority differ?
    General Baldwin. I don't know when it changed, because when 
I joined, it was the same as you. You had to serve before you 
got all or some of your bonus.
    Mr. Walz. Correct.
    General Baldwin. Somewhere around 2006, the National Guard 
Bureau changed its policy in order to provide a bigger 
incentive to get massive amounts of troops in, and they would 
pay the bonuses up front. And that was a very poor business 
rule that doesn't exist anymore.
    Mr. Walz. Okay. So that--so a lot of these--I shouldn't say 
a lot. I am trying to get the numbers on this. Many of them 
fell in that category?
    General Baldwin. That is correct.
    Mr. Walz. But there was a section of these, as you said, 
that where someone knew they were getting a bad bonus, they 
colluded with a recruiter, and there was a kickback, basically, 
to take this bad bonus?
    General Baldwin. That is correct.
    Mr. Walz. Now, could I ask--could you give me these numbers 
again, the error rate when you went back through and did your 
audit, the error rate in contracts in general?
    General Baldwin. So there were two--there was an audit done 
by the Army Audit Agency, and then an inquiry, which was a 
precursor, as you know, to an investigation that was initiated 
by my predecessor. First, with the Army Audit Agency that I 
didn't mention before, they found a 55 percent error rate in 
the sample that they looked at. I don't know how large that 
sample was.
    In the inquiry that was occurring in the month before I 
took command, they reviewed, I want to say it was 153 records, 
and in the case of those records, they found a 91 percent error 
rate. And that was enough that I felt compelled that we had to 
continue to look at every single record.
    Mr. Walz. What accounted for that? You know, and having 
done these before and the detail that went into them--I am 
still from the old age of carbon paper, and everything had to 
be exact or it was no good, and they threw them back out. How 
could you have a 91 percent--I mean, were these small errors, 
large errors, misinterpretations of the regulations?
    General Baldwin. It was all of that. But the root cause 
problem was lack of oversight of control, and lack of 
resources. So they had one person doing incentive managements. 
And the number of incentives had grown very rapidly from just a 
handful of incentives they would offer for critical MOSs, or 
bonuses, to a very, very broad pallet of incentives that ranged 
everything from medical professionals to people that are going 
to join the band and everything in between.
    And at the time, they had one person managing these 
incentives. She was overwhelmed. She was under tremendous 
pressure to help meet--get the numbers to disburse the money, 
and she had no good oversight. Only people pressing on her to 
get money out, no one checking to see if she needed help, no 
one checking to see if she was doing things correctly.
    Mr. Walz. Which is a recipe for disaster.
    General Kadavy, if I could move to you on this. When you 
did a systemwide NGB audit of this, if I am reading this 
correctly, you only found irregular bonus activity to a total 
of about $58,000. Is that correct? Am I reading this right?
    General Kadavy. Congressman, so when we did the 53 other 
States, territories, and District of Columbia, we did a 
sampling of about 9,600 records. We found 689 that had errors 
across the other 54 for a percent of about 14, and that was 
actually 2.4 million. Where, you know, General Baldwin 
mentioned the Army Auditing Agency, they did a sampling of 159 
in California. They discovered 97 errors.
    Mr. Walz. See, this one--and if my time is going to come 
up, but somewhere I would like to come back to this. Most 
often, when you have an issue like this, I find it systemwide, 
whether it is the VA [Department of Veterans Affairs] or DOD. 
This is very odd.
    Does that strike--we will come back to it. I know the fraud 
may be a piece of that, but that is a very interesting 
statistic. So I will get more when we come back on my time, but 
thank you.
    Dr. Heck. Mr. Knight.
    Mr. Knight. Thank you, Mr. Chair. And I have just a brief 
question, and I am going to yield some time.
    I, too, would like to thank Congressman Heck for his 
leadership. He has been invaluable.
    My only question is on the GIMS system, because we are 
talking about trust. And when I went down and signed when I was 
18 years old--I don't know that I was a whole lot smarter than 
Congressman Denham when he was 17, probably a lot smarter, but, 
you know, it is kind of a contract that you are going down 
there and you are trusting and believing what the recruiter is 
saying is the truth. So I think it is a trust issue that we are 
trying to build back.
    But, General Kadavy, you talked about the GIMS system a 
little bit. And I am going to give you a little bit of time and 
tell us how that is going to build back some of the trust that 
we can have, and how the recruiting process is going to go, and 
how we can be assured that some of--all of these problems if 
not--are going to be caught before they become a problem?
    General Kadavy. So, Congressman, I think GIMS puts trust 
back into the system. I think what we are really talking about 
is trust between leadership and soldiers. And in that--that is 
earned, and the system isn't going to fix that. And so we do a 
tremendous amount of training out in our professional education 
center for all recruiters. We are not getting our recruiters 
there in a timely fashion. We are working on that. We provided 
additional guidance to ensure they are getting the training, 
and then we have also implemented a program called POSTA 
[Positions of Significant Trust and Authority]. And I will have 
to get you the exact name of it.
    So the adjutant general has reviewed each and every 
recruiter to make sure they are ethically, morally, the right 
folks to be talking to young men and women that potentially 
could join our Army National Guard. And when there's issues, 
that they think the soldier's still good, it comes up to me. 
And I read each and every one of the POSTA requests for any 
waivers. And I think the time I have been the director, I have 
approved one. Because you are absolutely right, our very best, 
most trusted professionals must be the ones that are recruiting 
our young Americans.
    Mr. Knight. Very good.
    And Mr. Chair, I am going to yield the balance of my time 
to Congressman Denham.
    Dr. Heck. If the gentleman will suspend. I was informed by 
staff that subcommittee members cannot give their time to a 
non-subcommittee member. They have to wait until after all 
subcommittee members had an opportunity to ask their questions.
    Mr. Knight. I am going to keep my time.
    So, General Kadavy, on the same kind of vein, I know that 
Congresswoman Davis was talking us down this road of when the 
folks of--have been given a bonus, and then they have had to 
repay the bonus, but under the appeal, they were awarded the 
bonus. They should have gotten the bonus. They should have kept 
the bonus. But some of these folks have now paid back a bonus, 
and maybe their credit approval has been hurt. Some of the 
things that, because of paying back that bonus, it put them in 
some hardship. I mean, that is going to be part of the trust 
issue, too, how we can make those soldiers whole moving 
forward.
    Is that--obviously, that is going to be a big part of what 
you do. But is that also part of how we can help in this issue?
    General Kadavy. Congressman, I can tell you that it is very 
important to the cross-functional team that Mr. Levine is 
leading. It is one of the key issues we are looking at. At this 
point in time, what I am hearing is we think we have all the 
authorities and the abilities to make a soldier whole, 
particularly in the instances that you were talking about. But 
I would say the subject-matter experts on this particular 
question are probably on panel 2.
    Mr. Knight. Okay.
    And very good. Mr. Chair, I am going to yield back.
    Dr. Heck. Ms. Speier.
    All right, then we will go to Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    First--so, let me understand this right. So you have got a 
recruit coming in, and it takes a certain MOS for a certain 
length of time under the bonus, under--to--in order to get a 
bonus. That individual is placed, for whatever reason, in a 
different MOS. Is that--or occupies a different position in a 
unit that is different from that MOS. Is that individual 
required to pay back the bonus?
    General Kadavy. It depends. So we give bonuses for three 
reasons; for a skill, a grade, or a unit. It--if that is a 
critical MOS, and the soldier elects to change on their own, in 
general, yes, that is a recoupment. If we direct the change, 
or, for instance, we just had a number of units that changed 
their structure from military police to others. That was 
directed by us. There is no recoupment. And then a soldier, of 
course, can always provide an exception to policy request, and 
many have, that indicates if there were some issues--I can't go 
that far to drill; it is too far of a drive; we take all those 
considerations, and then a decision is made. But it doesn't 
necessarily mean that.
    But in the GIMS system, there is a flag that goes up, which 
means it needs to be adjudicated one way or another with 
exception to policy, or a termination of a contract.
