Military Personnel: Better Debt Management Procedures and	 
Resolution of Stipend Recoupment Issues Are Needed for Improved  
Collection of Medical Education Debts (01-APR-08, GAO-08-612R).  
                                                                 
Military physicians and other health care professionals are	 
needed to support operational forces during war or other military
conflicts and to maintain the well-being of the forces during	 
nonoperational periods. These professionals also provide health  
care services to military retirees and dependents. The Department
of Defense (DOD) acquires its health care professionals primarily
through two programs--the Armed Forces Health Professions	 
Scholarship Program and the Financial Assistance Program--with	 
which it recruits and trains military health care providers who  
fill medical specialty positions. These programs offer		 
participants reimbursement for tuition, books, fees, other	 
education expenses, and a stipend, which is a fixed amount of	 
money given to the participants on a monthly basis, in return for
an active duty service obligation. Recruiting and retaining	 
highly qualified health care professionals, however, is becoming 
more challenging for each of the military services. The added	 
stresses of repeated deployments and the general perceptions of  
war, along with the potential for health care providers to earn  
significantly more money outside of DOD, have caused some	 
professionals to choose to separate themselves from military	 
service, even after DOD has paid for all or part of their medical
education. Because DOD medical training programs can take years  
and are a costly investment, DOD is negatively affected both	 
financially and operationally when individuals do not fulfill	 
their active duty obligations. The Conference Report accompanying
the National Defense Authorization Act for Fiscal Year 2008	 
directed the Comptroller General of the United States to report  
to the congressional defense committees by April 1, 2008, on the 
number of Health Professions Scholarship Program or Financial	 
Assistance Program participants who do not enter active duty	 
following completion of the program of studies for which they	 
were enrolled, including the extent to which the military	 
services have sought and received reimbursement for stipends or  
annual grants paid. Accordingly, we examined the extent to which 
(1) participants in the Health Professions Scholarship Program or
Financial Assistance Program fail to enter active duty service,  
as obligated; (2) DOD has procedures in place to recoup 	 
expenditures paid under the Health Professions Scholarship	 
Program or Financial Assistance Program to participants who	 
failed to meet their contractual obligations; and, (3) DOD has	 
specifically sought and received reimbursement for stipends.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-612R					        
    ACCNO:   A81526						        
  TITLE:     Military Personnel: Better Debt Management Procedures and
Resolution of Stipend Recoupment Issues Are Needed for Improved  
Collection of Medical Education Debts				 
     DATE:   04/01/2008 
  SUBJECT:   Aid for education					 
	     Debt collection					 
	     Defense capabilities				 
	     Education or training costs			 
	     Education program evaluation			 
	     Financial management				 
	     Health care personnel				 
	     Health care programs				 
	     Health care services				 
	     Internal controls					 
	     Medical education					 
	     Military forces					 
	     Military operations				 
	     Military personnel 				 
	     Personnel recruiting				 
	     Program management 				 
	     Reimbursements to government			 
	     Scholarship programs				 
	     Armed Forces Health Professions			 
	     Scholarship Program				 
                                                                 
	     DOD Financial Assistance Program			 

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GAO-08-612R

   

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United States Government Accountability Office: 
Washington, DC 20548: 

April 1, 2008: 

Congressional Committees: 

Subject: Military Personnel: Better Debt Management Procedures and 
Resolution of Stipend Recoupment Issues Are Needed for Improved 
Collection of Medical Education Debts: 

Military physicians and other health care professionals are needed to 
support operational forces during war or other military conflicts and 
to maintain the well-being of the forces during nonoperational periods. 
These professionals also provide health care services to military 
retirees and dependents. The Department of Defense (DOD) acquires its 
health care professionals primarily through two programs--the Armed 
Forces Health Professions Scholarship Program and the Financial 
Assistance Program--with which it recruits and trains military health 
care providers who fill medical specialty positions. These programs 
offer participants reimbursement for tuition, books, fees, other 
education expenses, and a stipend, which is a fixed amount of money 
given to the participants on a monthly basis, in return for an active 
duty service obligation. Recruiting and retaining highly qualified 
health care professionals, however, is becoming more challenging for 
each of the military services. The added stresses of repeated 
deployments and the general perceptions of war, along with the 
potential for health care providers to earn significantly more money 
outside of DOD, have caused some professionals to choose to separate 
themselves from military service, even after DOD has paid for all or 
part of their medical education. Because DOD medical training programs 
can take years and are a costly investment, DOD is negatively affected 
both financially and operationally when individuals do not fulfill 
their active duty obligations. 

The Conference Report accompanying the National Defense Authorization 
Act for Fiscal Year 2008[Footnote 1] directed the Comptroller General 
of the United States to report to the congressional defense committees 
by April 1, 2008, on the number of Health Professions Scholarship 
Program or Financial Assistance Program participants who do not enter 
active duty following completion of the program of studies for which 
they were enrolled, including the extent to which the military services 
have sought and received reimbursement for stipends or annual grants 
paid. Accordingly, we examined the extent to which (1) participants in 
the Health Professions Scholarship: 

Program or Financial Assistance Program fail to enter active duty 
service, as obligated; (2) DOD has procedures in place to recoup 
expenditures paid under the Health Professions Scholarship Program or 
Financial Assistance Program to participants who failed to meet their 
contractual obligations; and, (3) DOD has specifically sought and 
received reimbursement for stipends. 

