    Military Personnel: DOD Needs Better Controls over Supplemental
    Life Insurance Solicitation Policies Involving Servicemembers
    (29-JUN-05, GAO-05-696).

    Servicemembers are engaged overseas in hostile actions that
    threaten their lives and possibly the future financial security
    of their families, should they die. To address their financial
    security needs, some servicemembers have purchased additional
    life insurance to supplement that offered by the government.
    Concerns have been raised, though, about solicitation violations,
    as well as problems in the system for setting up payroll
    allotments for such insurance. The Department of Defense (DOD)
    recently published a revised draft directive on solicitation but
    will not implement the directive until at least 90 days following
    this GAO report. GAO addressed three primary issues: (1) the
    extent to which DOD solicitation regulations are being violated;
    (2) the extent to which DOD personnel are adhering to allotment
    regulations for the purchase of supplemental life insurance; and
    (3) the extent to which the new directive addresses ongoing
    problems in supplemental life insurance solicitation policies.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-05-696
        ACCNO:   A28397
      TITLE:     Military Personnel: DOD Needs Better Controls over
    Supplemental Life Insurance Solicitation Policies Involving
    Servicemembers
         DATE:   06/29/2005
      SUBJECT:   Insurance regulation
    	     Life insurance
    	     Military personnel
    	     Military policies
    	     Policy evaluation
    	     Solicitations
    	     Allotment
    	     Policies and procedures

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    GAO-05-696

                     United States Government Accountability Office

                         GAO Report to Congressional Requesters

    June 2005

    MILITARY PERSONNEL

    DOD Needs Better Controls over Supplemental Life Insurance Solicitation Policies
                                Involving Servicemembers

                                           a

    GAO-05-696

    [IMG]

    June 2005

    MILITARY PERSONNEL

    DOD Needs Better Controls over Supplemental Life Insurance Solicitation Policies
    Involving Servicemembers

      What GAO Found

    DOD does not know the extent to which life insurance agents violate
    oninstallation commercial solicitation regulations and does not actively
    disseminate information on all confirmed violations to other parts of DOD
    or to state insurance regulators. GAO found that violations are occurring.
    For example, in responses to GAO's 2004 survey of personal financial
    management program managers, one-quarter said prohibited practices such as
    misleading sales presentations had occurred occasionally or routinely on
    their installations in the prior 12 months. Also, between October 2001 and
    October 2004, DOD revoked agents' on-installation solicitation approval at
    least 26 times. The reason DOD does not have complete data on violations
    is that it does not have adequate mechanisms for ensuring the systematic
    tracking of violations. The dissemination problem is attributable to a
    lack of oversight by the DOD policy office and an ambiguity in its
    guidance. DOD cannot develop an effective and efficient process for
    curbing violations without maintaining accurate data on the number, types,
    and severity of violations and disseminating confirmed violation data to
    relevant parties.

    DOD cannot determine the extent to which DOD personnel adhere to allotment
    regulations because of problems with DOD's payroll databases and the
    different ways in which regulations are implemented. DOD's Financial
    Management Regulations, among other things, restrict who can submit an
    allotment form for supplemental life insurance. GAO could not determine
    the number of servicemembers with supplemental life insurance allotments
    due to database limitations, such as all insurance allotments (for
    example, for life and automobile) sharing the same code. Contrary to
    regulations, GAO found finance personnel accepting allotment forms without
    confirming they came from authorized sources. Some said they did this to
    ensure that policies started promptly. Database problems limit DOD's
    visibility over prohibited practices, such as those for group solicitation
    and the acceptance of allotment forms without proper authorization. In
    addition, GAO could not substantiate the assertion that servicemembers are
    prevented from using allotments to purchase supplemental life insurance
    and has identified reasons why this is probably not a widespread problem.

    DOD's revised directive on commercial insurance solicitation practices on
    DOD installations adds new requirements, but does not fully address
    oversight deficiencies. The revised directive will incorporate the interim
    policy and practices now in place and, to partially address the problems
    cited above, will add requirements for gathering and disseminating
    information on confirmed violations. Those requirements, however, will
    focus on banned agents only, rather than all confirmed violations. The
    result will be DOD's continuing inability to identify the number, types,
    and severity of all violations, or to recognize patterns of violations.
    The directive will also add requirements that installation commanders
    inquire into alleged violations of the solicitation regulation.

    United States Government Accountability Office

    Contents

      Letter

    Results in Brief
    Background
    DOD Does Not Know the Extent of Solicitation Violations and Does

    Not Disseminate Information on All Confirmed Violations

    Data on Payroll Allotments for Supplemental Life Insurance Unreliable and
    Procedures for Submitting Such Allotments Are Not Always Being Followed

    DOD's Revised Directive Adds New Requirements, but Does Not

    Fully Address Oversight Deficiencies Conclusions Recommendations for
    Executive Action Agency Comments and Our Evaluation

    1 5 7

    12

    23

    32 36 37 39

    Appendixes

            Appendix I: Scope and Methodology 45 Appendix II: Details on Selected
               Recent In-Depth Investigations 50 Appendix III: Allotment Forms 58
          Appendix IV: Comments from the Department of Defense 60 Appendix V: GAO
                                             Contact and Staff Acknowledgments 65

      Related GAO Products

    Tables         Table 1: 14 Practices Prohibited by the DOD Directive on
                                                                      Personal
                        Commercial Solicitation on DOD Installations            9
                    Table 2: Locations and Years That Commanders Banned Agents
                             from an Installation-October 2001 through October
                                            2004                               16
               Table 3: Installations in the United States where GAO Conducted
                           Site Visits from July to December 2004              46
    Figures Figure 1: Personal Financial Management Program Managers'
               Perceptions of the Frequency with Which Selected
                              Solicitation Prohibitions Were Violated on Their
                               Installation from January through December 2004 14

    Contents

    Figure 2:	States Where Installation Commanders Banned Agents from October
    2001 through October 2004, States Reporting Ongoing Investigations of
    Supplemental Life Insurance Solicitation to Servicemembers in December
    2004, and the Number of Active Duty Servicemembers in the States

    Abbreviations

    DFAS Defense Finance and Accounting Service
    DOD Department of Defense
    DODIG Department of Defense Inspector General
    SGLI Servicemembers' Group Life Insurance

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    A

    United States Government Accountability Office Washington, D.C. 20548

    June 29, 2005

    Congressional Requesters

    Military personnel are engaged overseas in hostile actions that threaten
    their lives and possibly the future financial security of their families,
    should they die. As a result, some servicemembers purchase additional life
    insurance to supplement the benefits available through the
    governmentoffered Servicemembers' Group Life Insurance (SGLI) and other
    programs. In July 2004, we reported on the lump sum benefits and annuities
    available to servicemembers' survivors as well as the survivors of
    personnel employed by federal, state, and large municipal governments.1
    Recently, legislation was enacted to increase the maximum SGLI coverage to
    $400,000 and the death gratuity payment from $12,420 to $100,000.2 With
    the enactment of this legislation, the number of policies and amounts of
    supplemental life insurance sold to servicemembers could change from
    current levels.

    The Department of Defense (DOD) and the services have regulations to
    govern on-installation solicitation for supplemental life insurance, as
    well as other types of commercial products. Among other things, an
    installation must approve agents before they are allowed to solicit, and
    the agents must agree to abide by regulations that include prohibitions of
    14 types of practices. Violation of the regulations can result in the
    denial, suspension, or revocation of agents' or companies' approvals to
    solicit on the installation. Hereafter such agents are referred to as
    banned agents.

    Servicemembers who elect to supplement SGLI's coverage may purchase their
    additional coverage using payroll allotments or other types of payments
    such as checks or electronic transfers from checking or savings accounts.
    An important feature of the allotment process is a DOD-wide regulation
    that requires either the servicemembers or their representatives

    1 See GAO, Military Personnel: Survivor Benefits for Servicemembers and
    Federal, State, and City Government Employees, GAO-04-814 (Washington,
    D.C.: July 15, 2004). Additional information on the benefits provided to
    survivors of deceased servicemembers is available in Congressional
    Research Service, Military Death Benefits: Status and Proposals, RL32769
    (Washington, D.C.: Feb. 16, 2005).

    2 Emergency Supplemental Appropriations Act for Defense, the Global War on
    Terror, and Tsunami Relief, for the Fiscal Year Ending September 30, 2005,
    Pub. L. No. 109-13, sec. 10121013 (May 11, 2005).

    with a special power of attorney to submit the allotment form for
    supplemental life insurance.

    Some servicemembers have reported experiencing problems when purchasing
    supplemental life insurance. For example, a soldier described misleading
    sales presentations and other concerns during congressional hearings in
    2004. Similarly, DOD reports in 1999 and 2000 cited problems that included
    deceptive sales practices, violations of DOD policies regarding
    on-installation insurance solicitation, ineffective state insurance
    regulation programs, and inadequate safeguards in the allotment system
    used to pay for the supplemental life insurance.3 Negative effects
    associated with activities such as misleading sales presentations could
    include servicemembers' purchasing a product that either can be bought
    elsewhere more cheaply or does not meet their life insurance needs.

    Recently, a different type of life insurance-related concern has also been
    voiced. Some life insurance officials have asserted that servicemembers'
    chains of command have prevented personnel who wanted additional life
    insurance from actually purchasing it when they attempted to set up a
    payroll allotment.4 If servicemembers who truly want supplemental life
    insurance are prevented from obtaining it, they may have less than their
    desired level of coverage.

    The Office of the Under Secretary of Defense for Personnel and Readiness
    is responsible for developing the policies and procedures governing
    personal commercial solicitation; and the heads of DOD components, or
    their designees, are responsible for ensuring implementation of the
    regulations and compliance with their provisions. The Defense Finance and
    Accounting Service (DFAS) oversees the financial management regulations
    and the payroll computer systems and databases.

    3 See Final Report: Insurance Solicitation Practices on Department of
    Defense Installations (May 15, 2000), and DOD Office of the Inspector
    General, Commercial Life Insurance Sales Procedures in DOD, Report No.
    99-106 (Arlington, Va.: Mar. 10, 1999).

    4 See, for example, Amy Klamper, "Life Insurance for Troops in Iraq
    Nixed," National Journal (Apr. 3, 2004).

    In response to earlier problems and recommendations for change, the Office
    of Morale, Welfare, and Recreation Policy-within the Office of the Under
    Secretary of Defense for Personnel and Readiness-has been revising the DOD
    directive that governs the marketing and sale of life insurance and other
    commercial products on DOD installations.5 The Department of Defense
    Appropriations Act for Fiscal Year 2005 contained provisions indicating
    that the revised directive cannot be implemented until at least 90 days
    after we issue the present report.

    As agreed with your offices, this report addresses three issues: (1) the
    extent to which agents are violating DOD's policies governing the
    solicitation of supplemental life insurance to active duty servicemembers
    on domestic installations; (2) the extent to which DOD personnel are
    adhering to regulations that govern how active duty servicemembers
    establish payroll allotments to purchase supplemental life insurance; and
    (3) the extent to which the new directive addresses ongoing problems in
    supplemental life insurance solicitation policies.

    5 DOD Directive 1344.7, Personal Commercial Solicitation on DOD
    Installations (Feb. 13, 1986).

    In conducting this review, we limited the scope of our work to
    supplemental life insurance solicitations occurring on installations in
    the United States and to active duty servicemembers.6 Additional emphasis
    was given to findings pertaining to junior enlisted servicemembers because
    DOD and insurance officials have indicated that this subgroup is more
    likely to encounter problems with the marketing and sale of supplemental
    life insurance as well as with establishing payroll allotments for such
    purchases. Numerous methods were used to gather and assess information for
    this review. We examined DOD, service, and selected installation policies
    on personal commercial solicitation on installations and the establishment
    of allotments for supplemental life insurance, as well as oversight
    management principles identified in the Government Performance and Results
    Act of 1993.7 We also reviewed GAO, DOD, life insurance industry, and
    other reports. We interviewed officials from DOD, life insurance companies
    and associations, and other organizations such as the Consumer Federation
    of America to identify the many perspectives on the issues being studied.
    In conjunction with our work on another report, we sent a survey to all
    175 managers of DOD's personal financial management programs on
    installations in the United States.8 We also surveyed the insurance
    commissioners for the 50 states, the District of Columbia, and four
    territories: American Samoa, Guam, Puerto Rico, and the Virgin Islands. In
    addition, we interviewed personnel from the state insurance commissioner's
    office for 4 of the 6 states in which we conducted site visits to military
    installations, as well as personnel from the state insurance
    commissioner's office in Georgia. We also asked insurance companies and
    two national insurance associations to identify agents and company
    representatives who could be interviewed about solicitation and allotment
    practices at locations near the six installations we visited.

