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entitled 'Military Pay: Army Reserve Soldiers Mobilized to Active Duty 
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2004.

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Testimony: 

Before the House Committee on Government Reform, Subcommittee on 
Government Efficiency and Financial Management, House of 
Representatives: 

For Release on Delivery Expected at 2 p.m. EST Tuesday, July 20, 2004: 

MILITARY PAY: 

Army Reserve Soldiers Mobilized to Active Duty Experienced Significant 
Pay Problems: 

Gregory D. Kutz: 
Director: 
Financial Management and Assurance: 

Geoffrey B. Frank: 
Assistant Director: 
Financial Management and Assurance: 

John J. Ryan: 
Assistant Director: 
Office of Special Investigations: 

GAO-04-990T: 

GAO Highlights: 

Highlights of GAO-04-990T, a testimony to the Chairman, Committee on 
Government Reform, Subcommittee on Government Efficiency and Financial 
Management, House of Representatives: 

Why GAO Did This Study: 

In light of GAO’s November 2003 report highlighting significant pay 
problems experienced by Army National Guard soldiers mobilized to 
active duty in support of the global war on terrorism and homeland 
security, GAO was asked to determine if controls used to pay mobilized 
Army Reserve soldiers provided assurance that such pays were accurate 
and timely. GAO’s audit used a case study approach to focus on 
controls over three key areas: processes, people (human capital), and 
automated systems. 

What GAO Found: 

The processes and automated systems relied on to provide active duty 
pays, allowances, and tax benefits to mobilized Army Reserve soldiers 
are so error-prone, cumbersome, and complex that neither DOD nor, more 
importantly, Army Reserve soldiers themselves, could be reasonably 
assured of timely and accurate payments. Weaknesses in these areas 
resulted in pay problems, including overpayments, and to a lesser 
extent, late and underpayments of soldiers’ active duty pays and 
allowances at eight Army Reserve case study units. Specifically, 332 
of 348 soldiers (95 percent) we audited at eight case study units that 
were mobilized, deployed, and demobilized at some time during the 
18-month period from August 2002 through January 2004 had at least one 
pay problem. 

Pay Experiences at Eight Army Reserve Case Study Units: 

[See PDF for image]

[End of figure] 

Many of the soldiers had multiple problems associated with their active 
duty pays and allowances. Some of these problems lingered unresolved 
for considerable lengths of time, some for over 1 year. Further, 
nearly all soldiers began receiving their tax exemption benefit at 
least 1 month late. These pay problems often had a profound adverse 
impact on individual soldiers and their families. For example, 
soldiers were required to spend considerable time, sometimes while 
deployed in remote, hostile environments overseas, seeking help on pay 
inquiries or in correcting errors in their active duty pays, 
allowances, and related tax benefits. 

The processes in place to pay mobilized Army Reserve soldiers, 
involving potentially hundreds of DOD, Army, and Army Reserve 
organizations and thousands of personnel, were deficient with respect 
to (1) tracking soldiers’ pay status as they transition through their 
active duty tours, (2) carrying out soldier readiness reviews, 
(3) after-the-fact report reconciliation requirements, and (4) unclear 
procedures for applying certain pay entitlements. With respect to 
human capital, weaknesses identified at our case study units included 
(1) insufficient resources allocated to key unit-level pay 
administration responsibilities, (2) inadequate training related to 
existing policies and procedures, and (3) poor customer service. 
Several automated systems issues also contributed to the significant 
pay errors, including nonintegrated systems and limited processing 
capabilities.

What GAO Recommends: 

We provided a draft report detailing the results of our audit findings 
to DOD for review and comment on July 9, 2004. The draft report 
contains a series of 15 recommended actions. After receiving and 
considering DOD’s comments, we plan to finalize and issue the report. 
To its credit, DOD has already taken a number of actions in response to 
our report on the Army National Guard.

www.gao.gov/cgi-bin/getrpt?GAO-04-990T.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Gregory D. Kutz at 
(202) 512-9095 or Kutzg@gao.gov.

[End of Section]

Mr. Chairman and Members of the Subcommittee: 

Thank you for the opportunity to discuss controls over payroll payments 
to mobilized Army Reserve soldiers. In November 2003, we reported on 
significant pay problems experienced by mobilized Army National Guard 
soldiers. We also testified on this matter before the full committee in 
January 2004. Because of the severity of the problems identified for 
these mobilized Army National Guard soldiers, you, as well as other 
requestors,[Footnote 1] asked us to examine the accuracy and timeliness 
of payroll payments to mobilized Army Reserve soldiers.

In response to the September 11 attacks, many Army Reserve soldiers 
were activated to federal duty. A reported 98,000 Army Reserve 
soldiers--almost half of the soldiers in the Army's selected reserve--
had been mobilized to active duty at some point since September 2001. 
These forces were deployed on various important missions across the 
United States and overseas in support of Operations Noble Eagle, 
Enduring Freedom, and Iraqi Freedom. Their missions consisted mostly of 
combat support missions, such as supply, medical, and transportation 
operations, as well as military police and intelligence functions. 
Given the critical and continuing roles Army Reserve soldiers play in 
carrying out vital military and security missions, effective controls 
are needed to provide timely and accurate pays and allowances to these 
soldiers. Pay-related problems are not only costly and time-consuming 
to resolve, but result in financial hardship for soldiers and their 
families.

Because current Department of Defense (DOD) operations used to pay 
mobilized Army Reserve soldiers relied extensively on error-prone, 
manual transactions entered into multiple, nonintegrated systems, we 
did not statistically test controls in this area. Instead, we audited 
eight Army Reserve units as case studies to provide a detailed 
perspective on the nature of payroll deficiencies with respect to Army 
Reserve soldiers. Each of these units had mobilized, deployed, and 
demobilized at some time during the 18-month period from August 2002 
through January 2004. Appendix I provides details on the 14 pays and 
allowances we audited for these case study units, as well as an 
explanation of the three phases of an active duty mobilization 
(mobilization, deployment, and demobilization). Appendix II provides 
further details on our scope and methodology.

We found that Army Reserve soldiers experienced very similar problems 
to those we identified for Army National Guard soldiers. We provided a 
draft report detailing the results of our audit findings to DOD for 
review and comment on July 9, 2004. The draft report contains a series 
of 15 recommended actions. After receiving and considering DOD's 
comments, we plan to finalize and issue the report. To its credit, DOD 
has recognized the seriousness of these problems and has already taken 
a number of actions in response to our report on the Army National 
Guard, which I will address later in this testimony.

Today, I will summarize the results of our work with respect to (1) the 
pay experiences of Army Reserve soldiers at our case study units and 
(2) deficiencies in the three key control areas of processes, people, 
and automated systems.

Summary: 

Overall, 332 of the 348 (95 percent) Army Reserve soldiers from our 
eight case study units had at least one pay problem associated with 
their mobilization. Of these soldiers, 256 soldiers received an 
estimated $247,000 in overpayments, 294 soldiers received about $51,000 
in underpayments, and 245 soldiers received about $77,000 in late 
payments of their active duty pays and allowances. In addition, none of 
the 303 soldiers who deployed to designated combat zones received their 
combat zone tax exclusion benefits on time. Some of these problems 
lingered unresolved for considerable lengths of time--some for over one 
year. A brief summary of the results of our audits at each of our case 
study units is provided in appendix III.

The consequences of inaccurate, late, and missing payments, and 
associated erroneous debts had a profound financial impact on 
individual soldiers and their families. At one unit, several soldiers 
told us that they had to borrow money from friends and relatives in 
order to pay their bills when they initially deployed overseas. 
Soldiers and their families were required to spend considerable time, 
sometimes while the soldiers were deployed in remote, hostile 
environments overseas, in repeated attempts to address concerns over 
their pay and allowances, and related tax benefits.

Weaknesses in processes, human capital, and automated systems were 
associated with pay problems we identified. With respect to processes, 
until DOD improves the cumbersome and complex processes used to pay 
mobilized Army Reserve personnel, the Army, the Defense Finance and 
Accounting Service (DFAS), and, most importantly, the mobilized Army 
Reserve soldiers, cannot be reasonably assured of timely and accurate 
payroll payments. These processes, involving potentially hundreds of 
DOD, Army, and Army Reserve organizations and thousands of personnel, 
were not well understood or consistently applied with respect to 
maintaining accountability over soldiers and their associated pays, 
allowances, and tax benefits as the soldiers moved through the various 
phases of active duty mobilization.

In the human capital area, we found weaknesses including (1) 
insufficient resources allocated to key unit-level pay administration 
responsibilities, (2) inadequate training related to existing policies 
and procedures, and (3) poor customer service. The lack of sufficient 
numbers of well-trained, competent military pay professionals can 
undermine the effectiveness of even a world-class integrated pay and 
personnel system. A sufficient number of well-trained military pay 
staff is particularly crucial given the extensive, cumbersome, and 
labor-intensive process requirements that have evolved to support 
active duty pay to Army Reserve soldiers.