    Mr. Coffman. Okay. What is the status of these recruiting 
bonuses to pay others--other soldiers? That practice has 
stopped, right?
    General Kadavy. Yes. That's been stopped for quite some 
years by my predecessor.
    Mr. Coffman. What is the status of the bonus structure now 
for recruiting people, say, first-term enlistees?
    General Kadavy. I guess I don't understand the question.
    Mr. Coffman. What is it--so I assume there is still a bonus 
structure for first-term enlistees?
    General Kadavy. Right. There are enlistment bonuses for 
certain units, certain skill sets, and then retentions bonuses 
for certain grades where we don't have enough, for instance, 
maybe staff sergeants and et cetera.
    Mr. Coffman. And how dynamic is that process? Because I 
think it is--it seems like--I know in 2005, it was very tough 
to fill the ranks of the military across the board, and then, 
obviously, it is much easier today than it was back then.
    General Kadavy. Right. So, Congressman, it is very dynamic 
today. We are taking a look at it. I think it is almost too 
dynamic that it gets to be a bit confusing.
    You know, I just talked to a few of the adjutant generals 
that are on the general officer advisory committee. And we are 
likely going to go to talk to the States, and they provide us 
where their holes are at the beginning of the year and midyear. 
We will adjust it if need be, so that it stabilizes and doesn't 
change the skill sets and the grades in the units on a 
continual basis that maybe is confusing and causes some of 
these issues. So we are going to try to----
    Mr. Coffman. Right. But those enlisted soldiers that sign 
up for an MOS specialty, and they get moved, are--or they--how 
is that--I guess they elect to move. Are they--I just want to 
make sure that they are fully cognizant of----
    General Kadavy. No. What I am talking about is initial 
enlistment----
    Mr. Coffman. Right.
    General Kadavy [continuing]. That you sign. We are going to 
limit how often we change which skill sets. So we might have a 
different one every month. And sometimes it gets confusing to 
recruiters, or a recruit walks in thinking they are going to 
get a bonus, but they wait to make a decision a couple of 
months later, and that skill is no longer there as far as a 
recruiting.
    What you talk about is once a soldier signs a contract, 
GIMS verifies that. And, you know, as long as they live up to 
that contract, there are no issues. If something changes, GIMS 
flags it, and we adjudicate it either through an exception to 
policy, ABCMR, or if the soldier, for instance, doesn't 
complete a set of training and decides to no longer serve out 
their enlistment period in the Army National Guard, then, by 
statute and policy, we must recoup for any unexecuted portion 
of that contract.
    Mr. Coffman. Right. When you said if an enlisted soldier 
elects--first-term enlistment elects to change an MOS, then 
they would be responsible for recouping, and if it was a 
critical MOS, how would the command structure allow them to 
change--to elect to change their MOS?
    General Kadavy. Well, you know, I can't speak to every 
case. But, in general, you know what you signed up for. So in 
most cases, in my observation, is it is more related to changes 
in force structure, and force design updates that the Army 
provides. So you are in an MOS, in a unit, in a location today, 
and that changes. We do not collect from that particular 
soldier.
    And I don't see that as an issue that is related as much as 
it was in the past.
    Mr. Coffman. Sure.
    Chairman, I yield back.
    Dr. Heck. Thank you.
    Mr. Garamendi.
    Mr. Garamendi. Mr. Chairman, thank you for the privilege of 
sitting with your committee and now asking a question. I 
appreciate the information that has been elicited thus far in 
the testimony.
    We now have an NDAA that has a new law--a new section that 
will eventually become law, and it may affect--is certainly 
meant to affect those men and women that took a bonus in good 
faith, carried out their responsibilities, even though it may 
not have been to the strict MOS or other criteria, and have 
faced a clawback of their bonus.
    I agree with, I think, every member of this panel that that 
is unconscionable that that could happen, or did happen. But my 
real question is going forward.
    General Baldwin, you gave a bunch of statistics and numbers 
at the outset. I would like you to quickly review those in the 
context of how does the new, hopefully soon-to-be new law, in 
the NDAA, affect those men and women that are under review as a 
result of the bonus question that has arisen in California? If 
you could run through that quickly.
    And I also understand there is certain criteria that are in 
the soon-to-be law as well as criteria that you--excuse me--
that the Army may use to eliminate from the clawback, or 
potential clawback. Could we go through that, please?
    General Baldwin. Sure. So for, I think, the important step 
that is in the law is it--as OSD is putting together their 
team, and they will discuss it in the next panel that is going 
to be able to more rapidly adjudicate the cases and review 
soldiers to find the ones that the many, many, thousands, 
perhaps, the ones that deserve to keep their money. One of the 
main things that it does is that it relieves the notion that 
for that targeted group of individuals, that we have to have a 
presumption of guilt in order to review their case. They are 
going to review every case that they take before them. So that 
is very, very encouraging.
    The other thing the law does that I think is very, very 
helpful is that--and as I understand it, this would impact not 
only the soldiers that are in this population that we are 
addressing here, but National Guardsmen ostensibly both in the 
Army and the Air National Guard, from time forward, that if 
you--if DFAS establishes a debt for a National Guard soldier or 
airman, prior to this current NDAA, the National Guardsman 
could not go to DFAS to ask for a sum total financial relief 
for financial hardship. They could do it in the case if they 
had loss or damage coming from property, but in the case when 
they had been overpaid or paid bonus that they weren't due, 
they couldn't get relief if they were suffering from financial 
hardship. Title 10 Active Duty personnel could. Title 32 
couldn't. The current NDAA corrects that, and we are very, very 
happy to see that in there.
    Mr. Garamendi. I understand that there were other criteria 
that would eliminate from the clawback, certain men, guardsmen, 
Guards people, could you--is that the case? Are there--is it 
only this issue of financial hardship or does it have to do 
with rank, position?
    General Kadavy. If I could take this one, Dave?
    General Baldwin. Oh, sure.
    General Kadavy. Congressman, as a member of the cross-
functional team being led by OSD, we are still reviewing, and 
the next panel, Mr. Levine can tell you exactly where we are on 
this. But we are building criteria, and I think, based on the 
Secretary of Defense's guidance and what is in the NDAA, the 
intent is to only find those that were ineligible for a bonus 
and should have, or did know they were ineligible. The intent 
is not to recoup from soldiers that did not understand what was 
going on. It was only--it is only to get after those that were 
ineligible and accepted the bonus knowing they were ineligible.
    Mr. Garamendi. Will that criteria significantly reduce the 
number of Guards people that are affected?
    General Kadavy. So I have been asked if you could refer 
that question to the next panel.
    Mr. Garamendi. I will do so.
    Mr. Chairman, I want to thank you, and I want to thank this 
panel for writing into the NDAA the language that will 
significantly solve most of the problem, perhaps not all of it. 
And I would ask that in the future, this panel continue to 
observe and watch as this plays out. Thank you very much.
    Dr. Heck. Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman. Let me add my words of 
praise to you for your service to our country and to this 
Congress, and thank you as well for bringing this issue to the 
forefront today.
    Let me start with you, General Baldwin. You met with me 
yesterday, and I appreciated that. You took over in 2011, 
correct?
    General Baldwin. Yes, ma'am. April of 2011.
    Ms. Speier. And you took over, in part, because the 
Governor saw this as a problem, and wanted to relieve the 
general before you and put you in that position, correct?
    General Baldwin. That is correct.
    Ms. Speier. All right.
    So from 2011 until 2016, the only time this was ranked as 
an issue, and it was ranked number six, was in 2014 to the 
foreign--to the Armed Services Committee. And there was no 
impetus to take this seriously enough to fast-track it. And it 
was only until the Los Angeles Times did a story that this 
issue got some traction.
    So my question to you is, while you are not responsible for 
what happened before your watch, you are responsible for what 
happened after you took over. And why didn't you elevate this 
to a high enough level in 2012, in 2013, in 2015, and again in 
this year?