    During our six site visits, we requested materials related to the
    marketing and sale of supplemental life insurance and the establishment of
    allotments for that purpose. Those materials included a list of life
    insurance agents approved for on-installation solicitation, handouts
    distributed to assist servicemembers in determining their need for
    supplemental life insurance,

    6 An ongoing GAO effort is examining the characteristics of the commercial
    products being marketed to servicemembers and the regulation of those
    products.

    7 Pub. L. No. 103-62 (Aug. 3, 1993).

    8 See GAO, Military Personnel: More DOD Actions Needed to Address
    Servicemembers' Personal Financial Management Issues, GAO-05-348
    (Washington, D.C.: Apr. 26, 2005).

    documentation of violations of personal commercial solicitation and
    insurance-related policies, and complaints related to insurance
    solicitation and allotment processing. While on site visits, we conducted
    interviews or focus groups with installation leaders; the coordinator for
    the installation's personal commercial solicitation program;
    servicemembers; legal assistance attorneys from the Judge Advocate General
    corps; finance department personnel who managed and processed allotments;
    family support center staff responsible for personal financial management
    training and counseling activities; staff from morale, welfare, and
    recreation; and representatives of on-installation banks and credit
    unions. We observed the methods used to process and enter allotments for
    supplemental life insurance into the pay system. We assessed the
    reliability of allotment databases, and we later note in this report,
    limitations associated with the databases that prevented us from
    accurately estimating the number of allotments or amount of payments for
    supplemental life insurance. We performed our work from May 2004 through
    May 2005 in accordance with generally accepted governmental auditing
    standards. Additional information on our scope and methodology can be
    found in appendix I.

    Results in Brief	DOD does not know the extent to which agents are
    violating DOD's regulations governing the solicitation of supplemental
    life insurance to active duty servicemembers on installations in the
    United States and does not actively disseminate information on all
    confirmed violations to other interested parties. DOD had not collected
    information on the number, types, and severity of violations. Data from
    our survey of all DOD personal financial program managers on domestic
    installations, our interviews conducted on six installations, and cases
    where life insurance agents had been banned from installations indicate
    that solicitation violations are occurring. In response to our 2004
    survey, at least one-quarter of financial program managers responding to
    our survey indicated that five types of prohibited life insurance
    practices (such as providing misleading sales presentations) occasionally
    or routinely occurred on their installation during the preceding 12
    months. Also, at least 26 cases of banning agents for violations occurred
    between October 2001 and October 2004. Prior to our request for DOD to
    determine the number of enforcement actions when agents had been banned,
    DOD had not actively disseminated violation information to other parts of
    DOD or to state regulators. The absence of evaluative and reporting
    requirements in DOD's solicitation directive contributed to DOD's failure
    to assemble and disseminate such data. Failure to gather comprehensive
    information on all violators and

    disseminate it to all parts of DOD and appropriate state regulators limits
    the military's ability to effectively and efficiently identify problem
    agents or companies as well as patterns of violations.

    DOD cannot determine the extent to which DOD personnel adhere to allotment
    regulations because of problems with DOD's payroll databases and the
    different ways regulations are implemented. Database constraints prevented
    us from determining the number of servicemembers using supplemental life
    insurance allotments or the amount of money being paid to companies. We
    were unable to develop reliable estimates because of database quality
    concerns that we have previously documented as well as problems with the
    allotment forms. These problems limit the visibility that DOD and the
    installations have over the perceived need by servicemembers for
    supplemental life insurance. Second, contrary to DFAS regulations, some
    finance personnel have accepted forms to start the allotments without
    verifying that the person submitting the form was authorized to do so.
    Finance personnel said they do so to ensure that policies start promptly,
    but starting allotments without servicemembers' awareness can negatively
    affect members' finances and their unit's morale and readiness. The DOD
    solicitation directive discusses a 7-day "cooling-off" period between when
    E1s, E2s, and E3s sign a supplemental life insurance application and when
    finance personnel certify the allotment. But ambiguity in the requirement
    and the use of generic allotment forms can result in inconsistent
    enforcement of this requirement. Finally, some insurance officials
    maintain that chains of command prevent servicemembers from purchasing
    life insurance by not processing their allotments. We were unable to
    substantiate that assertion, based on our inability to obtain sufficient
    participation in our servicemember focus groups. Servicemembers may have
    decided not to purchase a particular policy for other reasons such as
    buyer's remorse or finding a more economically priced policy.

    DOD's revised directive on personal commercial solicitation on DOD
    installations adds new requirements, but does not fully address oversight
    problems. The draft directive incorporates existing interim guidance on
    financial education and current procedures pertaining to advertising and
    commercial sponsorship by solicitors. The draft directive also adds new
    requirements for gathering and disseminating data on solicitation
    violations, including maintaining a list of banned agents and
    disseminating such information to state regulators. However, the focus of
    the new requirements is on banned agents only. As was noted earlier,
    however, gathering and disseminating only the information concerning
    violations severe enough to cause the banning of agents will prevent DOD
    from

    identifying the number, types, and severity of all confirmed violations,
    or to recognize patterns of violations. The proposed new requirements also
    include having installation commanders inquire into any alleged violations
    of the solicitation regulation, and having insurance agents provide
    servicemembers with a DOD-wide questionnaire to evaluate their
    solicitation experience. The installation commander's inquiries could
    improve DOD's oversight of solicitation violations if an additional
    requirement existed for reporting all confirmed violations to higher-level
    commands. The questionnaire may be of limited value because it documents
    interactions that were not described as problems during our site
    visits-that is, insurance agents complying with requirements by soliciting
    in one-on-one prearranged appointments with servicemembers. An additional
    change in the directive, requiring insurance agents to clearly identify
    insurance products, could result in servicemembers' having better
    information for making decisions on purchasing supplemental life
    insurance.

    We are making five recommendations to improve DOD's policies and practices
    regarding supplemental life insurance solicitation on bases in the United
    States and the allotment process to purchase such products. Our
    recommendations pertain to enhancements to oversight requirements for
    evaluation and reporting violations, clarifications of ambiguous
    requirements, and improvements to the procedures used for allotments to
    purchase supplemental life insurance. In commenting on a draft of this
    report, DOD concurred with our recommendations.

    Background	DOD's directive on personal commercial solicitation establishes
    the policies and practices governing supplemental life insurance sales on
    installations in the United States and overseas.9 Each service provides
    additional policies and practices regarding on-installation commercial
    solicitation, and some installations further specify how these DOD and
    service policies and practices will be implemented locally.10 Importantly,
    DOD and the service policies do not cover supplemental life insurance

    9 DOD Directive 1344.7, Personal Commercial Solicitation on DOD
    Installations (Feb. 13, 1986).

    10 Army Regulation 210.7, Commercial Solicitation on Army Installations
    (Apr. 22, 1986); Secretary of the Navy Instruction 1740.2D, Solicitation
    and Conduct of Personal Commercial Affairs (Apr. 27, 1987) for the Navy
    and the Marine Corps; and Air Force Policy Directive 36-29, Military
    Standards (June 1, 1996).

    solicitation that occurs off an installation. For example, servicemembers
    can obtain life insurance through the Internet or from companies that
    advertise in private-sector publications aimed at military personnel.
    Also, some life insurance agents might sell supplemental life insurance
    off the installation after (1) the agents initially generated leads on
    potential customers through on-installation efforts such as sponsorship of
    morale, welfare, and recreation events; or (2) other types of initial
    contacts that include offering servicemembers a free meal at a local
    restaurant.

    Although the steps used to obtain permission to solicit on an installation
    may vary, the DOD directive notes that solicitors must meet the following
    requirements: be duly licensed, have the permission of the installation
    commander, and have made a specific appointment with a servicemember and
    conduct it in family quarters or other areas designated by the
    installation commander. The supplemental life insurance products offered
    on installations in the United States must comply with the insurance laws
    for the applicable state, contain no restrictions by reason of military
    service or occupation unless the restrictions are clearly stated on the
    face of the contract, plainly indicate any extra premium charges if they
    are imposed for reasons of military service or occupation, and contain no
    variation in the amount of death benefit or premium based on the length of
    time the contract has been in force unless the variations are clearly
    described therein.

    In addition to specifying requirements for the solicitors and the life
    insurance products, the DOD directive identifies the 14 prohibited
    practices, shown in table 1.11 Committing any of the prohibited practices
    can result in an agent or an agent's affiliated insurance company being
    banned. Among the other grounds for banning agents are failure to be duly
    licensed to sell insurance products under applicable federal, state, or
    local municipal laws; personal misconduct while on the installation;
    possession or attempted possession of allotment forms or their
    facsimiles;12 and substantiated complaints or adverse reports regarding
    goods or services and the manner in which they are offered.

    11 DOD Directive 1344.7, sec. 6.4.

    12 DOD Directive 1344.7, sec. 6.5. This DOD directive authorizes an
    installation commander to deny or revoke permission to an insurance agent
    or affiliated insurance company in possession of or attempting to possess
    allotment forms or their facsimiles to solicit on military installations.

    Table 1: 14 Practices Prohibited by the DOD Directive on Personal
    Commercial Solicitation on DOD Installations

                                  Prohibited Practices

    Solicitation of recruits, trainees, and transient personnel in a mass or captive
                                       audience.

    Making appointments with or soliciting military personnel who are in
    on-duty status.

    Soliciting without appointment in areas utilized for housing or processing
    of transient personnel, barracks areas used as quarters, unit areas,
    family quarters, and areas provided by installation commanders for
    appointed interviews.

    se of official identification cards by retired or reserve members of the
    military services to gain access to installations for the purpose of
    soliciting.

    UProcuring, attempting to procure, or supplying roster listings of DOD
    personnel for commercial solicitation purposes.

    Offering unfair, improper, and deceptive inducements to purchase or trade.

    Using rebates to facilitate transactions or to eliminate competition.

    Using manipulative, deceptive, or fraudulent devices, schemes, or
    artifices, including misleading advertising and sales literature.

    Using oral or written representations to suggest or give the appearance
    that DOD sponsors or endorses any particular company, its agents, or the
    goods, services, and commodities it sells.

    Full-time DOD personnel making personal commercial solicitations or sales
    to DOD personnel who are junior in rank or grade.

                   Entering into any unauthorized or restricted area.

    Using any portion of installation facilities, including quarters, as a
    showroom or store for the sales of goods and services, unless otherwise
    authorized.

    Using any portion of installation facilities, including quarters, as a
    showroom or store for the sales of goods and services, unless otherwise
    authorized.

    Advertising addresses or telephone numbers of commercial sales activities
    conducted on the installation, except authorized activities conducted by
    family members of military families residing in military housing.

                             Source: DOD Directive 1344.7.

    During the past decade, DOD issued two reports that addressed problems
    with on-installation supplemental life insurance solicitation. In March
    1999, the DOD Inspector General (DODIG) found that improper solicitation
    practices occurred at all 11 of the sampled installations.13 The improper
    practices included presentations by unauthorized personnel, presentations
    to captive audiences, solicitation during duty hours, solicitation in the
    barracks, and subjecting servicemembers to sales pressure and misleading
    sales presentations. The DODIG noted that the personal commercial
    solicitation directive was adequate but that additional controls were
    needed to administer and enforce the solicitation process. Among other
    things, the DODIG suggested there was a need for improved oversight at the
    installation level, stricter enforcement procedures when improper
    solicitation practices are substantiated, and additional interface with
    state regulatory authorities. In May 2000, a report commissioned by the
    Office of the Under Secretary of Defense for Personnel and Readiness
    reviewed insurance solicitation practices on DOD installations and
    identified many of the same concerns and recommendations contained in the
    DODIG report.14 In September 2000, DOD's Office of Force Management Policy
    established an insurance solicitation oversight working group to develop a
    strategy for eliminating prohibited life insurance solicitation practices
    on DOD installations. The working group's recommended improvements were
    included in a draft revision of the directive on personal commercial
    solicitation, and this draft revision was published for public comment in
    August 2003.

    An important step in purchasing supplemental life insurance is making the
    arrangement to pay for it. Some servicemembers pay for the insurance with
    a payroll allotment,15 a process that is governed by the DOD's Financial
    Management Regulation and individual service policies and is under the
    responsibility of DFAS. While the process for starting an allotment for
    supplemental life insurance varies across services and installations, it
    can be summarized in three steps:

    13 See DODIG, Report No. 99-106.

    14 See Final Report: Insurance Solicitation Practices on Department of
    Defense Installations.

    15 DOD, Financial Management Regulation 7000.14-R, Vol. 7A, Definitions,
    page xliv, indicates that an allotment is the definite portion of the pay
    and allowance of a person in the military service, which DFAS is
    authorized to pay directly to a person or an institution.

