-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-657T		

TITLE:     Military Pay: Military Debts Present Significant 
Hardships to Hundreds of Sick and Injured GWOT Soldiers

DATE:   04/27/2006 
				                                                                         
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GAO-06-657T

     

     * Summary
     * Continuing Pay Problems for Army Soldiers
     * Overpayments and Debt Collection Action Have Placed Signific
          * Fort Bragg Soldier Case Studies
          * Separated Battle-Injured Soldier Case Studies
     * DOD Actions to Address Pay and Travel Reimbursement Problems
     * Opportunities for a More Soldier-Friendly Debt Collection Pr
     * Concluding Comments
     * Contacts and Acknowledgments
          * Order by Mail or Phone

Testimony

Before the Committee on Government Reform, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EDT

Thursday, April 27, 2006

MILITARY PAY

Military Debts Present Significant Hardships to Hundreds of Sick and
Injured GWOT Soldiers

Statement of Gregory D. Kutz, Managing Director Forensic Audits and
Special Investigations

Army GWOT Solider Debt Army GWOT Solider Debt Army GWOT Solider Debt Army
GWOT Solider Debt Army GWOT Solider Debt Army GWOT Solider Debt Army GWOT
Solider Debt Army GWOT Solider Debt Army GWOT Solider Debt Army GWOT
Solider Debt Army GWOT Solider Debt Army GWOT Solider Debt Army GWOT
Solider Debt Army GWOT Solider Debt Army GWOT Solider Debt

GAO-06-657T

Mr. Chairman and Members of the Committee:

Thank you for the opportunity to discuss our recent work on Army military
pay. This testimony, which is the fifth in a series of reports and related
testimonies to this committee, is part of a continuing body of work
related to military and travel pay for soldiers who have served in the
Global War on Terrorism (GWOT) since the terrorist attacks of September
11, 2001. Our previous work1 identified hundreds of Army National Guard
and Reserve soldiers who experienced substantial pay and travel
reimbursement problems caused primarily by ongoing challenges in the areas
of human capital, processes, and automated systems. Our recent work, which
is presented in two reports that the committee is releasing today,2
presents two more examples of the overall result of a broken military pay
system.

Collection action on military debt has affected GWOT soldiers from all
Army components-Active, National Guard, and Reserve-and involves soldiers
who were injured or killed in combat as well as soldiers who suffered from
sickness and nonbattle injuries. Our Fort Bragg investigation looked into
allegations that there were overpayments made to sick and injured
in-service soldiers who were in Medical Retention outpatient3 status. The
Fort Bragg Medical Retention Processing Unit (MRPU) is 1 of 23 Army MRPUs.
Once overpayments are identified, they result in debt, which must be
repaid to the government. Our audit of soldier debt focused on GWOT
soldiers who were injured in battle and had separated from the service and
soldiers who were killed in combat and owed military debt related to
overpayments and other errors. We performed our Fort Bragg investigation
from August 2005 through March 2006 in accordance with quality standards
for investigations established by the President's Council on Integrity and
Efficiency. We performed our soldier debt audit from June 2005 through
March 2006 in accordance with generally accepted government auditing
standards.

1 GAO, Military Pay: Gaps in Pay and Benefits Create Financial Hardships
for Injured Army National Guard and Reserve Soldiers, GAO-05-125 and
GAO-05-322T (Washington, D.C.: Feb. 17, 2005); Army National Guard:
Inefficient, Error-Prone Process Results in Travel Reimbursement Problems
for Mobilized Soldiers, GAO-05-79 (Washington, D.C.: Jan. 31, 2005) and
GAO-05-400T (Washington, D.C.: Mar. 16, 2005); Military Pay: Army Reserve
Soldiers Mobilized to Active Duty Experienced Significant Pay Problems,
GAO-04-990T (Washington, D.C.: July 20, 2004) and GAO-04-911 (Washington,
D.C.: Aug. 20, 2004); and Military Pay: Army National Guard Personnel
Mobilized to Active Duty Experienced Significant Pay Problems, GAO-04-413T
(Washington, D.C.: Jan. 28, 2004) and GAO-04-89 (Washington, D.C.: Nov.
13, 2003).