    General Baldwin. So for the first 2 years you mentioned, 
2012 and 2013, we weren't aware of the amount of time it was 
going to take to get through the adjudication process. We first 
started pushing cases forward after doing a review in late 
2012. And since it was taking 2 years for cases to run their 
course, it wasn't until the end of 2013 to 2014 that we 
realized the scope of the problem we had based on the amount of 
time it was taking to get relief for soldiers. That is why in 
2014, we first brought----
    Ms. Speier. Okay. I am going to shortcut this a little bit, 
because I have a limited amount of time. I just want to make 
the point that while your--you have made it a priority on a 
list, you didn't make it a priority to the committee so it 
wasn't dealt with as it should have been.
    Now, you had mentioned to me that some of the largest 
bonuses went to physicians, the 40-, the 50-, the $60,000 
bonuses. And in those cases, they have not--they committed to 6 
years, served, in some cases, less than 2 years, got the bonus 
up front.
    Now, that decision to offer that bonus up front before you 
had committed the 6 years seems like a no-brainer. Why would 
anyone do that in an administrative role when the likelihood of 
someone skipping is pretty high?
    General Baldwin. Yes. So that was--that is a great example, 
because those cases, because the dollar amount were amongst the 
most egregious. The way that the program for benefits--for 
incentives for medical professionals worked at the time is they 
could actually get up to an $80,000 bonus, and it was paid out 
in tranches, so every couple of years as they served more time, 
they would get paid part of the bonus. And that was in 
accordance with the regulation.
    What happened is the incentive manager, though, would just 
push the button to pay the whole lump sum in 1 year, or maybe 
after 2 years. So if they had made a 6-year commitment, that 
medical professional served 2 years, got their 60-, $80,000, 
whatever it was, and then----
    Ms. Speier. Okay. So I want to go on record that those 
medical professionals that got those bonuses with a commitment 
to serve 6 years and only served 2, that we should claw back 
every single dime.
    Now, for those--you also told me that you were under the 
impression that for noncommissioned personnel, that are list--
who were--who were enlisted, that, for the most part, 
especially if they were over 10 years in length, that that is 
going to be waived, and that requirement for enlisted will not 
be clawed back? Is that true?
    General Baldwin. So that--I think that is one of the 
business rules that they are going to discuss in the next 
panel, that for certain ranks and for certain time in service, 
for more junior people, they are going to apply some rules that 
are more forgiving for people that may have been more senior, 
or perhaps worked in recruiting that should have known the 
rules.
    Ms. Speier. Okay. I have always had a problem with this 
``should have known,'' because if you received it, you didn't 
know that you weren't supposed to receive it, but you should 
have known, and it is 10 years past. That is, I think, an 
expectation that we should not require those individuals to pay 
it back, particularly if they committed to a contract and 
served for the requisite period of time.
    And with that, I yield back.
    Dr. Heck. Mr. Aguilar.
    Mr. Aguilar. Thank you, Mr. Chairman. I don't serve on this 
panel. Thank you for allowing me the opportunity to ask a few 
questions, and thank you for--it's been a pleasure to serve 
with you on the full committee as well.
    General Baldwin, can you explain--again, maybe this is 
getting into the should-have and did-know that you mentioned. 
Can you explain the process that was gone through to determine 
whether the incentive pay or the student loan needed to be 
recouped, and then immediately thereafter, once that decision 
was made and the notification was given, what were the next few 
steps along the process?
    General Baldwin. Sure. So I will address those cases where 
we did not find fraud or suspect fraud. So for the 
preponderance of the soldiers, what we would do is overlay the 
paperwork that they had that showed, here is their contract, 
here is what the regulation says in order for them to receive 
that certain benefit, in order for them to establish an 
eligibility, what other documents are required, and whether 
they--or not they had all that paperwork.
    By the rules that were in place on time--at that time, if 
someone was missing one of those elements, it voided the 
contract, and that forced us to then send them to the National 
Guard Bureau for an exception to policy, which we, again, sent 
with the ones that we did send where we are working with the 
soldiers we sent with endorsements recommending approval.
    If they did not get approved--if their exception to policy 
got approved by the National Guard Bureau, that was then within 
General Kadavy's predecessor to allow them to keep the money, 
and then we were done.
    If the National Guard Bureau did not or could not approve 
the exception to policy, it did give us the ability to help the 
soldier go to the Army Board of Corrections of Military 
Records, where the case would then go and get reviewed by an 
administrative law judge that would then make a determination 
of whether or not they would approve it. We have about a 50 
percent success rate.
    I will give you one concrete example of a fairly common 
problem that we found was for soldiers that were first-term 
enlistees, as with the case of Congressman Denham, where you 
can join the National Guard or the military when you are only 
17 years old, a lot of these soldiers hadn't graduated from 
high school when they enlisted. For the National Guard, you 
could do that. You could join the National Guard before you 
graduate from high school. However, in order to be eligible for 
the bonus, you have to produce a high school diploma.
    And in many cases, the soldier served and served well, but 
we just didn't have a high school diploma in their records, and 
in that case, we were--we had to take action. And those are 
cases that were fairly easy for us to go back to either 
exception to policy, or up to the ABCMR to get relief.
    Mr. Aguilar. What kind of time period were they given in 
order to correct the document side, the deficiency that you 
saw, whether it was a high school diploma or whether it was any 
other document?
    General Baldwin. So the only soldiers that we sent to 
recoupment were the soldiers that did not contact us. So the 
soldier contacted us, we worked with them and have continued to 
work with them, and to my knowledge, have not sent any soldier 
to recoupment for any benefit that we could assist them on.
    Mr. Aguilar. General Kadavy, do you want to talk a little 
bit about that from a process perspective, those that came 
through, you know, within that flowchart, those that came 
through that your office and your predecessor reviewed, you 
know, what did--what did that look like from the documentation 
standpoint? That is what I am concerned about are those folks 
that were dinged because of the lack of documentation but met 
the criteria for the bonus.
    General Kadavy. Yes. So I believe, I can't really speak for 
my predecessor, but our guidance, our intent is to work as hard 
as we can for an exception to policy for each and every 
soldier, and quite honestly, if they had served the term and 
met the agreements, an exception to policy was almost always 
provided.
    Mr. Aguilar. Okay. I appreciate it. I will yield back, Mr. 
Chairman.
    Dr. Heck. Ms. Graham.
    Ms. Graham. Thank you, Mr. Chairman.
    I think you touched on this. I will direct my question to 
General Kadavy. Did I pronounce your name correctly?
    General Kadavy. Kadavy.
    Ms. Graham. Kadavy, okay. It was one way or the other. I 
picked the wrong way. But you discussed in your initial--in 
your opening comments that you have not seen wide--this concern 
widespread across the country. It is limited to California.
    I am from Florida, and reached out to our National Guard as 
soon as I heard of this to just see where they thought that 
they were with any challenges with bonus recoupment with our 
National Guard, and we have about 12,000 in Florida. I just 
want to confirm that you don't see any--any of these concerns 
in Florida that have come to the attention of those here 
regarding California?
    General Kadavy. Well, specifically related to the fraud, we 
have given no guidance to any other State, district or the 
territory, or District of Columbia or any of the territories to 
do any audits or any inspections. As I said, through GIMS, we 
always have ongoing recoupments for generally those that don't 
meet the term of their enlistment.
    So specifically, I can't talk specifically to Florida and 
what is going on in Florida, but we have not directed any type 
of work, and we have not discovered any type of systemic 
problem related to fraud that we are aware of.
    Ms. Graham. Well, that answer kind of concerns me because I 
thought in the beginning that you stated that there weren't 
concerns across the country, that this was limited to 
California. Could this be something that the wonderful men and 
women that serve in our National Guard in Florida have to be 
worried about, because I certainly, as I think the only 
representative from Florida here, want to give them some 
assurances that that will not be the case.
