Variable Housing Allowance:

Rate Setting Criteria and Procedures Need To Be Improved

FPCD-81-70: Published: Sep 30, 1981. Publicly Released: Oct 19, 1981.

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Pursuant to a congressional request, GAO evaluated the Department of Defense's (DOD) methods for computing fiscal years (FY) 1981 and 1982 variable housing allowances (VHA) which were authorized for qualified members of the uniformed services.

The GAO evaluation indicated that Congress needs to correct certain weaknesses in VHA legislation, and DOD needs to correct certain procedural problems. GAO found that the basis DOD used to compute VHA rates is what service members say they are paying for housing. Such a basis introduces not only the potential for abuse, but also for uncontrolled cost growth that will not be visible to Congress until after it has occurred. Also, GAO stated that it is questionable whether, in the early years of the program, this method will enable service members to obtain adequate housing. GAO believes that a better basis for establishing a housing allowance would be some external measure of what the members' civilian peers pay for housing.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The FY 1985 Defense Authorization bill contains a major revision to the VHA program which renders the earlier recommendation obsolete.

    Matter: The House Subcommittee on Military Personnel and Compensation should prepare an amendment to Public Law 96-343, sec. 4(a), which amended section 403(a) of Title 37, United States Code, to delete the provision which requires that VHA be computed on the basis of service members' average cost of housing, and to insert a requirement that DOD establish a method for setting VHA rates based on an external measure of what military members' civilian peers pay for housing in various geographic areas. The specific procedures for accomplishing this should be left to DOD discretion. The amendment should also clarify whether the external measure of housing costs should include both rental and owner costs or be limited to rental costs.

  2. Status: Closed - Not Implemented

    Comments: The FY 1985 Denfense Authorizing bill contains a major revision to the VHA program which renders the earlier recommendation obsolete.

    Matter: If the House Subcommittee on Military Personnel and Compensation decides against an amendment to Public Law 96-343, sec. 4(a) and decides to retain the existing basis for setting VHA rates, it should clarify whether the phrase "average monthly cost of housing" was intended to be limited to rental housing costs or whether it was meant to include homeowner costs. If homeowner costs are to be included, DOD should be provided guidance on which of several alternative approaches should be used in measuring these costs. The Subcommittee should clarify whether certain procedures used by DOD to set variable housing allowance rates, including the possible use of regression analysis techniques and arbitrary rate adjustments, are consistent with the legislation requiring that VHA rates be: (1) the difference between the average monthly cost of housing in that area for service members at the same pay grade; and (2) 115 percent of the basic allowance for quarters to which the member is entitled. DOD should also develop a followup procedure to: (1) improve the questionnaire response rate; and (2) verify the accuracy of the survey data.

 

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