Automated systems weaknesses also contributed to the pay problems we 
found. For example, nonintegrated systems and limitations in system 
processing capabilities further constrained DOD's ability to provide a 
most basic service to these personnel, many of whom were serving under 
difficult conditions in the Middle East. The Defense Joint Military Pay 
System-Reserve Component (DJMS-RC)--originally designed to process 
payroll payments to personnel on weekend drills, on short periods of 
fewer than 30 days of annual active duty, or for training--is now being 
used to pay Army Reserve soldiers for up to 2 years. Army officials 
told us that the system is now stretched to the limits of its 
functionality. DFAS has established "workarounds" intended to 
compensate for the DJMS-RC system limitations, which further compound 
the human capital issues. Overall, we found the current stove-piped, 
nonintegrated systems were labor-intensive and required extensive 
error-prone manual data entry and reentry.

Case Studies Illustrate Significant Pay Problems: 

We found significant problems with the active duty pays, allowances, 
and related tax benefits received by the soldiers at the eight Army 
Reserve units we audited. The eight units we audited were: 

* 824th Quartermaster Company - Ft. Bragg, N.C.

* 965th Dental Company - Seagoville, Tex.

* 948th Forward Surgical Team - Southfield, Mich.

* 443rd Military Police Company - Owings Mills, Md.

* FORSCOM Support Unit - Finksburg, Md.

* 629th Transportation Detachment - Ft. Eustis, Va.

* 3423rd Military Intelligence Detachment - New Haven, Conn.

* 431st Chemical Detachment - Johnstown, Pa.

These units were deployed to help perform a variety of critical 
domestic and overseas combat support operations, including supply, 
medical, and transportation operations, as well as military police and 
intelligence functions.

For the eight units we audited, we found numerous and varied pay 
problems. For those problems that we could quantify,[Footnote 2] we 
identified about $375,000 in errors. These problems consisted of 
underpayments, overpayments, and late payments that occurred during all 
three phases of Army Reserve mobilization to active duty. For the 18-
month period from August 2002 through January 2004, we identified 
overpayments, underpayments, and late payments at the eight case study 
units estimated at $247,000, $51,000, and $77,000, respectively.
Footnote 3] Overall, we found that 332 of the 348 soldiers (95 percent) 
from our case study units had at least one pay problem associated with 
their mobilization to active duty. Table 1 shows the number of soldiers 
at our case study units with at least one pay problem during each of 
the three phases of active duty mobilization.

Table 1: Pay Problems at Eight Case Study Units: 

Army Reserve unit: 824th Quartermaster Company, N.C; 
Soldiers with pay problems: Mobilization: 11 of 68; 
Soldiers with pay problems: Deployment: 50 of 68; 
Soldiers with pay problems: Demobilization: 13 of 68.

Army Reserve unit: 965th Dental Company, Tex; 
Soldiers with pay problems: Mobilization: 25 of 93; 
Soldiers with pay problems: Deployment: 86 of 93; 
Soldiers with pay problems: Demobilization: 7 of 93.

Army Reserve unit: 948th Forward Surgical Team, Mich; 
Soldiers with pay problems: Mobilization: 5 of 20; 
Soldiers with pay problems: Deployment: 20 of 20; 
Soldiers with pay problems: Demobilization: 18 of 20.

Army Reserve unit: 443rd Military Police Company, Md; 
Soldiers with pay problems: Mobilization: 67 of 121; 
Soldiers with pay problems: Deployment: 114 of 121; 
Soldiers with pay problems: Demobilization: 17 of 121.

Army Reserve unit: FORSCOM Support Unit, Md; 
Soldiers with pay problems: Mobilization: 0 of 1; 
Soldiers with pay problems: Deployment: 1 of 1; 
Soldiers with pay problems: Demobilization: 1 of 1.

Army Reserve unit: 629th Transportation Detachment, Va; 
Soldiers with pay problems: Mobilization: 5 of 24; 
Soldiers with pay problems: Deployment: 24 of 24; 
Soldiers with pay problems: Demobilization: 1 of 24.

Army Reserve unit: 3423rd Military Intelligence Detachment, Conn; 
Soldiers with pay problems: Mobilization: 10 of 11; 
Soldiers with pay problems: Deployment: 10 of 11; 
Soldiers with pay problems: Demobilization: 9 of 11.

Army Reserve unit: 431st Chemical Detachment, Pa; 
Soldiers with pay problems: Mobilization: 6 of 10; 
Soldiers with pay problems: Deployment: 10 of 10; 
Soldiers with pay problems: Demobilization: 0 of 10. 

Source: GAO analysis.

[End of table]

Some of the pay problems we identified included the following.

* Forty-seven soldiers deployed overseas with the 824th Quartermaster 
Company from North Carolina improperly received hardship duty pay, 
totaling about $30,000, for up to 5 months after departing from their 
overseas duty locations.

* Nine soldiers of the 824th Quartermaster Company improperly received 
family separation allowance payments totaling an estimated $6,250 while 
serving at Ft. Bragg, their unit's home station.

* Forty-nine soldiers with the 824th Quartermaster Company did not 
receive the hardship duty pay they were entitled to receive when they 
arrived at their designated duty locations overseas until about 3 
months after their arrival.

* Ten soldiers with the 443rd Military Police Company had problems with 
their overseas housing allowance associated with their deployment in 
Iraq, including five soldiers who were underpaid about $2,700 and seven 
who did not receive their last allowance until more than 2 months after 
their active duty tour ended.

* A soldier with the 443rd MP Company who demobilized from an active 
duty deployment in August 2002, subsequently received erroneous active 
duty payments of about $52,000 through May 2004. These erroneous 
payments were not detected and stopped by DOD. The soldier contacted us 
to ask for our assistance in resolving this matter.

* A soldier from the 965th Dental Company who received an emergency 
evacuation from Kuwait as a result of an adverse reaction to anthrax 
and antibiotic inoculations he received in preparation for his overseas 
deployment, continued to receive about $2,900 in improper hostile fire 
and hardship duty payments after his return from Kuwait.

* A soldier with the 3423rd Military Intelligence Detachment did not 
receive an estimated $3,000 in family separation allowance payments 
associated with his active duty mobilization.

* Two soldiers received tens of thousands of dollars in active duty 
pays and allowances over the course of a year or more even though they 
never mobilized with their units.

* Nearly, all of the soldiers in the seven case study units that 
deployed overseas experienced late payments related to their combat 
zone tax exclusion benefit.

In some cases, the problems we identified may have distracted these 
professional soldiers from mission requirements, as they spent 
considerable time and effort while deployed attempting to address these 
issues. Further, these problems likely had an adverse effect on soldier 
morale.

Mobilized Army Reserve Pay Process, Human Capital, and Systems 
Deficiencies: 

Deficiencies in three key areas--process, human capital, and automated 
systems--were at the heart of the pay problems we identified. Process 
deficiencies included weaknesses in (1) tracking and maintaining 
accountability over soldiers as they moved from location to location to 
carry out their mobilization orders, (2) carrying out soldier readiness 
programs (SRPs)--primarily at the mobilization stations, (3) 
distributing and reconciling key pay and personnel reports during 
mobilizations, and (4) determining eligibility for the family 
separation allowance associated with active duty mobilizations. Human 
capital weaknesses included insufficient resources, inadequate 
training, and poor customer service. Finally, the automated systems 
supporting pays to mobilized Army Reserve soldiers were ineffective 
because they were not integrated and had limited processing 
capabilities.

Process Deficiencies: 

A substantial number of payment errors we found were caused, at least 
in part, by design weaknesses in the extensive, complex set of 
processes and procedures relied on to provide active duty pays, 
allowances, and related tax benefits to mobilized Army Reserve 
soldiers. Complex, cumbersome processes, developed in piecemeal fashion 
over a number of years, provide numerous opportunities for control 
breakdowns. We identified issues with the procedures in place for both 
determining eligibility and processing related transactions of active 
duty pay to mobilized Army Reserve soldiers. These process weaknesses 
involved not only the finance and military pay component of the Army, 
Army Reserve, and DFAS, but the Army's operational and personnel 
functions as well.

Flaws in Maintaining Accountability over Soldiers throughout 
Mobilization: 

Mobilization policies and procedures did not provide the Army with 
effective accountability and visibility over soldiers' locations to 
provide reasonable assurance of accurate and timely payments to 
mobilized Army Reserve soldiers. Reserve soldiers pass through four 
main transitions during the course of a typical mobilization cycle, 
including transitions from (1) their home stations to their designated 
mobilization station, (2) the mobilization station to their assigned 
deployment location, (3) the deployment location to their 
demobilization station, and (4) the demobilization station back to 
their home station.