    General Kadavy. Well, I----
    Mr. Levine. Congresswoman, we have conducted audits for 
the----
    Dr. Heck. State your name.
    Mr. Levine. I perform the duties of Under Secretary of 
Defense for Personnel and Readiness, Peter Levine, and I 
apologize. I am on the next panel.
    Ms. Graham. No, thank you for stepping in.
    Mr. Levine. I apologize for jumping on this, but because we 
have done some reviews and we have identified zero cases in 
Florida, I thought it would be helpful for me just to mention 
that.
    General Kadavy. Right.
    Ms. Graham. Zero cases is very good. Thank you. Thank you 
very much. So I will take, from your testimony, that the men 
and women that serve on our National Guard in Florida do not 
have to be worried about this same concern.
    Thank you. I appreciate that, and I yield back, Mr. 
Chairman. Thank you.
    Dr. Heck. Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman, and thank you, 
gentlemen, for being here today. I am troubled. Between 2006 
and 2008, National Guard senior noncommissioned officers 
improperly provided student loan repayments and bonuses to 
numerous California National Guard members, and one person, 
sergeant, master sergeant--female, Toni--I can't come up----
    General Kadavy. Toni Jaffe.
    Mr. Johnson. Toni Jaffe was the only person to be 
criminally sanctioned. But dozens of personnel, including 
senior leaders and general officers were punished by the 
California National Guard for this illegal activity. Is that 
correct?
    General Baldwin. That is correct, Congressman, but an 
additional 43 soldiers were charged and prosecuted by the--
either the Federal Government or district attorneys for fraud 
also. Master Sergeant Jaffe is not the only person that served 
jail time. She served far more time in prison than anyone else 
that did jail time, but there were other officers and some 
noncommissioned officers that were given sentences that 
included some jail time.
    Mr. Johnson. All right. Thank you. What was the highest 
ranking official to be found to have engaged in this 
misconduct?
    General Baldwin. So on the receiving side or the people 
that we actually had evidence that committed fraud or colluded 
to commit fraud, I believe it was a captain was the highest 
ranking individual that received money. Higher ranking officers 
weren't eligible for the bonuses.
    Mr. Johnson. Yeah. Actually, I am getting at those who were 
responsible for initiating the payments, not those who received 
them.
    General Baldwin. So the only person held responsible for 
initiating the payments was Master Sergeant Jaffe. I held many, 
many people responsible, though, for their failure to provide 
proper oversight or leadership. That included three two-star 
generals, one two-star general, and one colonel that was in the 
California National Guard, and then the National Guard Bureau 
fired a colonel that was working for the National Guard Bureau.
    Mr. Johnson. Why were not the others charged criminally? It 
appears that the master sergeant may have been made the fall 
guy from a criminal standpoint.
    General Baldwin. You would have to ask the U.S. attorney 
that question, Congressman, because they did those 
prosecutions, and they actually had seized all of the evidence 
related to that case. So if there was any evidence that senior 
leaders had actually colluded, I haven't seen that evidence. If 
I was presented with evidence like that, I would take the 
appropriate action.
    Mr. Johnson. What was it about the sergeant major's case 
that made it actionable from a criminal standpoint whereas 
others were not?
    General Baldwin. I don't know the details of the case. As I 
understand it, they had physical evidence, whether it was 
copies of contracts or it was emails where--or some forms of 
conversations which they can prove that she had actually 
colluded with officers and enlisted people to do this.
    Mr. Johnson. All right. The criminal cases now, is criminal 
prosecution--has the criminal investigation ended, or is it 
still ongoing?
    General Baldwin. I don't know. Again, you would have to ask 
the U.S. attorney that question.
    Mr. Johnson. Did you--did your office make any 
recommendations as to who or who would not be prosecuted? Who 
should or should not be prosecuted?
    General Baldwin. They did not have that conversation with 
us. And again, they seized all the evidence, so any 
recommendation that we did have would have to be based on the 
evidence. They seized all that evidence before I came back from 
Afghanistan.
    Mr. Johnson. Major General Baldwin, in your testimony, you 
stated that the--that service members--you stated service 
members that should be required to repay their bonuses should 
be made to do so.
    Can you describe in more detail in what cases would service 
members actually have to repay the bonuses that they have 
received, especially since in most cases it seems they got the 
bonuses through no fault of their own?
    General Baldwin. It would be in those cases where the 
service member egregiously violated the contract for which they 
said that they would serve. For example, they signed up and 
they never went to basic training, or they signed up for 6 
years and only performed 2 years of Guard duty and then either 
went AWOL [absent without leave] or left the Guard for some 
reason.
    Mr. Johnson. Do you have the numbers?
    Dr. Heck. The gentleman's time is expired.
    Mr. Johnson. Thank you.
    Dr. Heck. Mr. Denham.
    Mr. Denham. Thank you, Mr. Chair. General Baldwin, 
annually, you put together a list of priorities through your 
office; that is something you do every year?
    General Baldwin. That is correct.
    Mr. Denham. When do you start working on that?
    General Baldwin. Generally, we start working in the late 
fall, early spring, in order that we can present those 
legislative priorities to the Congress around the March 
timeframe so they are ahead of the mark.
    Mr. Denham. And I have got here in front of me your list 
from fiscal year 2015, so you would have started this in spring 
of 2014, address Congress later that year?
    General Baldwin. We would have presented it in the spring 
of 2014 and started working on it in the fall of 2013.
    Mr. Denham. So you got your fiscal year 2015--I just want 
to be clear. Fiscal year 2015 NDAA priorities, you present that 
to Congress when?
    General Baldwin. Around March of--it would have been around 
March of 2014.
    Mr. Denham. 2014. So you start working on that in 2013?
    General Baldwin. That is correct.
    Mr. Denham. And this year, in particular, fiscal year 2015, 
you list as priority number 6, your final priority, service 
member debt relief equity, that is the issue that we have now--
I introduced legislation on this issue. We have now included it 
in the NDAA this year, but I was surprised to see that in 
fiscal year 2016, your list of priorities, it wasn't in here. 
You have got six priorities, and this debt repayment was not 
one of them. Why did it fall off of the list?
    General Baldwin. So it fell off because in 2014, the item 
had been scored by the CBO [Congressional Budget Office] and we 
weren't successful in getting it through because of the cost 
that was involved. It was a tough sequestration year. In 2015--
--
    Mr. Denham. We are still under a tough sequestration year.
    General Baldwin. I understand that, Congressman. I regret 
not including it in the 2016--in the 2016 year. I am very 
encouraged that the committee, again, with your leadership 
assisting, is helping to get this legislation passed.
    Mr. Denham. Why wasn't it included in 2017? You would have 
started working on that 2 years ago, correct?
    General Baldwin. That is correct. Again, we--we felt that 
we had asked. We were not able to take that ball across the 
goal line, so we directed our time and energy towards trying to 
help the soldiers that we could influence. In retrospect, in 
hindsight, you are right, I should have continued to make this 
a priority.
    Mr. Denham. Is that a--your list of priorities, is that at 
your sole discretion or does the Governor weigh in on that?
    General Baldwin. Ultimately, it is my list, and I take 
responsibility for the list.
    Mr. Denham. In the language that we have now included in 
the NDAA, we have resolution to this. My concern has been--as a 
Member of Congress, I don't get a list from the DOD on who 
has--who they are going after for this debt forgiveness. I 
don't get a--any idea of who is having to repay this, who has 
been harassed, until they call my office. So somebody who has 
now repaid their debt, how do they go about filing to resolve 
this issue going forward?
    General Baldwin. So----
    Mr. Denham. What is the process? How does the process work 
to make somebody financially whole that has now taken a second 
out on their house and repaid a debt that they didn't owe?
    General Baldwin. I think the second panel will be able to 
address much of that. We have--still have our financial--our 
soldier assistance team in place. There is a 1-800 number that 
we have posted on our web page that people can call that have 
been in this so that we can get to work, that if they have 
suffered from this, or they are on the list of people that 
potentially may have or had a problem with it, that we can then 
refer them to the lawyers and the people, whether it is in 
California or at the Army or at OSD to get help.