To address our first objective, we obtained information related to the 
programs' authorized levels, goals, accession, and attrition rates. 
Using participant separation data from fiscal years 2003 through 2007, 
we identified the reasons for participants to separate or fail to serve 
their obligation. For our second objective, we interviewed officials 
from the Defense Finance and Accounting Service (DFAS); the Offices of 
the Surgeons General of the Army and Air Force; the Office of the 
Secretary of the Air Force for Manpower and Reserve Affairs; the Air 
Reserve Personnel Center, and the Navy's Bureau of Medicine and 
Surgery. Additionally, we obtained and reviewed DOD debt collection 
procedures, participant separation data from each of the services, and 
delinquent account information from DFAS for fiscal years 2003 through 
2007. We assessed the reliability of DFAS' data from the Defense Debt 
Management System by obtaining information on its management of the 
system and any data reliability procedures in place. We determined that 
the DFAS' Defense Debt Management System's data were sufficiently 
reliable for the purposes of this report. For our last objective, we 
obtained legal documentation from DOD and the military services and 
interviewed DFAS and service officials to discuss their interpretations 
of how the collection of stipends has changed over the years. Further, 
we analyzed changes to the statutes concerning DOD's authority to 
recoup stipends. We also obtained and reviewed the service agreements 
that program participants sign and their disclosure of recoupable 
expenses. 

We conducted this performance audit from February 2008 through March 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. Further 
details on our scope and methodology can be found in enclosure I. 

Results in Brief: 

Only a small percentage of the participants in the Armed Forces Health 
Professions Scholarship Program and Financial Assistance Program have 
failed to complete their education or serve their active duty service 
obligation. Our analyses of service and DFAS data showed that, for 
fiscal years 2003 through 2007, fewer than 1 percent (171) of the total 
number of participants (19,921) withdrew from the programs or, 
alternatively, graduated but did not go on to active duty service. The 
most common reasons cited by these participants were voluntary 
withdrawal from the program, medical disqualification, and academic 
failure. Upon withdrawal or release from the program, participants are 
obligated to reimburse the government for all or some portion of their 
medical education expenses unless relieved of that obligation by their 
respective service secretary. 

DOD has procedures in place to recoup medical education expenditures 
from participants who fail to complete their education or serve their 
active duty obligation, and many cases we reviewed were processed in a 
timely manner. However, in some cases, it took more than 5 years from 
the time recoupment actions on individuals' debts were initiated until 
the time DFAS established an official debt account and began collection 
efforts. Further, we found that confusion exists between the military 
services and DFAS as to who bears responsibility for initiating the 
debt recoupment actions. DFAS officials told us that they believe the 
military services are to make attempts to collect on the debts before 
turning them over to DFAS. However, officials from each of the military 
services said that they do not attempt to collect any money themselves 
because they claim to have neither (1) the debt collection authorities 
that DFAS has, nor (2) the resources to dedicate to this task, even if 
they had the authority to do so. We also found that DFAS did not always 
follow debt collection procedures, as they often accepted Air Force 
debt recoupment packages without the necessary transmittal letter, 
which is used to track the routing and processing of the debts. In 
addition, the military services reported that they would like to know 
more about the status of the debts sent to DFAS, but DFAS contended 
that it returns to the services the signed and dated transmittal 
letters, when they exist, as an indication that the debt has been 
officially accepted and is being pursued. Nevertheless, service 
officials indicated that they could benefit from more frequent and 
clearer communication about the status of the debts and any need to 
reconcile DFAS and service data. For example, during the course of our 
review, we found that DFAS was pursuing about $6 million in medical 
education debt, while service records identified about $8.5 million in 
debts. Until DOD takes steps to clarify the roles and responsibilities 
for initiating debt recoupment actions, follow established debt 
collection procedures, and improve communications, its collection of 
medical education debts will be hindered by confusion and 
inconsistency. 

DOD's practice of seeking reimbursement for stipends has changed over 
time, and the department's efforts to recoup money are diminished by 
conflicting views among the services and DFAS over DOD's legal 
authority to recoup stipends. Recent changes in the laws have resulted 
in inconsistent interpretations among the military services and DFAS, 
which collects the debts for the services. Accordingly, the agreements 
that program participants sign upon accepting DOD's financial 
assistance do not consistently state whether stipends are to be 
recouped. Without a clear determination regarding the recoupability of 
stipends and communication of this determination to all program 
participants, DOD is not in a position to ensure that it is collecting 
all of the money to which it is authorized or collecting reimbursements 
consistently across the services. Further, program participants do not 
have full and accurate information regarding DOD's recoupment policies. 

We are recommending that the Secretary of Defense take several 
measures, first, to help strengthen debt collection procedures among 
the services and DFAS, and second, to resolve conflicting 
interpretations of the legal authority to recoup stipends, so as to 
ensure that DOD can collect all of the money to which it is authorized 
and can do so consistently across the services and in a timely manner. 
In commenting on a draft of our report, DOD concurred with each of our 
recommendations and included estimated completion dates for taking 
corrective actions. The department's comments are reprinted in 
enclosure II. 