Soldiers' active duty pays, allowances, and related tax benefits are 
closely tied to soldiers' locations. For example, timely data regarding 
the dates soldiers arrive at and leave designated locations are 
essential for accurate and timely hardship duty pays, allowances, and 
related combat zone tax exclusion benefits. To effectively account for 
soldiers' movements during these transitions, unit commanders, unit 
administrators, as well as individuals assigned to personnel and 
finance offices across the Army Reserves, Army mobilization stations, 
and in theater Army locations must work closely and communicate 
extensively to have the necessary data to pay Army Reserve soldiers 
accurately and on time throughout their active duty tours.

However, we identified several critical flaws in the soldier 
accountability procedures in place during the period of our audit. 
Specifically, we identified flawed procedures for accountability over 
(1) soldiers that are supposed to go through processing for 
mobilization and demobilization, and (2) dates of soldiers' arrival to 
and departure from designated hardship duty deployment locations.

Mobilization Station Accountability: 

We found that effective procedures were not in place to monitor and 
validate the propriety of active duty pays to mobilized Army Reserve 
soldiers. The accountability controls in place at Army mobilization 
stations responsible for unit mobilization and demobilization 
processing were not effective in detecting any missing Army Reserve 
soldiers assigned to units passing through those locations. As a result 
of these control design flaws, several soldiers received up to a year 
of active duty pay based on issued mobilization orders, even though the 
soldiers never reported for active duty.

Illustrative Cases: 

Flaws in Soldier Location Accountability Procedures Resulted in 
Erroneous Active Duty Payments; 
* A soldier assigned to the 965th Dental Company received a 
mobilization order, but based on a discussion with his commander about 
a medical condition, was told he would be transferred to a unit that 
was not mobilizing. However, the unit commander did not provide a list 
of the unit's mobilizing soldiers to the UPC and did not provide any 
information on this soldier indicating that he would not be reporting 
to the unit's mobilization station. Consequently, neither the UPC nor 
the mobilization station personnel had any means of detecting that a 
soldier had not mobilized with his unit and therefore was improperly 
receiving active duty pays. As a result, the soldier's pay was started 
on February 11, 2003, and continued through February 2004, resulting in 
more than $36,000 in overpayments. This improper active duty pay was 
stopped only after we identified the error and notified Army officials; 
* A soldier contacted GAO in March 2004 to inquire as to why he had 
been receiving active duty pay for almost a year even though, 
according to the soldier, he was not mobilized to active duty during 
that time. Subsequent inquiry determined that, at least on paper, the 
soldier was transferred from Maryland's 443rd Military Police Company 
to Pennsylvania's 307th Military Police Company in February 2003, and 
was mobilized to active duty with that unit in March 3, 2003. 
Applicable active duty pays and allowances for the soldier were 
initiated based on these March 3, 2003, orders. After the 307th 
military police company demobilized in February 2004, the soldier’s 
mobilization order was revoked. Nonetheless, available pay 
documentation indicated the soldier continued receiving erroneous 
active duty pay and allowances for basic pay, and allowances for 
subsistence, housing, and family separation totaling an estimated 
$52,000 through May of 2004. 

[End of table]

Deployment Accountability: 

Flaws in soldier accountability procedures associated with overseas 
deployment locations resulted in payment errors for almost all of the 
soldiers in our case study units. Soldiers were generally paid late or 
underpaid location-based incentives upon their initial arrival into 
designated hardship duty and hostile fire locations. Subsequently, they 
were often overpaid these same location-based entitlements because 
these payments continued, sometimes for long periods of time, after 
soldiers left designated overseas locations. Army local area servicing 
finance locations are to obtain documentation--flight manifests, for 
example--showing soldier arrival and departure date information to use 
as a basis for starting and stopping location-based pays, allowances, 
and associated tax benefits. However, despite diligent efforts by Army 
local area servicing finance officials to develop and maintain accurate 
documentation showing soldiers at the designated deployment locations, 
we found indications that this information was often not timely or 
accurate for the soldiers at our case study units.

One of our case study units, the 443rd MP Company, relied on an 
extraordinary, labor-intensive workaround to ensure that necessary 
documentation supporting any changes in the location of the unit's 
soldiers, as well as other pay-support documentation, was received by 
the unit's area servicing location while the soldiers were deployed in 
Iraq.

Individual Case Illustration: Biweekly Flights to Transmit Unit Pay 
Documents; 

* While deployed to guard Iraqi prisoners at Camp Cropper in Iraq, the 
unit commander of the 443rd Military Police Company assigned a sergeant 
to help address myriad pay complaints. The sergeant was deployed to 
Iraq as a cook, but was assigned to assist in pay administration for 
the unit because he was knowledgeable in DJMS-RC procedures and pay-
support documentation requirements and was acquainted with one of the 
soldiers assigned to the unit's servicing finance office in Camp 
Arifjan, Kuwait. Every 2 weeks, for about 5 months, the sergeant 
gathered relevant pay-support documentation from the unit's soldiers, 
took a 1 hour and 15 minute flight to the Kuwait airport, and then 
drove an hour to the Army finance office at Camp Arifjan. The day 
following the sergeant's biweekly journey to Camp Arifjan, the 
sergeant worked with the Army finance officials at Camp Arifjan to 
enter transactions into DMO, often for 8-12 hours, to get unit 
soldiers' pay entitlements started or corrected, particularly hardship 
duty pays requiring manual input every month.

[End of table]

These flawed procedures, which were relied on to account for Army 
Reserve soldiers' actual locations and their related pay entitlements 
while deployed, resulted in pay problems in all seven of our case study 
units that deployed soldiers overseas. For example: 

* All 49 soldiers who deployed overseas with our 824th Quartermaster 
Company case study unit were underpaid their hardship duty pay when 
they first arrived at the designated location. Subsequently, almost all 
solders in the unit were overpaid their hardship duty pay--most for up 
to 5 months--after they left the designated location, and some 
continued to receive these payments even after they were released from 
active duty. In total, we identified about $30,000 in improper hardship 
duty payments received by this unit's soldiers.

* Seventy-six soldiers with the 965th Dental Company received improper 
hardship duty payments totaling almost $47,000 after they had left 
their hardship duty location.

* None of the 24 soldiers deployed with the 629th Transportation 
Detachment received hardship duty pay for the months they arrived and 
departed the hardship duty areas. In addition, they did not receive 
hostile fire pay for almost 3 months after their arrival at their 
assigned overseas deployment locations.

The debts created by overpayment of these location-based payments 
placed an additional administrative burden on both the soldiers and the 
department to calculate, monitor, and collect the overpaid amounts.

Lack of Clear Pay Review Procedures at Mobilization Stations: 

Some of the pay problems we found were associated with flawed 
procedural requirements for the pay support review, which is part of 
the SRP process carried out at Army mobilization stations. Procedures 
followed by Army mobilization station finance officials during the SRP 
were inconsistent with respect to what constitutes a "thorough review" 
of soldiers' pay support documentation to determine if it is current 
and complete and has been entered into the DJMS-RC pay system.

While finance officials at some mobilization stations carried out one-
on-one detailed pay reviews with each soldier, as well as a unit-wide 
finance briefing, finance officials at other mobilization stations 
carried out less thorough procedures. At two mobilization stations, 
finance officials provided only a unit-wide briefing and did not meet 
individually with the soldiers to conduct a detailed review of their 
military pay accounts. We found far fewer pay problems (excluding 
location-based pays) for the soldiers who went through the individual 
detailed pay reviews during the SRP than the soldiers who received less 
thorough or no individual reviews of their pay entitlements at their 
mobilization stations.

Inadequate Processes for Key Pay and Personnel Reconciliation Reports: 

Design flaws in the procedures in place to obtain and reconcile key pay 
and personnel reports impaired the Army's ability to detect improper 
active duty payments. As discussed previously, we identified several 
cases in which such improper payments continued for over a year without 
detection.

The Army Reserve pay review and validation procedures were initially 
designed for pays to Army Reserve soldiers performing weekend drills, 
annual training, and short-term active duty mobilizations of 30 days or 
fewer. Correspondingly, pay and personnel reconciliation processes in 
place during our audit were focused primarily on requirements for unit 
commanders to reconcile data for reserve soldiers while they are in an 
inactive (weekend drilling only) status.

Specifically, current Army Reserve procedures require that unit 
commanders review a key report, the Unit Commanders Pay Management 
Report,[Footnote 4] for soldiers in their units performing weekend 
drill activities, for short-term active duty mobilization activities, 
and in planning for lengthy active duty mobilizations. However, these 
procedures do not clearly require unit commanders to review this key 
report for Army Reserve soldiers in subsequent phases of their active 
duty mobilization tours. The unit commander at one of our case study 
units, the 965th Dental Company, stated that he did not believe that a 
review and reconciliation was needed. Instead, he stated he relied on 
the unit's soldiers to identify any pay problems. However, in light of 
the extensive manual entry, and nonintegrated systems currently relied 
on for mobilized Army Reserve soldiers' pay, the timely and complete 
reconciliation of comparable pay and personnel data in these key 
reports can serve as an important detective control to identify any pay 
errors shortly after they have occurred.