    1.	Servicemembers or their representatives with a special power of
    attorney complete an allotment form and submit it either directly to the
    installation finance office or to the finance office through the
    servicemembers' unit administrative office.

    2.	The installation finance office processes the allotment requests and
    electronically submits them to DFAS.

    3.	The first monthly payments are made to vendors more than a month after
    the forms are submitted, because the processing of the allotment requests
    takes time and the once-a-month payments result in the need to wait for
    half of the payments to be taken out of each of the servicemembers' next
    two payroll deposits.

    The allotments for all types of commercial insurance are supposed to be
    coded as an AI discretionary allotment when they are entered into a DFAS
    database.16 The procedure for purchasing SGLI with an allotment is
    different from that used to purchase private supplemental life insurance
    with an allotment. One reason is active duty servicemembers are
    automatically insured for the maximum SGLI coverage. Servicemembers may
    subsequently elect to reduce their SGLI coverage, or to cancel it
    entirely.

    DOD's effort to revise the directive began in 2002 after reports17 in 1999
    and 2000 documented problems with supplemental life insurance solicitation
    on installations and made recommendations for improvement. In 2003, DOD
    obtained public comments on a draft directive during a public forum
    available to interested parties. Those comments and other input from
    sources such as DOD's general counsel served as the basis for a draft
    directive published in the Federal Register on April 19, 2005, and
    discussed during a public hearing held on May 6, 2005, to obtain
    additional comments.

    16 DOD, Financial Management Regulation 7000.14-R, Vol. 7A, Chapters 41
    and 42 (February 2002), contains the policies and procedures for
    allotments. Each military service also has additional allotment processing
    policies and practices. See, for example, Army Regulation 37-104-4,
    Military Pay and Allowances Policy and Procedures-Active Component,
    Chapter 24 (Sept. 30, 1994).

    17 DODIG, Report No. 99-106, and Final Report: Insurance Solicitation
    Practices on Department of Defense Installations.

      DOD Does Not Know the Extent of Solicitation Violations and Does Not
      Disseminate Information on All Confirmed Violations

    DOD does not know the extent to which life insurance agents are violating
    regulations pertaining to on-installation personal commercial
    solicitation, and it does not actively disseminate information about all
    confirmed violations18 to other portions of DOD and state insurance
    regulators. Although many of the sources that we contacted for our review
    identified violations, DOD does not know how widespread the violations are
    because it has not collected information on the number, types, and
    severity of the violations. Even when violations have been severe enough
    to result in commanders banning agents from their installation, DOD did
    not actively provide that information to other installations or to state
    insurance regulators. The absence of evaluative and reporting requirements
    in the solicitation directive, as well as ambiguity in the directive about
    the dissemination of information, are some of the reasons for these
    situations that limit DOD's ability to provide oversight of supplemental
    life insurance solicitation on installations and prevent violators from
    having access to servicemembers on installations.

        DOD Does Not Know the Extent to Which Life Insurance Agents Have Violated
        Solicitation Policies on Domestic Installations

    Because of the absence of evaluation and reporting requirements, DOD has
    not collected the data that it needs to monitor the number, types, and
    severity of life insurance agents' violations of DOD's regulations
    regarding on-installation solicitation. But data from our review suggest
    that the violations are not restricted to a few installations. Our data
    regarding alleged violations of the 14 prohibited practices identified in
    DOD's commercial solicitation directive came from multiple sources:
    perceptions expressed in a DOD-wide survey and numerous interviews at six
    installations; information on the number and geographical dispersion of
    cases where installation commanders had banned agents during the past 3
    years because of violations; and a review of in-depth documentation for
    four of the cases serious enough to result in banning agents.

    18 Confirmed violations are acts that an installation commander has
    determined, after consideration of the entire record to include any
    information submitted by the insurance company(s) and agent(s) involved,
    are violations of DOD's commercial solicitation policies and procedures.

    A survey of personal financial management program managers19 on
    installations in the United States indicated that six types of prohibited
    solicitation practices were perceived to have occurred with varying
    frequency on their installations during the prior 12 months.20 More than
    one-third of the managers indicated that misleading sales presentations
    regarding supplemental life insurance had occurred occasionally or
    routinely on their installations, and more than one-quarter said that four
    of the other five prohibited practices had occurred at least occasionally
    (see fig. 1). In interviews conducted during our visits to six
    installations, multiple sources-for example, solicitation coordinators,
    legal assistance attorneys, servicemembers, and insurance agents-indicated
    that the types of violations shown in figure 1 had occurred on their
    installations. For three or more of the six installations, multiple
    sources told us of agents inappropriately using their military retiree
    credentials to gain access to servicemembers for life insurance
    solicitation purposes, life insurance agents possessing or processing
    allotment forms, and life insurance agents participating in
    military-sponsored training. The installations had little or no
    documentation to show that the violations identified in the interviews had
    been reported or investigated.

    19 The personal financial management program manager is a professional
    staff member designated and trained to organize and execute financial
    planning and counseling programs for the military community. See
    GAO-05-348 for additional details on the managers, the program, and other
    findings from the survey.

    20 The six types of violations used as survey items were based on findings
    from the 1999 DODIG report (see DODIG, Report No. 99-106). The report
    showed that seven types of prohibited practices occurred on the studied
    installations. Because supplemental life insurance solicitation was one of
    many issues covered in our survey, the other types of violations were
    excluded to limit the time required to answer the survey.

    Figure 1: Personal Financial Management Program Managers' Perceptions of
    the Frequency with Which Selected Solicitation Prohibitions Were Violated
    on Their Installation from January through December 2004

                    42.7             20.5             24.8             12.0

    Misleading sales presentations

                    46.0              23.9             22.1             8.0

    Solicitation in the barracks

                    47.4              23.3             19.8             9.5

    Solicitation during duty hours

                    49.2              20.3             21.2             9.3

    Presentations by unauthorized personnel

                    50.4              21.9             18.5             9.2

                  Presentations to groups by life insurance personnel

                    73.5              13.7              9.4       3.4

                  Required attendance at life insurance presentations

    0 20406080 In percent

    Never

    Seldom Occasionally

    Routinely Source: GAO.

    After we asked DOD if it had a list of insurance agents and companies
    whose solicitation privileges had been withdrawn, DOD requested the
    information from the services and installations.21 As of April 2005, DOD's
    request for information identified 51 cases that occurred on installations
    in the United States from April 1998 through October 2004. Some
    installations supplied information on enforcement actions that did not
    result in the banishment of agents or companies. Table 2 provides
    information on 26 cases in which commanders banned agents-25 from DOD's
    list and one additional case we later identified-from October 2001 through
    October 2004.22 Examining only the more recent cases minimizes the
    possibility that a case would have been the basis for findings in the 1999
    and 2000 DOD reports on supplemental life insurance. Table 2 shows that
    the 26 cases occurred on 11 installations in eight states. Our analysis
    additionally revealed that agents from one life insurance company were
    involved in 9 (about 35 percent) of the 26 cases, and agents from another
    company were involved in 6 (about 23 percent) of the cases.

    21 After gathering the data for this review, DOD posted information about
    the 51 cases on a DOD Web site.

    22 It is likely that more than 26 enforcement actions resulted in
    commanders banning agents from their installation during the period of
    interest. DOD acknowledged that its list was probably incomplete; and we
    found an additional case at Fort Bliss, Texas. Also, 6 of the 51 cases did
    not include a date for the commander's actions, but the actions may have
    occurred during our restricted period of interest. In addition, some of
    the cases in DOD's list, such as those at Beale Air Force Base,
    California, indicate that events occurred in multiple years, but we only
    counted the events as one case. Finally, since DOD told us that its
    request for information pertained to banned agents only, additional cases
    would probably result if DOD made another request for all enforcement
    actions.

    Table 2: Locations and Years That Commanders Banned Agents from an
    Installation-October 2001 through October 2004

                      State      Installation, listed by separate action     Year
                 California                         Beale Air Force Base     2003
                                                    Beale Air Force Base     2003
                                        Camp Pendleton Marine Corps Base     2003
                                        Camp Pendleton Marine Corps Base     2003
                    Georgia                                 Fort Benning     2003
                                                            Fort Benning     2004
                                                            Fort Benning     2004
                                                            Fort Benning     2004
                                                            Fort Benning     2004
                                                            Fort Benning     2004
                                                            Fort Benning     2004
                                                             Fort Gordon     2003
                                                             Fort Gordon     2003
                                                             Fort Gordon     2003
                                                             Fort Gordon     2003
                                                             Fort Gordon     2004
                     Kansas                     McConnell Air Force Base     2002

             Illinois               Naval Station Great Lakes             2001
           Mississippi     Naval Construction Battalion Center Gulfport   2003
          North Carolina                    Fort Bragg                    2004
                                            Fort Bragg                    2004
              Texas                         Fort Bliss                    2003
             Virginia                      Fort Eustis                    2002
                                           Fort Eustis                    2002
                                           Fort Eustis                    2004
                                Naval Amphibious Base Little Creek        2003

    Source: DOD data, and GAO analysis.

    Our review also examined the in-depth documentation for two cases from
    Camp Pendleton, California, and two cases at Fort Benning, Georgia, both
    of which are listed in table 2. The documentation, sometimes more than 200
    pages, illustrates the situations that led to the violations, the types of
    violations occurring, and the amount of effort required to conduct the
    investigations. The cases are summarized as follows, and additional
    details on each are provided in appendix II.

    o 	Camp Pendleton: In 2003, an insurance agent requested and obtained
    authorization to teach a class on veterans' affairs benefits and financial
    planning to Marines. During the class, the agent said very little about
    veterans' benefits but spoke at length about investments. The agent
    distributed cards for Marines to provide contact information. Using this
    information, the agent later sold Marines insurance policies at their
    homes and on duty, sometimes without appointments. During the meetings,
    Marines were given the impression that the agent represented the
    Department of Veterans Affairs. This agent's solicitation privileges were
    suspended for 2 years by the installation.

    o 	Camp Pendleton: In 2003, insurance agents requested and obtained
    permission to teach veterans' affairs classes to Marines fresh from boot
    camp. The classes, with required attendance, started as veterans' benefits
    discussions but shifted to investment sales pitches after noncommissioned
    officers left the classrooms. Agents distributed applications, allotment
    forms, and statements of understanding, encouraging participants to sign
    quickly, not read the forms, leave the dollar amount lines blank, and
    provide signed photocopies of their identification cards. The Marines were
    not allowed to take any paperwork with them and were told that copies
    would be sent to their home of record. The agents, including at least one
    retired Marine, were fired by their employer. Refunds were offered to
    those who purchased policies.

    o 	Fort Benning: In 2003 and 2004, agents accessed soldiers in a basic
    combat training brigade through unit non-commissioned officers for the
    express purpose of providing financial planning classes. In unit
    classrooms, the agents discussed the value of investing. At the end of the
    presentations, soldiers who desired additional information completed a
    form. Weeks later, the agents met with soldiers individually or in small
    groups in the unit's area. The agents were fired from the companies they
    represented, and several officers and enlisted personnel involved in
    arranging the presentations were reprimanded. The manager for DOD's
    personal commercial solicitation program said that he was unaware of any
    other instance where enforcement included punishment of installation
    personnel, but added that his office does not track such information.

    o 	Fort Benning: In 2002, two agents accessed soldiers in the infantry
    training brigade through unit non-commissioned officers for the express
    purpose of providing financial management classes. The classes were

    included on the training scheduled in conjunction with other personal
    financial affairs presentations and were conducted in unit classrooms.
    Non-commissioned officers escorted the soldiers to the classrooms.
    According to the investigation, some of the non-commissioned officers had
    knowledge of the solicitation actions taking place. These agents later had
    their solicitation privileges revoked by the installation, and refunds
    were provided to those who purchased policies.

    DOD-wide, service-specific, and installation-level factors contribute to
    the lack of information on violations. The absence of evaluation and
    reporting requirements in DOD's directive on personal commercial
    solicitation is a primary reason why the services and installations do not
    emphasize assessment and why DOD cannot estimate the extent to which life
    insurance agents are violating the 14 proscribed practices and other parts
    of the directive.23 The absence at the installation level of documentation
    of confirmed violations by life insurance agents is also caused by several
    other factors, including: (1) the time it takes for personnel to lodge a
    complaint and other personnel to investigate it; (2) reluctance to get
    either the agents or installation personnel in trouble, especially when
    the agents appear to have the support of someone in the chain of command;
    and (3) the lack of knowledge about permitted and prohibited practices by
    both individuals being solicited and other servicemembers who allow life
    insurance agents to conduct financial training or perform other prohibited
    practices.

