Military Personnel: Management and Oversight of Selective	 
Reenlistment Bonus Program Needs Improvement (25-NOV-02,	 
GAO-03-149).							 
                                                                 
Because of the recent growth in DOD's Selective Reenlistment	 
Bonus Program, the House Appropriations Committee asked GAO to	 
determine (1) the extent to which the services have followed	 
their criteria for managing their programs and (2) whether DOD	 
has provided adequate guidance for and oversight of the program. 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-149 					        
    ACCNO:   A05603						        
  TITLE:     Military Personnel: Management and Oversight of Selective
Reenlistment Bonus Program Needs Improvement			 
     DATE:   11/25/2002 
  SUBJECT:   Eligibility criteria				 
	     Military forces					 
	     Military reenlistment bonuses			 
	     Program evaluation 				 
	     DOD Selective Reenlistment Bonus Program		 

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GAO-03-149

Report to the Chairman, Subcommittee on Defense, Committee on
Appropriations, House of Representatives

United States General Accounting Office

GAO

November 2002 MILITARY PERSONNEL

Management and Oversight of Selective Reenlistment Bonus Program Needs
Improvement

GAO- 03- 149

The Navy and Air Force have not used all of the criteria they have
established for selecting critical military specialties eligible for
bonuses under their Selective Reenlistment Bonus Programs. The Army*s
guidance does not include specific criteria for selecting critical
specialties. Since these services have not used all of their criteria, the
number of eligible specialties and the number of enlisted personnel who
receive bonuses have expanded. Moreover, the services did not manage their
programs to stay within their budgets appropriated by Congress. The
Department of Defense*s (DOD) budget for the Selective Reenlistment Bonus
Program has more than tripled in recent years* from $235 million in fiscal
year 1997 to an estimated $789 million in fiscal year 2002.

Services' Selective Reenlistment Bonus Program Budgets, Fiscal Years 1997-
2002

DOD has not provided adequate guidance for and oversight of its Selective
Reenlistment Bonus Program. DOD canceled an instruction that established
criteria for selecting specialties for the program. Without this
instruction, DOD cannot be sure that the program is being implemented as
intended. Also, DOD has not reviewed the services* processes for selecting
critical specialties or for establishing their corresponding bonus levels,
despite requirements to do so annually. Thus, DOD has not ensured that the
services are implementing their programs appropriately to help improve
short- term retention in critical military specialties.

MILITARY PERSONNEL

Management and Oversight of Selective Reenlistment Bonus Program Needs
Improvement

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 149. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Derek Stewart at (202) 512- 5559 or stewartd@ gao.
gov. Highlights of GAO- 03- 149, a report to the

Chairman, Subcommittee on Defense, Committee on Appropriations, House of
Representatives

November 2002

Because of the recent growth in DOD*s Selective Reenlistment Bonus
Program, the House Appropriations Committee asked GAO to determine (1) the
extent to which the services have followed their criteria for managing
their programs and (2) whether DOD has provided adequate guidance for and
oversight of the program.

GAO recommends that until DOD issues required program guidance  the
services manage their

programs to stay within requested budgets and  the services adhere to
their

established guidance. The Army should establish specific guidance for
selecting specialties for inclusion in its program.

GAO also recommends that the Secretary of Defense require the
Undersecretary for Personnel and Readiness to  issue an instruction that

provides the services with guidance for administering and selecting
specialties for inclusion in their Selective Reenlistment Bonus Programs,
and  conduct annual reviews of the

services* programs as required by DOD*s directive.

DOD Comments DOD concurred or partially concurred with our
recommendations.

Page i GAO- 03- 149 Reenlistment Bonus Program Letter 1

Results in Brief 1 Background 4 Not Using All Criteria Expanded the Number
of Specialties and

Reenlistees 9 DOD Has Not Provided Adequate Guidance and Oversight 14
Conclusions 17 Recommendations for Executive Action 18 Agency Comments and
Our Evaluation 18

Appendix I Scope and Methodology 22

Appendix II How the Selective Reenlistment Bonuses Are Paid 24

Appendix III Growth of the Services* Selective Reenlistment Bonus Programs
and Initial Payments 26

Program Growth 26 Growth in Initial Payments by the Services 27

Appendix IV Comments from the Department of Defense 31

Tables

Table 1: Selective Reenlistment Bonus Program Characteristics by Service,
Fiscal Year 2001 8 Table 2: Selective Reenlistment Bonus Program
Characteristics by

Service, Fiscal Years 1997 and 2001 11 Table 3: Eligibility for Zones A,
B, and C under the Selective

Reenlistment Bonus Program 25

Figures

Figure 1: Services* Selective Reenlistment Bonus Program Budgets, Fiscal
Years 1997- 2002 6 Figure 2: Cost of the Selective Reenlistment Bonus
Program in

Constant 2002 Dollars, Fiscal Years 1990- 2002 26 Contents

Page ii GAO- 03- 149 Reenlistment Bonus Program

Figure 3: Army*s Selective Reenlistment Bonus Program*s Initial Payments,
Budget Request, and Reported Expenditures, Fiscal Years 1997- 2002 27
Figure 4: Navy*s Selective Reenlistment Bonus Program*s Initial

Payments, Budget Request, and Reported Expenditures, Fiscal Years 1997-
2002 28 Figure 5: Marine Corps* Selective Reenlistment Bonus Program*s

Initial Payments, Budget Request, and Reported Expenditures, Fiscal Years
1997- 2002 29 Figure 6: Air Force*s Selective Reenlistment Bonus Program*s

Initial Payments, Budget Request, and Reported Expenditures, Fiscal Years
1997- 2002 30

Abbreviations

DOD Department of Defense GAO General Accounting Office

Page 1 GAO- 03- 149 Reenlistment Bonus Program

November 25, 2002 The Honorable Jerry Lewis Chairman, Subcommittee on
Defense Committee on Appropriations House of Representatives

Established by Congress in 1974, the Department of Defense*s (DOD)
Selective Reenlistment Bonus Program for enlisted military personnel is
DOD*s primary tool for addressing short- term retention problems in
critical military specialties (or skills). It allows the services to pay
bonuses ranging from a few thousand dollars up to $60,000 to entice
enlisted personnel in selected specialties to reenlist for another term in
the military. The bonus amounts vary, mainly on the basis of the services*
needs in certain critical specialties and the length of reenlistment.
Fifty percent of the bonuses are paid in initial bonus payments and the
remaining 50 percent in equal anniversary payments for each year of
reenlistment. Between fiscal years 1997 and 2002, the cost of this program
more than tripled* from $235 million in fiscal 1997 to an estimated $789
million in fiscal 2002. The services* total budget requests for the
program have continued to increase even though the U. S. economy has
slowed.

Concerned about the recent growth of DOD*s Selective Reenlistment Bonus
Program, you asked us to review how the military services are
administering this program to retain enlisted personnel in critical
military specialties. Specifically, our objectives were to determine (1)
the extent to which the services followed their criteria for managing the
Selective Reenlistment Bonus Program and (2) whether DOD provided adequate
guidance for and oversight of the program.