In addition, Army guidance does not specify how deployed units are to 
receive these reports. Distribution of these reports is particularly 
problematic for units deployed in remote locations overseas. Unit 
commanders for several of our case study units stated they did not 
receive these key reports while deployed. Had those reports been 
available and reconciled, they could have been used to identify and 
correct improper active duty payments, such as the large, erroneous 
active duty overpayments discussed previously.

Family Separation Allowance Eligibility Requirements Are Not Clear: 

The existing procedures for applying eligibility requirements for 
activated Army Reserve soldiers' family separation allowance payments 
were not clear. These flawed procedural requirements for paying family 
separation allowance led to varying interpretations and pay errors for 
Army Reserve soldiers at the implementing Army home stations and 
mobilization stations.

DOD policy clearly provides that soldiers are entitled to receive 
family separation allowance if their family does not reside near the 
duty station, which is generally defined as within 50 miles.[Footnote 
5] However, DOD guidance and the form for implementing this policy were 
not clear because they did not provide for a determination that the 
soldier's family does not live near the soldier's duty station. 
Specifically, they did not require soldiers to certify that (1) they 
live over 50 miles away from the unit's home station and do not commute 
daily, or (2) the soldier's commander has certified the soldier's 
required commute to the duty station is not reasonable. As a result, we 
found inconsistencies as to when soldiers received family separation 
allowance. For example, soldiers from the 824th Quartermaster Company 
received family separation allowance payments while stationed at their 
Ft. Bragg home station even though they lived within 50 miles of the 
base and no documentation was available showing the unit commander 
authorized an exception. In contrast, 14 soldiers with Maryland's 443rd 
Military Police Company who lived over 50 miles away from their home 
station, including several soldiers from Puerto Rico, did not receive 
family separation allowance based on their arrival at their home 
station.

Human Capital Issues: 

Human capital weaknesses also contributed to the pay problems mobilized 
Army Reserve soldiers experienced in our eight case study units. Our 
Standards for Internal Control in the Federal Government state that 
effective human capital practices are critical to establishing and 
maintaining a strong internal control environment, including actions to 
ensure that an organization has the appropriate number of employees to 
carry out assigned responsibilities. Even in an operational environment 
supported by a well-designed set of policies and procedures and a 
world-class integrated set of automated pay and personnel systems, an 
effective human capital strategy--directed at ensuring that sufficient 
numbers of people, with the appropriate knowledge and skills, are 
assigned to carry out the existing extensive, complex operational 
requirements--is essential. Such a human capital strategy supporting 
accurate and timely active duty payments to mobilized Army Reserve 
soldiers must encompass numerous DOD components spread across the world 
that are now involved in carrying out the extensive coordination, 
manual intervention, and reconciliations required to pay mobilized Army 
Reserve soldiers.

Well-trained pay-support personnel throughout various DOD components 
are particularly critical given the extensive, cumbersome, and labor-
intensive process requirements that have evolved to provide active duty 
payments to mobilized Army Reserve soldiers. We encountered many 
sincere and well-meaning Army, Army Reserve and DFAS personnel involved 
in authorizing and processing active duty payments to these soldiers. 
The fact that mobilized Army Reserve soldiers received any of their 
entitled active duty pays, allowances, and tax benefits accurately and 
on-time is largely due to the dedication and tireless efforts of many 
of these pay-support personnel to do the right thing for these 
mobilized Army Reserve soldiers. However, in conjunction with our case 
studies, we observed the following human capital weaknesses in the 
current processes and organizational components now relied on to pay 
mobilized Army Reserve soldiers: (1) inadequate resources provided to 
support unit-level pay management, (2) inadequate pay management 
training across the spectrum of pay-support personnel, and (3) customer 
service breakdowns.

Inadequate Resourcing for Critical Unit Administrator Positions: 

Vacancies and turnover in key unit administrator positions, and the 
deployment of unit administrators to fill other military requirements, 
impaired a unit's ability to carry out critical pay administration 
tasks that could have prevented or led to early detection of pay 
problems associated with our case study units. In addition to pay 
administration responsibilities, unit administrator duties include 
duties for personnel and supply operations. We were told that vacancies 
in unit administrator positions were difficult to fill and often 
remained vacant for many months because Army policy requires the 
individual filling the unit administrator position have a "dual" 
status, which means the individual must perform duties both in the 
capacity of an Army Reserve military occupation specialty as well as 
unit administrator.

For example, at the 948th Surgical Team, the unit administrator 
position was vacant prior to and during the unit's mobilization. We 
were informed that the 948th Surgical Team had difficulty filling the 
vacancy because of its dual status--i.e., the individual must have (1) 
a medical background to meet the unit's mission requirements, and (2) 
knowledge and experience performing the personnel, payroll, and supply 
tasks of a unit administrator. In the absence of the unit 
administrator, the unit commander assigned a sergeant with limited 
knowledge of pay entitlements and DJMS-RC processing requirements to 
help carry out some of the unit administrator's pay management duties. 
The sergeant told us that during a 2-week period during late April 
2003, she spent about 100 hours attempting to resolve the unit's pay 
problems, while concurrently carrying out her duties as a health 
specialist.

Inadequate Pay Management Training: 

In addition to concerns about the level of resources provided to 
support critical unit administrator positions, we identified instances 
in which the lack of adequate training on pay management duties and 
responsibilities provided to unit administrator and finance office 
personnel contributed to soldiers' pay problems. Further, we found that 
unit commanders did not always support these important pay management 
duties. Our Standards for Internal Control in the Federal Government 
provide that management should establish and maintain a positive and 
supportive attitude toward internal controls and conscientious 
management.

Several of the individuals serving as unit administrators in our case 
study units informed us that they had received limited or no formal 
training covering unit administrator pay management responsibilities 
and that the training they did receive did not prepare them for 
mobilization issues associated with supporting and processing active 
duty pays. Moreover, few of these unit administrators had completed all 
of the required training on active duty pays and allowance eligibility 
and processing requirements. Unit administrators have responsibility 
for a variety of pay-related actions, including working with the unit 
soldiers to obtain critical pay support documentation, maintaining 
copies of pay support records, providing pay-transaction support 
documentation to the UPC, and reviewing pay reports for errors. Without 
adequate training, unit administrators may not be aware of these 
critical pay management responsibilities.

Lack of training contributed to a number of pay errors that unit 
administrators could have prevented: 

* At the 824th Quartermaster unit, while our audit of unit pay reports 
showed that the unit administrator reviewed the documents, we saw no 
indication that she used this information to identify and stop an 
overpayment of $18,000 to one soldier in her unit. As a result, the 
erroneous pay was allowed to continue for another 5 months.

* Several soldiers with the 965th Dental Company did not receive 
promotion pay increases and other entitlements for over 2 months 
because the unit administrator failed to process necessary pay-support 
documentation--available at the time of unit's initial SRP--until after 
the unit was deployed on active duty.

* At the 443rd Military Police Company, the unit's finance 
sergeant[Footnote 6] who was assigned pay management responsibilities 
did not gather and submit current documentation needed to support 
active duty pays, such as documents showing soldiers' marital status 
and number of dependents. As a result, soldiers from this unit 
experienced overpayments, underpayments, and late payments associated 
with their housing and cost of living allowances.

Inadequate training of military pay technicians at Army finance offices 
at mobilization and demobilization stations, and at area servicing 
finance locations (for deployed soldiers), also adversely affected the 
accuracy and timeliness of pays to mobilized Army Reserve soldiers. Few 
of the military finance personnel responsible for processing pay 
information at the mobilization and demobilization stations and at the 
area servicing finance office for deployed units had formal training on 
DJMS-RC pay procedures. Instead, several of the military pay 
technicians and supervisors we talked to at the Army mobilization and 
demobilization stations told us they relied primarily on on-the-job 
training to become knowledgeable in the pay eligibility and pay 
transaction processing requirements for mobilized Army Reserve 
soldiers. For example, military pay personnel at the Defense Military 
Pay Office at Ft. Eustis informed us that instead of receiving formal 
training on active duty pay entitlements or DJMS-RC pay processing, 
they became knowledgeable in mobilization and demobilization pay 
processing procedures by processing hundreds of soldiers within 2 to 3 
weeks of being assigned these responsibilities. They also said they 
contacted full-time civilians in the finance office, as well as UPC and 
DFAS officials, by telephone for assistance.

Also, few of the Army finance personnel at overseas area servicing 
finance locations received formal training on Army Reserve pay 
eligibility and DJMS-RC processing requirements before assuming their 
duties. These personnel had primary responsibility for supporting 
active duty payments to mobilized Army Reserve soldiers deployed 
overseas, including responsibility for processing location-based 
active duty payments to these soldiers. Camp Arifjan was the Army 
location assigned responsibility for processing pay to mobilized Army 
Reserve soldiers deployed in Kuwait and Iraq during 2003. Officials 
from the 336th Command, the Army command with oversight responsibility 
for Camp Arifjan, confirmed that while finance personnel at Camp 
Arifjan received training in the pay eligibility and pay processing 
procedures for active duty Army soldiers, they were not adequately 
trained in pay eligibility and processing procedures for Army Reserve 
soldiers.