    Mr. Denham. And what if there is an individual that is 
still serving that either in the Guard or Reserves that is 
being asked to repay a debt, but in their chain of command, 
they are asking them not to go to a legislator or a Member of 
Congress, what would you--what your opinion of that be?
    General Baldwin. That violates--that violates the policies 
that are in place that are both OSD policies and policies that 
I have within the military department. No one can interfere 
with an individual's right or ability to make a protected 
communication between themselves and their elected officials.
    Mr. Denham. Thank you. I look forward to following up with 
you on that as we resolve this issue for a constituent.
    One final question, and you and I had a discussion about 
this earlier. I have a big concern with--when somebody takes a 
government document, a private email, and puts that out for the 
press to see, my concern in this case wasn't about the 
legislation itself. My concern is with the issue with 
recruitment and retention that it has now had on the Department 
of Defense, and even the VA in this case. I would like to 
follow up with you on this release of emails from your 
subordinates to get a further clarification on why they felt a 
need to go outside their chain of command on this issue as 
well.
    General Baldwin. I look forward to that, Congressman, and 
if there is anyone in the California military department that 
violated any laws, rules, policies, or regulations, we will 
take the appropriate action.
    Mr. Denham. Thank you.
    Dr. Heck. I would like to thank both of you for taking the 
time to be here today to review this important issue, and at 
this time, we will switch out the panels, and we will hear from 
representatives from the Office of Secretary of Defense.
    I would now like to introduce our second panel. We have Mr. 
Peter Levine performing the duties of the Under Secretary of 
Defense for Personnel and Readiness from the Department of 
Defense, Ms. Alissa Starzak, general counsel for the Department 
of the Army, and Ms. Teresa McKay, director of the Defense 
Finance and Accounting Service.
    Mr. Secretary, you are recognized for 5 minutes.

STATEMENT OF HON. PETER LEVINE, PERFORMING THE DUTIES OF UNDER 
 SECRETARY OF DEFENSE FOR PERSONNEL AND READINESS, ACCOMPANIED 
BY ALISSA M. STARZAK, GENERAL COUNSEL, DEPARTMENT OF THE ARMY, 
 AND TERESA A. McCAY, DIRECTOR, DEFENSE FINANCE AND ACCOUNTING 
                            SERVICE

    Mr. Levine. Mr. Chairman, Ranking Member Davis, first of 
all, thank you for holding this hearing, and I really 
appreciate the discussion that I heard with the first panel. It 
shows some serious engagement on what is really an important 
issue.
    I would also like to join your colleagues, Mr. Chairman, in 
thanking you for your service. You have been very good to the 
Department of Defense. Your focus on these personnel and 
readiness issues has been really important to us and really 
helpful to us, so thank you.
    I can't also--I would also like to, if I may, thank 
Chairman Thornberry for being here and for continuing to 
listen, on occasion, to my good friend, Mr. Simmons, who I see 
also on the back row there. You have my written statement, and 
I won't read any of it, but there are a few points that I would 
like to focus on, some of which have already been discussed but 
I think deserves some attention.
    First of all, recoupment is an ordinary fact of life in the 
military. Our pay systems aren't as perfect as we would like 
them to be, and we have run into any number of issues, from the 
person we heard about earlier, who might be divorced and still 
getting a BAH [Basic Allowance for Housing] as if they were 
married, to somebody who has got the wrong paycheck or fails to 
pay a bill, fails to pay a travel bill. We are recouping 
against as many as a 100,000 soldiers, sailors, airmen, and 
marines at any given time, civilians as well.
    The California Army National Guard cases are a particular--
particularly the ones that have been in the press, have been 
reported in the press are particularly egregious set of cases, 
but I wouldn't want members of the committee to think that this 
is the nature of recoupment and that we always have this 
problem with recoupment.
    There are a number of reasons why these cases are 
particular--the cases we read about in the press are 
particularly troublesome. One is that many of them are based 
just on a technical deficiency. We have heard about wrong MOS 
cases where, also where the soldier may have been misled as to 
whether that wrong MOS mattered, whether they needed to have a 
high school diploma. Technical absence of paperwork, which 
seems like a pretty minor reason for recoupment, particularly 
in the case--in cases like this where we have service members 
who made a commitment on the basis of a bonus, and then served 
out that commitment. So when we come in later after somebody 
has fulfilled their commitment and then question on a technical 
ground why they received a bonus in the first place, that is a 
particular hardship.
    What I hope you will understand is, that that is not all 
the cases that we are dealing with even with the California 
National Guard. We heard about some of the medical 
professionals who may have received bonuses and then not served 
out their commitment. We have a significant number of other 
cases in this pile of recoupment cases where we had service 
members make a commitment and receive a bonus on the basis of 
commitment, and then not fulfill that commitment.
    So as a matter of basic fairness to those who did serve out 
their commitment, we need to take a very close look at those 
cases, and those would tend to be cases in which we would 
expect to uphold--in most cases, uphold the recoupment if the 
service member didn't fulfill the terms of the commitment, the 
terms of the contract.
    The second point I would like to focus on briefly is just 
how the process of recoupment sets up. We read in the press 
that the Pentagon ordered recoupment; the Pentagon means a lot 
of different things to a lot of people. It could mean the 
Secretary or OSD, or people in Washington, or could mean the 
entire Department of Defense.
    The way we work on these kinds of issues, and it is not 
just limited to recoupment issues or pay issues. We have an 
auditor come in and look at an issue, an auditor identifies a 
problem, and they have standards to which they work to identify 
those problems, but auditors do not make decisions for the 
Department of Defense. Auditors do not determine that we are 
going to recoup or not going to recoup. Auditors make 
recommendations.
    So if you are in a contract matter, an auditor would make a 
recommendation to a contracting officer and the contracting 
officer would make a decision.
    In this case, the auditor would make a recommendation to 
the property and financial accounting official who is 
technically an employee of the National Guard Bureau but is 
appointed by the California National Guard and is--a California 
National Guard member appointed by the California National 
Guard, but then serves as a Federal role because they are 
activated when they are appointed to that position.
    As we look at the way these cases set up, we had the Army 
Audit Agency do an audit and make a recommendation with regard 
to a limited number of cases and found an error rate, I think 
we heard, of 50-something percent. California National Guard 
looked at that. We have--when we look at these things, we have 
discretion, we have enforcement discretion. We don't have to 
say, ``Yes, the auditor said to do this; we are going to do 
every one of these things.''
    Before we get to the point of establishing a debt, we can 
determine whether it is in our interest to establish a debt or 
not. So as we have looked at other States where we had smaller 
numbers and lower error rates, we see that some of the other 
States with the National Guard where you had 8 cases, only 2 of 
them were sent for recoupment; or 10 cases, only 3 were sent 
for recoupment; or 40 cases, only 5 were sent for recoupment. 
Some States sent all the cases for recoupment. They make those 
judgments.
    What California did, and it was within their discretion, 
and given that they said that they did another review and found 
a 91 percent error rate, I can't say it is wrong for them to do 
this, but they not only referred all the cases that they had 
for recoupment, but they also said, ``We are going to do 100 
percent review of everybody else.'' So we are not only going to 
refer for recoupment those cases that were in our sample, we 
are going to go to the rest of the universe, which brought in 
about 17,000 more individuals.
    I think that what the California National Guard discovered 
over a period of years after they did that was that they didn't 
have the bandwidth to deal with those cases. And so they dealt 
with some of those cases and put some of them into recoupment. 
Some of them should have put into--they should have put into 
recoupment, some of them maybe not, but they left thousands of 
other cases hanging out there with the threat of recoupment 
over them, which I think adds to the unfairness of this 
process.