Our work was limited to the services* Selective Reenlistment Bonus
Programs that encompassed enlisted specialties between fiscal years 1997
and 2002. Our report is limited to data through fiscal year 2001, the last
year for which official program data are available. We conducted our
review from January through August 2002 in accordance with generally
accepted government auditing standards. (See app. I for more information
on our scope and methodology.)

The Navy and Air Force have not used all of the criteria established in
their guidance for selecting critical military specialties eligible for
bonuses under their Selective Reenlistment Bonus Programs. For example,
although the Navy*s regulations require a *balanced application* of all
the

United States General Accounting Office Washington, DC 20548

Results in Brief

Page 2 GAO- 03- 149 Reenlistment Bonus Program

criteria used for determining which occupations belong in the program,
according to Navy officials, an occupation must meet only one of five
criteria to become eligible. According to a DOD review of the selective
reenlistment bonus program, this is not appropriate since a particular
skill could be a good candidate on the basis of several criteria but
inappropriate on the basis of only one. The Army*s guidance does not
include specific criteria for selecting critical specialties, meaning that
the Army can select any number of specialties. Our review found that
Marine Corps managers generally used all of the criteria as required.
Since 1997, the services have expanded the number of eligible specialties
and the number of enlisted personnel who receive reenlistment bonuses. For
all the services combined, the total number of reenlistees receiving
bonuses more than doubled, from approximately 23,000 in fiscal year 1997
to almost 59,000 in fiscal 2001. At the same time, average bonuses have
increased. Moreover, during the same period, the Army, Navy, and Air Force
did not manage their programs to stay within their budgets appropriated by
Congress. Specifically, although Congress appropriated an additional $165
million above the services* budget requests during fiscal years 1997-
2001, the three services spent over $240 million dollars more on initial
bonus payments than Congress had appropriated. These factors* the
inconsistent use of criteria, increases in the number of specialties and
reenlistees, paying higher bonuses, and not managing their programs to
stay within appropriated budgets* have contributed to program costs that
have more than tripled since fiscal year 1997.

DOD has not provided adequate guidance for and oversight of its Selective
Reenlistment Bonus Program. While DOD issued a directive and an
instruction in 1985 to provide the services with guidance for
administering their programs, it canceled the instruction in 1996. The
instruction established criteria that the services should apply when
selecting specialties for inclusion in the program. Without this
instruction, DOD cannot be sure that the program is being implemented as
intended and that adequate internal controls are in place to govern the
operations of the services* programs. Also, DOD has not reviewed the
services* processes for selecting critical specialties, despite
requirements in the directive to do so annually. Thus, DOD has not ensured
that the services are implementing their programs appropriately to help
improve short- term retention in critical military specialties. Although
we raised similar concerns in a 1996 report, DOD has taken no action on
our recommendation to provide more explicit guidance regarding the
selection of critical specialties. Consequently, the problems we
identified then remain unaddressed today. Although DOD*s comptroller
reviews the services* annual program budget requests, these budget reviews
do not

Page 3 GAO- 03- 149 Reenlistment Bonus Program

include a substantive review of the program. For example, one review
failed to discover a flawed budget estimate of $34 million in unneeded
funding for anniversary payments.

We are making recommendations to improve the services* management of the
Selective Reenlistment Bonus Program and DOD*s oversight responsibilities.
In response to our report, DOD disagreed with our conclusion that it
cannot be sure that the Selective Reenlistment Bonus Programs are being
implemented as intended. DOD stated that the criteria that the services
use to administer their programs are sound and that they allow the
services to target their resources to meet the services* unique retention
needs. DOD concurred with our recommendation to issue an instruction that
provides the services with guidance for administering their programs and
partially concurred with our other recommendations. In addressing our
recommendations, DOD raised concerns about the services* potential loss of
flexibility to respond to external factors and objected to an additional
administrative requirement. Finally, DOD stated that the program is
routinely reviewed and that each service prepares a plan for using the
bonuses that is carefully reviewed as part of the budget process. The
agency comments section of this report contains more details on DOD*s
positions and our response to them.

Page 4 GAO- 03- 149 Reenlistment Bonus Program

In 1974, DOD requested congressional approval to target its reenlistment
bonus program toward critical specialties where it was experiencing
staffing shortfalls. Before 1974, the military had provided a $2,000
reenlistment bonus for all servicemembers willing to reenlist. During that
year, DOD raised concerns that the bonus program was not focused enough to
meet the services* needs. In 1974, Congress authorized the use of
selective bonuses, which gave the services flexibility to adjust the
bonuses paid to reenlistees to aid in staffing the most hard- to- fill
critical specialties. 1 Overall, the Selective Reenlistment Bonus Program
is intended to increase reenlistments in specialties deemed critical by
the Secretary of Defense.

To implement the Selective Reenlistment Bonus Program, DOD issued a
directive in 1985, 2 updated in 1996, which assigns specific
responsibilities for administering the program to the Office of the
Secretary of Defense and to the services* Secretaries. Under this
directive, the Assistant Secretary of Defense for Force Management Policy,
under the Under Secretary of Defense for Personnel and Readiness, is
responsible for establishing procedures for administering the selective
reenlistment bonus program. Specifically, the Assistant Secretary of
Defense for Force Management Policy is responsible for establishing (1)
criteria for designating military specialties that qualify for bonuses,
(2) criteria for individual members* eligibility for bonuses, and (3)
reporting and data requirements for the annual review and evaluation of
programs as well as individual services* requests for military skill
designations. In addition, according to the DOD directive, the Assistant
Secretary of Defense for Force Management Policy is responsible for
annually reviewing and evaluating the services* enlisted personnel bonus
programs in conjunction with the annual budget cycle. These reviews are to
include an assessment of the criteria used for designating critical
military specialties. As a result of these reviews, the Office of the
Secretary of Defense is to make the revisions needed to attain specific
policy objectives.

1 The authority for the reenlistment bonus is codified at 37 U. S. C. 308.
2 DOD Directive Number 1304. 21. Background

Page 5 GAO- 03- 149 Reenlistment Bonus Program

At the same time that DOD issued its 1985 directive, it issued an
instruction providing the services with guidance for managing their
programs. However, this instruction was canceled in 1995, and replacement
guidance has not been issued, although the updated overarching directive
remains in effect. DOD did not issue replacement guidance because of
administrative and legal questions that have only recently been resolved,
thus clearing the way for reissuance of the guidance. The canceled
instruction was to require the services to provide a balanced evaluation
of five factors in identifying critical specialties: a consideration of
(1) serious understaffing in adjacent years, (2) persistent shortages in
total career staffing, (3) high replacement costs, (4) the arduousness or
unattractiveness of the work, and (5) whether the specialty is essential
to the accomplishment of defense missions. In addition, the instruction
was to require that a reasonable prospect must exist for enough
improvement in the occupation to justify the cost of providing the bonus.
The instruction was also to require the services to provide DOD with
reports on the status of their programs and on the status of the
specialties included in their programs.