We were told of instances in which Army finance personnel were unable 
to help Reserve soldiers resolve their pay problems. For example, the 
948th Surgical Team contacted an Army finance unit located in Kandahar, 
Afghanistan, to request its assistance in resolving the unit's pay 
problems. However, the finance personnel at that location were unable 
to help resolve the 948th Surgical Team's pay problems because they 
said they had not had training in this area and were not familiar with 
DJMS-RC processing requirements and procedures. All 20 soldiers with 
the 948th Surgical unit experienced pay problems associated with their 
location-based hardship duty payments, which required manual processing 
every month by the unit's area servicing finance office.

Further, we saw little evidence that the unit commanders of our case 
study units received any training on their role in supporting their 
unit administrators in these important pay management responsibilities. 
For example, at one of our case study units, the 965th Dental Company, 
the unit commander informed us that he did not support the review of 
pay management reports because soldiers had the capability to review 
their pay online and would use this capability to identify and report 
any pay problems. However, as discussed earlier, while we identified 
numerous instances in which soldiers received overpayments or had other 
pay problems, we saw little indication that these soldiers found and 
reported these problems prior to our audit. Moreover, we identified two 
instances in which soldiers did not report that they had received tens 
of thousands of dollars in improper active duty payments.

Customer Service Breakdowns: 

Our audit work at eight case study units identified significant soldier 
concerns with both the level and quality of customer service they 
received related to their active duty pays, allowances, and tax 
benefits. The soldiers' concerns centered around three distinct areas: 
(1) the accessibility of customer service, (2) the ability of customer 
service locations to help soldiers, and (3) the treatment of soldiers 
requesting assistance. Servicing soldiers and their families with pay 
inquiries and problems is particularly critical in light of the error-
prone processes and limited automated system processing capabilities. 
Ultimately, pay accuracy is left largely to the individual soldier.

Although there are several sources that soldiers can turn to for pay 
issue resolution, including an online system and a toll free phone pay 
assistance number, soldiers at our case study units experienced 
problems in accessing these sources. Mission requirements and the 
distance between deployment locations and field finance offices often 
impaired the soldiers' ability to utilize the in-theater customer 
service centers. Also, soldiers did not always have Internet and 
telephone access to utilize sources through these media. The lack of 
Internet access for deployed soldiers was particularly problematic 
because it limited soldiers' access to pay, allowance, and tax benefit 
data reflected in their leave and earnings statements. Lacking leave 
and earnings statements, soldiers had no means to determine the 
propriety of their active duty payments. For example, soldiers with the 
948th Surgical Team told us that their inability to access the leave 
and earnings statements adversely affected their overall morale.

Even when mobilized reservists were able to contact customer service 
sources, their pay issues often continued because the office they were 
instructed to contact was unable to address their inquiry or correct 
their problem. In some cases, customer service sources failed to help 
soldiers because they lacked an understanding of what was needed to fix 
the problems. When representatives of the 948th Surgical Team contacted 
their parent company for help in correcting pay problems, personnel 
with the parent company informed them that they could not fix the 
unit's pay problems because they (incorrectly) believed that the unit 
was paid through the Army's active duty pay system. Soldiers at other 
units were redirected from one source to another. Soldiers were not 
aware of which sources could address which types of problems, and more 
significantly, the customer service sources themselves often did not 
know who should correct a specific problem.

An Army Reserve major's experience illustrates the time and frustration 
that is sometimes involved with soldiers' attempts to obtain customer 
service for correcting errors in active duty pays, allowances, and 
related tax benefits. 

Individual Case Illustration: Extensive, Time-consuming Action Required 
to Resolve Pay Issue; 

* A soldier from Maryland was mobilized in March 2003 from the Army's 
Individual Ready Reserve to active duty to serve as a liaison between 
the Army and Air Force to help coordinate ground and air combat 
operations in Iraq. After completing his 2-month active duty tour and 
returning to an inactive reserve status in May 2003, he contacted Army 
officials to inform them that he was continuing to receive active duty 
pays and volunteered to immediately repay these erroneous overpayments. 
In July 2003, he wrote a check for $6,150.75 after receiving 
documentation showing his debt computation. However, he continued to 
receive Leave and Earnings Statements indicating that he had an 
outstanding debt. He contacted his Army demobilization finance office 
to determine how to get the erroneous outstanding debt removed from 
his pay records. After being referred by officials at that location to 
various DFAS locations (including once being told, "There is nothing 
more I can do for you."), he contacted us for assistance. After DFAS 
recomputed the soldier's debt as a result of our inquiry, the soldier 
was informed that he owed an additional $1,140.54, because the original 
debt computation did not fully consider the erroneous combat zone tax 
exclusion benefits he received. Overall, he spent nearly a year after 
his 2-month active duty tour ended, and about 20 phone calls, faxes, 
and letters in contacting at least seven different DOD representatives 
at five different customer service centers to correct active duty pay 
and allowance overpayments and associated combat tax exclusion benefit 
problems.

[End of table]

Finally, soldiers expressed concern about the treatment they sometimes 
received while attempting to obtain customer service. Soldiers 
expressed concern that certain customer service representatives did not 
treat soldiers requesting assistance respectfully. For example, one 
soldier who attempted to make corrections to his Certificate of 
Discharge or Release from Active Duty (DD 214) informed us that 
mobilization station personnel told him that the citations and dates of 
service he was trying to add "didn't matter." Additionally, some 
soldiers told us that when they raised concerns about the quality of 
customer service they received with respect to their pay inquiries and 
concerns, they were sometimes ignored. For example, soldiers with 
Connecticut's 3423rd Military Intelligence Detachment told us they 
contacted the local Inspector General because they believed that 
finance personnel at their deployment location had both actively tried 
to impair the payment of their active duty entitlements and had tried 
to intimidate and discourage the unit's soldiers from seeking help 
elsewhere. However, they were not aware of any action taken as a result 
of their concerns.

Systems Problems: 

Weaknesses in automated systems contributed significantly to the 
underpayments, overpayments, and late payments we identified. These 
weaknesses consisted of (1) nonintegrated systems with limited system 
interfaces and (2) limited processing capabilities within the pay 
system. The Army and DFAS rely on the same automated pay system to 
authorize and process active duty pays for Army Reserve soldiers as 
they use for Army National Guard soldiers. In addition, similar to the 
Army National Guard, the Army Reserve's personnel and order-writing 
systems are not integrated with the pay system. Consequently, many of 
the systems problems experienced by mobilized Army Reserve soldiers are 
similar to those that we identified in our report on pay issues 
associated with mobilized Army National Guard soldiers.[Footnote 7]

Because of the automated systems weaknesses, both Army Reserve and 
active Army personnel must put forth significant manual effort to 
accurately process pays and allowances for mobilized Army Reserve 
soldiers. Moreover, to compensate for the lack of automated controls 
over the pay process, both DFAS and the Army place substantial reliance 
on the review of pay reports to identify pay errors after the fact. 
Part of this reliance includes the expectation that soldiers review 
their own leave and earnings statements, even though these statements 
do not always provide clear explanations of all payments made. Finally, 
because of DJMS-RC's limitations, the system cannot simply stop 
withholding taxes for soldiers in designated combat zone locations. 
Instead, for these soldiers, the system withholds taxes and then pays 
the soldiers the amount that was withheld at least a month after the 
soldiers were first entitled to receive this benefit.

Automated Systems Are Not Integrated and Have Limited Interfaces: 

The key pay and personnel systems involved in authorizing, entering, 
processing, and paying mobilized Army Reserve soldiers are not 
integrated and have only limited interfaces. Figure 1 provides an 
overview of the key systems involved in authorizing, entering, 
processing, and making active duty payments to mobilized Army Reserve 
soldiers.

Figure 1: Key Systems Involved in Authorizing, Entering, Processing, 
and Paying Mobilized Army Reserve Soldiers Are Not Effectively 
Integrated or Interfaced: 

[See PDF for image] 

Note: 

1 - Regional Level Application System (RLAS): 

2 - Tactical Personnel System (TPS): 

3 - Transition Processing (TRANSPROC) System: 

4 - Defense Military Pay Office (DMO): 

5 - Total Army Personnel Database - Reserve (TAPDB-R): 

6 - Defense Joint Military Pay System - Reserve Component (DJMS-RC): 

[End of figure]

Lacking either an integrated or effectively interfaced set of personnel 
and pay systems, DOD must rely on error-prone, manual data entry from 
the same source documents into multiple systems. We found numerous 
instances in which pay-affecting personnel information was not entered 
promptly into the pay system, resulting in numerous pay errors.