    The lack of documentation on confirmed violations can result in negative
    outcomes for both DOD and the life insurance industry. For instance, DOD
    is unable to identify the extent of specific types or patterns of
    problems, such as multiple instances of the same violation for agents from
    a single insurance company. Furthermore, DOD cannot determine whether
    there are many agents violating the regulations on a few occasions; a
    small number of agents violating the regulations on many occasions; or
    many people talking about a relatively few, well-publicized violations.
    Without knowing the extent of the problem, DOD cannot develop an effective
    and efficient strategy for curbing the violations. The lack of
    documentation could also negatively affect the life insurance industry and
    its agents. "Broad brush" complaints create a negative image of the
    industry. Some of the agents we interviewed were concerned that the highly
    publicized cases

    23 The Army is the only service with a regulation requiring that
    violations be reported to the service level.

    are painting a negative picture of them and their profession, even though
    they said they had not violated the regulations on personal commercial
    solicitation.

        DOD Does Not Disseminate Information about All Confirmed Violations and
        Enforcement Actions to Other Parts of DOD or to State Life Insurance
        Regulators

    The DOD policy office responsible for oversight of supplemental life
    insurance solicitation on installations does not routinely disseminate
    information on all confirmed violations to installations, to the services,
    or to state life insurance regulators. Although the DOD solicitation
    directive provides installation commanders with discretionary authority to
    report banned agents to their military department, they are not obliged to
    do so. Specifically, if installation commanders believe it is warranted,
    they can recommend extending or lifting actions taken against life
    insurance agents on other installations to their respective military
    departments. Additionally, the Office of the Secretary of Defense for
    Personnel and Readiness could, when appropriate, extend or lift the
    actions for other military departments.24 Notably, the current
    solicitation directive does not require the installation commander to
    routinely report information on all confirmed violations to state
    insurance regulators.25 It merely requires installations to notify
    appropriate state licensing authorities if the grounds for withdrawing
    solicitation privileges involve the eligibility of the agent or company to
    hold a state license or meet other regulatory requirements.26

    One indication that installation commanders and DOD policy officials have
    had only limited communications about violations was the absence of a DOD
    list of cases where agents had been banned from installations for
    violating the personal commercial solicitation directive. The DOD policy
    office did not generate its list of cases until we requested the
    information for this review. This lack of information sharing occurred
    even when policy violations were severe enough to warrant the banning of
    agents. These communications-related problems continued despite three
    recommendations in the 1999 DODIG report: (1) require that all

    24 DOD Directive 1344.7, sec. 6.5.2.4.

    25 It is important to involve state insurance authorities because in
    accordance with the McCarran Ferguson Act, 15 U.S.C. sec. 1011-1015
    (1948), the life insurance industry generally is regulated under state
    laws. The Military Personnel Financial Services Protection Act, S. 418,
    109th Congress, sec. 6 (2005) was introduced in Congress this year and
    would, if enacted into law, make it clear that state law shall apply to
    insurance activities conducted on military installations.

    26 DOD Directive 1344.7, sec. 6.5.2.2.

    installations in the local area and the services' higher commands be
    notified of "any adverse actions" taken against an insurance agent; (2)
    require the services to track such actions and report the information to
    the office with oversight responsibility; and (3) increase the interaction
    with state life insurance regulators. During our visits to six
    installations, solicitation coordinators told us that they did not
    routinely interact with their counterparts on other installations, but
    several of the insurance agents that we interviewed said they were
    approved to solicit on multiple bases in multiple states.

    We found a similar lack of communication between the various parts of DOD
    and state insurance regulators. In our December 2004 survey of all state
    insurance commissioners' offices, only one state reported that DOD had
    notified it of disciplinary actions taken against a life insurance agent
    during the prior 12 months, even though several of the 26 cases in table 2
    occurred during the same period. Our survey also revealed that 100 percent
    of the life insurance commissioners' offices responding to our survey said
    it would be a good practice if DOD were to notify their offices whenever
    it took a disciplinary action against a life insurance agent, and 68
    percent said they would like more communications with the military.

    Figure 2 shows the states where installation commanders took 26
    enforcement actions to ban agents from October 2001 through October 2004;
    states where regulators indicated on our survey that the office had an
    ongoing investigation involving life insurance sales to servicemembers;
    and the number of active duty servicemembers in the states. State
    regulators reported in our survey that they had ongoing investigations in
    nine states: Alaska, California, Colorado, Georgia, Illinois, Iowa,
    Kentucky, New York, and Texas. Regulators' investigations were occurring
    in four states (California, Georgia, Kentucky, and Texas) that have at
    least 30,000 servicemembers in them. Four states (California, Georgia,
    Illinois, and Texas) had both an ongoing investigation by the state
    insurance regulators in December 2004 and an installation where an agent
    had been banned between October 2001 and October 2004.

    Since the DODIG made recommendations to improve information sharing 6
    years earlier that were not implemented, the absence of oversight by the
    DOD policy office appears to be the primary reason for the past lack of
    DOD-wide information sharing on banned agents and the continued lack of
    information sharing on lesser confirmed violations. Ambiguity in the
    solicitation directive about who should disseminate violations-related
    information to state regulators and the types of information that should
    be disseminated may have contributed to a lack of information sharing.
    Another reason for the lack of contact relates to uncertainty regarding
    the states' ability to govern what occurs on an installation. Several
    state regulatory officials stated that they were uncertain about whether
    they had jurisdiction over life insurance sales on military installations.
    DOD officials informed us that they began meeting with the National
    Association of Insurance Commissioners in May 2005 to address some of
    these issues, and legislation27 has been introduced in Congress to require
    greater communication between DOD and the association. Additionally,
    several installation officials stated that their office considered the
    involvement of state regulators only for serious complaints or problems
    that involved life insurance products.

    The failure to disseminate information to other parts of DOD or to state
    insurance regulators about agents and companies who violate the
    solicitation policy-especially when the violations were serious enough to
    ban agents-can enable violators to continue operating on other
    installations. State insurance regulators in North Carolina told us that
    by not reporting violations to state regulators, installations prevent the
    state regulators from determining whether further actions, such as
    revocation of licenses, are warranted. Maintaining a list only of banned
    agents does not allow DOD or state regulators to spot patterns of
    violations by agents or companies that may have committed multiple lesser
    violations on multiple installations. If present, such patterns would be
    detectable only when solicitation coordinators are able (1) to identify
    the other installations where the agents or companies are approved to
    operate and (2) to communicate with their peers on the other installations
    about violations committed there by the agents or companies. Limited
    communications between installations also hinders the promotion of best
    practices. For example, other installations might be interested in Camp
    Pendleton's testing of agents before approving them for on-installation
    solicitation. When determining whether to ban some agents from Camp
    Pendleton,

    27 Military Personnel Financial Services Protection Act, S. 418, 109th
    Congress, sec. 6 (2005).

    investigators were able to show that the agents correctly answered test
    questions about prohibited practices- yet still committed the prohibited
    practices.

      Data on Payroll Allotments for Supplemental Life Insurance Unreliable and
      Procedures for Submitting Such Allotments Are Not Always Being Followed

    We could not determine the extent to which servicemembers follow DOD's and
    the services' allotment processing policies when purchasing supplemental
    life insurance because of limitations in the allotment databases and the
    different ways that finance offices were accepting forms to start the
    allotments. Even with DFAS assistance, we could not generate reliable
    monthly estimates of the number of servicemembers with, or the amount of
    money allotted for, supplemental life insurance. The unreliability of
    estimates stemmed from longstanding database and computer system
    constraints, such as the coding used when gathering and entering the life
    insurance allotments into the databases and computer problems that we have
    documented in prior reports. Another problem area with supplemental life
    insurance allotments is the lack of certification that occurred when
    allotment forms were submitted to and processed by some finance offices.
    Contrary to financial management regulations, some finance personnel were
    accepting allotment forms through the mail or from individuals without
    verifying that the submitter was either the servicemember or that person's
    representative with a special power of attorney. We could not substantiate
    insurance officials' and agents' assertion that servicemembers were being
    prevented from using allotments to purchase life insurance. Several
    factors suggest that all servicemembers who want to obtain supplemental
    life insurance can do so.

        Databases of Allotment Information Cannot Be Utilized to Monitor
        Servicemembers' Use of or Perceived Need for Supplemental Life Insurance

    We, with assistance from DFAS, attempted but could not determine with
    sufficient reliability either the number of servicemembers who have
    allotments for supplemental life insurance products or the number of
    dollars that servicemembers pay as allotments to life insurance companies
    each month. Although DOD's Financial Management Regulation28 supplies the
    primary guidance governing the procedures used to gather allotment
    information and then electronically enter and store the information, each
    service has a policy and procedures directing how to implement the DOD
    regulations. Among other things, the military services' policies and
    procedures specify how allotments for supplemental life insurance and
    other products or services are to be coded, the number of discretionary
    allotments that each servicemember is allowed, and which forms can be used
    to initiate allotments. Allotments to purchase life insurance are also
    governed by the DOD directive on personal commercial solicitation. The
    directive requires a 7-day cooling-off period between the time when E1s
    through E3s sign a supplemental life insurance application and the time
    the allotment is certified.29

    A variety of DFAS database-related constraints limit the visibility that
    the DOD solicitation policy office, the services, and installations have
    over servicemembers' use of and perceived need for supplemental life
    insurance. These constraints include the following:

    o
    Although the databases can be used to identify servicemembers with an
    insurance allotment (an AI code), the allotment could be for
    servicemembers' or family members' life, health, automobile, or other
    insurance. Conversely, other servicemembers' insurance allotments are not
    detectable if they are coded for savings (an AS code) or other types of
    accounts that the servicemembers also have with the company providing
    supplemental life insurance.

    o
    Servicemembers are limited to six allotments in total and one
    discretionary allotment per company, even if they have multiple

    28 DOD, Financial Management Regulation 7000.14-R Vol. 7A, Chapters 41 and
    42; DFAS-INM (Army), Part 6, Chapter 1; DFAS-DE (Air Force) Manual 7073-1,
    Chapter 57; DJMS Procedures Training Guide (Navy), Part 6; DFAS-KC
    7220.31-R (Marine Corps), Chapters 23	25 and appendixes N, O, P, and Q.

    29 DOD Directive 1344.7, encl. E3.3.2.

    accounts (supplemental life insurance, savings, and so forth) with a
    company.

    o
    DOD and service regulations permit the use of at least seven different
    allotment forms, but forms such as the government-wide Standard Form 1199A
    or DOD-wide DD Form 2558 do not ask whether the allotment is for
    supplemental life insurance. (See app. III for a copy of each form.)

    o
    The payroll databases cannot tell how many servicemembers pay insurance
    companies directly by checks, electronic withdrawals from personal
    accounts, and so forth.

    o
    DFAS maintains separate databases for the different military services, and
    the code used to identify an insurance company is not the same for all
    services. Creating a DOD-wide list requires additional work to merge the
    resulting information.

    DOD was informed about some of these database constraints in the 1999
    DODIG report, in which analysts noted that they could not determine what
    portion of the allotments were made specifically for life insurance.

    A major cause of these database-related problems is DOD's systems
    supporting servicemembers' pay. In our earlier reports, we documented
    serious problems with these systems, noting that they were prone to error
    and required manual data reconciliation, correction, and entry across
    nonintegrated systems.30 While a significant system enhancement project is
    under way to improve the administration of military pay, DOD is likely to
    continue operating with existing system constraints for several years. The
    continued use of forms that do not require information and coding specific
    to life insurance could cause allotment data to continue to be unreliable
    for oversight purposes, even when the new computer system becomes
    operational. Information obtained during interviews indicated another
    cause for data unreliability. Some interviewees suggested that
    servicemembers might use codes other than AI to avoid the additional
    requirements encountered when starting allotments for supplemental life
    insurance. The additional requirements include the cooling-off period and

    30 See GAO, DOD Systems Modernization: Management of Integrated Military
    Human Capital Program Needs Additional Improvement, GAO-05-189
    (Washington, D.C.: Feb. 11, 2005), and GAO, Military Pay: Army National
    Guard Personnel Mobilized to Active Duty Experienced Significant Pay
    Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003).

    the requirement to submit a paper form for all supplemental life insurance
    allotments, rather than using the electronic MyPay system.