The Selective Reenlistment Bonus Program has experienced substantial cost
growth, as shown in figure 1. DOD*s budget for the Selective Reenlistment
Bonus Program has more than tripled in recent years* from $235 million in
fiscal year 1997 to an estimated $789 million in fiscal 2002. The Air
Force*s reenlistment bonus budget increased proportionately more than the
other services* from $26 million in fiscal year 1997 to over an estimated
$258 million in fiscal 2002.

Page 6 GAO- 03- 149 Reenlistment Bonus Program

Figure 1: Services* Selective Reenlistment Bonus Program Budgets, Fiscal
Years 1997- 2002

Page 7 GAO- 03- 149 Reenlistment Bonus Program

DOD*s Selective Reenlistment Bonus Program currently allows the services
to pay reenlistment bonuses of up to $60,000, though the services have set
different maximums. The service secretaries designate which specialties
are eligible to receive bonuses. (See app. II for more discussion of bonus
determinations.) Total bonus amounts are determined by multiplying (1) the
service member*s current monthly basic pay by (2) the number of additional
years of obligated service and by (3) a bonus multiple that can range from
0.5 to 15. The bonus multiples are determined by each service for all
specialties they deem critical. For example, an enlistee who earns $24,000
per year and reenlists for 4 years in an occupation with a multiple of 4
would receive a reenlistment bonus of $32,000. This amount is calculated
by multiplying the monthly basic pay of $2,000 by the number of
reenlistment years (4) and by the multiple (4). The bonus multiples are
determined by each service for all eligible specialties, and the
occupations that they deem most critical or hardest to fill would
generally receive higher multiples. Navy officials told us that they also
consider alternative wages that certain specialties can obtain outside of
the military when determining the size of the bonus multiplier for a
critical specialty.

Each of the services has established its own guidance for implementing its
selective reenlistment bonus program. This guidance varies by service.
Generally, the services* guidance establishes eligibility criteria for
servicemembers and in some cases also defines criteria for selecting
specialties for inclusion in the program. The Navy and Marine Corps have
adopted all the original criteria that were established by DOD*s 1985
program instruction. The Air Force updated its program guidance in 1998,
which only partially reflected DOD*s original program instruction. This
instruction includes the criteria for individual servicemembers*
eligibility as well as guidance for the selection of specialties. The Army
has established guidance for individual servicemembers* participation in
the program but not specific guidance for determining which specialties
should be included in the program. How the Selective

Reenlistment Bonus Program Works

Page 8 GAO- 03- 149 Reenlistment Bonus Program

In addition to establishing their own guidance for selecting individuals
and occupations to include in the program, the services have also defined
some other program characteristics, which also differ between the services
as shown in table 1 for fiscal year 2001. While congressional
authorization allows the maximum amount of a bonus to be $60,000 and the
maximum multiple to be 15, the services determine their own limit. In
fiscal year 2001, the maximum bonus ranged from $35,000 to $60,000, and
the services* maximum bonus multiple ranged from 5.0 to 8.0. The table
also displays the minimum and maximum reenlistment periods.

Table 1: Selective Reenlistment Bonus Program Characteristics by Service,
Fiscal Year 2001

Program characteristic Army Navy Marine Corps Air Force

Maximum bonus $40,000 a $60,000 $35,000 $60,000 Maximum multiple 5.0 8. 0
5.0 6. 0 Minimum obligation 3 years 3 years 4 years 4 years Maximum
obligation 6 years 6 years 6 years 6 years

Source: The services* regulations and guidance. a The Army authorizes two
specialties (Satellite Communication Systems Operator- Maintainer and

Korean Voice Interceptors) to reenlist for as much as $40,000 if
servicemembers qualify. The Army*s remaining occupations are limited to a
maximum reenlistment bonus of $20,000.

The Army, Navy, and Air Force pay bonuses to reenlistees with an initial
payment and equal annual installments over the reenlistment period. The
initial payment is made at the time of the reenlistment or when the
reenlistment period begins and is equal to 50 percent of the total bonus.
The remaining 50 percent is paid in equal annual payments over the term of
the reenlistment, and the payments are called *anniversary payments.* In
the example above, the initial 50- percent payment would be $16,000, and
the anniversary payments would be $4,000 for 4 years. Starting in fiscal
year 2001, the Marine Corps began paying the entire bonus in one lump- sum
payment at the beginning of the reenlistment period. It is too early to
determine what effect this change will have on the operation of the Marine
Corps* selective reenlistment bonus program.

Page 9 GAO- 03- 149 Reenlistment Bonus Program

For fiscal years 1997- 2001, some services did not consistently apply all
the criteria they had established to select which specialties they include
in the reenlistment program. By not doing so, they broadened the number of
eligible specialties and reenlistees who received bonuses. While achieving
higher reenlistments, the services have not managed their programs to stay
within their congressionally appropriated budgets. As a result, the
services spent more on their program than was appropriated in each of
fiscal years 1997- 2001.

Some services are not consistently using all of the criteria they have
established to select critical specialties for the Selective Reenlistment
Bonus Program. The Navy and Marine Corps have adopted the original DOD
instruction (see background, p. 6), which requires a balanced application
of all five criteria to identify critical specialties. Marine Corps
officials told us that they utilize all of these criteria in selecting
specialties eligible for a bonus. However, the Navy uses only the
following four criteria when identifying specialties for inclusion in the
program: (1) severe undermanning, (2) severe career undermanning, (3) high
training and replacement costs, and (4) skills essential to accomplishing
the defense mission. According to Navy officials, any one of these
criteria qualifies a specialty for inclusion in the program. According to
DOD*s only review of the selective reenlistment bonus program, this is not
appropriate, since a particular skill could be a good candidate on the
basis of several criteria, but inappropriate on the basis of one.

While the Air Force considers numerous factors when making determinations
about which occupations to include in its program, it does not prioritize
its occupations as required by Air Force instructions. As a result, the
bonuses paid may not reflect the importance of the specialty. The Air
Force has adopted most of the original DOD criteria; however, it does not
require a balanced application of those criteria. The Air Force*s criteria
include (1) shortfalls in meeting current and projected reenlistment
objectives (reenlistment rates and the size of specific- year groups, as
well as adjacent- year groups), (2) shortages in current and projected
noncommissioned officer manning, (3) high training investment and
replacement cost for a skill, (4) expected improvement in retention
resulting from designation as a selective reenlistment bonus skill, and
(5) priority of the skill. An Air Force review board considers the
criteria, and then a professional judgment is made on whether to include a
skill in the program. Not Using All Criteria

Expanded the Number of Specialties and Reenlistees

Some Services Do Not Consistently Use All of the Criteria They Have
Established for Selecting Specialties That Receive Bonuses

Page 10 GAO- 03- 149 Reenlistment Bonus Program

The Army has not adopted all of DOD*s original criteria. The Army has
established regulations governing the eligibility of individuals for
inclusion in the program, but it has not established regulations for
selecting occupations to include in its program. As a result, the
specialties that the Army selects for bonuses may not be critical.
According to Army officials, the criteria can fluctuate depending on their
current needs. During fiscal year 2002, the Army*s criteria for selection
of critical specialties included (1) budget constraints, (2) current and
projected strengths, (3) retention rates, (4) training constraints, (5)
replacement costs, (6) priority military occupational specialties, and (7)
shortages within mid- grade levels. The Army uses understaffing as the
primary criterion for designating occupations as critical and eligible for
bonuses.