2 GAO, Military Pay: Inadequate Controls for Stopping Overpayments of
Hostile Fire and Hardship Duty Pay to Over 200 Sick or Injured Army
National Guard and Army Reserve Soldiers Assigned to Fort Bragg,
GAO-06-384R (Washington, D.C.: Apr. 27, 2006) and Military Pay: Hundreds
of Battle-Injured GWOT Soldiers Have Struggled to Resolve Military Debts,
GAO-06-494 (Washington, D.C.: Apr. 27, 2006).

3 For the purposes of this testimony, "outpatient" means soldiers who are
being medically evaluated for specialized treatment. This may include
surgery, which would require hospitalization at a later date.

The Debt Collection Act of 19824 provides a statutory basis for federal
agencies to use appropriate debt collection tools, such as interest
charges, offset, and private collection agencies. Collection action on
military debts consists of pay offset for soldiers who are still in the
service and escalates to collection through debt notification letters,
credit bureau reporting, and private collection agency action when
soldiers have left the service and have not paid their military debts.
Debts of separated soldiers may also be collected through offsets against
federal income tax refunds; retirement pay; and federally administered
benefits payments, such as Social Security Administration benefits. These
offsets are handled by the Department of the Treasury Offset Program,
referred to as TOP.

Today, I will summarize the results of our recent work with respect to the
(1) overpayments made to Army National Guard and Reserve soldiers at the
MRPU at Fort Bragg and the extent and reported causes of debt for
battle-injured Army soldiers who have left the service and (2) the effects
of overpayments and debt-related problems for case study soldiers and
their families. Debt collection action presents the most serious hardships
on injured soldiers who face physical limitations and continuing medical
treatment. I will also discuss the Army's actions to address pay and debt
management problems and how current debt relief authority can be made more
soldier-friendly.

                                    Summary

Continuing pay problems resulted in overpayments and debt for sick and
injured Army soldiers serving in the GWOT. As shown in our prior work,
these pay problems resulted in significant frustration and financial
problems for the soldiers and their families. Our audit of separated Army
GWOT soldier debt identified nearly 1,300 separated battle-injured
soldiers and soldiers who were killed in combat who had incurred $1.5
million in debt during the first 4 years of the GWOT deployment (October
2001 through September 2005).5 According to DOD, the primary cause of this
debt related to military pay problems. As a policy, the Defense Finance
and Accounting Service (DFAS) has authority to write off debts of soldiers
who were killed in combat. However, according to DFAS officials, military
debt can be satisfied from the final pay of these soldiers, 6 and DFAS may
pursue collection action on other deceased soldiers' debts.

4 Pub. L. No. 97-365, 96 Stat. 1749 (1982).

We found that hundreds of battle-injured soldiers were pursued for
repayment of military debts through no fault of their own, including at
least 74 soldiers whose debts had been reported to credit bureaus and
private collection agencies at the time we initiated our audit in June
2005. In response to our audit, Army and DFAS officials told us that they
had suspended collection action on these soldiers' debts and recalled
their reports to credit bureaus and their referrals to private collection
agencies and TOP until a determination could be made as to whether these
soldiers' debts were eligible for relief.

In addition, our investigation of pay problems related to Army National
Guard and Reserve soldiers assigned to the MRPU at Fort Bragg-1 of 23
MRPUs-identified overpayments of approximately $218,0007 to 232 sick and
injured8 Army National Guard and Reserve soldiers. Many sick and injured
Fort Bragg soldiers faced garnishment of wages and other debt collection
actions resulting from these pay errors.

As illustrated by our case studies, debt collection action resulted in
significant frustration and financial problems for soldiers and their
families. For example, our Fort Bragg investigation found that several
sick and injured soldiers who were still in the service experienced large,
unexpected deductions-as much as $1,172 from a single paycheck-for
repayment of debt resulting from the Army's failure to stop hostile fire
and hardship duty pay for soldiers who were in Medical Retention status.
The longer it took the Fort Bragg Finance Battalion to stop the
overpayments, the greater the amount of debt that accumulated for the
soldier and the greater the financial impact since more money eventually
would be withheld from the soldier's pay or sought through debt collection
action after the soldier had separated from the service.

5 We determined that these data were reliable for the purposes of our
audit.

6 Circumstances in which debt can be offset against a fallen soldier's
final pay include normal adjustments to collect outstanding advance pay
and minimal overpayments within the current month and other outstanding
debt, such as nonsufficient fund checks.