Background: 

With the end of the draft in 1972, the military services needed a new 
means of acquiring active duty physicians. To address this need, the 
Uniformed Services Health Profession Revitalization Act of 1972 
contained provisions that allowed the secretaries of each military 
department to establish and maintain a health professions scholarship 
program for their respective department under regulations prescribed by 
the Secretary of Defense.[Footnote 2] Under these provisions, DOD 
developed the F. Edward Hï¿½bert Armed Forces Health Professions 
Scholarship Program and Financial Assistance Program, which is the 
military services' largest source for physicians.[Footnote 3] While the 
Assistant Secretary of Defense for Health Affairs, who reports to the 
Under Secretary of Defense for Personnel and Readiness, provides 
procedures and standards required to implement both the Health 
Professions Scholarship Program and the Financial Assistance Program, 
the individual service departments[Footnote 4] are responsible for 
managing, funding, and administering their portions of these programs. 
Under the Health Professions Scholarship Program, qualified students 
receive full medical school tuition and reimbursement for books and 
various equipment and fees, as well as a stipend, a fixed amount of 
money given to the participants on a monthly basis. In return, after 
graduation, program participants incur an 8-year contractual service 
obligation. The contractual service obligation consists of two 
elements: the active duty obligation and the reserve service 
obligation. The active duty obligation is calculated as a 2-year 
minimum plus an additional 6 months for every 6-month semester of 
educational benefits received. The reserve service obligation is the 
portion of the 8-year contractual service obligation remaining after 
the participant serves the active duty obligation portion. The 
Financial Assistance Program targets health care professionals in 
specialty training by offering them an annual grant, monthly stipend, 
and reimbursement for books, various equipment, and fees. In return, 
they, too, incur a contractual service obligation. 

All persons who enroll in either the Health Professions Scholarship 
Program or the Financial Assistance Program sign an agreement with 
their respective service. While agreements differ by service, they 
generally contain a provision requiring the program participant to 
agree to reimburse the U. S. government for all costs it incurred, plus 
interest, or any portion thereof, as determined by the respective 
service secretary in the event that the participant voluntarily or 
because of misconduct or other reasons fails to complete the active 
duty or alternative service obligations set out in the agreement. While 
most of the programs' participants enter active duty at the O-3 pay 
grade (that is, as captains in the Army or Air Force and as lieutenants 
in the Navy) upon graduation from the program and begin their first 
year of graduate medical education in military medical facilities, some 
participants do not graduate from the program, and some graduate but 
decline to fulfill their active duty obligation for various reasons. If 
the participants' resignation is approved and it is determined that 
they must repay all or part of their medical education expenses, the 
services initiate the debt recoupment paperwork and DFAS records and 
manages any delinquent debts assigned to it from the services. 

DOD guidance[Footnote 5] limits the total number of participants in the 
Health Professions Scholarship Program and Financial Assistance Program 
to 5,000 per year--a participant pool that was equally divided among 
the services until the beginning of fiscal year 2006. Since that date, 
a larger share has been allocated to the Army because of its increased 
projected needs. During fiscal years 2003 through 2007, the Army had a 
cumulative total of 7,229 program participants, the Navy had 6,248 
participants, and the Air Force had 6,444 participants. Table 1 shows 
the breakdown of the cumulative program costs for the 5 most recent 
fiscal years. 

Table 1: Total Health Professions Scholarship Program and Financial 
Assistance Program Costs Expended by the Army, Navy, and Air Force for 
Fiscal Years 2003-2007 (rounded to the nearest thousand): 

Expense item: Tuition; 
Army: $223,906,000; 
Navy: $215,249,000; 
Air Force: $164,971,000. 

Expense item: Stipends; 
Army: $88,700,000; 
Navy: $80,637,000; 
Air Force: $108,060,000. 

Expense item: Other expenses; 
Army: $14,298,000; 
Navy: $14,633,000; 
Air Force: $32,350,000. 

Expense item: Totals; 
Army: $326,904,000; 
Navy: $310,519,000; 
Air Force: $305,381,000. 

Source: Army, Navy, and Air Force data. 

[End of table] 

Number of Participants Who Fail to Graduate or Serve Their Obligation 
Is Low: 

We found that for fiscal years 2003 through 2007, fewer than 1 percent 
of a total of 19,921 participants across each of the military services' 
Health Professions Scholarship Program and Financial Assistance Program 
failed to graduate or to serve their active duty obligation. 
Participants' reasons for quitting the program or not serving ranged 
from personal reasons to academic or medical disqualifications. 

We analyzed both service and DFAS data for the number of individuals 
who failed to graduate or who did not serve their active duty 
obligation, along with the reasons for their withdrawal. Our analyses 
showed that, for fiscal years 2003 through 2007, a total of 171 
individuals--51 from the Army, 48 from the Navy, and 72 from the Air 
Force--either did not complete their education or failed to serve their 
obligation. Each of these totals comprises about 1 percent of its 
respective service's total participants for the same time frame. These 
individuals failed to complete the programs for a variety of reasons. 
Table 2 shows the reasons given for separation for these 171 
individuals. 

Table 2: Reasons for Individuals' Withdrawals from the Health 
Professions Scholarship Program and the Financial Assistance Program--
Fiscal Years 2003-2007: 

Reason: Voluntary withdrawal; 
Number of occurrences: 44. 