The services, with the exception of the Marine Corps, have not been
applying all of their criteria for selecting specialties to include in
their Selective Reenlistment Bonus Programs. This has led to an increase
in the number of specialties that the services made eligible for
reenlistment bonuses during fiscal years 1997- 2001. As the number of
specialties eligible for bonuses grew, so did the number of reenlistments
receiving bonuses from each service. (See table 2.) 1 In fiscal year 2001,
the Navy awarded bonuses to the smallest percentage of specialties of the
services, but those awards accounted for the largest number of bonus
recipients. The Air Force awarded bonuses to approximately 80 percent of
its specialties, which were paid to 42 percent of its reenlistees.

Between 1997 and 2001 all of the services increased the number of
specialties for which they offered reenlistment bonuses. As a result,
there was an increase in the total number of reenlistees who got bonuses.
For all the services combined, the total number of reenlistees receiving
bonuses more than doubled* from approximately 23,000 in fiscal year 1997
to almost 59,000 in fiscal 2001. Along with this growth in the number of
specialties and reenlistees receiving bonuses has been an increase in the
average bonus paid* from approximately $5, 500 in fiscal year 1997 to over
$8,000 in fiscal 2001. In constant 2001 dollars, the average initial bonus
payment has grown from approximately $5,900 in fiscal year 1997 to over

1 DOD*s 2002 Quadrennial Review of Military Compensation stated that use
of the program had increased substantially since 1997 as the services
began to report recruiting and retention problems. The report states the
increased use of selective reenlistment bonuses as a key factor in the
services* meeting aggregate retention objectives over the past 3 years.
Growth in the Number of

Specialties and Reenlistees

Page 11 GAO- 03- 149 Reenlistment Bonus Program

$8,000 in fiscal 2001. The Navy had the greatest increase in average
initial payments* from over $7,200 in fiscal year 1997 to almost $11,000
in fiscal 2001. The Air Force average initial payment also increased* from
approximately $3, 900 in fiscal year 1997 to $7,100 in fiscal 2001. Unlike
the other services, the Army*s average bonus fell by $500 between fiscal
years 1997 and 2001.

Table 2: Selective Reenlistment Bonus Program Characteristics by Service,
Fiscal Years 1997 and 2001 Service Program characteristic Army Navy Marine
Corps Air Force Total Fiscal year 1997 2001 1997 2001 1997 2001 1997 2001
1997 2001

Number of bonus specialties 72 124 204 219 133 163 68 158 477 644

Number of specialties a 267 274 1,146 b 1,153 b 424 397 197 197 2,034
2,021

Percentage of specialties 27 45 18 19 31 41 35 80 23 33

Number of bonus recipients 6, 726 17,125 11,580 21,356 1, 414 3,123 3,612
17,336 23,332 58,940

Number of reenlistees 78,478 63,059 40,947 42,270 13,486 13,830 43,836
40,865 176,747 160,024

Percentage receiving bonus 9 27 28 51 10 23 8 42 13 37

Average initial payment c $4,400 $4,218 $6,764 $10,957 $5,442 $15,065 d
$3,598 $7,089 $5,512 $8,079

Average initial payment in constant 2001 dollars $4,721 $4,218 $7,258
$10,957 $5,840 $15,065 $3,861 $7,089 $5,915 $8,079

Source: The services* budget justification documents and other information
provided by the services. a The number of service specialties varied over
this time period for some services as some

occupations were merged or eliminated. b Navy specialties included 107
ratings plus 1,039 skill classifications in 1997 and 92 ratings plus

1,061 skill classifications in 2001. c Current- year dollars.

d The Marine Corps implemented a lump- sum (100 percent) payment option in
fiscal year 2001. Under the anniversary payment method, the initial
payment would have been $7,532.50.

From fiscal year 1998 through fiscal 2001, none of the services* Selective
Reenlistment Bonus Programs stayed within their appropriated program
budgets. Rather, with the exception of the Marine Corps, the services
reprogrammed or realigned funds from other programs within the enlisted
personnel budget to make more bonus payments than they were originally
funded to pay. The services are able to do this under their budget
authority. However, they are restricted from shifting funding amounts of
Services* Programs Not

Managed to Stay Within Appropriated Budgets

Page 12 GAO- 03- 149 Reenlistment Bonus Program

over $10 million from other budget authority lines, such as from officer
pay programs, without seeking congressional prior approval for
reprogramming of resources.

Overall, we found that the Army, Navy, and Air Force did not manage their
programs to stay within their budgets appropriated by Congress. Rather,
with the exception of the Marine Corps, the services have allowed their
program to continue running the entire fiscal year and have exceeded their
budget appropriation during the past several years. (See app. III for more
detail on budget requests and actual initial bonus payments.) Even though
Congress provided $165 million in additional funding during fiscal years
1997- 2001, the three services spent approximately $240 million dollars
more on initial bonus payments than Congress had appropriated. During
fiscal years 1997- 2001, the Navy exceeded its appropriated budget by more
than $121 million; the Air Force, by $70 million; and the Army, by about
$49 million. However, these services pay 50 percent of their bonuses up
front as initial payments and pay the remaining 50 percent in annual
installments over the reenlistment period. Consequently, they have to pay
an additional $240 million in anniversary payments in future years. This
means that the total cost of the over expenditures on initial payments
made during fiscal years 1997- 2001 could be as much as $480 million.

Although the Army, Navy, and Air Force have periodically reviewed their
programs during the fiscal year, they have made few adjustments to the
program to stay within their appropriated budgets. With the exception of
the Marine Corps, the services either do not establish goals for
improvement in critical specialties or manage their programs to stay
within the goals they have set. For example, while the Navy does establish
retention goals for specialties included in the program, it does not
prioritize its specialties and modify the bonuses, as needed, to stay
within those goals. For example, in fiscal year 2001, the Navy exceeded
its goals in 75 specialties by more than 110 percent. By exceeding its
goals in some occupations, the Navy may be neglecting other specialties
that could utilize increased bonuses to improve retention. For example, we
found 64 specialties that were below 90 percent of the retention goal for
fiscal year 2001. In 50 cases, the Navy reduced the multiples (12) or made
no change (38) for these specialties from fiscal year 2000.

During fiscal year 2002, the services experienced a strong recruiting and
retention year, which, according to service officials, caused the Army and
Navy to scale back or close their programs. The Army expected to exceed
its fiscal year 2002 program budget estimates by over $45 million and
Management of Selective

Reenlistment Bonus Program

Page 13 GAO- 03- 149 Reenlistment Bonus Program

closed its program 45 days prior to the end of the fiscal year. These
actions were taken after both services had exceeded their budgets for
fiscal year 2002. The Navy lowered the bonus amounts paid during fiscal
year 2002 after acknowledging that it would exceed its fiscal year 2002
appropriation if these actions were not taken. Starting in fiscal year
2001, the Marine Corps instituted a plan to close its program when the
budget limit was met. The Marine Corps closed its program in July 2002,
since the appropriated budget was met at that time.