7 As a result of the lack of supporting documents and data reliability
concerns, we likely did not identify precise overpayment amounts. We have
provided information on the overpayments we identified to cognizant Fort
Bragg officials for further research to determine the proper amounts that
are owed to the government or the soldiers.

8 The term injured includes battle-injured and non battle-injured
soldiers.

Case studies related to both of our reports showed that sick and injured
soldiers sometimes went months without paychecks9 because debt caused by
overpayments of combat pay and other errors was offset against their
military pay. Similarly, work performed for both of our reports also
showed that when debts were not paid after the soldiers separated from the
service, they were subject to credit bureau reporting and collection
agency actions. Out-of-service debt collection actions created additional
hardships on the soldiers by preventing them from getting loans to buy
houses or automobiles or pay off other debt, and sending several of the
soldiers into financial crisis. Some battle-injured soldiers forfeited
their final separation pay to cover part of their military debt, and they
left the service with no funds to cover immediate expenses while facing
collection action on their remaining debt. Because of their lack of
income, 16 of 19 separated battle-injured soldiers who contacted us during
our audit told us that they had difficulty paying basic household
expenses. Because they were unable to pay their military debts, 16 of
these soldiers' debts were reported to credit bureaus, 9 soldiers were
pursued by collection agencies, and 8 soldiers had their income tax
refunds withheld under TOP.

Preventing debt from occurring in the first place is the best solution to
this problem. Our past reports included over 80 recommendations for
improvements in human capital, processes, and automated systems to address
pay and travel problems. Although the fundamentally flawed, error-prone
system remains, the Department of Defense (DOD) and the Army have taken a
number of actions to address these problems and help prevent them from
occurring in the future. These actions represent primarily human efforts
and workarounds intended to compensate for the current system. For
example, the Army and DFAS have created a Wounded-in-Action (WIA) database
of personnel, payroll, and medical data on soldiers who became sick, were
injured, or were killed in combat. This database provides useful
information for identifying and resolving soldier pay and debt problems.
The Army and DFAS have also issued standard operating procedures and
initiated training and oversight activities at several Army field
locations.

9 We found that after voluntary allotments and other required deductions,
many times there was no net pay due the soldier.

Our Fort Bragg report recommends that in conjunction with the Army's
proactive efforts to improve Army National Guard and Reserve pay account
management, DOD and the Army follow up with finance offices supporting the
22 MRPUs that were not part of our investigation to determine the extent
to which overpayments had occurred at these locations and ensure that
appropriate corrective action is taken.

Opportunities also exist to make the debt collection process more soldier
friendly. Our report on debts of battle-injured soldiers raises a number
of matters for congressional consideration with regard to expanding debt
relief authority in current law, including providing uniform debt relief
to injured GWOT soldiers and exempting these soldiers from credit bureau
reporting and private collection agency and TOP action.

                   Continuing Pay Problems for Army Soldiers

Continuing pay problems resulted in overpayments and debt for sick and
injured GWOT Army soldiers. When Army and medical unit commanders fail to
report changes in soldier duty status and location, overpayments of
combat-related pay, such as hostile fire pay, hardship duty pay, and
family separation pay, continue-sometimes for several months past the time
the soldier is eligible to receive this combat-related pay. As illustrated
by our case studies, which are discussed in the next section of our
testimony, changes in duty status and location occur when soldiers become
sick or injured or they do not deploy with their units and when soldiers
are injured after deployment or sustain battle injuries and are medically
evacuated.

Our investigation into allegations of pay problems related to 37 soldiers
assigned to the MRPU at Fort Bragg identified actual overpayments of
approximately $218,000 to 232 sick and injured Army National Guard and
Reserve soldiers in outpatient status during the period April 2003 through
June 2005. These overpayments occurred in part because unit and medical
commanders failed to record changes in duty status and location of sick
and injured soldiers. Data available during our case studies showed that
it took from 14 to 203 days to stop overpayments once a soldier visited
the Finance Battalion. As demonstrated in our past reports, finance
offices in theater were often unable to start or stop hostile fire pay or
hardship duty pay as required because of problems with human capital,
processes, and the lack of integrated pay and personnel systems. When
overpayments were not detected or they were not detected in a timely
manner, the dollar amount of soldier debts continued to increase. Debts
that remained unpaid after these soldiers left the service were subject to
collection through credit bureau reporting, private collection agencies,
and TOP offsets of income tax refunds and other designated federal
payments.