Reason: Medical disqualification; 
Number of occurrences: 29. 

Reason: Academic failure; 
Number of occurrences: 20. 

Reason: Declaration of homosexual orientation; 
Number of occurrences: 15. 

Reason: Noncompliance/misconduct; 
Number of occurrences: 15. 

Reason: Personal/hardship; 
Number of occurrences: 12. 

Reason: Declaration of conscientious objector status; 
Number of occurrences: 8. 

Reason: Gender identity disorder; 
Number of occurrences: 1. 

Reason: Security clearance denial; 
Number of occurrences: 1. 

Reason: Unknown; 
Number of occurrences: 26. 

Total: 
Number of occurrences: 171. 

Source: DOD case files. 

Note: We were not able to confirm reasons for withdrawals in all cases 
because detailed files were not available at the time of our review. 

[End of table] 

When participants resign from the program, they must give the reason 
for their separation, and a decision is made as to whether to accept 
their resignation and whether or not they will be obligated to repay 
their medical educational expenses. When recoupment of medical 
education expenses is determined to be necessary, the services initiate 
their debt recoupment paperwork. 

DOD Has Procedures in Place to Recoup Expenses, but Procedural 
Weaknesses Are Hindering Implementation: 

DOD has established procedures to recoup medical education expenditures 
from participants who fail to complete their education or to serve 
their active duty service obligation; however, our analyses revealed 
weaknesses in the collection, management, and monitoring of these 
debts, such as significant delays in the collection of some accounts. 
Specifically, confusion exists with regard to the roles and 
responsibilities for the initiation of debt recoupment actions, and we 
found that DFAS had not been fully adhering to established debt 
collection procedures. Further, once DFAS accepts and records debt 
recoupment packages, little communication occurs between DFAS and the 
services concerning the status of the recoupment efforts. DFAS is 
currently pursuing about $6 million in medical education debt that 
resulted from participants leaving the program or choosing not to 
fulfill their service obligation for the years we reviewed. 

While the services transferred many complete and properly constructed 
debt recoupment packages to DFAS in a timely manner, several years 
passed in other cases before DFAS initiated any recovery. The Under 
Secretary of Defense (Comptroller) is responsible for establishing 
uniform DOD financial management policies, principles, and procedures 
and has issued a financial management regulation that addresses these 
matters. Even though DOD's regulation[Footnote 6] clearly states what 
items the services are to include in debt packages that are transferred 
to DFAS, we found several examples of debt packages that were returned 
from DFAS to the services multiple times because they were incomplete 
or improperly constructed, which resulted in significant delays in the 
process. For example, the Army prepared the debt recoupment paperwork 
for one case in July 2003, but did not send a complete and properly 
constructed debt package to DFAS until February 2008. Thus, no 
collections occurred for a 5-year period on a $17,000 debt. 
Additionally, the Army began the paperwork on a $221,000 debt beginning 
in January 2005, but the Army still had not sent DFAS a complete and 
proper debt package at the time of our review. According to DFAS 
officials, it is not uncommon for large time gaps to elapse while DFAS 
waits for the services to complete required documentation or properly 
prepare the packages after DFAS has rejected them as incomplete. Such 
rejections and returns can occur multiple times on a single case. For 
example, DFAS initially rejected a Navy case in November 2005 because 
the debt amount was missing from the documentation, and so DFAS sent it 
back to the Navy. DFAS rejected the package a second time in May 2006 
because the package did not include an appropriation code or breakdown 
of the debt and again sent it back to the Navy. DFAS subsequently 
rejected the package a third time in May 2007 for the same reasons and 
a fourth time in February 2008, stating in the latter case that it 
could not recoup stipend amounts that the Navy had included in the 
package. Army and Navy officials confirmed that they were unaware of 
instructions for preparing debt recoupment paperwork and were unsure of 
the content and format that DFAS expects in the debt packages. 

Roles and responsibilities between DFAS and the military services for 
initiating debt recoupment actions are not clear. According to DFAS 
officials, the services are supposed not only to issue the initial 
bill, invoice, notice, or demand for payment letter, but also to 
attempt collecting on the debt and to take appropriate follow-up action 
before transferring the debt. However, responsible officials from the 
Army, Navy, and Air Force all told us that they do not attempt any 
initial collection of funds because they have neither (1) the debt 
collection authorities that DFAS has, nor (2) the resources to dedicate 
to this task, even if they had the authority to do so. As a result, the 
military services have been preparing the initial debt recoupment 
packages, and DFAS has been collecting the debts. 

Additionally, we found an example where DFAS had not been adhering to 
established debt recoupment procedures. The DOD Financial Management 
Regulation requires the military services to prepare and submit a debt 
transmittal letter to DFAS to process the delinquent debts. Use of the 
transmittal letter helps to control the transmission of debt cases and 
to identify all attached debt case files by name, social security 
number, and monetary amount. Once DFAS accepts the debt and records it 
in its Defense Debt Management System, a copy of the transmittal letter 
is returned to the service with an effective date of transfer listed on 
it. DFAS officials said that this transmittal letter is an important 
part of the package and that without it, packages would be rejected. 
However, they noted that since the Air Force debt packages come from an 
office co-located with DFAS in the same building, DFAS officials often 
accepted hand-carried Air Force debt packages without transmittal 
letters. The informality of this practice increases the potential for 
errors in transferring and tracking these debt packages between DFAS 
and the Air Force. 