According to some service officials, three key factors combined to cause
the services to increasingly rely on the Selective Reenlistment Bonus
Program to staff critical specialties during fiscal years 1997- 2001.
These factors were (1) the downsizing of the U. S. military forces during
the 1990s, (2) a decline in recruiting in the early to mid- 1990s, and (3)
fewer reenlistments during the late 1990s. The combination of these
factors, according to service officials, has contributed to growth in
costs during fiscal years 1997- 2002. According to the Congressional
Research Service, the shortfalls in recruiting and retention in fiscal
years 1998- 1999 were the first since fiscal 1979.

Regarding downsizing, the U. S. military substantially reduced its number
of active- duty military personnel after the end of the Cold War. During
fiscal years 1990- 1999, the number of active- duty enlisted personnel
declined from 1.7 million to 1.2 million* approximately 34 percent. Part
of this reduction in the military force was due to a reduction in the
services* recruiting goals. For example, DOD*s recruiting goals decreased
consistently from 229,172 in fiscal year 1990 to as low as 174, 806 in
fiscal 1995 before increasing again in the years following. One of the
intended purposes of reducing these goals was the desire to arrive at a
smaller force by decreasing new enlistments instead of forcing more
experienced personnel to leave the military. However, according to DOD
officials, fewer new enlistments in the mid- 1990s produced too few
enlisted personnel to meet the services* needs for mid- level personnel
(those with 5- 10 years of experience) in the late 1990s.

The services had varying degrees of success in achieving their higher
recruiting goals in the late 1990s. For example, in fiscal year 1999, the
Army failed to meet its goal* recruiting only 95 percent of its target.
The Navy and the Army also failed to meet their recruiting goals in fiscal
year 1998, recruiting 88 and 92 percent, respectively. These failures to
achieve recruiting goals were perceived by the services as a serious
problem because of its potential impact on the force structure. Factors
Influencing Growth

Page 14 GAO- 03- 149 Reenlistment Bonus Program

The services also experienced retention problems that coincided with the
recruiting shortfalls. While the Army achieved its reenlistment goals for
first- term and mid- career enlisted personnel, shortfalls occurred in the
career reenlistment term. For example, during fiscal years 1996- 1998, the
Army*s reenlistment rates for the eligible population decreased from 65.7
to 60.1 percent. First- term reenlistment rates for the Navy decreased
consistently during 1996- 1999 from a reenlistment rate of 32.9 percent of
the eligible population to 28.2 percent. Also, during fiscal years 1998-
2000, the Air Force did not meet its aggregate retention goal of 55
percent for first- term personnel, getting 54, 49, and 52 percent,
respectively.

DOD canceled the instruction containing criteria for the Selective
Reenlistment Bonus Program in 1995 and has not replaced it. According to
DOD officials, there were administrative impediments that involved the
recoupment of reenlistment bonuses from some servicemembers who leave the
military because of disciplinary actions initiated by DOD. These
administrative impediments were resolved in fiscal year 2002 and have
cleared the way for issuance of a new DOD instruction. Also, DOD has not
provided adequate oversight nor conducted the reviews over the program
that its directive, which is still in effect, requires. In the absence of
DOD criteria and oversight, the services have not been held accountable
for using any criteria to designate critical specialties or to report to
DOD how they select the specialties. As a result, the services have
expanded their programs to include specialties that may not be critical to
their missions. In addition, the DOD comptroller conducts only limited
reviews of the budgets the services submit for the program each year. As a
result, DOD has not assured that the increases in the services* Selective
Reenlistment Bonus Programs budgets each year were justified.

The Office of the Secretary of Defense has not followed the DOD directive
requiring it to establish guidance for the services to use in
administering the reenlistment bonus programs. According to the directive,
DOD is responsible for providing the services with guidance to ensure
proper program administration through an instruction on (1) establishing
criteria for designating the military skills eligible for bonuses, (2)
determining individual members* eligibility for awards, and (3)
establishing reporting and data requirements for the review and evaluation
of annual programs and individual requests for military skill
designations. Without this instruction, the services have not had clear
direction on how to manage their programs. DOD is currently updating the
instruction, and officials stated that they intend to issue it sometime
during 2003. DOD Has Not

Provided Adequate Guidance and Oversight

DOD Has Not Replaced Essential Program Guidance

Page 15 GAO- 03- 149 Reenlistment Bonus Program

The Office of the Secretary of Defense has provided only limited
oversight, which has resulted in little feedback to the services on the
administration of their selective reenlistment bonus programs. DOD has
conducted only one comprehensive review of the program (in 1991) to
determine the best use of resources. Currently, although the Office of the
Secretary of Defense is responsible for monitoring and conducting ongoing
oversight, it does not conduct detailed annual reviews of the program as
required by its directive. Furthermore, although DOD*s Comptroller
conducts periodic program reviews, these reviews are limited to the
services* budget submissions and their justification. In addition, the
comptroller*s recently initiated recruiting and retention hearings devote
only a small part of the meetings to reviewing each service*s Selective
Reenlistment Bonus Program.

The Office of the Secretary of Defense has not complied with its directive
that requires that the office conduct annual Selective Reenlistment Bonus
Program reviews. These reviews are intended to assess the services*
programs in conjunction with the annual program budget reviews and to
result in recommendations to the Secretary of Defense for measures
required to attain the most efficient use of resources. DOD acknowledged
that these reviews have not been conducted in recent years, but it is
currently taking steps to restart reviews of the services* programs and
told us that it plans to complete these reviews by March 2003. In
addition, DOD is required by directive to annually review the criteria
used to designate eligible military skills and to make any changes needed
to attain specific policy objectives. However, DOD has not conducted these
annual reviews. Moreover, it has not reviewed the services* processes for
establishing their reenlistment bonus programs.

The last comprehensive review of the program was conducted in 1991.
However, the services were not required to respond to the findings of the
1991 review and consequently did not take any action on the findings, and
DOD has not conducted any subsequent reviews of this nature. The 1991
review found that the program was generally well managed. However, the
review raised concerns about the general nature of the guidance provided
to the services and raised questions about 34 percent of the services*
specialties eligible for bonuses. In addition, the review noted that a
*balanced* application of all the criteria contained in DOD*s instruction
was needed to ensure that only critical specialties were selected. The
report specifically noted that staffing shortfalls alone were not
sufficient criteria to qualify an occupation for inclusion in the program.
While chronically undermanned, the report noted that musicians would not
be considered critical for the fulfillment of defense missions and thus
would DOD Oversight Has Been

Limited DOD Has Conducted No Comprehensive Program Review Since 1991

Page 16 GAO- 03- 149 Reenlistment Bonus Program

not receive a bonus. The report noted that none of the services, at that
time, provided selective reenlistment bonuses for musicians. However, the
Army is currently offering bonuses to some musician specialties on the
basis of chronic understaffing in those areas.