    The absence of data regarding which servicemembers do or do not carry
    supplemental life insurance limits the oversight that DOD policy officials
    and installation solicitation coordinators can exert. For example, the
    inability to obtain accurate data prevents the DOD policy office from
    monitoring increased or decreased perceived needs for supplemental life
    insurance, an important issue now that new legislation has been enacted to
    almost double the lump sum death benefits offered through the government.
    Also, the lack of accurate data prevents the solicitation coordinators
    from easily checking whether servicemembers on an installation submitted
    an unusually large number of new allotments for supplemental life
    insurance during a short period, a possible sign of mass solicitation to
    recruits or trainees or other prohibited practices.

        Allotments for Supplemental Life Insurance Have Been Started without
        Verifying Required Authorization and the Elapse of the Cooling-Off Period

    Contrary to regulations, some finance personnel have accepted allotment
    forms to start supplemental life insurance without verifying that the
    person submitting the form is authorized to do so or, if applicable, that
    a cooling-off period has occurred. According to DOD's Financial Management
    Regulation, establishment of, discontinuance of, or changes to existing
    allotments for supplemental life insurance are to be based on a written
    request by a servicemember or someone with a special power of attorney on
    behalf of the servicemember.31 For junior enlisted servicemembers, the DOD
    directive on personal commercial solicitation provides an additional
    requirement: "For personnel in pay grades E-1, E-2, and E-3, at least
    seven days shall elapse for counseling between the signing of a life
    insurance application and the certification of an allotment. The
    purchaser's commanding officer may grant a waiver of this requirement for
    good cause, such as the purchaser's imminent permanent change of station."

    31 DOD, Financial Management Regulation 7000.14-R, Vol. 7A, Chapter 41,
    sec. 410801. This regulation allows most financial allotments to be
    established though MyPay, DOD's automated payroll program. MyPay allows
    servicemembers to start, stop, or change allotments with financial
    institutions when the funds are directed to be sent to a savings or
    checking account. MyPay is not intended to be used for allotments to
    purchase supplemental life insurance. Use of MyPay to establish a
    supplemental insurance allotment makes it impossible for installation
    officials to monitor or enforce the proper use of insurance allotments and
    other parts of the on-installation personal commercial solicitation
    requirements.

    Nonetheless, DOD personnel and insurance agents indicated that some
    offices accepted allotment forms personally submitted by insurance agents
    or through the mail with only the signature on the form serving as proof
    that the servicemember wanted to start an allotment for supplemental life
    insurance. For example:

    o
    A life insurance agent is alleged to have submitted allotment forms at
    Fort Bragg for servicemembers who later said they had not wanted the
    policies for which they were paying.

    o
    Finance office personnel at Naval Station Great Lakes said that about half
    of all insurance allotment forms submitted to and processed by their
    office came from insurance agents.

    o
    DFAS representatives who process allotments for Marines stated that they
    accepted and processed allotment forms submitted directly from Marines
    through the mail without the required certification.

    o
    Finance office personnel at Lackland Air Force Base were concerned about
    the high number of mailed allotment forms from insurance companies or
    otherwise on behalf of servicemembers and requested DFAS guidance on
    processing such forms.

    Several reasons were suggested for DOD personnel's acceptance of allotment
    forms that were not submitted personally by the servicemembers or their
    representatives with a special power of attorney. DFAS personnel
    representing the Marines said that they accepted and processed mailed
    insurance allotment forms from Marines who, due to their transitional
    status, were unable to properly certify the forms, but wished to promptly
    initiate policies or to keep policies from lapsing. In addition, Air Force
    personnel said that servicemembers have tight training schedules that make
    it more convenient to mail the forms than to hand carry them to the
    finance office. The Air Force has recently clarified its policies to
    require contacting servicemembers and verifying the request when allotment
    forms are received by mail.

    The causes are different for noncompliance with the requirement to have 7
    days elapse between the time junior enlisted servicemembers sign a life
    insurance application and the time an allotment is certified. On allotment
    forms such as the governmentwide Standard Form 1199A or the DOD-wide DD
    Form 2558, no one is asked to certify that the required cooling-off period
    and, possibly, counseling have occurred. Therefore, these forms do

    not require finance personnel to determine whether the full 7 days have
    elapsed before they certify the allotment. Other causes for noncompliance
    with the required cooling-off period are ambiguities in the directive.
    First, the requirement for a cooling-off period may be for all life
    insurance allotments started by junior enlisted servicemembers, but its
    inclusion in a directive governing only on-installation solicitation could
    cause finance officials to interpret the requirement as applying only to
    those allotments for supplemental life insurance sold on an installation
    to junior enlisted servicemembers. Second, it is unclear whether the
    counseling is required or optional during the cooling-off period. Further,
    the directive and the standard allotment forms do not contain procedures
    for documenting whether the counseling took place. Third, it is unclear
    when the commanding officer must sign a waiver for the cooling-off period
    and/or counseling.

    Starting a supplemental life insurance allotment for servicemembers who do
    not want one or were not required to allow the cooling-off period to
    elapse can result in extra expenses for servicemembers who may already be
    financially challenged. Even if servicemembers receive premium
    reimbursements like those promised by insurance companies following the
    incidents at Fort Benning, Fort Bragg, Camp Pendleton, and possibly other
    places, months can pass between the paying for the allotments and the
    reimbursements. During that time, servicemembers are without a portion of
    their income, and this decreased income could result in budgeting
    difficulties and fees for such things as bounced checks and late payments.
    As we pointed out in our April 2005 report on the financial conditions of
    servicemembers and their families,32 pressure from creditors, falling
    behind in paying bills, and bouncing two or more checks were negative
    financial events reported by approximately one-eighth to one-fifth of
    servicemembers on a 2003 DOD-wide survey.33 In addition, more than 10
    percent of servicemembers answered "in over your head" or "tough to make
    ends meet but keep your head above water" when the survey asked them to
    characterize their financial condition. For servicemembers who

    32 See GAO-05-348.

    33 Sampling errors of estimates for servicemembers do not exceed +/- 5
    percentage points. These sampling errors do not include errors due to
    other sources, such as potential bias attributable to the overall 35
    percent response rate. DOD conducted research to assess the impact of this
    response rate on overall estimates. We have no reason to believe that
    potential non-response bias in the estimates not otherwise accounted for
    by DOD's research is substantial for the variables we studied in our
    earlier 2005 report.

    were already having financial difficulties, unplanned allotments and any
    extra expenses could result in debt and bad credit histories for
    servicemembers, as well as adversely affect unit readiness and morale as
    the chain of command attempts to address any resulting financial problems.

        Assertion That Servicemembers Are Prevented from Purchasing Supplemental
        Life Insurance Could Not Be Substantiated

    Some insurance officials and agents asserted that chains of command
    prevent servicemembers from purchasing supplemental life insurance, but we
    were unable to substantiate the assertion. As we have previously
    mentioned, DOD's Financial Management Regulation requires that
    servicemembers or their representative with a special power of attorney
    complete and submit an allotment form if the supplemental life insurance
    is to be purchased with a payroll deduction. Also, the previously
    discussed requirement for a cooling-off period and possibly counseling for
    junior enlisted personnel is important to examining the life insurance
    officials' and agents' assertion.

    During a meeting at the start of our review, officials from insurance
    companies and national insurance associations asserted that some
    servicemembers were being prevented from purchasing supplemental life
    insurance. Also, a firm that sells supplemental life insurance on and off
    multiple installations supplied us with documents34 on 1,344
    servicemembers who completed insurance applications from October 2002
    through September 2004 but did not subsequently start a policy through the
    firm. During site visits to two of the installations where the majority of
    the 1,344 servicemembers were based at the time of completing their
    applications, we attempted to conduct focus groups with subgroups of those
    servicemembers. Our points of contact on the installations indicated that
    many of the servicemembers had rotated to other installations or were in
    training that could not be missed.

    34 Approximately 65 percent of the files included an allotment form with a
    servicemember's signature.

    Although we could not determine how representative these 1,344
    applications were of all applications completed without a purchase being
    made, this case study of the experiences at one firm provides some insight
    into the viability of cost-related alternative reasons why servicemembers
    might not follow through with the purchase of supplemental life insurance
    coverage. Our analysis of the 1,344 cases showed that 831 applications
    were for E1 through E3 servicemembers, and the per person average monthly
    cost of the products in the applications was $92.35 For those 831 junior
    enlisted personnel, 3 percent of the cases contained only an application
    for life insurance, 52 percent contained only an application for what an
    official from the firm characterized as "a life insurance product with an
    accumulation fund,"36 and 45 percent included both types of applications.

    Military officials, servicemembers, and insurance officials and agents
    identified reasons-in addition to being actively prevented from processing
    a supplemental life insurance allotment form-why servicemembers might not
    start a policy after completing an application. These other reasons
    included:

    o
    The counseling supplied during the 7-day cooling-off period could have
    been misinterpreted as an implicit order from the chain of command not to
    purchase the insurance, rather than as advice about the advantages and
    disadvantages of purchasing supplemental life insurance or a particular
    type of coverage.

    o
    The counseling could have resulted in the servicemember's following
    through on purchasing a supplemental policy but obtaining it from another
    vendor, and possibly at a lower price.

    o
    Some servicemembers may have developed buyers' remorse when they later
    considered the competing demands on their compensation.

    35 At the time that applications were completed, coverage through the
    government-offered SGLI was $16.25 per month for $250,000 of coverage.
    During our review, insurance officials stated that they too offered
    similar term-life policies for approximately the same amount.

    36 GAO has another review under way that is examining, among other things,
    the quality of the financial products-including supplemental life
    insurance-offered to servicemembers.

    o
    Servicemembers may have completed the application because of high pressure
    sales practices, knowing they would not later file an allotment form.

    o
    An allotment may not get started because of a lost or missing allotment
    form.

    Although we were not able to determine whether chains of command were
    intentionally preventing servicemembers from purchasing supplemental life
    insurance, information of four types suggests that the inability to
    purchase supplemental life insurance coverage is probably not a widespread
    problem. First, 85 percent of the state insurance regulators in our survey
    indicated that no insurance company had filed a complaint regarding the
    sale of life insurance to servicemembers on installations from October
    2003 through December 2004, and the other 15 percent said they did not
    know. Second, most of the insurance agents identified by the national
    insurance associations and interviewed during our six installation visits
    indicated that they had not experienced a problem with the allotment
    process. In contrast, agents for two life insurance companies typically
    reported a problem, and the concerns related primarily to the processing
    of allotments on two installations that were served by the firm that
    supplied us with the more than 1,000 cases. Third, when we were able to
    talk with servicemembers identified as having completed insurance
    applications without starting allotments, they indicated that they did not
    purchase the supplemental life insurance for reasons other than prevention
    by the chain of command.37 Finally, if servicemembers wanted life
    insurance and were actively prevented by the chain of command from filing
    allotment forms to make the purchase, they could pay the premiums by
    check, electronic withdrawals from other financial accounts, or some other
    means, without further chain of command intervention.

    37 It is impossible to determine whether the installation directed us only
    to servicemembers who chose not to purchase the policies for reasons other
    than active prevention. We did, however, receive written statements from
    two junior enlisted servicemembers and we contacted one on his personal
    cell phone. He confirmed that he did not want the policy after completing
    the application. In addition, to lessen the likelihood that other
    servicemembers would not answer truthfully when speaking in a focus group,
    we administered an anonymous survey before the focus group sessions to
    promote honest responses about each individual's experiences in the
    solicitation and allotment processes.

      DOD's Revised Directive Adds New Requirements, but Does Not Fully Address
      Oversight Deficiencies

    DOD's revised directive on personal commercial solicitation practices on
    DOD installations incorporates new requirements, but does not address all
    oversight problems.38 Numerous changes have been proposed. Some interim
    policy and practices that are currently in place have been incorporated
    into the draft revision. Also, requirements for gathering and
    disseminating information have been proposed, but they do not fully
    address oversight deficiencies. Still other proposed requirements address
    issues such as the type of information that life insurance agents will
    provide to servicemembers to describe the product being offered by the
    agent.

        Draft Directive Proposes to Incorporate Existing Interim Policy and
        Formalized Practices Already in Place

    One of the larger sets of additions to the draft directive proposes to
    incorporate interim policy that DOD issued in 2002 about on-installation
    financial education presentations.39 Those additions generally prohibit
    representatives of commercial loan, finance, insurance, or investment
    companies from providing such presentations. With certain restrictions,
    the presentations may, however, be provided by representatives of the
    following types of organizations: credit unions and banks located on
    military installations,40 nongovernmental, noncommercial organizations
    expert in the field of personal financial affairs, and those that are
    either tax	exempt (under 26 U.S.C. 501(c)(3) or (c)(23)) or under a
    contract with the government. Among other things, restrictions require
    that the presenter and educational materials use disclaimers to indicate
    clearly that they do not endorse or favor any commercial supplier,
    product, or service. Also, the installation commander shall consider the
    company's history of complying with on-installation commercial sales
    instructions if the presenting organization is affiliated with a company
    that sells or markets insurance or other financial products.