    Now, I have to say, we have oversight over the California 
National Guard. Army--Army has audit--has oversight, the 
National Guard Bureau has oversight. We were not aware of this 
until we read it in the newspaper, and that is on us. We missed 
this. But when we became aware of this, the Secretary 
specifically directed me to go in and address this, do this, do 
this fairly, do this expeditiously, get it done by next summer.
    So we are going through a process where we are going to be 
looking at--we are going to be looking at these cases to figure 
out which ones should be subject to recoupment, and we are 
going to do it as expeditiously as possible. As your 
legislation requires, we are going to favor the soldier 
wherever possible, but we are going to--we are going to account 
for the differences in different types of cases.
    Now, we have two basic categories of cases that we have to 
deal with. One is those cases that were already determined to 
have a debt and sent to DFAS for recoupment. DFAS is just sort 
of the receiver here. They get the cases. They implement it. 
Somebody else tells them that they are supposed to recoup. So 
we have about 1,400 cases in that category.
    Then we have a second category of cases that were 
essentially put under suspicion or threat of recoupment, about 
16,000 more cases in that category. For those cases that are in 
recoupment, we have the question of, are we going to dismiss 
the case? Are we going to forgive the debt? Are we going to 
repay the soldier if we decide it was improper?
    We are--we are--we put those through a screening process. 
We have already had the Army Audit Agency look at all 1,400 
cases through a preliminary screen. Through that preliminary 
screen, we think that we can eliminate about a quarter of them, 
which we will be able to recommend for forgiveness without 
further action.
    We are going to go through a second review, which is going 
to get us into a more detailed review to look at those cases. 
It is my hope that we can pare those cases down to--by about 
half before we put the remainder in front of a further review 
process, which I will describe in a moment.
    So it is my hope we get from 1,400 down to about 1,700 
before we--just based on our reviewing the paperwork without 
involving the soldier at all and tell half of them you are off 
the hook. That is a goal. I don't know what exact numbers we 
get to.
    Turning to the second category, the 15,000, the larger 
category, in that case, we have greater discretion because we 
haven't yet established the debt. So we have our enforcement 
discretion at this point, and so we are going to establish a 
number of rules of thumb, which were referred to earlier, and 
these will be my recommendations. It will be up to the 
Secretary of the Army to accept those recommendations, but I 
expect that he is going to have the same objective that I do 
and the Secretary of Defense does, which is that we want to 
pare these cases down to the most serious ones.
    So we are going to screen out cases that are more than 10 
years old. That is consistent with your legislation. I expect 
we are going to screen out cases with some exceptions--we are 
going to have to be careful about soldiers who have gone AWOL 
or have other kinds of problems--but we are basically going to 
try to screen out cases with a debt of $10,000 or less.
    We are going to screen out cases with--we are going to try 
to screen out most of the cases with enlisted members and lower 
ranking members, members without prior service on the basis 
that it is unlikely that they would have a basis to know that 
they were going to be--to read and understand their contract. 
This was an issue that came up earlier.
    So as we go through those screens, I think we will get--
from that second universe of 16,000 or so cases, I expect to 
reduce that by about 90 percent, so we get down to about 10 
percent of those. So about something between--something on the 
order of 2,000--1,500 to 2,000 cases. We will then put that 
universe through the kinds of screens, substantive screens, 
substantive review of that, and I hope to get that down 
further.
    It is my hope that by the end of the year, we will have--we 
will have something between 1,000 and 2,000 cases total out of 
the total universe of 17,000 that are subject to review. Those 
are the cases that we will then put in front of BCMRs [Boards 
for the Correction of Military Records] and allow soldiers to 
come in and make their case that they shouldn't be subject to 
recoupment.
    But the objective is to find the easy ones first, get rid 
of those, tell people we are not pursuing you, so we don't have 
to tell you you have to come into a BCR [Board for Correction 
of Records] or you can come into a BCMR. We are telling you you 
are off the hook, we are done with you, and do that on the 
basis of paper so that we can focus our resources on those 
cases that are most significant where we really need to 
understand the facts better.
    The Army has already staffed up the BCMRs, they have 
identified the people who will be serving in this role, so we 
are going to add resources. They are in the training process. 
We expect to be up and running by beginning of the year, and 
that the staffing numbers that they have established, we 
believe, are sufficient so that if we have 2,000 cases, we will 
be able to handle that number of cases by the July 1 deadline 
that was set by the Secretary.
    That concludes my testimony, Mr. Chairman. I would be 
happy--we would all be happy to answer any of your questions.
    [The prepared statement of Mr. Levine can be found in the 
Appendix on page 51.]
    Dr. Heck. Ms. Starzak, Ms. McKay, do you have any opening 
comments? No. Great. Thank you. And thank you, Mr. Secretary, 
for taking time to be here and running us through the process.
    So one of the questions that I asked General Baldwin, which 
he deferred to the second panel, was of those 400 who they had 
recommended being relieved but lost, did not get--seek--I guess 
were not granted relief, do they have another appeal avenue, or 
is that it? They are done----
    Mr. Levine. Let me say two things: First, I don't 
necessarily tracked all of General Baldwin's numbers. Not that 
his numbers are wrong, but we are trying to develop our own 
database and go through the numbers in our own way, so I can't 
identify necessarily those 400 cases.
    What I can say is we will provide an avenue for everybody 
here. In the cases of those who have been committed--who have 
already been convicted of fraud, that may be a narrower avenue, 
but we will provide an avenue for everybody.
    Dr. Heck. And then my only other question is for those that 
are in collections, let's say, and they are having wages or 
something garnished by the IRS [Internal Revenue Service] or 
who may have been turned over to a credit agency, whose--you 
know, where is the rose getting pinned to make sure that the 
IRS stops taking money or that we help get credit ratings 
restored?
    Mr. Levine. This is a DFAS function, and we believe that 
has already been taken care of in terms of stopping action. Ms. 
McKay may want to respond to that in greater detail.
    Ms. McKay. That is correct. When the Secretary asked us to 
stop the recoupment, we were able to do that within a week for 
the cases that had been identified to us by the California 
National Guard.
    That included the cases that we had internal to DFAS where 
we were recouping from their military pay as well as any 
voluntary repayments that were underway, as well as any cases 
that we had turned over to the Treasury for recoupment, and 
that would include the category of private collection agencies.
    We also took action to rescind any reporting to the credit 
reporting bureaus, and so those--those--for those cases that 
were identified by the California National Guard to us, those 
credit ratings have been restored as if these debts never 
occurred.
    Dr. Heck. Thank you. Thank you very much.
    Mr. Levine. The one thing I would like to add, Mr. 
Chairman, is in terms of the 1 week, there are a handful of 
cases that lagged the 1 week, only because we had trouble 
identifying the individual involved. We had erroneous Social 
Security numbers and things like that that we have been trying 
to clean up as we went along.
    Dr. Heck. All right. Thank you. Mrs. Davis.
    Mrs. Davis. Thank you, Mr. Chairman, and thanks for being 
here. Of all the changes that have been suggested, and some are 
in the legislation and that you have been working on, is there 
an area that you have seen, by virtue of correspondence from 
guardsmen or women or others that is still hanging out there, 
still an issue that you are not sure that you could tell me 
confidently that you have resolved?
    Mr. Levine. Congresswoman, I am confident that we have the 
authority that we need to clean up this situation. We need to 
put the resources into it that we are now putting into it, and 
we will address this, I think, in a way that is fair to 
everybody.
    The--we would, of course, always prefer to see legislation 
before it goes into law because we can help head off unintended 
side effects, but we believe that we can work with the 
legislation that you have enacted and do what we need to do.
    Mrs. Davis. Anybody else have a concern?
    Okay. One of the issues, and we had the opportunity to see 
a number of pieces of correspondence from those who were really 
affected by this, some from California, not necessarily all, 
and certainly our offices had had several inquiries and we had 
casework around this, but minimally so that there wasn't a 
sense that this was anything systemic at that particular time, 
and I think the issue over, you know, whether or not, you know, 
it was number six on a list of issues that the Guards were 
looking at, but we do have a number--you know, quite a bit of 
correspondence, I think, that you all have received over the 
course of time that suggests to me that perhaps it wasn't 
followed through on a number of occasions.