In a 1996 report, we raised similar concerns regarding the management and
oversight that DOD was providing the program with in, among other aspects,
determining which skill categories should receive bonuses. 2 In that
report, we noted that the Office of the Secretary of Defense had not
provided adequate guidance for and oversight of the Selective Reenlistment
Bonus Program. Additionally, we noted that its guidance to the services
for determining which specialties categories should receive bonuses was
too general in nature. As a result, each service used a different
procedure for identifying which specialty categories were to receive
retention bonuses. With regard to oversight, while DOD guidance required
detailed annual reviews of the specialty categories that the services
planned to include in their programs, DOD had not conducted these reviews.
Our report recommended that DOD (1) provide more explicit guidance
regarding the determination of shortage categories and eligibility for
bonuses and require the services to establish and document more specific
criteria for determining which skills will receive bonuses and (2) monitor
the services* adherence to this guidance. DOD took no action on our
recommendations, and the program has continued to grow unconstrained
since.

DOD*s Comptroller conducts limited annual reviews of the services* program
budget submissions. According to the analysts responsible for these
reviews, they review high- level program summaries that do not provide
insights into the details of how the program is run. They essentially
review the services* budget estimates and a small sampling of specialties
that the services represent as their top retention- critical specialties.
We found that these reviews were limited because of the small number of
skills considered by the review, and we questioned some specialties that
the services included in their top retention- critical specialties. We
found some specialties that had appeared on the services* lists for
several years were not receiving the highest bonuses. For example, the
Navy listed the service occupation of Cryptologic Technician

2 See U. S. General Accounting Office, Retention Bonuses: More Direction
and Oversight Needed, GAO/ NSIAD- 96- 42 (Washington, D. C.: Nov. 24,
1995). Comptroller Conducts Limited

Review of Program Budget Requests

Page 17 GAO- 03- 149 Reenlistment Bonus Program

(Collection) 3 as being critically undermanned during fiscal years 1997-
2002. However, the bonus multiplier for this specialty has not been higher
than 4. 5 during this time frame and was lowered to 4.0 in fiscal year
2001. During that year the Navy retained only 160, or 82 percent, of the
goal of 194 (out of 431 potential retainees) Cryptologic Technicians.

Because of the general nature of its reviews, the DOD Comptroller*s
analysts did not identify inaccuracies in the services* budget estimates
because of the general nature of their reviews. For example, in two
instances, the services overestimated the amount of their anniversary
payments and used the additional funds to make initial payments. For
example, in fiscal year 2001, the Army overestimated its anniversary
payments by $9 million. In fiscal year 2002, the Air Force overestimated
its anniversary payments by approximately $17 million. According to
service officials, these estimates are easy to calculate; since they are
obligations incurred from the previous years* bonus programs and are known
amounts. These unbudgeted initial payments also resulted in an additional
obligation of $26 million that must be paid in future years, since these
services pay 50 percent of their bonuses up front and must pay the
remaining 50 percent over the reenlistment period (a total of $52
million).

The Selective Reenlistment Bonus Program was intended to help the services
meet short- term retention problems in selected critical specialties.
Instead, the services have broadened the number of specialties included in
the program by not using all of their criteria to selectively target
critical specialties. As a result, the number of eligible specialties and
the corresponding number of enlisted personnel included in the program
have increased significantly. The growth in the number of eligible
specialties and enlisted personnel who receive reenlistment bonuses may
well continue if actions are not taken to constrain this expansion.
Actions that may constrain the program*s growth include requiring the
services* to adhere to criteria they have already established for
selecting critical specialties and by DOD*s issuing an instruction
governing the operation of the program. While several factors influenced
the program*s growth in

3 Cryptologic Technicians perform a variety of duties at numerous overseas
and stateside shore commands; aboard surface ships; and, to a limited
degree, aboard aircraft and submarines. Duties include performing the
collection and analysis of state- of- the- art communication signals using
sophisticated high- powered computers, specialized computer- assisted
communications equipment, video display terminals, and electronic/
magnetic recorders. Conclusions

Page 18 GAO- 03- 149 Reenlistment Bonus Program

recent years, it is likely that the impact of these factors could have
been mitigated if DOD had replaced the canceled instruction and had
exercised appropriate oversight. Without an instruction to guide the
services, DOD cannot be sure that the program is being implemented as
intended and that adequate internal controls are in place to govern the
operations of the services* programs. Without clear DOD guidance and
oversight, managing the program and justifying its growth are difficult.
In 1996, we raised concerns about the lack of oversight that DOD was
providing the program in, among other aspects, determining which skill
categories should receive bonuses. The Office of the Secretary of Defense
could have exercised more effective controls over the services* management
of their programs, had it followed our recommendations to provide
appropriate guidance and more active oversight.

In the absence of a DOD instruction governing the services* implementation
of the program, we recommend that the Secretary of Defense require the
services to do the following:

 Apply all the criteria they have established for selecting critical
specialties under their Selective Reenlistment Bonus Programs. In the case
of the Army, criteria should be established for selecting critical
specialties.  Manage their programs to stay within their appropriations
or, if

circumstances require, provide the Office of the Secretary of Defense with
adequate justification for increased expenditures over appropriated
amounts.

To improve DOD*s oversight and the services* management of the Selective
Reenlistment Bonus Program, we recommend that the Secretary of Defense
require that the Undersecretary for Personnel and Readiness

 issue an instruction that provides the services with guidance for
administering and selecting specialties for inclusion in their programs
and  conduct annual reviews of the Selective Reenlistment Bonus Program
as

required by DOD*s directive. DOD provided official comments on a draft of
this report. DOD did not agree with the report*s conclusion that the
Department cannot be sure that the Selective Reenlistment Bonus Programs
are being implemented as intended. While DOD stated that program controls
are in place to ensure a reasonable balance between oversight and
execution, we found that fundamental management controls were not in
place. For example, DOD Recommendations for

Executive Action Agency Comments and Our Evaluation

Page 19 GAO- 03- 149 Reenlistment Bonus Program

canceled the key instruction that provides the services with essential
guidance for administering their programs 7 years ago and has not replaced
it. Also, the comptroller*s budget reviews of the services* programs were
limited and, in some cases, were not effectively performed. Furthermore,
these budget reviews were never intended to provide detailed programmatic
oversight. Office of the Secretary of Defense officials told us that
detailed programmatic reviews required by DOD*s directive had not been
conducted since 1991. Consequently, without these essential management
controls, it is not clear how the Department can be sure that the program
is being implemented as intended.

DOD concurred or partially concurred with our recommendations. Our
evaluation of DOD*s comments on these recommendations follows:

DOD concurred with our recommendation to issue an instruction that
provides the services with guidance for administering their programs. The
Department stated that it has drafted and is staffing a new DOD
Instruction 1304.22 that will govern the procedures for administering the
program.

DOD partially concurred with our recommendation that the Secretary of
Defense require the services to apply all the criteria they have
established for selecting specialties under their Selective Reenlistment
Bonus Programs. DOD stated that its criteria are sound and that the
services* processes are balanced. As we noted in our report, the
Department*s instruction that was canceled required a balanced application
of five criteria. We found that the services do not always apply their
criteria in a balanced fashion. DOD also stated that, although the Army
does not have a regulation governing its Selective Reenlistment Bonus
Program, the criteria it uses are sound. However, we found that the Army*s
criteria are not clearly defined. Therefore, it is difficult to determine
whether the criteria are being applied in a balanced fashion. Not using
all the criteria allows the number of specialties included in the program
to expand with a corresponding increase in reenlistments. For example, the
number of Army reenlistments with bonuses more than doubled from
approximately 7,000 in fiscal year 1997 to over 17,000 in fiscal 2001. DOD
also stated that it does not use the program to address aggregate end-
strength goals. We did not intend to infer that the program is being used
to meet aggregate end- strength goals. We removed the discussion of the
services use of the program to meet aggregate end- strength goals from the
report.