In addition, both DFAS and service officials explained that little 
communication occurs between them concerning the status of the 
recoupment effort after DFAS accepts and records a debt package in its 
Defense Debt Management System. Officials from each of the military 
services said that they would like to know more about the status of the 
debts sent to DFAS. However, DFAS officials stated that they send 
signed and dated transmittal letters, when they exist, back to the 
services and contended that this action fulfilled their purpose. 
Nevertheless, service officials indicated that they could benefit from 
more frequent and clearer communication. 

To correlate the amount of debt established and sought by the services 
and DFAS, we compared the services' data regarding individuals who did 
not complete the program or failed to serve their active duty 
obligation for fiscal years 2003 through 2007 against the data DFAS 
extracted from its Defense Debt Management System. Table 3 shows the 
differences between the service and DFAS data. 

Table 3: Number of Individuals and Debts Owed, as Reported by the 
Military Services and DFAS (rounded to the nearest thousand): 

Service: Army; 
Services' data: $3,696,000 (48 individuals); 
DFAS' data: $2,161,000 (41 individuals). 

Service: Navy; 
Services' data: $2,263,000 (39 individuals); 
DFAS' data: $407,000 (10 individuals). 

Service: Air Force; 
Services' data: $2,594,000 (57 individuals); 
DFAS' data: $3,252,000 (57 individuals). 

Service: Totals; 
Services' data: $8,553,000 (144 individuals); 
DFAS' data: $5,820,000 (108 individuals). 

Source: Army, Navy, Air Force, and DFAS data. 

[End of table] 

As table 3 shows, the data provided by the services indicate that there 
is about $8.5 million in debts, while the DFAS data indicate that there 
is approximately $6 million of delinquent medical education debt 
recorded in its system for accounts initiated during fiscal years 2003 
through 2007. Similarly, the data provided by the services identified 
144 individuals who owed debts, while the data maintained by DFAS 
identified only 108 individuals. Our efforts to reconcile the data 
revealed multiple reasons why differences existed between the two data 
sets, but in actuality, the differences for almost all of the cases 
could be explained. Many of the differences can be explained by the 
following three reasons and are consistent with issues we have 
previously discussed. First, we found that the service data contained a 
number of debts that had been paid in full and had therefore been 
purged from the DFAS database. Second, we found cases that the services 
had initiated and that DFAS had rejected and sent back to the services, 
most often because the recoupment package was either incomplete or 
improperly prepared, and therefore they had not yet been recorded in 
the DFAS system. Third, we found cases for which the services had 
prepared debt recoupment packages they had only recently sent to DFAS, 
where the packages had not yet been reviewed and accepted and were 
therefore not yet recorded in the DFAS system. This was especially true 
for the Navy, from which 17 individuals' debt packages had just arrived 
at DFAS at the time of our review. Additionally, the Navy list included 
11 more individuals who had separated from the program as far back as 
2004, but whose debt packages had just been completed and had not yet 
been sent to DFAS for review. Complicating our review of the DFAS 
records was the fact that some of its files had inadvertently been sent 
to the Federal Center for storage in preparation for DFAS' upcoming 
move to Indianapolis. Taking these and other factors into account, we 
developed a reconciled list that, we believe, reflects a more realistic 
snapshot of the status of recoupment for the time frame we examined. 
Our reconciled list indicates that there were actually 51 Army, 48 
Navy, and 72 Air Force individuals, for a total of 171 individuals, who 
account for approximately $10 million of medical education debt either 
already collected or currently in the process of recoupment, as shown 
in table 4. 

Table 4: Reconciled Medical Education Debts for Fiscal Years 2003-2007 
and Average Debt Amount per Individual (rounded to the nearest 
thousand): 

Reconciled debt amounts; 
Army (51 individuals): $3,840,000; 
Navy (48 individuals): $2,595,000; 
Air Force (72 individuals): $3,684,000; 
Total (171 individuals): $10,119,000. 

Average debt; 
Army (51 individuals): $75,000; 
Navy (48 individuals): $54,000; 
Air Force (72 individuals): $51,000; 
Total (171 individuals): $59,000. 

Source: GAO analysis of DFAS, Army, Navy, and Air Force data. 

Totals may include stipend amounts. 

[End of table] 

Until DOD takes steps to clarify roles and responsibilities, follow 
existing regulations, and develop better communication procedures, its 
collection of medical education debts will be hindered by confusion and 
inconsistency. 

Unresolved Questions Exist as to DOD's Authority to Recoup Stipends: 

DFAS and the military services are not in agreement as to whether 
stipends paid under the Health Professions Scholarship Program or the 
Financial Assistance Program can be recouped from those who fail to 
complete either the program or their active duty service obligation. 
The practice of recouping stipends has undergone changes over the 
years, and the Health Professions Scholarship Program and Financial 
Assistance Program service agreements that individuals sign upon 
accepting DOD's financial assistance do not consistently state whether 
stipends are to be recouped. 