    And so, to what extent do you take another look at some of 
that correspondence and see what was happening in the lives of 
the men and women who were writing, why they weren't getting 
any response whatsoever, whether the hotline or either the--and 
the assistance center wasn't responding? Why was that?
    Mr. Levine. Honestly, I don't know the answer to that. I 
have been asked by the Secretary to take a forward look and 
clean this thing up going forward. I have not been asked to go 
back and retrace the history of how we got to where we are 
today. I agree with you that we--and that is why I pointed out 
that we have an oversight role here. I think that we should 
have seen this before now, and I don't know why we didn't.
    Mrs. Davis. Thank you. So I guess, going forward, because I 
am for that as well, I think that that is what is really 
important. We don't want this to happen again. But I am a 
little concerned that we have these cases, and do you--do you 
receive inquiries on the part of the men and women for 
additional assistance, whether it is mental health or financial 
assistance, whatever that may be? I mean, does there seem to be 
that--a group of individuals who clearly, this made a 
difference in their lives?
    Mr. Levine. So we obviously have all sorts of mechanisms 
through the Department of Defense for receiving complaints. 
There were any number of avenues of appeal for these soldiers 
that are established avenues of appeal; appeal to DFAS, appeal 
to the Secretary of the Army, appeal to BCMR, those are 
official channels they can go through. In addition, we have, 
obviously, abilities to complain to Members of Congress, 
ability to go to hotlines. We have--we have pressure valves for 
those kinds of things. I can't tell you why those pressure 
valves didn't raise this case to a higher level before now. I 
just don't know.
    Mrs. Davis. I think what I am wondering about is going 
forward, and as this law changes, and we can be grateful that 
at least in the numbers that we have seen, we are not going to 
see this kind of occurrence, I hope, again, but we still have 
all these cases out there that, in fact, perhaps people really 
could have used some assistance and can still use assistance. 
How do we deal with that?
    Mr. Levine. So going forward, I think that the Guard really 
has--the National Guard Bureau really has taken important steps 
in instituting this automated system, which will--which should 
automatically pop up places where we have improper payments and 
instituting a double-check system so you don't have the one 
person who can sign off on something and get in the kind of 
problems we had in California there.
    So while I can't be 100 percent confident that we are going 
to avoid any problems, I think we are much more likely to 
identify these kind of payment errors early, and I think the 
big problem here was not that we had the payment errors. It is 
that we made these errors and then let somebody sit--serve out 
their service and then came back to them after they served out 
their service and said, ``Oh, by the way, we made a mistake, we 
want our money back.''
    Mrs. Davis. Right. Yeah.
    Mr. Levine. If we identify that problem in a timely manner, 
then as a matter of--then at that point, I think it is much 
more appropriate to recoup than it is when you come back 5 
years later and say I want my money back.
    Mrs. Davis. Right. Because I think as we look at the 
timeframe, and even the timeframe from 2011 until 2016, under 
the general's command, I think that there are a lot of cases 
there that people were hurting, and I don't know whether there 
is also a mechanism within the Guard, there should be, to check 
up on people just the same way that we check up on people that 
are going through transition and have returned and do not 
request the assistance of a mental health provider or any kind 
of health provider, that there is a sense that they have--we 
have to check up on them.
    Mr. Levine. I appreciate that. That is part of a 
commander's responsibility.
    Mrs. Davis. Okay. Well, let that--and I think, going 
forward, I suspect that the committee is going to want to have 
another opportunity really to talk about this perhaps in 6 
months, and see how everybody is doing, okay. Thank you very 
much.
    Dr. Heck. Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman. Mr. Levine, and if 
anybody else wants to answer this, but I am surprised, from 
members of the National Guard, that we would go for these, and 
let's just call it deficiencies, or whatever you want to call 
it, that we were going after them civilly and affecting the 
credit union. Does that affect Active Duty people as well when 
there is a mistake on a bonus?
    Mr. Levine. So again, this is a fairly unique case because 
we were going after people on technical grounds. Some people, 
at least on technical grounds years after this technical 
mistake was made when they had already served out. We refer 
cases for recoupment all the time. As I indicated, there are 
probably 100,000 cases under recoupment at any given time. We 
pursue them.
    They are large cases and small cases. I think that the 
numbers show that most of them are relatively small cases. I 
mean, we could have recoupment cases for lost or damaged 
equipment. We could have recoupment cases because you failed to 
pay for your travel. We could have recoupment cases because you 
were getting--you are getting aviation incentive pay when you 
weren't a pilot, you know, any number of different kinds of 
reasons we could have recoupment cases.
    When the debt is certified, I--in this case, the property 
and financial officer for the National Guard out in California, 
when the debt is certified, it goes to DFAS, and I believe DFAS 
would follow the same procedures in each case. So I would defer 
to Ms. McKay to speak to that.
    Ms. McKay. Yes, sir. You asked specifically about Active 
Duty. So as long as the--when a debt is established on an 
Active Duty member, it is handled within the military pay 
system. Debts are recouped against the payments going to the 
military members at a predetermined statutory rate, and so it 
would come out of their Active Duty pay.
    As long as an account is not delinquent, and in these 
cases, there will be active collections against the debt, they 
are not considered delinquent, there wouldn't be any credit 
reporting against them.
    Mr. Coffman. Mr. Levine, in your testimony you address the 
comparative recoupment amounts between California and other 
States as $11 million in California alone and a total of only 
$2 million between all of the States. I understand that a 
special audit team was sent to the State of Colorado, 
Washington, Texas, and the territory of Puerto Rico to check 
100 percent of the records in each of those States and 
territories. The records check revealed that the automated 
systems' internal controls were not working as intended, 
resulting in management of the system being brought to the 
National Guard Bureau level as a short-term solution.
    Would you describe for us how those systems were not 
working as intended, and what the results of that were in each 
of those States, particularly perhaps for the State of 
Colorado?
    Mr. Levine. So I am unable to answer the question as to the 
specific internal control deficiencies in the State of 
Colorado. We did have the Triple A [Army Audit Agency] and the 
National Guard Bureau conduct reviews across the States. They 
did determine that there were internal weaknesses, lack of 
oversight, lack of multiple signoff, the kinds of weaknesses 
that we discovered in California. What we didn't discover was 
the kind of exploitation of the weaknesses or systematic 
problems of weaknesses, where in California they determined 
that there was fraud involved.
    With regard to Colorado, I am interested by the 100 percent 
review because, again, as with Florida, I have--I asked the 
National Guard Bureau and the Triple A to look at whatever 
cases we had elsewhere, and I have got a rack-up of those, 
which is what the $2 million comes from. I show the same thing 
for Colorado that I do for Florida, which is no cases of 
recoupment.
    So if you have something different on that on Colorado 
recoupment, I would be very interested in seeing that. I can't 
guarantee that I have got 100 percent accurate information, but 
I would certainly like to know if there is a significant number 
of recoupment cases in Colorado, because I don't show any based 
on the information we have been able to gather at this point.
    Mr. Coffman. On the recruiting bonus side, we do.
    Mr. Levine. Okay. I would be--if you have information on 
that, I----
    Mr. Coffman. Sure.
    Mr. Levine [continuing]. Would appreciate it if you share 
it with us so we can go back to the National Guard Bureau and 
the Triple A and see where that fell through the cracks.
    Ms. Starzak. Actually, I would like to distinguish between 
the two. The recruiting bonuses are a different issue----
    Mr. Coffman. Okay.
    Ms. Starzak [continuing]. Than this enlistment bonus issue. 
So when Triple A looked at those questions, it did do an audit 
of several States. I think it was Missouri----
    Mr. Coffman. Okay.
