Millions Written Off in Former Service Members' Debts--Future Losses Can Be Cut

AFMD-81-64: Published: Jul 28, 1981. Publicly Released: Jul 28, 1981.

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During fiscal years 1977 to 1979, $67 million owed by former service members was written off by the military services as bad debts, while only 13 percent of the total owed was collected. The collections made by the services were barely more than the costs incurred for processing and collecting the debts.

The Department of Defense (DOD) can substantially reduce its annual bad debt losses by making sure that service members' debts are offset against amounts due them at the time they separate from the service, acting more quickly to initiate collection of those debts remaining after separation, and using effective, businesslike collection techniques. GAO found that, when service members separated from the military, disbursing offices frequently did not compute the separating member's final pay in accordance with DOD regulations. Statistics showed that millions of dollars of overpayments were made by disbursing offices when members separated. DOD needs to strengthen controls and provide enough time to ensure that pay records are complete so that debts can be identified and offset against separation pay. Also, GAO believes that disbursing offices and their commanders need to be informed of separation disbursement errors so that corrective action will be taken. Millions of dollars in debts were not being collected because of lengthy delays in initiating collection action on the part of the services. Having all military finance offices formally notify members of their debts upon separation would help the offices initiate collection actions more promptly. Finally, GAO believes that the military services must become more effective and businesslike in their collection actions through increased contact with debtors and the charging of interest on debts not payed promptly.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: This report is 2 years old and GAO does not expect DOD to implement its recommendations.

    Recommendation: The Secretary of Defense should require the military services to: (1) have disbursing offices issue collection letters to indebted members at the time they separate; and (2) streamline procedures at the centers so that debts not identified by disbursing offices can be determined and collection actions can be quickly initiated. These actions should include expediting accumulation of documentation needed to review the separation cases and processing debt cases faster through elimination of duplicate reviews.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: This report is 2 years old and GAO does not expect DOD to implement its recommendations.

    Recommendation: The Secretary of Defense should have the Army ensure that collection letters initiated by disbursing offices are properly controlled by the center so that follow-up action can be taken as necessary.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: This report is 2 years old and GAO does not expect DOD to implement its recommendations.

    Recommendation: The Secretary of Defense should require the military services to: (1) arrange for personal interviews with selected debtors where feasible and make telephone contact with debtors when possible; and (2) charge interest on debts that are not paid promptly.

    Agency Affected: Department of Defense

  4. Status: Closed - Not Implemented

    Comments: This report is 2 years old and GAO does not expect DOD to implement its recommendations.

    Recommendation: The Secretary of Defense should require the military services to: (1) designate an official at each military personnel separation point who is responsible for certifying on separation processing checklists that a reasonable attempt was made to ensure that all documentation and entries affecting debts and separation pay are included in the separating members' pay records; (2) provide sufficient time to disbursing offices to identify debts and correctly calculate separation pay (a minimum standard time for effectively performing this task should be established); (3) issue instructions to disbursing offices emphasizing the need for correct computation of separation payments and identification of all debts; (4) inform disbursing offices and their commanders of errors made in computing and processing separation payments so corrective action can be taken; and (5) review training programs for disbursing office personnel to ensure that personnel are adequately trained for computing and processing final separation payments.

    Agency Affected: Department of Defense

 

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