Our audit of separated Army GWOT soldier debt identified nearly 1,300
battle-injured soldiers who left the service owing $1.5 million, including
almost 900 battle-injured soldiers whose debts totaled about $1.2 million
and about 400 soldiers who died in battle whose debts totaled over
$300,000. As a policy, DFAS does not pursue collection action on the debts
of fallen soldiers. However, Army and DFAS officials told us that under
certain circumstances,10 military debt can be satisfied from the final pay
of fallen soldiers. In addition, DFAS may pursue collection of debts of
other deceased soldiers. We found that hundreds of separated
battle-injured soldiers were pursued for repayment of military debts that
occurred through no fault of their own, including 74 soldiers whose debts
had been reported to credit bureaus, private collection agencies, and TOP
at the time we initiated our audit in June 2005. Although the Debt
Collection Act gives DOD authority to use these debt collection tools, in
response to our audit, the Army temporarily suspended collection action on
debts of battle-injured soldiers until a determination could be made about
whether these soldiers' debts were eligible for relief.

As illustrated in figure 1, Army and DFAS data for fiscal years 2002
through 2005 showed that 73 percent of the debts for the nearly 1,300
separated battle-injured soldiers and soldiers killed in combat related to
errors in pay calculations, combat pay errors, and erroneous leave
payments during fiscal years 2002 through 2005. The remaining 27 percent
of these soldiers' debts related to repayment of enlistment bonuses (11
percent) where soldiers did not complete the required term of service or
they improperly received more than one bonus; payments for tuition and
training (6 percent) where soldiers did not complete their training or
they did not fulfill service requirements related to their training; and
other expenses (8 percent) related to unpaid bills for family medical
services, housing and household moves, insurance premiums, travel
advances,11 and loss or damage of government property. The reasons for the
remaining debt (2 percent) were not recorded in the Defense Debt
Management System.

10 Circumstances in which debt can be offset against a fallen soldier's
final pay include normal adjustments to collect outstanding advance pay
and minimal overpayments within the current month and other outstanding
debt, such as nonsufficient fund checks.

11 In accordance with 41 C.F.R. S: 301-71.305 federal employees are
required to account for outstanding travel advances when they file travel
claims. Any unused amount of a travel advance is required to be repaid.

Figure 1. Dollar Amounts of Battle-Injured and Fallen Soldier Debts by
Major Reason.

Other debts relate to provisions in law and DOD business rules in effect
at various times. For example, until mid-2005, soldiers were required to
repay portions of their enlistment bonus, special pay, and educational
benefits and stipends when they failed to fulfill their required terms of
service because of early separation as a result of their war injuries.
According to DFAS officials, although unit commanders and finance offices
are authorized to write off debts for lost and damaged equipment when
soldiers who were injured or killed by hostile fire are medically
evacuated from the theater of operation, they have not always done so. In
addition, unpaid bills for family medical services, housing and household
moves, insurance premiums, and outstanding travel advances generate debt.
Because Army units and medical facilities have not always prepared or
processed changes in orders when a soldier's duty status or location
changed, soldiers do not have the documentation needed to submit vouchers
for travel reimbursement. The new WIA Support Team's standard operating
procedures for soldier pay account review require identification and
processing of all soldier travel claims.

Overpayments and Debt Collection Action Have Placed Significant Hardship on Sick
                    and Injured Soldiers and Their Families

Debt collection actions have caused a variety of problems for injured and
sick Army GWOT soldiers. Case studies related to both of our reports
showed that sick and injured soldiers sometimes went months without
paychecks because debt caused by overpayments of combat pay and other
errors was offset against their military pay.12 Work performed for both of
our reports also showed that when debts were not paid after the soldiers
separated from the service, they were subject to credit bureau reporting
and collection agency actions and offsets. Out-of-service debt collection
actions created additional hardships on the soldiers by preventing them
from paying for basic household expenses, getting loans to buy houses or
automobiles or pay off other debt, and sending several of the soldiers
into financial crisis. Some battle-injured soldiers forfeited their final
separation pay to cover part of their military debt, and they left the
service with no funds to cover immediate expenses while facing collection
action on their military debt.