    38 70 Fed. Reg. 20316 (2005).

    39 70 Fed. Reg. 20316 (2005), part 50.11 (g).

    40 The draft directive also requires banks and credit unions operating on
    DOD installations to provide financial counseling services as an integral
    part of their financial service offerings. Banks and credit unions
    operating on DOD installations are subject to additional requirements
    specified in other DOD policies (for example, DOD Directive, 1000.11,
    Financial Institutions on DOD Installations (June 9, 2000); DOD, Financial
    Management Regulation 7000.14-R, Vol. 5, Chapter 34 (September 2000).

    An additional change to the draft solicitation directive incorporates
    procedures pertaining to advertising and commercial sponsorship that were
    already in place at some of the installations we visited.41 For example,
    the draft directive notes that solicitors are allowed to provide
    commercial sponsorship of DOD morale, welfare, and recreation programs or
    events on installations but are not to contact participants without their
    written permission. Interviews with insurance agents and installation
    personnel during our site visits indicated that agents were already
    generating lists of future contacts through the use of forms that program
    or event participants completed, indicating their permission for the
    future contact.

        Proposed Evaluation, Reporting, and Dissemination Requirements Do Not Fully
        Address Oversight Deficiencies

    DOD has taken some positive steps to improve its oversight of personal
    commercial solicitation on installations by proposing to add four new sets
    of requirements that pertain to gathering and disseminating evaluative
    data. Each of the requirements has associated problems that could limit
    the usefulness of the gathered and disseminated data.

    Two sets of proposed changes add requirements for gathering and
    disseminating information about violations on banned agents. As we noted
    earlier, continued gathering and disseminating information on only those
    violations severe enough to result in banning an agent will result in
    DOD's continuing to be unable to (1) identify the number, types, and
    severity of all violations and (2) recognize patterns of violations.
    Failure to disseminate information on all confirmed violations to all
    parts of DOD and to state regulators can allow violators to continue
    operating on installations.

    41 70 Fed. Reg. 20316 (2005), part 50.11 (f).

    As the result of another proposed addition to the draft directive,
    installation commanders will be required to inquire into any alleged
    violations of the solicitation regulation or questionable solicitation
    practices.42 This step could increase the DOD's oversight of the number,
    types, and severity of confirmed violations occurring throughout all
    military installations if there were also an additional requirement to
    report all confirmed violations to higher-level commands. Some factors
    that could keep the number of inquiries into potential violations
    artificially low are the lack of knowledge about which solicitation
    practices are prohibited, the steps required to report a violation, and
    whom to contact when a suspected violation occurs. We reported in April
    2005 that only the Army is monitoring the completion of required personal
    financial management training for junior enlisted personnel, and it
    estimated that about 18 percent of that group had not received the
    required training. Our earlier review did not assess the amount or the
    types of life insurance-related training provided, but we noted that each
    service administered its personal financial training differently.43 When
    we recommended additional DOD oversight by requiring the services to
    develop and implement plans to monitor the training, the Under Secretary
    of Defense for Personnel and Readiness partially concurred with our
    recommendation but noted that the DOD instruction governing personal
    financial management training had sufficient procedures to let the
    military departments accomplish their responsibilities.

    Another proposed addition to the draft directive would require an
    insurance agent to provide a servicemember with a new DOD-wide
    questionnaire that would contain questions about the servicemember's
    experiences during the prearranged appointment with the agent for
    solicitation.44 The value of information obtained from this assessment
    instrument may be very limited, and might even create an erroneous
    impression of what has occurred during the typical solicitation
    appointments. The questionnaire will document interactions that were not
    described as problem areas during our visits to six installations-that is,
    life insurance agents who were complying with the requirement to
    prearrange one-on-one solicitation meetings. Also, the voluntary
    completion of the forms will result in a lack of transparency, since some

    42 70 Fed. Reg. 20316 (2005), part 50.11 (c) (3).43 See GAO-05-348.44 70
    Fed. Reg. 20316 (2005), part 50.11 (a) (iii).

    forms may not be turned in for a variety of reasons: For example, they
    were never distributed by an agent, or the servicemembers did not want to
    take the time to fill in and drop off the form. In addition, the directive
    includes no requirement to submit the data to higher levels so that
    service-wide and DOD-wide information can be developed.

        OtherChanges Will Result in Better Explanation or Clarification of Existing
        Requirements

    Another change merits special mention because it could result in
    servicemembers' having better information for making decisions about
    whether or not to purchase a specific amount or type of supplemental life
    insurance coverage.45 All financial products that contain insurance
    features must clearly explain the insurance features of those products.
    The draft regulation elaborates further about insurance products, stating
    that if there is a savings component to an insurance product, the agent
    shall provide the customer written documentation, which clearly explains
    how much of the premium goes to the savings component per year, broken
    down over the life of the policy. This document must also show the total
    amount per year allocated to insurance premiums. The customer must be
    provided a copy of this document that is signed by the insurance agent.
    One problem that might be encountered in implementing this proposed
    requirement is the absence of any guidance about what types of information
    must be contained in the written description and who (for example, the
    installation's solicitation coordinator or the National Association of
    Insurance Commissioners) would judge whether the information is conveyed
    clearly.

    Three other changes in the draft also merit mention. First, solicitors are
    prohibited from contacting DOD personnel by calling a government telephone
    or by sending an e-mail to a government computer unless the parties have a
    pre-existing relationship. Second, solicitors with military identification
    cards and/or vehicle decals must present documentation issued by the
    installation authorizing solicitation when entering the installation for
    that purpose. Third, commercial sponsors may not use sponsorship to
    advertise products and/or services not specifically agreed to in the
    sponsorship agreement.

    45 70 Fed. Reg. 20316 (2005), part 50.11 app. A.

    A DOD official informed us that DOD plans to review the findings and
    recommendations of our report and then request more public comments after
    our report is issued. He also indicated DOD will not publish a final
    revised directive until at least 90 days after the issuance of our report,
    consistent with the provisions of Section 8133 of the Department of
    Defense Appropriations Act for Fiscal Year 2005.46

    Conclusions
    DOD cannot identify the extent to which life insurance agents are
    violating solicitation policies or procedures, the types, severity, or
    patterns of violations. A proposed new provision in the draft directive
    would require DOD to maintain and disseminate a master file on banned
    agents, but this new provision will still not provide DOD with a full
    picture of the important but missing data outlined in the prior sentence.
    For example, DOD's current list (1) is not searchable to help solicitation
    coordinators quickly check on agents who want to be approved or
    re-approved for on	installation solicitation, (2) does not provide the
    same information on every case as is evidenced by the absence of dates for
    6 of the 51 cases, (3) does not identify the specific types of violations
    that occurred-data critical for identifying patterns of violations, and
    (4) probably does not contain information on all agents who installation
    commanders have determined violated regulations but have not done
    something severe enough to be banned. The continued absence of these
    important data will force DOD, the services, and installations to take
    actions based on isolated incidents, anecdotes, and other possibly
    insightful, but non-optimum information. DOD has, however, taken a
    positive step by including a requirement in the draft directive to
    maintain a list of contacts for state insurance regulators, but it does
    not require installation commanders to keep state regulators generally
    informed about all confirmed solicitation violations occurring on their
    installation. This ambiguity could result in some relevant violations not
    getting reported to state regulators. Similarly, ambiguity is present in
    the wording of the requirement for the cooling-off period for junior
    enlisted servicemembers who want to purchase supplemental life insurance.
    While DOD's draft directive clarified that the period is 7 calendar days,
    other ambiguities were identified earlier in this report. Failure to
    address these issues during the current revision could result in
    inconsistent enforcement of that requirement.

    46 Pub. L. No. 108-287, sec. 8133 (Aug. 5, 2004).

    The quality of the information in the DFAS payroll databases limits the
    ability of other parts of DOD in their efforts to (1) monitor
    servicemembers' perceived need for supplemental life insurance and (2)
    detect prohibited group presentations as evidenced by large numbers of new
    allotments for supplemental life insurance. Continued reliance on multiple
    generic allotment forms and a generic data entry code that does not
    distinguish different types of insurance products (for example, life
    versus automobile) will perpetuate existing data reliability problems.
    Furthermore, the continued use of generic forms to start a supplemental
    life insurance allotment results in a missed opportunity for DOD to
    institute steps to address solicitation requirements whose enforcement has
    not been assessable. For example, DOD has no current forms or other
    assessment methods for documenting that the required cooling-off period
    for junior enlisted personnel occurred, servicemembers received required
    documents from life insurance agents, and the finance or administrative
    staff who accepted the allotment form for supplemental life insurance also
    verified that the person submitting it was either the purchaser or the
    servicemember's representative with a special power of attorney. With
    regard to this last enforcement and documentation issue, our review found
    some noncompliance with the requirement that only servicemembers or their
    representatives with special power of attorney could start supplemental
    life insurance allotments. Even though some of the reasons for the
    noncompliance may be well-meaning, some of the instances where finance
    officials have accepted such allotment forms from unauthorized persons
    have resulted in banning agents, diverting valuable resources away from
    the military mission to conduct investigations, and possibly placing
    servicemembers and their families at financial risk when unanticipated
    allotments begin for unwanted products. Adherence to existing regulations
    would go far to eliminating these negative effects.

      Recommendations for Executive Action

    We are making five recommendations. We recommend that the Secretary of
    Defense direct the Under Secretary of Defense for Personnel and Readiness
    to take the following actions in revising DOD's solicitation regulation:

    o
    Develop and implement, with the services, a DOD-wide searchable violations
    database that uses consistent data elements and coding across services.
    Solicitation coordinators or others at the installation would then be
    required to enter the installation name, violating agent's name, insurance
    company supplying the product, type(s) of violation(s), date and type of
    action taken, and other information important for

    identifying patterns of violations and facilitating efficient data
    collection and dissemination of information on confirmed violators to all
    installations and state insurance regulators.

    o
    Specify in the revised directive that the installation commander is
    responsible for notifying state insurance regulators, the service
    secretariat, and DOD, when the commander has determined that agents or
    companies have violated DOD, service, or installation policies. Requiring
    installation commanders to contact appropriate state officials regarding
    all confirmed violations of DOD's commercial solicitation directive
    increases the likelihood that state insurance officials will be provided
    an opportunity to determine if further action such as revocation of a
    state license is warranted.

    o
    Clarify the portion of the revised directive that pertains to the
    cooling-off period that must elapse before junior enlisted personnel can
    start an allotment to purchase supplemental life insurance. Addressing and
    eliminating the ambiguities that we have identified about what is required
    versus optional could result in better compliance with the directive.

    We recommend that the Secretary of Defense direct the Defense Finance and
    Accounting Service to take the following actions:

    o
    Determine what current and future modifications should be made to the
    regulations, forms, and procedures used to initiate and electronically
    capture supplemental life insurance allotments so that more useable data
    are available to the DOD, service, and installation offices responsible
    for overseeing supplemental life insurance solicitation. This step might
    include developing and implementing a single code and form that would be
    used for supplemental life insurance allotments and to document compliance
    with requirements that DOD has previously had little visibility over.

    o
    Issue a message to all finance offices and the Defense Finance and
    Accounting Service offices that process allotments for supplemental life
    insurance to remind personnel that DOD's Financial Management Regulation
    indicates that only servicemembers or their designated representatives
    with special power of attorney for the prescribed purpose are authorized
    to start, stop, or modify financial allotments. If deviations from the
    policy are warranted to allow mailed allotment

    forms, the Defense Finance and Accounting Service should specify the
    additional verification required in those situations.

      Agency Comments and Our Evaluation

    DOD's comments are included in this report as appendix IV. DOD partially
    concurred with our first two recommendations and fully concurred with the
    three remaining recommendations.

    In commenting for DOD, the Principal Deputy for Personnel and Readiness
    raised three issues concerning the thoroughness and accuracy of our
    review.