We found several instances in which soldiers that were promoted while 
on active duty did not receive their pay raises when they should have 
because the promotion information was not promptly recorded in DJMS-RC. 
For example, one Army Reserve soldier's promotion was effective on July 
1, 2003. However, the soldier's promotion was not processed in the pay 
system until October 2003, which delayed an increase in both his basic 
pay and basic allowance for housing. The soldier received his promotion 
pay, including back pay, in late October 2003, resulting in late 
payments totaling over $2,700.

Lacking an effective interface between pay and personnel systems, DOD 
and the Army must rely on after-the-fact detective controls, such as 
pay and personnel system data reconciliations to identify and correct 
pay errors occurring as a result of mismatches between personnel and 
pay system data. However, even these reconciliations will not identify 
soldiers that are being paid for active duty while in inactive status 
because the Army Reserve personnel system currently does not maintain 
data to indicate whether or not soldiers are on active duty.

Limited Automated Processing Capabilities: 

DJMS-RC was not designed to pay Army Reserve soldiers for active duty 
tours longer than 30 days. According to DOD officials, requiring DJMS-
RC to process various types of pays for active duty tours that exceed 
30 days has stretched the system's automated processing capabilities. 
Because of the system's limitations, the Army and DFAS were required to 
make monthly error-prone manual inputs for certain active duty pays, 
such as hardship duty pay. We found many instances in which these 
manual inputs resulted in payment errors. Moreover, because of the way 
in which hardship duty pay was processed and reported on soldiers' 
leave and earnings statements, mobilized Army Reserve soldiers could 
not always determine whether they received all of their entitled pays 
and allowances. In addition, because of current processing limitations, 
DJMS-RC cannot process a required tax exclusion promptly for soldiers 
in a combat zone. This processing limitation has resulted in late 
payments of this benefit for all entitled Army Reserve soldiers.

Hardship Duty Pay: 

During our audit period, we found numerous errors in hardship duty pay 
as a result of a DJMS-RC processing limitation that required the use of 
a miscellaneous payment code for processing this type of pay. Because 
of the use of this miscellaneous code instead of a code specifically 
for hardship duty pay, this pay could not be automatically generated on 
a monthly basis once a soldier's eligibility was established. 
Therefore, hardship duty pay had to be manually entered every month for 
eligible soldiers.

We found that nearly all soldiers in our case studies who were eligible 
for hardship duty pay experienced problems with this pay, including 
late payments, underpayments, and overpayments. For example, the 965th 
Dental Company's soldiers from Seagoville, Texas, experienced both 
underpayments and overpayments. Specifically, all 85 soldiers deployed 
to Kuwait were underpaid a total of approximately $8,000 for hardship 
duty pay they were entitled to receive during their deployment 
overseas. Subsequently, 76 of the unit's soldiers were overpaid a total 
of almost $47,000 because they continued to receive hardship duty 
payments for more than 6 months after they had left the theater.

Both underpayments and overpayments, as well as late payments, of 
hardship duty pay occurred largely because of the reliance on manual 
processing of this pay every month. The errors often occurred because 
local area finance personnel did not receive accurate or timely 
documentation such as flight manifests or data from the Tactical 
Personnel System indicating when soldiers arrived or left the theater. 
As a result, finance personnel did not start these payments on time, 
and did not stop these payments as of the end of the soldiers' active 
duty tour date recorded in DJMS-RC.

Use of the miscellaneous code to process hardship duty pay also 
precluded the use of system edits as backup controls to prevent 
overpayments. Because a miscellaneous code is used for various types of 
payments, DFAS could not set up an edit to stop hardship duty pay after 
a soldier's active duty tour ended in the event finance personnel 
mistakenly continued to manually process hardship duty pay. Similarly, 
DFAS could not establish an edit to prevent duplicate payments of 
hardship duty pay processed using the miscellaneous code. As a result, 
hardship duty pay could be entered more than once for a soldier in a 
given month without detection. From our case studies, we identified 
three soldiers who each received two hardship duty payments for one 
month, resulting in total overpayments of $250.

Use of the miscellaneous payment code also made it difficult for 
soldiers to understand, and determine the propriety of, some of the 
payments reflected on their leave and earnings statements. Hardship 
duty pay and other payments that are processed using the miscellaneous 
code are reported on leave and earnings statements as "other credits." 
Furthermore, the leave and earnings statements did not provide any 
additional information about what the "other credits" were for unless 
pay clerks entered additional explanations in the "remarks" section of 
the statement, which they rarely did. As a result, lacking any 
explanations, soldiers often had no means to determine if these types 
of payments were appropriate and accurate.

Unit commanders told us that they relied on soldiers to identify any 
pay problems based on their review of their leave and earnings 
statements. However, because leave and earnings statements do not 
always provide adequate information or, as discussed previously, may 
not be available to soldiers while deployed, reliance on the soldiers 
to identify pay errors is not an effective control.

Combat Zone Tax Exclusion: 

In addition to soldiers' pay problems that occurred primarily because 
of the extensive use of manual processes, soldiers also experienced 
systematic problems with automated payments related to their combat 
zone tax exclusion, which resulted in late payments of this benefit for 
all soldiers in the seven case study units that deployed overseas. 
Soldiers are entitled to the combat zone tax exclusion for any month in 
which the soldier performs active service in a designated combat zone 
area.[Footnote 8]

Because DJMS-RC was designed as a pay system for Army Reserve soldiers 
in weekend drill status, it does not have the processing capability to 
halt the withholding of applicable income taxes. Therefore, as a 
workaround procedure to compensate for this limitation, an automated 
process was established whereby the system first withholds taxes 
applicable to payments made while soldiers are in a combat zone, and 
then later reimburses soldiers for these withheld amounts in the 
following month. As a result of this workaround process, with few 
exceptions, Army Reserve soldiers who served in a designated combat 
zone received their combat zone tax exclusion benefit at least one 
month late.

Soldiers experienced longer delays in receiving this benefit if they 
arrived in a combat zone after the midmonth cutoff for DJMS-RC 
processing, which is approximately on the seventh day of each month. In 
these cases, entitlement to the tax exclusion was not recognized until 
the following month, which then delayed the soldier's receipt of his 
combat zone tax benefit until the next month--the third month the 
soldier was deployed in the combat zone. For example, members of the 
824th Quartermaster Company that deployed to Afghanistan arrived in 
country on July 14, 2003, but did not receive their first combat zone 
tax exclusion reimbursements until early October, almost 3 months after 
they became eligible for the exclusion.

Actions to Improve Accuracy and Timeliness of Mobilized Army Guard and 
Reserve Pay: 

DOD and the Army have reported a number of relatively recent positive 
actions with respect to processes, human capital practices, and 
automated systems that, if implemented as reported, should improve the 
accuracy and timeliness of active duty pays, allowances, and related 
tax benefits provided to mobilized Army Reserve soldiers. Payroll 
payments to mobilized Army Reserve soldiers rely on many of the same 
processes and automated systems used for payments to mobilized Army 
National Guard soldiers. Consequently, actions to improve the accuracy 
and timeliness of Army Reserve soldier payments are closely tied to 
actions taken in response to several of the recommendations in our 
November 2003 Army National Guard pay report.[Footnote 9]

Because many of DOD's actions in this area were implemented in the fall 
of 2003 or later, they were not in place soon enough to have had a 
positive impact on mobilized Army Reserve soldiers' payments that we 
audited through January 2004. However, if implemented as reported to 
us, many of DOD's actions in response to the recommendations in our 
November 2003 report should help reduce the incidence of the types of 
pay problems we identified for Army National Guard soldiers as well as 
those identified in the Army Reserve case study units I have presented 
today.

With respect to the process deficiencies and related recommendations, 
DOD reported implementing additional procedural guidance intended to 
help minimize the pay problems attributable to non-standard or unclear 
procedures. One of the purposes of this guidance is to eliminate any 
questions regarding which DOD entity is responsible for resolving a 
soldier's pay issues or questions. Further, as of January 2004, DOD 
reported establishing a new procedure under which DFAS assumed 
responsibility (from the Army finance offices located in various 
overseas locations) for all monthly manual entry of mobilized Army 
Reserve and Army National Guard soldiers' location-based hardship duty 
pays.

DOD also reported completing several actions related to our previous 
recommendations to improve the human capital practices related to 
payments to mobilized Army soldiers. For example, the Army reported 
that it had taken action to provide additional training for Army 
finance personnel at overseas finance locations and at mobilization and 
demobilization stations, as well as for those Army finance personnel 
scheduled for deployment. This training was directed at better ensuring 
that these personnel are adequately trained on existing and new pay 
eligibility and pay processing requirements for mobilized Army National 
Guard and Army Reserve soldiers. DOD also reported establishing a new 
policy in January 2004 directed at more clearly affixing responsibility 
for addressing soldiers' pay problems or inquiries. Under this new 
policy, the Army National Guard established a pay ombudsman to serve as 
the single focal point for ensuring coordinated, prompt customer 
service on all Army National Guard soldiers' pay problems.