Fort Bragg Soldier Case Studies

Case studies developed as part of our Fort Bragg investigation showed that
some soldiers and their families had to expend significant time and effort
dealing with pay problems and resulting debt while recovering from
sickness and injuries. Several soldiers experienced large, unexpected
deductions-as much as $1,172 from a single paycheck-for repayment of debt
resulting from the Army's failure to stop hostile fire and hardship duty
pay for soldiers who were in Medical Retention status.

As illustrated in table 1, for 9 of the 10 MRPU soldiers in our case
studies, it took pay technicians at the Fort Bragg Finance Battalion from
14 to 203 days to stop the overpayments once the soldiers visited the
Finance Battalion. The resulting overpayments ranged from $553 to $2,300.
The Finance Battalion could not provide documentation for us to determine
the amount of time it took to stop overpayments for one of our case study
soldiers. The soldiers' injuries ranged from those inflicted by improvised
explosive devices (IED) to post-traumatic stress disorder.

12 We found that after voluntary allotments and other required deductions,
many times there was no net pay due the soldier.

Table 1. Examples of Fort Bragg Soldier Pay Problems

Source: GAO.

aDays elapsed equals the number of days between the date the soldier
visited Finance and date ineligible pay was stopped.

bEstimated overpayments equals hostile fire and hardship duty payments
made to a soldier after arrival at Fort Bragg MRPU.

Soldier #6 in the table above, an Army National Guard soldier, suffered a
stroke on June 26, 2004, while serving in Iraq. He was medically evacuated
and arrived at Fort Bragg in early July 2004. Our investigation revealed
that the soldier visited the Fort Bragg Finance Battalion on July 30,
2004, as part of his MRPU processing. Despite following MRPU procedures,
this soldier's hostile fire and hardship duty pay continued until November
5, 2004-approximately 4 months after his initial visit to the Finance
Battalion. By this time, the soldier's overpayments had resulted in debt
of $1,300. The Fort Bragg Finance Battalion eventually collected about
$972 of this amount from a single paycheck, which was about 50 percent of
the soldier's disposable pay. As a result, the soldier's wife told us that
she had to defer paying some of their bills, including the monthly payment
on their second mortgage.

Separated Battle-Injured Soldier Case Studies

Case studies related to our audit of separated battle-injured soldier debt
showed that several of these soldiers also had gone without a paycheck for
several months while they were in Army medical facilities undergoing
treatment for their war injuries because debt caused by overpayments of
combat pay and other errors was offset against their military pay. One
soldier said he had no money for food while several soldiers told us they
received assistance from family members. When these soldiers leave the
Army, they generally do not have jobs and many of them face continuing
medical treatment for battle injuries, making it difficult to hold a job.
Some soldiers told us that their final separation pay was offset to cover
their debt and they left the service with no funds to pay immediate
expenses.

Because of the lack of income, 16 of the 19 soldiers who contacted us
during our audit told us that they had difficulty paying for basic
household expenses. The Army's failure to record separation paperwork in
the pay system and other payment errors resulted in over $12,000 of debt
for one severely battle-injured soldier who suffered brain damage when his
convoy came under attack. Although the soldier's family expected that he
would receive retirement pay when his active Army pay stopped upon his
separation, the soldier had no income for several months while the Army
attempted to recover his military debt. As a result the soldier's family
was unable to pay household bills, the utilities were shut off, and the
soldier's dependent daughter was sent out of state to live with relatives.

In addition, three soldiers told us that they were erroneously identified
as absent without leave (AWOL) by their units while they were actually in
the hospital or receiving outpatient care for their war injuries. The AWOL
status for at least two of these soldiers created debt because it appeared
that the soldiers received pay when they were not in duty status. At the
time these soldiers were listed as AWOL by their Army units, they were
actually receiving medical treatment. One soldier was receiving outpatient
therapy for her knee injury under the care and direction of an Air Force
physician based on an Army medical referral and the other soldier was in a
military hospital at Fort Campbell. Debt-related experiences of 19
separated battle-injured soldiers who contacted us included the following.

           o  Sixteen soldiers had their military debts reported to credit
           bureaus, 9 soldiers had debts turned over to private collection
           agencies, and 8 soldiers had their income tax refunds withheld
           under TOP.
           o  Sixteen could not pay their basic household expenses.
           o  Four soldiers were unable to obtain loans to purchase homes,
           meet other needs, or obtain VA educational benefits because of
           service-related debt on their credit reports.
           o  At least 8 soldiers were owed travel reimbursements at the same
           time they were being pursued for collection of their
           service-related debts.