    First, DOD incorrectly stated that our review was only to look at the
    complaints of the insurance industry and that after we did not
    substantiate these complaints, we instead looked at DOD's oversight of
    commercial insurance solicitation on DOD installations. While we were
    aware of the industry's complaints, we focused our review on broader
    systemic issues, like the implementation of DOD and service poliies,
    procedures, and regulations governing the marketing and sale of
    supplemental life insurance on domestic military installations. Focusing
    on these systemic issues, however, allowed us to determine whether the
    complaints had merit. At every stage during our review, we emphasized that
    we were asked to review compliance with DOD's regulations and policies on
    both the marketing and sale of life insurance on installations and the
    processing of financial allotments for such products. For example, in the
    letter notifying the Secretary of Defense that we were beginning our
    review and at our first meeting with DOD and service representatives, we
    listed the following three researchable questions:

    1.
    What are DOD's and the services' policies and procedures for the marketing
    and sale of life insurance policies to military personnel and the
    processing of financial allotments for military personnel?

    2.
    How do DOD and service regulations affect the marketing and sale of life
    insurance policies and the processing of financial allotments to military
    personnel?

    3.
    How are the processes and procedures for the marketing and sale of life
    insurance policies and the handling of financial allotments, especially
    for commercial products like life insurance policies, implemented at Fort
    Bragg, Fort Lewis, and other military installations?

    Our report fully addressed solicitation and allotment issues in addition
    to providing our congressional requesters with an update on the revision
    of DOD's personal commercial solicitation directive, as they also
    requested. Further, DOD stated that our report makes only minor mention of
    the fact that we did not substantiate the insurance industry's assertions
    that servicemembers were being prevented from using allotments to obtain
    life insurance. To the contrary, we devoted a section of our report to the
    issue, but that issue was only one of many allotment-related concerns that
    we addressed in that portion of the report.

    Second, DOD expressed concern about our use of survey data in examining
    the extent to which insurance solicitation violations were occurring on
    installations. The most significant reason for using the survey was the
    incompleteness and other problems associated with the data that DOD
    maintains on violations. The problems with those data are addressed more
    fully in our later response to DOD's partial concurrence with our first
    recommendation. Because we were aware that survey data are
    unsubstantiated, we supplemented that information with data gathered from
    other sources such as DOD's list of banned agents and information gathered
    from a wide variety of individuals during our six visits to military
    installations. DOD similarly conduits surveys to monitor other personnel
    issues. For example, the Office of the Under Secretary of Defense for
    Personnel and Readiness conducted a survey of over 75,000 servicemembers
    asking for unsubstantiated perceptions about racial/ethnic discrimination
    and harassment47 and these data could be combined with compliance-related
    information from DOD's investigations of alleged violations to give the
    department a more complete view of the issue. DOD also stated that we
    should have disclosed the wording used in the survey. The information that
    DOD reviewed in our figure 1 is the exact wording of our survey items.
    Although the wording for the overall question, "During the past 12 months,
    how often have the following practices concerning supplemental life
    insurance taken place on the installation?" was changed to a declarative
    sentence to increase readability, our paraphrasing is a true
    representation of what we asked. Finally, the response rate of 75 percent
    for our survey of all personal financial management program managers on
    U.S. installations is higher than the rate obtained on recent DOD-wide
    surveys such as the August 2004 survey which had a response rate of 40
    percent. Given these facts, we believe that our discussion about the

    47 See Defense Manpower Data Center, Armed Forces Equal Opportunity
    Survey, DMDC Report No. 97-027 (Arlington, Va.: August 1999) p. 40.

    extent of solicitation policy violations was appropriate, especially since
    DOD had information on only the subset of violations serious enough to
    merit banning an agent from an installation.

    Lastly, DOD maintained that we made a false statement about the department
    not knowing the extent of personal solicitation policy violations. DOD's
    point is incorrect on several grounds. First, early in our review in May
    2004, we asked DOD officials whether a DOD-wide database existed that the
    services could use to report to DOD insurance agents or companies that
    have had their solicitation privileges withdrawn. DOD officials told us
    that while there was such a system, it was up to the services to provide
    updated information. DOD officials said at the time there was no
    comprehensive information available to document such actions. In October
    2004-approximately 5 months after we asked for a list of all banned
    agents-DOD provided us with information similar to that provided on its
    Commanders Page Web site as of April 2005. At the time we received this
    information, the Director of the program that oversees personal commercial
    solicitation told us that the list may not be complete and accurate-which
    we found to be true-but that it provided all of the information that the
    services had reported. Second, DOD's list of banned agents did not include
    all cases where insurance agents or companies were banned. As we reported,
    personnel at Fort Bliss, Texas, indicated that the installation commander
    had banned an agent who was not included on DOD's Commanders Page Web site
    as of April 2005. Third, unless DOD bans every agent who violates in any
    way the solicitation policy regardless of the severity of the violation,
    its data on banned agents are not equivalent to knowing the extent of all
    confirmed violations.

    Regarding DOD's comments about our recommendations, DOD partially
    concurred with our first recommendation to develop and implement a
    searchable violations database, but DOD's explanation of its partial
    concurrence does not identify any additional steps to address the
    deficiencies that we identified with their current procedures. As we noted
    in our report, the monitoring system should focus on all confirmed
    violations of solicitation policies and not just on those severe enough to
    result in agents being banned. By establishing a database on all confirmed
    violations, DOD would have a more complete picture of solicitation
    violation activities to better identify patterns, types, and severity of
    confirmed violations. If patterns are found, they could serve as the basis
    for identifying actions to eliminate the recurring or systemic problems.
    Our proposed database would also provide installation solicitation
    officers with a resource to check whether agents requesting solicitation
    approval or

    re-approval at their installations were involved in prior violations at
    other locations.

    DOD partially concurred with our second recommendation that installation
    commanders notify state insurance regulators of confirmed violations of
    solicitation policies. DOD's position is that such reporting by
    installation commanders should only be required when the violations
    involve the eligibility of the agent to hold a state license and to meet
    other regulatory requirements. We believe that DOD should report all
    confirmed violations to state regulators. Installation commanders and
    their legal advisers may not have the expertise needed to determine
    whether a solicitation violation involved license-eligibility or
    regulatory requirements. Having installation commanders report all
    confirmed violations to state regulators would allow the regulators to
    decide whether further action is appropriate. As we pointed out in our
    report, state insurance officials from North Carolina were concerned that
    DOD's lack of reporting violations prevented them from determining whether
    further actions, such as revocation of licenses, are warranted.

    DOD concurred with our third recommendation and stated that it had
    identified an additional ambiguity in the current revised directive
    regarding who is responsible for monitoring and enforcing the cooling-off
    period for supplemental life insurance purchases. DOD's proposed revision
    addresses the concerns that we raised.

    DOD concurred with our fourth recommendation and stated that they will
    consider our proposed changes for a future enhancement of their pay
    system. In addition, DOD said that it will review its regulations and
    forms to determine what current and future modifications should be made.

    DOD concurred with our fifth recommendation and stated that it will issue
    a message identifying who can start, stop, or modify allotments to all
    finance offices and Defense Finance and Accounting Service offices that
    process allotments.

    As agreed with your office, unless you publicly announce its contents
    earlier, we plan no further distribution of this report until 30 days
    after its issue date. At that time, we will provide copies of this report
    to interested congressional committees and the Secretary of Defense. We
    will also make copies available to others upon request. This report will
    be available at no charge on GAO's Web site at http://www.gao.gov.

    If you or your staff have any questions regarding this report, please
    contact me at (202) 512-5559 or stewartd@gao.gov. Contact points for our
    Offices of Congressional Relations and Public Affairs may be found on the
    last page of this report. GAO staff members who made major contributions
    to this report are listed in appendix V.

    Derek B. Stewart Director, Defense Capabilities and Management

    List of Congressional Requesters

    The Honorable Tom M. DavisChairmanCommittee on Government ReformHouse of
    Representatives

    The Honorable Duncan L. HunterChairmanCommittee on Armed ServicesHouse of
    Representatives

    The Honorable Christopher ShaysChairmanSubcommittee on National Security,
    Emerging Threats

    and International RelationsCommittee on Government ReformHouse of
    Representatives

    The Honorable Jim CooperThe Honorable Martin T. MeehanThe Honorable Ellen
    O. TauscherHouse of Representatives

    Appendix I

    Scope and Methodology

    In addressing the objectives of our engagement, we reviewed reports that
    had been issued by GAO, DOD, and others, including the life insurance
    industry. We interviewed officials from DOD, life insurance companies and
    associations, and other organizations, such as the Consumer Federation of
    America, to identify the many perspectives on the issues being studied. In
    connection with another report, we constructed, pre-tested, and
    administered insurance-and allotment-related survey questions to all 175
    installation-level managers of DOD's personal financial management
    programs located in the United States.1 We received completed surveys from
    131 installations, yielding an overall response rate of 75 percent, which
    ranged from a low of 62 percent for the Air Force to 93 percent for the
    Marine Corps. We also constructed, pre-tested, and administered an e-mail
    survey to the insurance commissioners for the 50 states, the District of
    Columbia, and four territories: American Samoa, Guam, Puerto Rico, and the
    Virgin Islands. We received completed surveys from 46 states, the District
    of Columbia, and one U.S. Territory, yielding an overall response rate of
    87 percent. We did not receive surveys from four states (California,
    Delaware, Florida, and Idaho) and three territories (American Samoa, Guam,
    and the Virgin Islands). We later contacted the four non-responding states
    to verify if they had any investigations on insurance sales practices on
    military installations, and only California responded to our inquiries. In
    addition, we interviewed personnel from the state insurance commissioner's
    office for four of the six states where we conducted site visits to
    military installations, as well as personnel for the commissioner's office
    in Georgia. We also asked insurance companies and two national insurance
    associations to identify agents and company representatives who could be
    interviewed about solicitation and allotment practices at the six
    installations. During site visits, we requested materials related to the
    marketing and sale of supplemental life insurance and the establishment of
    allotments for that purpose. Those materials included a list of life
    insurance agents approved for on-installation solicitation, handouts
    distributed to assist servicemembers in determining their need for
    supplemental life insurance, documentation for violations of personal
    commercial solicitation and insurance-related policies, and complaints
    related to insurance solicitation and allotments. While on the site visit,
    we conducted individual interviews or focus groups with the following
    types of individuals: installation leaders; the coordinator for the
    installation's commercial solicitation program; servicemembers; legal
    assistance attorneys from the Judge Advocate General corps; finance
    department

    1 See GAO-05-348.

    Appendix I Scope and Methodology

    personnel who managed and processed allotments; family support center
    staff responsible for personal financial management training and
    counseling activities; staff from morale, welfare, and recreation; and
    representatives of on-installation banks and credit unions.

    We limited our scope to the sale-marketing, solicitation, and purchase- of
    life insurance to active duty servicemembers on installations in the
    United States. Emphasis was given to findings pertaining to junior
    enlisted servicemembers since DOD and insurance officials have indicated
    that this subgroup is more likely to encounter problems with the marketing
    and sale of supplemental life insurance and establishment of an allotment
    for such a purchase. During the course of our work, we visited six
    installations (see table 3). We selected the installations based on inputs
    from DOD and insurance officials, and with due consideration for the large
    number of Army personnel deployed to Iraq and Afghanistan. We did obtain
    additional information on completed and ongoing large-scale investigations
    of violations that occurred on other installations: Fort Benning, Georgia,
    and Fort Stewart, Georgia, although we did not conduct site visits to
    these installations.

    Table 3: Installations in the United States where GAO Conducted Site
    Visits from July to December 2004

    Service Installation

                Army Fort Bragg, North Carolina Fort Campbell, Kentucky

            Fort Lewis, Washington Navy Naval Station Great Lakes, Illinois

    Marine Corps Camp Pendleton, California

    Air Force Lackland Air Force Base, Texas

    Source: GAO.