DFAS officials told us that until mid-2007, they were collecting 
stipend amounts as part of debt recoupment accounts. They said that at 
about that time, however, they were advised that the issue of stipend 
recoupment had been reviewed by the DFAS General Counsel, Army 
attorneys, and an Office of the Secretary of Defense attorney, all of 
whom had concluded that stipends could not be recouped, based on 
section 2005 of Title 10 of the U.S. Code[Footnote 7], which addresses 
active duty agreement and reimbursement requirements for people 
receiving advanced education assistance. Since these attorneys decided 
that stipends were not recoupable, DFAS started rejecting debt packages 
sent from the services if the packages included stipend amounts, 
sending with the rejections a standard cover sheet explaining this 
position. Officials we spoke with from each of the services confirmed 
that the issue of stipend recoupment has been confusing, that there 
seems to have been a change in the practice of recouping stipends 
within the past year, and that the change has caused many recoupment 
packages to be rejected by DFAS. 

We discussed the confusion over the current legal status of the stipend 
recoupment issue with an Air Force legal official during the course of 
our review. He confirmed that differing interpretations of the laws 
existed and mentioned that a number of revisions and amendments had 
been made to the laws over the past 25 years. He explained that Air 
Force officials had again reviewed the statutes and determined that the 
amendments in the 2006 National Defense Authorization Act had made 
stipends recoupable. The Air Force currently holds that stipends are 
recoupable, based on section 303a (e) of Title 37 of the U.S. Code, 
which addresses repayment of bonuses and other benefits.[Footnote 8] 

Additionally, we reviewed a number of Army, Navy, and Air Force service 
agreements and discussed them with officials to determine whether they 
specifically mentioned stipends as part of the medical education costs 
that could be recouped. We determined that, in all but one agreement we 
examined, stipends were not explicitly addressed. They generally 
contain a provision that follows a standard format requiring a program 
participant to agree to repay the government for all costs incurred, 
plus interest, or any portion thereof, as determined by the respective 
service secretary, in the event that the participant voluntarily or 
because of misconduct or other reasons fails to complete the active 
duty or alternative service obligations set forth in the agreement. In 
most of the agreements we reviewed, no specific references were made to 
stipends. The Air Force official informed us that the fiscal year 2008 
Air Force Health Professions Scholarship Program and Financial 
Assistance Program service agreements will contain language reflecting 
the 2006 change to the law that, in their opinion, allows stipends to 
be considered a recoupable medical education cost. 

As a result of these inconsistencies regarding the eligibility of the 
stipend for recoupment, DOD is not in a position to ensure that it is 
collecting all of the money to which it is authorized or collecting 
reimbursements consistently across the services. Furthermore, program 
participants do not have full and accurate information about DOD 
recoupment policies. 

Conclusions: 

Although nearly all participants in the Armed Forces Health Professions 
Scholarship Program and Financial Assistance Program complete their 
medical education and serve their required active duty service, there 
are a number of cases where this does not happen. Because of the time 
required to educate and train medical personnel and the financial 
investment that DOD makes in these individuals, their loss further 
exacerbates the challenges DOD faces in its ability to fill critically 
needed medical positions. Even though DOD can seek recoupment of the 
money spent on these students, its ability to actually collect that 
money is complicated by noncompliance with internal regulations, the 
lack of a system to routinely monitor and follow up on these debts, and 
legal questions. Until DOD takes steps to clarify roles and 
responsibilities, follow established debt recoupment procedures, 
develop better communication procedures, determine the legality of 
stipend recoupment, and clarify that determination to the military 
services and program participants, its collection of medical education 
debts will be hindered by confusion and inconsistency. 

Recommendations for Executive Action: 

To help strengthen debt collection procedures, we recommend that the 
Secretary of Defense direct: 

* the Under Secretary of Defense, Comptroller, and the service 
secretaries to clarify the roles and responsibilities of DFAS and the 
services for initiating the debt recoupment collection process and 
revise the DOD Financial Management Regulation as necessary; 

* the Director, Defense Finance and Accounting Service, to follow the 
established regulation requiring transmittal letters as part of debt 
recoupment packages transferred from the military services; and, 

* the Director, Defense Finance and Accounting Service, to establish a 
procedure to periodically communicate with the services the status of 
debt recoupment packages that DFAS has officially accepted and 
established within its Defense Debt Management System so that any 
discrepancies among the services' records can be reconciled in a timely 
manner. 

To provide greater assurance that the correct legal sums of money are 
recouped from program participants who do not fulfill their active duty 
service obligations and to fully disclose debt collection expectations, 
we recommend that the Secretary of Defense direct: 

* the Under Secretary of Defense for Personnel and Readiness, in 
coordination with the Under Secretary of Defense, Comptroller, the 
Assistant Secretary of Defense for Health Affairs, and DOD General 
Counsel, to review and determine whether stipends are legally eligible 
for recoupment and clearly communicate this determination to the 
services and DFAS; and, 

* the Assistant Secretary of Defense for Health Affairs and the service 
secretaries to determine whether specific language needs to be included 
in program participants' service agreements in order to accurately 
reflect the policy regarding recoupable expenses, once that 
determination is made, and include specific language in the agreements 
if found to be necessary. 