           Table 2 illustrates examples of the effects of debt collection
           actions on 10 of our separated Army battle-injured case study
           soldiers and their families. Debts imposed the greatest hardship
           on battle-injured soldiers who have had to endure financial
           problems while they cope with adjusting to physical limitations
           caused by their injuries.

Table 2.Examples of Battle-Injured Soldier Pay Problems Resulting in
Military Debt after Separation

Source: GAO.

Five soldiers and family members told us that they had contacted their
unit finance offices multiple times for assistance in resolving their pay
and debt problems. However, the soldiers said that finance personnel
either did not get back to them as promised or the finance personnel they
spoke with said they could not help them with their problems. DFAS and
Army officials we spoke with acknowledged that finance office personnel at
some locations lacked the knowledge needed to accurately input
transactions to soldier pay accounts. DFAS officials told us they recently
initiated actions to train Army finance office personnel at several
locations.

          DOD Actions to Address Pay and Travel Reimbursement Problems

Our past reports included over 80 recommendations for improvements in
human capital, processes, and systems to address pay and travel problems.
Preventing these problems from occurring in the first place is the best
solution. Efforts to fundamentally reengineer the current system into an
integrated pay and personnel system have fallen far short of expectations.
DOD and the Army have taken a number of actions to improve human capital
and correct process weaknesses. For example, the Army and DFAS have
created a WIA database of personnel, payroll, and medical data on soldiers
who were sick, injured, or killed in combat. This database provides useful
information for identifying and resolving soldier pay and debt problems.
The Army and DFAS have also issued standard operating procedures and
initiated training and oversight activities at several Army field
locations. In addition, the Army established a formal Ombudsman Office in
May 2005 to assist Army Guard and Reserve soldiers in resolving a variety
of pay and travel problems. Over the past few months, DFAS has deployed
staff to several field locations to train the finance staff on the
processing of pay transactions. Although these actions are positive, they
primarily represent workarounds and substantial human efforts to overcome
the error-prone, labor-intensive system that exists today.

       Opportunities for a More Soldier-Friendly Debt Collection Process

Our analysis of debt relief authority in the National Defense
Authorization Act for Fiscal Year 2006 identified additional opportunities
to alleviate the burden that military debt and collection action places on
sick and injured soldiers. For example, the act could be clarified to make
debt relief available to soldiers regardless of when they separated from
active duty. Currently, soldiers who separated from the Army more than 1
year ago are not eligible to obtain debt relief, and soldiers who paid
debts are not eligible for refunds.

Case studies included in both of our recent reports showed that some
battle-injured soldiers did not receive debt notification letters until 8
to 10 months after they separated from the Army. One battle-injured
soldier who separated in October 2004 told us that he received his debt
notification letter in November 2005-more than 1 year after he separated
from the Army. All but three of our case study battle-injured soldiers
separated from the Army more than 1 year ago, and these soldiers'
eligibility for debt relief under the act has already expired. Another
non-battle-injured soldier included in our Fort Bragg investigation who
separated from the Army National Guard in June 2005, received his debt
notification letter at the end of March 2006-10 months after he separated
from the service-stating that his debt would be reported to credit
bureaus, if not paid within 30 days and to private collection agencies if
not paid within 60 days. Further, the current debt relief authority is not
permanent; it will expire on December 31, 2007.

Our report on debts of battle-injured soldiers raises a number of matters
for congressional consideration with regard to expanding debt relief
authority in current law, including providing uniform debt relief to
injured GWOT soldiers and exempting these soldiers from credit bureau
reporting and private collection agency and TOP action. Our report on MRPU
soldier overpayments recommends that DOD follow up with the 22 MRPUs that
were not part of our investigation to determine the extent of overpayments
at those locations and ensure appropriate corrective action is taken.