With respect to automated systems, the Army and DFAS have acknowledged 
serious deficiencies in the current automated systems used to pay 
mobilized Army Reserve soldiers, and report that they have implemented 
a number of significant improvements, particularly to reduce an 
estimated 67,000 manual monthly entries for hardship duty pay. For 
example, in response to our recommendations in the National Guard 
report, DOD reported taking actions to (1) automate manual monthly 
hardship duty pay in March 2004, (2) eliminate the use of "other 
credits" for processing hardship duty pay and instead process these 
pays using a unique transaction code to facilitate implementing a 
system edit to identify and stop erroneous payments, (3) compare active 
duty release dates in the Army's system used to generate Release From 
Active Duty Orders with soldiers' end of active duty tour dates shown 
in DJMS-RC to identify and stop any erroneous active duty payments, and 
(4) increase the reliability and timeliness of documentation used to 
support soldiers' arrival at and departure from designated overseas 
locations.

Further, DOD has a major system enhancement effort underway in this 
area--the Defense Integrated Military Human Resources System (DIMHRS). 
As an interim measure, DOD is now pursuing Forward Compatible Payroll 
(FCP). FCP is intended to replace payroll systems now used to pay Army 
military personnel and help eliminate several of the labor-intensive, 
error-prone workarounds necessitated by current DJMS-RC processing 
limitations. As of May 2004, FCP was expected to be operational for all 
Army Reserve soldiers by March 2005.

Concluding Comments: 

The increased operating tempo for Army Reserve and Army National Guard 
active duty mobilizations has stressed the current processes, human 
capital, and automated systems relied on to pay these soldiers. The 
significant number of problems we identified associated with active 
duty pay, allowances, and related tax benefits provided to mobilized 
Army Reserve soldiers at eight case study locations raises serious 
concerns about whether current operations can be relied on to provide 
accurate and timely payments. These pay problems caused considerable 
frustration, adversely affected soldiers' morale, and placed an 
additional unnecessary burden on both the soldiers and their families. 
Further, if not effectively addressed, these pay problems may 
ultimately have an adverse impact on Army Reserve reenlistment and 
retention.

Strengthening existing processes, human capital practices, and 
automated systems is critical to preventing, or at minimum, promptly 
detecting and correcting the errors we identified. In this regard, DOD 
and the Army have reported a number of relatively recent positive 
actions intended to improve the accuracy and timeliness of active duty 
pays, allowances, and related tax benefits provided to mobilized Army 
Reserve soldiers. DOD's completed and planned near-term actions, if 
implemented as reported, should reduce the number of pay problems.

However, mobilized Army Reserve soldiers cannot be reasonably assured 
of accurate and timely active duty pays, allowances, and related tax 
benefits until DOD completes a reengineering of all the processes, 
human capital practices, and automated systems supporting this critical 
area. Fully and effectively addressing Army Reserve soldiers pay 
problems will require priority attention and sustained, concerted, 
coordinated efforts by DFAS, the Army, and the Army Reserve to build on 
actions taken and planned.

Finally, I commend the Chairman and Vice Chairman for holding an 
oversight hearing on this important issue. Your Committee's continuing 
interest and diligence in overseeing efforts to effectively and 
efficiently support our Army Guard and Reserve forces will be essential 
in bringing about comprehensive and lasting improvements to many 
decades-old, entrenched problems. We are committed to continuing to 
work with you and DOD to identify and monitor actions needed to bring 
about comprehensive and lasting solutions to long-standing problems in 
its business and financial management operations.

Mr. Chairman, this concludes my statement. I would be pleased to answer 
any questions 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) 512-9095 or [Hyperlink, kutzg@gao.gov]. Individuals 
making key contributions to this testimony include James D. Berry Jr., 
Amy C. Chang, Francine M. DelVecchio, Geoffrey B. Frank, Jennifer L. 
Hall, Ken Hill, Kristi L. Karls, Jason M. Kelly, Tram Le, Julia C. 
Matta, Jonathan T. Meyer, Michelle Philpott, John J. Ryan, Jenniffer 
F. Wilson, Leonard E. Zapata. 

[End of section]

Appendix I: Background: 

While on active duty, all Army Reserve soldiers earn various 
statutorily authorized types of pays and allowances. The types and 
amounts of pay and allowances that Army Reserve soldiers are eligible 
to receive vary depending upon rank and length of service, dependency 
status, skills and certifications acquired, duty location, and the 
difficulty of the assignment. While Army Reserve soldiers mobilized to 
active duty may be entitled to receive over 50 types of pays and 
allowances, we focused on 14 types of pays and allowances applicable to 
the Army Reserve units we selected for case studies. As shown in table 
2, we categorized these 14 pay and allowance types into two groups: (1) 
pays, including basic pay, medical and dental and foreign language 
proficiency skill-based pays, and location-based hostile fire and 
hardship duty pays, and (2) allowances, including allowances for 
housing, subsistence, family separation, and cost of living for the 
continental United States.[Footnote 10]

Table 2: Active Duty Pays and Allowances Associated with Case Study 
Units: 

Pays: Basic pay; 
Description: Salary; 
Dollar amount: Varies depending on rank and years of service.

Pays: Hazardous duty pay (Jump pay); 
Description: Pay for parachute jumping; 
Dollar amount: $150 per month.

Pays: Aviation career incentive pay; 
Description: Pay for officers performing operational flying duty; 
Dollar amount: Varies from $125 to $840 per month based on years of 
aviation service.

Pays: Foreign language proficiency pay; 
Description: Pay for specialized foreign language skills; 
Dollar amount: Varies depending on proficiency but may not exceed $300
per month.

Pays: Hardship duty location pay for designated areas; 
Description: Pay when assigned to duty in specified locations; 
Dollar amount: $50, $100, or $150 per month (depending on duty 
location).

Pays: Hardship duty location pay for certain places (phase out began 
on January 1, 2002); 
Description: Pay to enlisted soldiers when assigned to duty in 
specified locations; 
Dollar amount: Varies from $8 to $22.50 per month depending on rank.

Pays: Medical and dental pay; 
Description: Various special entitlements and incentives for medical 
and dental professionals; 
Dollar amount: Varies from $100 per month to $3,000 per month 
depending on medical specialty, professional qualifications, and 
creditable service.

Pays: Hostile fire/imminent danger pay; 
Description: Full pay for any portion of month when assigned to a 
location subject to or in close proximity to hostile fire or assigned 
to duty in a designated imminent danger location; 
Dollar amount: $150 per month through September 30, 2002, $225 per 
month, effective October 1, 2002, through December 31, 2004.

Allowances: Basic allowance for housing; 
Description: Meant to offset the cost of housing when member does not 
receive government-provided housing; 
Dollar amount: Varies depending on location, rank, and whether member 
has dependents.

Allowances: Basic allowance for subsistence; 
Description: Meant to offset costs for a member's meals; 
Dollar amount: Varies depending on whether member is officer or 
enlisted.

Allowances: Family separation allowance I; 
Description: Meant to offset added housing expenses resulting from 
forced separation from dependents; 
Dollar amount: Equivalent to monthly basic allowance for housing for 
member of same rank without dependents.

Allowances: Family separation allowance II; 
Description: Meant to offset certain expenses resulting from forced 
separation from dependents; 
Dollar amount: $100 per month from January 1, 1998, through September 
30, 2002; $250 per month effective October 1, 2002, through December 
31, 2004.

Allowances: Cost of living allowance in the continental United States; 
Description: Meant to provide compensation for variations in costs 
(other than housing) in the continental United States; 
Dollar amount: Varies depending on location, rank, years of service, 
and whether member has dependents.

Allowances: Overseas housing allowance; 
Description: Meant to provide compensation for variations in housing 
costs overseas; 
Dollar amount: Varies depending on location, rank and whether the 
member has dependents. 

Source: GAO.

[End of table]

Mobilization Phases: 

As shown in figure 2, three key phases are associated with the pays and 
allowances applicable to mobilized Army Reserve soldiers: (1) 
mobilization: starting applicable active duty pays and allowances, (2) 
deployment: starting and stopping applicable location-based active duty 
pays while continuing other nonlocation-based active duty pay and 
allowance entitlements, and (3) demobilization: stopping active duty 
pays and allowances.

Figure 2: Three Key Phases for Active Duty Pays to Army Reserve 
Soldiers: 

[See PDF for image]

[End of figure]

Mobilization: 

During mobilization, units receive alert orders and begin preparing for 
active duty by conducting Soldier Readiness Processing (SRP) at the 
unit's home station. Among other things, the SRP is intended to ensure 
that each soldier's financial records are in order. The unit 
administrator is supposed to gather all necessary documentation for 
each soldier and send it to the U.S. Army Reserve Pay Center (UPC). 
There, pay technicians enter transactions to initiate basic pays and 
allowances for the mobilized soldiers based on soldiers' mobilization 
orders and documentation sent by the unit.