Agency Comments and Our Evaluation: 

In commenting on a draft of our report, DOD concurred with each of our 
recommendations and included estimated completion dates for taking 
corrective actions. The department's comments are reprinted in their 
entirety in enclosure II. 

We are sending copies of this report to the Secretary of Defense; the 
Secretaries of the Army, Navy, and Air Force; and the Director of the 
Defense Finance and Accounting Service. We will also make copies 
available to others on request. In addition, the report will be 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

Should you or your staff have any questions on the matters discussed in 
this report, please contact me at (202) 512-3604 or [email protected]. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this letter. GAO staff who 
made key contributions to this report are listed in enclosure III. 

Signed by: 

Brenda S. Farrell: 
Director, Defense Capabilities and Management: 

Enclosures - 3: 

List of Congressional Committees: 

The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate: 

The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
United States House of Representatives: 

The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States House of Representatives: 

[End of correspondence] 

Enclosure 1: 

Scope and Methodology: 

To address our objectives, we obtained and reviewed available 
documents, laws, regulations, and other information related to the 
Armed Forces Health Professions Scholarship Program and Financial 
Assistance Program. 

We interviewed officials within the TRICARE Management Activity, the 
Defense Finance and Accounting Service, the Offices of the Surgeons 
General of the Army and Air Force, the Office of the Secretary of the 
Air Force for Manpower and Reserve Affairs, the Air Reserve Personnel 
Center, and the Navy's Bureau of Medicine and Surgery. 

To determine the extent to which the participants of the Health 
Professions Scholarship Program and Financial Assistance Program fail 
to enter active duty service as obligated, we obtained both accession 
and attrition information from the military services along with reasons 
for disenrollment. 

Initially, we discussed the programs with a TRICARE Management Activity 
official since this office manages the execution of policy issued by 
the Assistant Secretary of Defense for Health Affairs in the 
administration of all DOD medical and dental programs. From this 
office, we obtained various statutory authority documentation, DOD 
guidance, directives, and policy memorandum citations, overall program 
participant goals and actual fill rates for fiscal years 2003 through 
2007 and by corps (medical, dental, nurse, or allied health). 

Each of the military services provided data of the participants who, 
for fiscal years 2003 through 2007, had failed to complete their 
medical education or did not fulfill their active duty service 
obligation after their graduation and now had a medical education 
related debt to DOD. Additionally, they also provided specific reasons 
why these participants separated from the program or failed to fulfill 
their active duty service obligations. From this information we 
compiled a summary of the most common reasons for separation. 

To determine the extent to which DOD has procedures in place to recoup 
expenditures paid to Health Professions Scholarship Program or 
Financial Assistance Program participants who fail to fulfill the 
active duty obligation, we obtained statutes and legal opinions along 
with DOD, the Defense Finance and Accounting Service, and each 
service's regulations or instructions on recoupment procedures. 

We also used GAO's Internal Control Management and Evaluation Tool 
(GAO-01-1008G), to identify important communication procedures. 
Adherence to these standards, while not required, provides a 
systematic, organized, and structured approach to assessing an agency's 
internal control structure. Additionally, we obtained data from the 
Defense Finance and Accounting Service's Defense Debt Management System 
of all participants for fiscal years 2003 through 2007 for whom it had 
a medical education related debt established in the automated system. 
Using this information and the data that the military services had 
provided earlier, we used a case-by-case analysis to reconcile the data 
and explain the differences between the two sets of data in order to 
identify weaknesses in the internal control procedures for reporting 
and managing the collection of delinquent medical education debts. We 
assessed the reliability of the Defense Finance and Accounting 
Service's data from the Defense Debt Management System by obtaining 
information on the management of the system and any data reliability 
procedures in place. We determined that the Defense Finance and 
Accounting Services' Debt Management System's data were sufficiently 
reliable for the purposes of this report. 

To determine the extent to which the DOD has, specifically, sought and 
received reimbursement for stipends, we obtained legal documentation 
from DOD and the military services and discussed their interpretations 
of how the collection of stipends has changed over the years. Further, 
we analyzed changes to the statutes concerning DOD's authority to 
recoup stipends. Additionally, we obtained and reviewed the service 
agreements that program participants sign and their disclosure of 
recoupable expenses. 

We conducted this performance audit from February 2008 through March 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit. 

[End of enclosure 1] 

Enclosure 2: 

Comments from the Department of Defense: 

The Assistant Secretary Of Defense: 
Health Affairs: 
Washington, DC 20301-1200: 

March 28, 2008: 

Ms. Brenda S. Farrell: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Ms. Farrell: 

This is the Department of Defense response to the Government 
Accountability Office (GAO) draft report, "Military Personnel: Better 
Debt Management Procedures and Resolution of Stipend Recoupment Issues 
Are Needed for Improved Collection of Medical Education Debts," dated 
March 24, 2008 (GAO Code 351130/GAO-08-612R). We concur with the 
recommendations of the report. 

My points of contact on this audit are Mr. Richard Franco (functional) 
at (703) 681ï¿½4321 and Mr. Gunther Zimmerman (Audit Liaison) at (703) 
681-4360. 