                              Concluding Comments

Our most recent work shows that wounded soldiers continue to struggle with
a broken pay system. These pay problems have resulted in significant
frustration for injured soldiers and their families. In addition, we found
instances of soldiers injured fighting the GWOT being referred to credit
reporting agencies and collection agents. This is especially problematic
for injured soldiers who are facing other difficult challenges. Although
DOD has taken action to improve the military pay system, most of the
progress to date represents workarounds and human efforts to overcome what
remains today as a fundamentally flawed system. Absent a successful
reengineering of the current pay system, problems for soldiers will
continue. Consistent oversight by Congress will be needed to ensure that
DOD provides our soldiers with the world class military pay system that
they deserve.

Mr. Chairman and Members of the Committee, this concludes my statement. I
would be pleased to answer any questions that you or other members of the
committee may have at this time.

                          Contacts and Acknowledgments

For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-7455 or [email protected] . Major contributors to this
testimony include Gary Bianchi, Mary Ellen Chervenic, Dennis Fauber, Gayle
Fischer, Jason Kelly, Renee McElveen, Richard Newbold, and John Ryan.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this testimony.

(192205)

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Highlights of GAO-06-657T , a report to Committee on Government Reform,
U.S. House of Representatives

April, 27, 2006

MILITARY PAY:

Military Debts Present Significant Hardships to Sick and Injured GWOT
Soldiers

In light of GAO's past four reports and testimonies on Army military pay
and travel pay for soldiers who have served in the Global War on Terrorism
(GWOT), GAO was asked to determine if weaknesses in Army processes for
initiating and terminating active duty pay might result in erroneous
payments and debt, including (1) overpayments to soldiers in the Fort
Bragg Medical Retention Processing Unit (MRPU)-1 of 23 MRPUs-and

(2) overpayments and other errors that resulted in debt collection action
against battle-injured soldiers who were released from active duty. GAO
also was asked to develop case studies to illustrate the effects of these
problems on soldiers and their families and to determine ways that
Congress could make the debt collection process more soldier friendly.

What GAO Recommends

GAO's report on overpayments at Fort Bragg (GAO-06-384R) recommended that
DOD determine whether the same problems had occurred at the other 22 MRPUs
and ensure that appropriate corrective action is taken. GAO's report on
separated soldier debt (GAO-06-494) raised several matters for Congress to
consider regarding legislation to provide uniform debt relief to injured
soldiers and exemptions from credit bureau reporting and private
collection agency action. DOD partially concurred on the Fort Bragg report
and concurred on the soldier debt report.

Continuing pay problems resulted in overpayments and debt for sick and
injured Army soldiers serving in GWOT. As with GAO's prior work, these pay
problems resulted in significant frustration and financial problems for
the soldiers and their families. Our audit of separated Army GWOT soldier
debt identified nearly 1,300 separated battle-injured soldiers and
soldiers who were killed in combat during the first 4 years of GWOT
deployment who had incurred a total of $1.5 million in debt as of
September 30, 2005. DOD has authority to write off debts of deceased
soldiers and generally does not pursue collection action on the debts of
soldiers who were killed in action. However, we found that hundreds of
battle-injured soldiers were pursued for repayment of military debts
through no fault of their own, including at least 74 soldiers whose debts
had been reported to credit bureaus and private collection agencies at the
time we initiated our audit in June 2005. Although the Debt Collection Act
gives DOD authority to use these debt collection tools, in response to our
audit, the Army temporarily suspended collection action on debts of
battle-injured soldiers until a determination could be made about whether
these soldiers' debts were eligible for relief. In addition our
investigation of pay problems related to Army National Guard and Reserve
soldiers assigned to the Fort Bragg MRPU identified overpayments of
approximately $218,000 related to 232 sick and injured soldiers. Many sick
and injured Fort Bragg soldiers faced garnishment of wages and other debt
collection action resulting from their pay errors. The table below
illustrates experiences of 3 case study soldiers.

Case Study Examples on Impact of Injured Soldier Pay Problems Resulting in
Debt

Source: GAO analysis.

Congress recently gave the Department of Defense (DOD) authority to cancel
some GWOT soldier debts. Because of restrictions in the law, debts of
injured soldiers who separated at different times can be treated
differently, and soldiers who paid their debts are not eligible for
refunds. Also, because this authority expires in December 2007, soldiers
and their families could face bad credit reports and visits from
collection agencies in the future.
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