DOD partially concurred with our recommendation that the services manage
their programs to stay within their appropriations or, if

Page 20 GAO- 03- 149 Reenlistment Bonus Program

circumstances require, provide the Office of the Secretary of Defense with
adequate justification for increased expenditures over appropriated
amounts. DOD stated that, in general, it did not concur with an imposition
of new centralized control over the services* budget execution.
Furthermore, DOD stated its concern that the services need to be able to
respond to changes in external factors during the 2 years between budget
submission and program execution. However, as our report points out, DOD
has repeatedly exceeded its appropriations during the last 5 fiscal years.
For example, during fiscal years 1997- 2001, the services spent over $240
million above their appropriations. Better program oversight and
management by DOD would have required the services to justify exceeding
their appropriations during this 5- year period. We do not believe that
more accountability for budget execution will diminish the services*
ability to respond to changing operational needs.

DOD partially concurred with our recommendation that the Office of the
Secretary of Defense conduct annual reviews of the Selective Reenlistment
Bonus Program. DOD cited the annual reviews conducted by DOD*s Comptroller
as an example of routine program reviews. However, as we have previously
noted, these reviews are limited to the services* budget submissions and
justification. And, only a small sample of occupations are included in the
budget submission. DOD also stated that part of the budget process
includes reviews by the Office of Management and Budget. However, Office
of Management and Budget officials told us that their reviews are limited
and do not constitute a detailed assessment of the services* programs.
DOD*s response also stated that its annual defense report will provide a
listing of DOD- critical skills and other pertinent information. However,
this listing will not represent a detailed programmatic review. DOD*s
Annual Defense Report is an overarching representation of all DOD programs
and does not permit the level of detailed information required to fully
assess the Selective Reenlistment Bonus Program.

We continue to believe that our recommendations have merit and have made
no adjustments to them. During the course of our review, the House
Appropriations Committee directed the Secretary of Defense to report on
several aspects of the Selective Reenlistment Bonus Program and to provide
the Committee with that report by March 31, 2003. It also directed us to
review and assess that report and report back to the Committee by June 1,
2003.

Page 21 GAO- 03- 149 Reenlistment Bonus Program

DOD*s comments appear in their entirety in appendix IV. DOD also provided
technical comments, which we incorporated into the report as appropriate.

We are sending copies of this report to interested congressional
committees; the Secretaries of Defense and the Army, Navy, and Air Force;
the Commandant of the Marine Corps; and the Director, Office of Management
and Budget. We will send copies to other interested parties upon request.
In addition, the report will be available at no charge on the GAO Web site
at http:// www. gao. gov.

Please contact me at (202) 512- 5559 if you or your staff have any
questions regarding this report. Key contributors to this report were
Donald Snyder, Kurt Burgeson, James Driggins, Marjorie Pratt, Brian James,
Jane Hunt, Earl Williams, and Maria- Alaina Rambus.

Derek B. Stewart Director, Defense Capabilities and Management

Appendix I: Scope and Methodology Page 22 GAO- 03- 149 Reenlistment Bonus
Program

To determine the extent to which the services followed their Selective
Reenlistment Bonus Program*s management criteria, we reviewed their
criteria and other documentation of overall program development and
execution. We examined the retention rates as reported by the services as
well as prepared program expenditure and growth trends. We then reviewed
the services* reported contributing program growth factors: (1) budgetary
changes, (2) the effects of downsizing initiated in the early 1990s, and
(3) changes in the recruiting and retention climate during the 1990s. We
also attended one of the Department of Defense (DOD) Comptroller*s
quarterly services* recruiting and retention briefings in addition to
reviewing materials from previous briefings.

To determine how the selective reenlistment bonus program has been used to
address retention problems in specialties of most concern to the services,
we reviewed the critical specialties they identified in the selective
reenlistment bonus sections of their budget justification books. 1 Since
the Air Force did not report its top critical retention occupations in its
justification books, we examined the critical occupations listed by the
Army, Navy, and Marine Corps for fiscal year 1998 (fiscal year 1999 for
the Army) to 2003. More specifically, we identified specialties that
appeared on the services* lists for 3 or more years. We then reviewed the
history of the bonus multiples that the services applied to these
occupations to determine how they were used to address the retention
problems in those occupations.

To identify trends in the programs budget, we compared the services*
budget requests with their actual budget expenditures for fiscal years
1997* 2002. As part of this trend analysis, we reviewed both the initial
and anniversary payments made during each of the fiscal years and
projected them into the future. We also reviewed congressional actions
that took place during this time period. We also conducted trend analyses
of the number of reenlistees receiving bonuses, changes in the occupations
eligible for bonuses, and changes in the average bonus amounts. We were
unable to measure the impact of pay increases on the average bonus amounts
during this time frame because the multiples used to calculate the bonuses
varied from year to year.

1 Budget justification books are submitted to Congress each year in
support of the services* budget requests. Appendix I: Scope and
Methodology

Appendix I: Scope and Methodology Page 23 GAO- 03- 149 Reenlistment Bonus
Program

To assess whether DOD provided adequate program guidance and oversight, we
reviewed legislation and DOD directives and instructions governing the
program. In addition, we reviewed these materials and evaluated the extent
to which the program was meeting its intended purpose as defined by
Congress and DOD. We obtained and reviewed the guidance established by the
services for implementing their programs. We reviewed the criteria
contained within the services* guidance and assessed their adherence to
it.

We interviewed DOD and Selective Reenlistment Bonus Program officials and
reviewed their program oversight and guidance policies and procedures.
These interviews were conducted with officials in the Office of the Under
Secretary of Defense (Comptroller); Assistant Secretary of Defense (Force
Management Policy); Deputy Chief of Staff for Personnel* Army
(Professional Development); Deputy Chief of Staff, Personnel* Air Force
(Skills Management); Deputy Chief of Naval Operations (Manpower and
Personnel); Deputy Chief of Staff for Manpower and Reserve Affairs* Marine
Corps; and Deputy Chief of Staff for Programs and Resources* Marine Corps.
We also met with officials from the Office of Management and Budget. We
also reviewed our own published report, and data from the Office of the
Secretary of Defense, the Congressional Research Service, and RAND. We
also obtained data on bonus levels from DOD and the services, the numbers
of personnel reenlisting overall and within the program, critical skills,
and retention and recruitment data. We reviewed, but did not verify, the
accuracy of the data provided by DOD and the services.

Appendix II: How the Selective Reenlistment Bonuses Are Paid

Page 24 GAO- 03- 149 Reenlistment Bonus Program

The services use DOD*s Selective Reenlistment Bonus Program to help meet
their staffing requirements. The selective reenlistment bonus is designed
to offer an attractive reenlistment or extension incentive to improve
staffing in critical military specialties. 1 The active duty individuals
in the critical military specialties who reenlist or extend their
enlistments are to serve for the full period of the reenlistment or
extension contract.