    Appendix I Scope and Methodology

    To address the extent to which agents were violating DOD's policies
    governing the solicitation of supplemental life insurance to active duty
    servicemembers on domestic installations, we reviewed and analyzed DOD,
    service, and selected installations' policies and directives governing
    personal commercial solicitation, primary among these was the DOD
    directive on personal commercial solicitation on DOD installations. We
    also reviewed DOD reports on commercial life insurance sales;2 materials
    provided by insurance association and company officials, as well as
    insurance agents; and state government announcements such as those from
    the office of the Georgia state insurance commissioner about
    investigations of and enforcement actions against some companies and
    agents who sold supplemental life insurance to servicemembers. We
    contacted the Federal Trade Commission to ascertain whether its Military
    Sentinel system contained any information on complaints or investigations
    on supplemental life insurance sales to servicemembers. We obtained a wide
    range of perspectives about the sale of supplemental life insurance to
    servicemembers during meetings with DOD and service headquarters
    officials, officials from companies and two life insurance associations
    (the American Council of Life Insurers and the National Association of
    Insurance and Financial Advisors), and a representative of the Consumer
    Federation of America. In addition to interviewing staff from the
    insurance commissioners' offices in four of the six states where we
    visited installations and in the state of Georgia, we constructed,
    pre-tested, and administered an e-mail survey to the insurance
    commissioners for the 50 states, the District of Columbia, and four
    territories. We also used responses about supplemental life
    insurance-related issues from a survey of all DOD personal financial
    management program managers, professional staff employed on most
    installations who were responsible for coordinating the financial
    management training, counseling, and other assistance provided to
    servicemembers. During our site visits, we asked that the command point of
    contact provide us with the following types of materials: a list of life
    insurance agents approved for on-installation solicitation, handouts
    distributed to assist servicemembers in determining the need for
    supplemental life insurance, documentation for violations of personal
    commercial solicitation and insurance-related policies, and complaints
    related to insurance solicitation. While on the installation, we conducted
    individual or focus group interviews with the following types of
    installation personnel or offices: installation leadership, the
    coordinator for

    2 Final Report: Insurance Solicitation Practices on Department of Defense
    Installations, and DODIG, Report No. 99-106.

    Appendix I Scope and Methodology

    the installation's commercial solicitation program, legal assistance
    attorneys from the Judge Advocate General corps, and family support center
    staff responsible for financial training and counseling activities. We
    also asked the life insurance associations and company officials for the
    names of agents that we could interview while on our site visits. As part
    of our site visits, we conducted interviews with on-installation bank and
    credit union officials, asking about current and planned efforts to offer
    supplemental life insurance through their financial institution.

    To address how effectively DOD personnel are adhering to DOD's regulations
    that govern how active duty servicemembers establish payroll allotments to
    purchase supplemental life insurance, we interviewed officials from DFAS
    at their headquarters and field offices associated with each service. We
    also reviewed and analyzed guidance documents governing servicemembers'
    use of allotments that DFAS, the services, and selected installations
    provided to us. We interviewed finance officials at the installations we
    visited and observed the data entry process used to electronically
    transmit data from the installation to the payroll accounting system
    maintained by DFAS. At several installations, we also interviewed
    officials at administrative units that serve as intermediaries in the
    processing of servicemembers' allotments and asked questions as personnel
    demonstrated the procedures used in submitting, processing, and confirming
    allotment transactions.

    To assess the extent to which the draft revision of DOD's directive will
    address ongoing problems with supplemental life insurance policies on DOD
    installations, we reviewed the Department of Defense Appropriations Act
    for Fiscal Year 20053 to determine the restrictions on when the draft
    directive could be issued. We conducted interviews with DOD program
    officials to discuss proposed changes, the reasons for the proposed
    changes, and other issues related to the draft directive. Also, DOD
    provided us with a copy of the draft directive as of January 2005 so that
    we could compare and contrast it to the current version of the directive.
    We compared that version to the one printed in the April 19, 2005, Federal
    Register announcement.4 We subsequently contacted DOD policy officials to
    determine whether DOD intended to again request comments after our report
    was issued.

    3 Pub. L. No. 108-287 (Aug. 5, 2004). 4 70 Fed. Reg. 20316 (2005).

    Appendix I Scope and Methodology

    We performed our work from May 2004 through May 2005 in accordance with
    generally accepted government auditing standards.

    Appendix II

    Details on Selected Recent In-Depth Investigations

    We are providing synopses of the reports that investigators prepared after
    they completed gathering data on alleged violations. We did not
    independently attempt to verify the allegations or the weight of the
    evidence supporting decisions reached by installation commanders. Instead,
    we merely summarize the information provided in the investigative reports.

    Installation: Camp Pendleton, California

    Period when the violations occurred: October through November 2003

    Description of the violations: An insurance agent approached an officer
    requesting authorization to teach a class on veterans' affairs benefits
    and financial planning to squadron Marines. The officer believed the class
    would benefit Marines and included the agent on the training schedule.
    During the class, the agent spoke little about veterans' benefits,
    focusing more on investments. The agent distributed cards to obtain
    contact information and later met with Marines while they were on duty or
    in their homes to sell them policies. The agent described the policy as an
    investment plan, rather than an insurance policy, guaranteed, as stated by
    the agent, to provide Marines "$500,000 to $1,000,000 by the time they
    reached their sixties." The agent also tried to sell the investment plan
    to Marines without appointments. During the meetings, Marines were given
    the impression that the agent was a representative of the Department of
    Veterans' Affairs and was able to assist them in obtaining their benefits.
    On one occasion, the agent tried to obtain a MyPay personal identification
    number from a Marine.

    Investigators determined that these actions violated prohibited
    solicitation practices including providing financial planning and
    insurance classes without prior approval; attempting to solicit or sell
    insurance without an appointment; attempting to sell insurance in an
    unauthorized area; using unfair, deceptive, misleading, or fraudulent
    schemes to encourage sales; and soliciting to trainees.

    Documentation to assess the scope of the problem: The investigation report
    included sworn statements from 12 Marines who met with the agent as well
    as two other Marines approached by the agent.

    Estimated number of affected servicemembers: The initial class included 15
    to 25 Marines, and the agent conducted the class at least one other time.

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    Actions taken:

    o
    By the installation: Solicitation privileges for the agent were suspended
    for two years for all Western area Marine Corps installations.

    o
    By the insurance company: The insurance company returned the agent's
    solicitation pass and ceased all operations on the installation with no
    plans of reopening.

    Installation's interaction with state insurance commissioner's office: The
    installation recently provided copies of the investigation to the state
    insurance commissioner.

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    Installation: Camp Pendleton, California

    Period when the violations occurred: May through September 2003

    Description of the violations: Under the guise of presenting information
    on veterans' affairs benefits, two insurance agents obtained permission
    from a commanding officer to provide the classes to Marines arriving from
    boot camp, at which attendance was required. Four people conducted the
    classes, including three insurance agents and the wife of one agent.
    According to participants, the classes started with normal veterans'
    benefit discussions, but shifted into an investment and life insurance
    sales pitch after non-commissioned officers left the room. The product was
    identified as a "can't lose proposition" and participants were told that
    participation would earn them about $500,000 in just over 21 years. During
    the sales pitch, agents distributed paperwork, including applications,
    allotment forms, and statements of understanding, to the Marines.
    Participants were encouraged not to read the forms and sign them quickly,
    leave the amounts on the allotment forms blank, provide the insurance
    company representatives access to MyPay personal identification numbers,
    and provide signed photocopies of their identification cards. The agents
    brought portable printers to the meetings to obtain the necessary
    information. The Marines were not allowed to take paperwork with them,
    being told that copies would be sent to their home of record.

    Investigators determined that these actions violated prohibited
    solicitation practices including soliciting military personnel who are in
    an on-duty status; soliciting without appointment in areas utilized for
    the housing and processing of transient personnel and in unit areas; using
    manipulative, deceptive, or fraudulent devices, including misleading
    advertising and sales literature; soliciting recruits, trainees, and other
    personnel while in a "mass" or "captive" audience; and violating the
    requirement that at least seven days elapse between the signing of a life
    insurance application and the certification of an allotment for personnel
    in pay grades E1 through E3.

    Documentation to assess the scope of the problem: The investigation report
    included interviews from 26 Marines in the five classes. Additional
    information, such as direct deposit forms and statements of understanding,
    was also included.

    Estimated number of affected servicemembers: 345

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    Actions taken:

    o
    By the installation: Solicitation privileges for the agents were revoked
    for Camp Pendleton and all Western region Navy and Marine Corps
    installations.

    o
    By the insurance company: The insurance company shut down its operations
    at Camp Pendleton and has no plans to reopen. The company terminated the
    three agents involved, at least one of whom was a retired Marine. Refunds
    were provided to 110 Marines before the June 8, 2004 cutoff date.

    Installation's interaction with state insurance commissioner's office: The
    investigation report recommended the California Department of Insurance be
    notified of the report results. The installation recently provided copies
    of the report to the state insurance commissioner.

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    Installation: Fort Benning, Georgia

    Period when the violations occurred: December 2003 through July 2004

    Description of the violations: Four agents, two who were on Fort Benning's
    list of authorized insurance and investment agents, gained access to
    soldiers in the Basic Combat Training Brigade through unit
    non	commissioned officers under the pretext of providing financial
    planning or financial management classes. The agents conducted their
    briefings in unit classrooms, discussing the value of investing and
    providing examples of wealth accumulation. At the end of these
    presentations, soldiers wanting additional information were asked to
    complete an informational form. Following up on leads generated from the
    forms, the agents returned to the unit area a few weeks later and met
    individually or in a small group with soldiers. These follow-on meetings,
    involving the use of laptop computers and direct deposit forms, took place
    in unit classrooms or unit dayrooms. Fort Benning officials found that
    officers and non-commissioned officers contributed to the solicitations
    and a number of drill sergeants knew of the insurance presentations in the
    unit area.

    Investigators determined that these actions violated prohibited
    solicitation practices including soliciting during enlistment or induction
    processing or during basic combat training; soliciting to mass, group, or
    captive audiences; and misusing the allotment of pay system.

    Documentation used to assess the scope of the problem: The investigation
    report included sworn statements from a number of soldiers who met with
    the agents. Additional information, such as direct deposit forms, was also
    obtained.

    Estimated number of affected servicemembers: 377

    Actions taken:

    o
    By the installation: Installation solicitation privileges for the agents
    were revoked. Three officers and seven enlisted personnel involved were
    reprimanded for failing to adequately safeguard the soldiers for whom they
    had responsibility.

    o
    By the insurance company: The agents involved were fired from the
    insurance companies they represented. The insurance company from

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    which most of the policies appear to have been sold has agreed to provide
    refunds to soldiers.

    Installation's interaction with state insurance commissioner's office: The
    investigation report recommended that findings be shared with the state
    licensing agencies. Installation officials have provided information to
    the state of Georgia regarding these incidents.

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    Installation: Fort Benning, Georgia

    Period when the violations occurred: July 2002 through October 2002

    Description of the violations: Two agents conducted financial management
    briefings to soldiers in the infantry training brigade. The agents gained
    access to soldiers through unit non-commissioned officers under the
    pretext of providing financial management classes. The classes were
    imbedded into the training schedule with other personal and financial
    affairs presentations and were conducted in unit classrooms on the
    installation. The soldiers were escorted to the classrooms by
    non	commissioned officers, and according to the investigation, some of the
    non-commissioned officers had knowledge of the solicitation actions taking
    place. In addition to the financial management classes, one of the agents
    allegedly made insurance presentations in training areas to
    non	commissioned officers. During these presentations, some trainees met
    with the agent and subsequently purchased life insurance policies.

    Investigators determined that these actions violated prohibited
    solicitation practices including soliciting during enlistment or induction
    processing or during basic combat training; soliciting to mass, group, or
    captive audiences; making appointments with or soliciting military
    personnel who are in an "on duty" status; and using manipulative,
    deceptive, or fraudulent devices or schemes to sell products, including
    misleading advertising and sales literature.

    Documentation used to assess the scope of the problem: The investigation
    report included sworn statements from involved non	commissioned officers,
    soldiers who attended the briefings, and Army community affairs officials
    who received complaints from two of the soldiers involved.

    Estimated number of affected servicemembers: 906

    Actions taken:

    o
    By the installation: Installation solicitation privileges for the two
    agents were revoked.

    o
    By the insurance company: The agents involved were fired from the
    insurance company they represented. The insurance company offered

    Appendix II
    Details on Selected Recent In-Depth
    Investigations

    refunds to affected persons, and as of May 2005, about 20 percent of the
    soldiers received refunds.

    Installation's interaction with state insurance commissioner's office:
    Installation officials have provided information to the state of Georgia
    regarding these incidents.

                                      Appendix III

                                    Allotment Forms

    Appendix III Allotment Forms

                                      Appendix IV

                        Comments from the Department of Defense

    Note: Page numbers in the draft report may differ from those in this
    report.

    Appendix IV
    Comments from the Department of Defense

    Appendix IV
    Comments from the Department of Defense

    Appendix IV
    Comments from the Department of Defense

    Appendix IV
    Comments from the Department of Defense

    Appendix V

                         GAO Contact and Staff Acknowledgments

    GAO Contact Derek B. Stewart (202) 512-5559

    Acknowledgments	In addition to the individual named above, James Cook,
    Jack Edwards, Lynn Johnson, David Mayfield, Terry Richardson, Arnett
    Sanders, Cheryl Weissman, and Kristy Williams made key contributions to
    this report.

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