Sincerely, 

Signed by [illegible], for: 

S. Ward Casscells, MD: 

Enclosure: As stated: 

GAO Draft Report Dated March 24, 2008: 
GAO-08-612R (GAO CODE 351130): 

"Military Personnel: Better Debt Management Procedures and Resolution of
Stipend and Stipend Recoupment Issues are Needed for Improved 
Collection of Medical Education Debts" 

Department Of Defense Comments To The Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense. Comptroller, and the service 
Secretaries to clarify the roles and responsibilities of the Defense 
Finance and Accounting Service (DFAS) and the services for initiating 
the debt recoupment collection processes and revise the DOD Financial 
Management Regulation as necessary. 

DOD Response: Concur. The Deputy Chief Financial Officer (DCFO) will 
clarify the roles and responsibilities of the DFAS and the Services for 
initiating the debt recoupment collection process and revise the DOD 
Financial management Regulation, Volume 5, Chapter 29. "Collection of 
Out-of-Service Debts," as necessary. Estimated completion date is June 
30, 2008. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Director of DFAS to follow the established regulation 
requiring transmittal letters as part of debt recoupment packages 
transferred From the military services; 

DOD Response: Concur. During the audit, it was discovered that 
transmittal letters were not required for debt packages that were hand 
carried from the Air Reserve Personnel Center (ARPC) to the DFAS 
technician. The DCFO will direct the Director, DFAS to issue policy 
memorandum advising ARPC that a transmittal letter must accompany all 
debt recoupment packages. Estimated completion date is April 4. 2008. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Director of DFAS to establish a procedure to periodically 
communicate with the services the status of debt recoupment packages 
that DFAS has officially accepted and established within its Debt 
Management System so that any discrepancies among the services' records 
can be reconciled in a timely manner. 

DOD Response: Concur. The DCFO will direct the Director, DFAS to 
periodically communicate with the Services the status of debt 
recoupment packages that DFAS has officially accepted and established 
within its Debt Management System so that any discrepancies among the 
Service's records can be reconciled in a timely manner. Estimated 
completion date is April 4, 2008. 

Recommendation 4: The GAO recommends that the Under Secretary of 
Defense for Personnel and Readiness, in coordination with the Under 
Secretary of Defense, Comptroller, the Assistant Secretary of Defense 
for Health Affairs, and DOD General Counsel, to review and determine 
whether stipends are legally eligible for recoupment and clearly 
communicate this determination to the services and DFAS 

DOD Response: Concur. This issue will he referred to the appropriate 
legal counsel offices for review by 01 April 2008. 

Recommendation 5: The GAO recommends that the Assistant Secretary of 
Defense for Health Affairs and the service secretaries to determine 
whether specific language needs to be included in program participants' 
service agreements in order to accurately reflect the policy regarding 
recoupable expenses, once that determination is made. and include 
specific language in the agreements if found to be necessary. 

DOD Response: Concur, pending outcome of DOD response to Recommendation 
4. 

[End of enclosure 2] 

Enclosure 3: 

GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Brenda S. Farrell, (202) 512-3604 or [email protected]: 

Acknowledgments: 

In addition to the individual named above, David Moser (Assistant 
Director), Rebecca Beale, Janine Cantin, Nicole Harms, Terry 
Richardson, Cheryl Weissman, and Matthew Young made key contributions 
to this report. 

[End of enclosure 3] 

Footnotes: 

[1] H.R. Conf. Rep. No. 110-477, at 928 (2007). 

[2] Pub. L. No. 92-426, ï¿½2121 (1972), codified at 10 U.S.C. ï¿½ï¿½2120-
2127. 

[3] The scholarship program also sponsors students of dentistry, 
optometry, and nursing, for example. 

[4] The Navy's medical department supports both the Navy and the Marine 
Corps. 

[5] DOD Directive 6000.12, Health Services Operations and Readiness 
(Apr. 29, 1996). 

[6] DOD 7000.14-R, Volume 5, Chapter 29, August 2003. 

[7] This law allows service secretaries to require a person to enter 
into a written agreement, as a condition to receiving assistance, in 
which the person agrees to, among other things, be subject to the 
repayment provisions of 37 U.S.C. 303a (e) in the event that the person 
does not fulfill the obligations specified in the agreement. Prior to 
an amendment in the National Defense Authorization Act for Fiscal Year 
2006, 10 U.S.C. ï¿½2005 did not make reference to 37 U.S.C. 303a (e) but 
required the person to agree to repay a portion of the total "cost of 
advanced education." Section 2005 contains a provision that exempts 
stipends under the Health Professions Scholarship Program from the 
definition of "cost of advanced education" for purposes of that 
section. 

[8] The Air Force believes stipends are recoupable under 37 U.S.C. 
ï¿½303a(e), as recently amended by section 687 of the National Defense 
Authorization Act for Fiscal Year 2006, which states that a member of 
the uniformed services who receives a "bonus or similar benefit" that 
is subject to the condition that the member continue to satisfy certain 
eligibility requirements shall repay to the United States an amount 
equal to the unearned portion of the bonus or similar benefit if the 
member fails to satisfy the requirements, except in certain 
circumstances authorized by the Secretary concerned. It further states 
that the term "bonus or similar benefit" means a bonus, incentive pay, 
special pay, or similar payment, or an educational benefit or stipend, 
paid to a member of the uniformed services under a provision of law 
that refers to the repayment requirements of this subsection. 

[End of section] 

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