Under the Selective Reenlistment Bonus Program, there are two methods of
bonus payments: (1) initial and/ or (2) anniversary. The initial payment
is the first installment paid to the individual when the individual
reenlists or begins serving the extension. The initial payment is either
50 percent of the total bonus or 100 percent of the total bonus, called
the *lump- sum payment.* Any remaining bonus is paid in equal annual
installments on the anniversary date for the remainder of the reenlistment
contract period.

The Office of the Secretary of Defense has established three eligibility
zones for the payment of selective reenlistment bonuses. These zones are
defined in terms of years of active- duty service. Zone A includes
reenlistments falling from 17 months to 6 years of active duty; zone B,
from 6 to 10 years; and zone C, from 10 to 14 years. The Selected
Reenlistment Bonus multiples are calculated for each of these three zones.
(See table 3.) Service members may receive only one selective reenlistment
bonus within any one zone and must reenlist or extend their reenlistments
for at least 3 years if they accept a bonus.

1 A military specialty is an element of the enlisted classification
structure that identifies an individual position or a group of closely
related positions on the basis of the duties involved. The term used to
designate a military specialty differs according to the military service
concerned, such as *military occupational specialty,* used by the Army and
Marine Corps; *Air Force specialty,* used by the Air Force; and *Navy
enlisted classification,* used by the Navy. Appendix II: How the Selective
Reenlistment

Bonuses Are Paid

Appendix II: How the Selective Reenlistment Bonuses Are Paid

Page 25 GAO- 03- 149 Reenlistment Bonus Program

Table 3: Eligibility for Zones A, B, and C under the Selective
Reenlistment Bonus Program

Calculated zone Eligibility characteristics

Zone A  Individual must have at least 17 months of continuous active duty
service (other than active duty for training as a reservist) but not more
than 6 years of active duty on the date of reenlistment.

 Individual must not have previously received a zone A selective
reenlistment bonus. Zone B  Individual must have completed at least 6 but
not more than

10 years of active service (including active duty for training as a
reservist) on the date of reenlistment.

 Individual must not have previously received a zone B selective
reenlistment bonus. Zone C  Individual must have completed at least 10
but not more

than 14 years of active service (including active duty for training as a
reservist) on the date of reenlistment.

 Individual must not have previously received a zone C selective
reenlistment bonus.

Source: DOD Financial Management Regulation Volume 7A, Chapter 9, Section
090201.

Appendix III: Growth of the Services* Selective Reenlistment Bonus
Programs and Initial Payments

Page 26 GAO- 03- 149 Reenlistment Bonus Program

This appendix describes the growth of the program in constant dollars and
growth in the services* initial payments during fiscal years 1997- 2002.

The services* budgets for the selective reenlistment bonus program have
grown during fiscal years 1990- 2001. During the military drawdown in the
early to mid- 1990*s, the cost of the program declined. During the period
from fiscal year 1996- 2002, the budgets of the services* programs grew
from $243 million to an estimated $790 million in constant (inflation
adjusted) dollars. Figure 2 displays the cost of the retention bonus
program in constant 2002 dollars during fiscal years 1990- 2002.

Figure 2: Cost of the Selective Reenlistment Bonus Program in Constant
2002 Dollars, Fiscal Years 1990- 2002

Appendix III: Growth of the Services* Selective Reenlistment Bonus
Programs and Initial Payments

Program Growth

Appendix III: Growth of the Services* Selective Reenlistment Bonus
Programs and Initial Payments

Page 27 GAO- 03- 149 Reenlistment Bonus Program

The Army*s Selective Reenlistment Bonus Program budget for initial
payments grew from $30 million to $72 million during fiscal years 1997-
2001. (See fig. 3.) During fiscal years 1997- 2001, the Army exceeded its
appropriated budget by approximately $49 million after taking into account
an additional $64 million that Congress added to the Army*s initial
payments budget over this period.

Figure 3: Army*s Selective Reenlistment Bonus Program*s Initial Payments,
Budget Request, and Reported Expenditures, Fiscal Years 1997- 2002

Growth in Initial Payments by the Services

Army

Appendix III: Growth of the Services* Selective Reenlistment Bonus
Programs and Initial Payments

Page 28 GAO- 03- 149 Reenlistment Bonus Program

The Navy, which recently has had the largest Selective Reenlistment Bonus
Program, also experienced budget growth in its initial payments from $78
million to $234 million during fiscal years 1997- 2001. (See fig. 4.)
During fiscal years 1997- 2001, the Navy exceeded its appropriated budget
by more than $121 million after taking into account an additional $44
million that Congress added to the Navy*s initial payments budget over
this period.

Figure 4: Navy*s Selective Reenlistment Bonus Program*s Initial Payments,
Budget Request, and Reported Expenditures, Fiscal Years 1997- 2002

Navy

Appendix III: Growth of the Services* Selective Reenlistment Bonus
Programs and Initial Payments

Page 29 GAO- 03- 149 Reenlistment Bonus Program

The Marine Corps, from fiscal year 1997 through 2002, had the smallest
Selective Reenlistment Bonus Program. The Marine Corps* program is also
unique because in fiscal year 2001, it began making lump- sum bonus
payments. This resulted in a significant increase in the program*s cost
for that year. During fiscal years 1997- 2000, the Marine Corps* program
budget for initial payments grew annually from $8 million to $25 million.
However, the transition to lump- sum payments in fiscal year 2001 caused
the Marine Corps* budget for new payments to exceed $46 million. (See fig.
5.)

Figure 5: Marine Corps* Selective Reenlistment Bonus Program*s Initial
Payments, Budget Request, and Reported Expenditures, Fiscal Years 1997-
2002

Marine Corps

Appendix III: Growth of the Services* Selective Reenlistment Bonus
Programs and Initial Payments

Page 30 GAO- 03- 149 Reenlistment Bonus Program

During fiscal years 1997- 2001, the Air Force*s reenlistment bonus budget
for initial payments grew from $13 million to $123 million, an 846-
percent increase. (See fig. 6.) During fiscal years 1997- 2001, the Air
Force exceeded its appropriated budget by more than $70 million after
taking into account an additional $57 million that Congress added to the
Air Force*s initial payments budget over this period.

Figure 6: Air Force*s Selective Reenlistment Bonus Program*s Initial
Payments, Budget Request, and Reported Expenditures, Fiscal Years 1997-
2002

Air Force

Appendix IV: Comments from the Department of Defense

Page 31 GAO- 03- 149 Reenlistment Bonus Program

Appendix IV: Comments from the Department of Defense

Appendix IV: Comments from the Department of Defense

Page 32 GAO- 03- 149 Reenlistment Bonus Program

Appendix IV: Comments from the Department of Defense

Page 33 GAO- 03- 149 Reenlistment Bonus Program

Appendix IV: Comments from the Department of Defense

Page 34 GAO- 03- 149 Reenlistment Bonus Program (350194)

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