    Ms. Starzak [continuing]. Indiana, Pennsylvania, and a 
couple of others potentially. They did not find systemic 
problems. They did identify some concerns with internal 
controls. The National Guard Bureau also had sent audit teams 
out to different States and they asked their internal folks to 
audit. Those came out with some results, but again, there was 
no--there was no finding of the type of systemic problems that 
they had in California.
    Mr. Levine. Having said that, the numbers that I got from 
Triple A and National Guard Bureau are supposed to cover both 
of those reviews, so if you have something else, I would really 
appreciate seeing it.
    Mr. Coffman. Absolutely.
    Mr. Levine. Thank you, Congressman.
    Mr. Coffman. Thank you. Oh, and I just--before I yield 
back, I just want to thank you, Mr. Chairman. Thank you so much 
for your service to this committee. It has been a privilege to 
work with you, despite the fact that you greatly outrank me in 
terms of being in the military.
    Dr. Heck. Ms. Speier.
    Ms. Speier. Thank you again. The issue of counseling those 
who now have issues around their credit and the like, is that 
something that is going to be undertaken by the Guard or by a 
separate office?
    Mr. Levine. We do financial counseling for members, for 
service members generally. We provide that as a service. My 
expectation would be it would be done through the National 
Guard Bureau, but we would have to check that for you.
    Ms. Speier. All right. Because the National Guard indicated 
to me that they feel that since they are in close proximity to 
them, that they would like to pursue providing that counseling.
    Mr. Levine. It would be my expectation that in the normal 
course of events, that it would be the California National 
Guard that would counsel California National Guard soldiers, 
but again, we will have to check that for you.
    [The information referred to can be found in the Appendix 
on page 63.]
    Ms. Speier. All right. When the general was kind of running 
through those that were prosecuted and pending cases, most of 
them from the U.S. attorney, when he referenced the court-
martials, seven of them, six officers, one enlisted, I guess, 
he made the statement that both because of lack of evidence and 
just the UCMJ itself, prevented them from pursuing court-
martials of those individuals. What would have to be changed in 
the UCMJ in order to allow the military justice system to work?
    Mr. Levine. The military justice system has the same 
presumption of innocence that the civilian justice system does, 
and so we have the same issues of proof that we have in the 
civilian justice system, and often, they are cases which we 
might have a suspicion that somebody did something wrong, but 
when we have prosecutors look at the case, they say there is 
just not enough here to pursue it, to pursue it to trial.
    I think that given the way our justice system works, that 
is to be expected, and I don't think that we are in--that any 
of us want to change the fundamental premises of our justice 
system.
    Ms. Speier. Oh, no, no, but I just wondered based on what 
you said whether there was something within the UCMJ that we 
needed to look at.
    Mr. Levine. I don't think there is anything unique to the 
UCMJ that I would look to. I would look to the difficulty of 
prosecuting cases where there is tough evidentiary questions, 
which we run into in general.
    Ms. Speier. All right. And then, I guess, finally, I am 
still somewhat confused by the fact that this was a California-
only problem, and it appears that the National Guard chose to 
distribute these bonuses in a manner that was inconsistent with 
other National Guards in an effort to, I guess, get their 
numbers up, but to somehow offer a recruitment bonus that is 
given 100 percent at the beginning of the tour as opposed to in 
increments seemed quite foolish. Should there be more 
uniformity among the various National Guards?
    Mr. Levine. So the way I would describe it is that we had a 
system at that time that was vulnerable to abuse, and that 
system was vulnerable to abuse not only in California, but in 
other States, too. It was in California that they identified 
abuse and that they went after it, pursued it for that reason. 
It is not that the other States didn't have the same system, it 
is that they didn't find that same evidence of abuse that led 
into this 100 percent audit and review that they did in 
California.
    Ms. Speier. I see. So, but moving forward, that is not 
going to be able--that abuse cannot take place?
    Mr. Levine. I can never tell you that we won't have 
mistakes or problems in the Department of Defense. I think we 
have addressed this one, but where we will make a mistake the 
next time, I can't tell you.
    Ms. Speier. All right. Well, thank you all for your 
service, and I yield back.
    Dr. Heck. Thank you. Thank you, Mr. Levine and Ms. Starzak 
and Ms. McKay for being here. I know it is a very difficult 
issue but one we want to make sure we get our hands around to 
ensure that we take care of the guardsmen and women in 
California and make sure we don't have any similar issues 
across the defense enterprise, so we appreciate you being here.
    Before we adjourn, I just want to take a moment of personal 
privilege, as this is my last subcommittee hearing, and one--I 
thank my ranking member, Mrs. Davis, for all of her help over 
the last 2 years. You know, when we set out an agenda for this 
Congress, what we were going to accomplish in this 
subcommittee, we had quite a few major issues, and people said 
we were crazy for thinking we could get even one of them done. 
Whether that be UCMJ reform, retirement reform, healthcare 
reform, commissary reform, and due to your support, the hard 
work of all of the committee members, and the incredible staff, 
we got all four of them done, and that would not have happened 
had it not been for the great working relationship that we all 
have.
    I also, although he is not here, want to thank the Sergeant 
Major, Mr. Walz. We know standing beside every officer is an 
NCO making sure he gets the job done right, and Mr. Walz was 
that person for me. And I really want to thank the staff, 
everybody who made the last 2 years as successful as it has 
been. It has been a great honor to serve, and it shows this 
committee's commitment to taking care of our men and women in 
uniform, their families, our retirees, and our survivors. There 
being no further business, the hearing is adjourned.
    [Whereupon, at 4:05 p.m., the subcommittee was adjourned.]



      
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                            A P P E N D I X

                            December 7, 2016

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                            December 7, 2016

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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   

      
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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                            December 7, 2016

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              RESPONSE TO QUESTION SUBMITTED BY MS. SPEIER

    Mr. Levine. Currently, Soldiers are directly contacting the Soldier 
Incentives Assistance Center (SIAC), which is part of the California 
National Guard created to assist affected soldiers, to access the 
following four types of trained and certified financial counseling 
resources listed below. Indeed, it is the primary contact point for 
affected Soldiers to be directed to the most suitable and available of 
the four types of counseling resources. The counselors receive Office 
of the Secretary of Defense (OSD)-approved training and meet fiduciary 
standards (i.e., best interests of member).
    1. Personal Financial Management (PFM) Services: The Military 
Services provide full-time PFM services at active duty installations to 
meet the long-term financial readiness needs of Service members. 
National Guard (NG) members and families may utilize PFM services.
    2. Personal Financial Counselors (PFCs): OSD provides accredited 
PFCs by request to meet the financial readiness needs of the active and 
reserve component. ``On demand'' PFCs are available for short-term 
requirements of 3 days or less. ``Surge'' PFCs are available for 30 to 
90 days. ``Rotational'' PFCs are available for medium-term requirements 
of 180 days to 365 days. PFCs provide in-person counseling only.
    3. Military OneSource: Military OneSource (MOS) provides a referral 
service to all Service members and family members (any status) to in-
person, telephone, or online (chat) financial counseling. Additionally, 
MOS maintains a database of all counseling resources nationwide (i.e., 
PFM and PFC), which users can search by zip code to find the nearest 
counselor.
    4. Community Partners: National Guard State Family Program 
Directors (SFPDs) and Airman and Family Readiness Program Managers 
(AFRPMs) sustain referral networks of financial professionals willing 
to donate time or reduce fees to counsel NG members and families. These 
community partners comply with DODI 1344.07, ``Personal Commercial 
Solicitation on DOD Installations,'' rules and requirements.
    Additionally, The California Army National Guard (CAARNG) is 
working directly with the California Franchise Tax Board to provide 
assistance based on pending legislation.
    The Army National Guard (ARNG) is experienced in handling the 
entire spectrum of Soldier financial issues. Typically, the majority of 
phone calls taken by our Family Assistance Centers (FACs) involve 
financial issues. The 17 FACs in California assist Soldiers in finding 
local resources for everything from paying the rent and buying 
groceries to long-term debt and credit management.   [See page 33.]

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