After the initial SRP, soldiers go as a unit to an assigned active duty 
Army mobilization station, where they undergo a second SRP. As part of 
this second SRP, finance personnel at the mobilization station are 
responsible for confirming or correcting the results of the first SRP, 
including obtaining any necessary documentation and promptly initiating 
appropriate active duty pay and allowance transactions that were not 
initiated during the first SRP.[Footnote 11]

Deployment: 

While deployed on active duty, there are several active Army and DFAS 
components involved in paying mobilized Army Reserve personnel. The 
Army area servicing finance office, which may be within the United 
States or in a foreign country, is responsible for initiating pays 
earned while the soldier is located in certain specified locations, 
such as location-based pays for hostile fire and hardship duty. Pay 
technicians at these area servicing finance offices are responsible for 
starting these types of pays for each soldier based on documentation, 
such as annotated battle rosters or flight manifests, showing when 
soldiers arrived at these designated locations.

While the designated Army area servicing finance offices have primary 
responsibility for administering pay for deployed Army Reserve 
soldiers, finance personnel at the cognizant mobilization station or at 
the UPC can also enter certain pay-altering transactions that occur 
during deployments, such as those related to a soldier's early 
separation from active duty. In addition, the UPC has responsibility 
for entering all monthly nonlocation-based, nonautomated pay and 
allowance transactions, such as foreign language proficiency pay.

Demobilization: 

Upon completion of an active duty tour, Army Reserve soldiers normally 
return to the same active Army locations from which they were mobilized 
for demobilization processing before returning to their home stations. 
There, each soldier should receive a copy of the Release from Active 
Duty (REFRAD) order and a Form DD 214, Certificate of Release or 
Discharge from Active Duty. Pay technicians at the demobilization 
station are required to use the date of release from active duty shown 
on these documents as a basis for stopping all Army Reserve soldiers' 
active duty pay and allowances. The UPC is responsible for 
discontinuing monthly input of all nonlocation-based, nonautomated pays 
and allowances. If the demobilization station did not take action to 
stop active duty pays for demobilized Army Reserve soldiers, or if a 
soldier did not return to the demobilization station for active duty 
out-processing, the responsibility for stopping active duty pays and 
allowances falls to the soldier's unit or the UPC.

[End of section]

Appendix II: Scope and Methodology: 

Because current DOD operations used to pay mobilized Army Reserve 
soldiers relied extensively on error-prone, manual transactions entered 
into multiple, nonintegrated systems, we did not statistically test 
controls in this area. Instead, we audited eight Army Reserve units as 
case studies to provide a detailed perspective on the pay experiences 
of mobilized Army Reserve soldiers. Each of these units had mobilized, 
deployed, and demobilized at some time during the 18-month period from 
August 2002 through January 2004. Using data supplied by the Army 
Reserve Headquarters Operations Center, we selected case study units 
that had a variety of deployment locations and missions.

To identify the pay experiences associated with each case study unit, 
we obtained and analyzed DJMS-RC pay transaction extracts and other 
available documentation. We also conducted follow-up inquiries with 
cognizant personnel at the Army Reserve Command, Regional Readiness 
Command, and the Army Reserve Pay Center. Because our objective was to 
provide insight into the pay experiences of mobilized Army Reserve 
soldiers, we did not perform an exact calculation of the net pay 
soldiers should have received. Our audit results reflect only problems 
that we identified and we counted problems only once in the phase in 
which they first occurred, even though the problems we identified 
sometimes extended into subsequent phases. Soldiers in our case study 
units may have experienced additional pay problems that we did not 
identify.

For purposes of characterizing pay and allowance problems for this 
report, we defined overpayments and underpayments as those that were in 
excess of (overpayment) or less than (underpayment) the entitled 
payment. We considered as late payments any active duty pay or 
allowance paid to the soldier over 30 days after the date on which the 
soldier was entitled to receive such payments. In addition, while we 
did not attempt to calculate the exact impact of any soldier over, 
under, and late payments on their combat zone tax exclusion benefits, 
we did examine readily available data to determine the extent to which 
our case study unit soldiers' experienced problems with their entitled 
combat zone tax exclusion benefits.

In addition, we conducted a number of other procedures, including: 

* Observing procedures and practices followed by the various DOD 
components involved in providing active duty pays and allowances to 
Army Reserve soldiers;

* Interviewing recently demobilized soldiers about their pay 
experiences while mobilized; and: 

* Reviewing selected edit and validation checks in DJMS-RC, and certain 
data entry processes for DJMS-RC.

We conducted our audit work from November 2003 through June 2004 in 
accordance with U.S. generally accepted government auditing standards. 
Further details on our scope and methodology will be provided in our 
soon-to-be-issued report.

[End of section]

Appendix III: Summaries of Case Studies: 

We audited the pay experiences of soldiers in the following eight Army 
Reserve units as case studies of the effectiveness of the processes, 
human capital practices, and automated systems in place over active 
duty pays, allowances, and related tax benefits: 

* 824th Quartermaster Company, Fort Bragg, N.C.

* 965th Dental Company, Seagoville, Tex.

* 948th Forward Surgical Team, Southfield, Mich.

* 443rd Military Police Company, Owings Mills, Md.

* FORSCOM Support Unit, Finksburg, Md.

* 629th Transportation Company, Ft. Eustis, Va.

* 3423rd Military Intelligence Detachment, New Haven, Conn.

* 431st Chemical Detachment, Johnstown, Pa.

These case studies are presented to provide an overview of the types 
and causes of any pay problems experienced by these units. We selected 
regional readiness commands that had a large number of activated 
Reserve units that had mobilized, deployed, and returned from their 
tour of active duty in support of Operations Noble Eagle, Enduring 
Freedom, and Iraqi Freedom. From the list of units assigned to these 
Readiness Commands, we selected eight case studies that had a variety 
of deployment locations and missions, including both overseas and 
continental U.S. deployments.

824th Quartermaster Company Fort Bragg, NC: 

Number of mobilized unit soldiers' pays audited: 68: 

Period of mobilization: February 2003 to September 2003: 

Principal deployment location: Kuwait and surrounding locations, 
Afghanistan, and Fort Bragg, NC: 

Deployment duties: Rigged parachutes for individual soldiers and large 
equipment drops.

Number of unit soldiers with at least one problem with active duty pay 
and allowance entitlements: 58 of 68: 

Unit Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 11 of 68.

Phase: Deployed; 
Number of soldiers with pay problems: 50 of 68.

Phase: Demobilization; 
Number of soldiers with pay problems: 13 of 68.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $60,000 (57): 

Late payments identified (number of soldiers affected): $3,000 (9): 

Underpayments identified (number of soldiers affected): $10,000 (49): 

Combat zone tax exclusion benefit problems identified: All 49 soldiers 
deployed overseas received their combat zone tax exclusion benefit at 
least 1 month late, totaling about $20,000. In addition, approximately 
$1,300 was over-withheld from 5 soldiers.

Examples of specific problems identified: 

* Nine soldiers were paid family separation allowance even though they 
remained at their home station and worked within their normal commuting 
distance of fewer than 50 miles. Another soldier did not receive his 
entitled family separation allowance, totaling $1,400, until the end of 
his active duty tour.

* Forty-nine soldiers were underpaid hardship duty pay: 

* Forty-seven soldiers continued to receive hardship duty pay payments 
for up to 5 months following their return home, totaling $30,000.

* Forty-four soldiers that were deployed overseas were overpaid hostile 
fire pay.

* One soldier who demobilized early due to a medical condition 
continued to receive active duty pay and entitlements until the end of 
January 2004 when we identified the error, resulting in an overpayment 
of about $18,000.

965th Dental Company Seagoville, Tex: 

Number of mobilized unit soldiers' pays audited: 93: 

Period of mobilization: February 2003 through July 2003: 

Principal deployment location: Camp Arifjan, Kuwait: 

Deployment duties: Provided emergency dental services: 

Number of unit soldiers with at least one problem with active duty pay 
and allowance entitlements: 89 of 93: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 25 of 93.

Phase: Deployed; 
Number of soldiers with pay problems: 86 of 93.

Phase: Demobilization; 
Number of soldiers with pay problems: 7 of 93.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $100,000 (86): 

Late payments identified (number of soldiers affected): $16,000 (86): 

Underpayments identified (number of soldiers affected): $27,000 (65): 

Combat zone tax exclusion benefit problems identified: 75 of the 85 
soldiers deployed overseas received their combat zone tax exclusion 
benefit 2 to 3 months late, totaling approximately $24,000. In 
addition, we identified $200 in over-withholdings and $300 in under-
withholdings.

Examples of specific problems identified: 

* Eighty-five soldiers were underpaid for hardship duty pay of $8,000: 

* Sixty-six soldiers received hardship duty pay totally $47,000 for at 
least 6 months after leaving Kuwait.

* One soldier received mobilization orders but did not report to the 
unit's mobilization station. Nonetheless, he received $36,000 of active 
duty pay for over 12 months. These overpayments continued until we 
discovered them during our audit.

* Another soldier received hostile fire pay, hardship duty pay, family 
separation allowance, and the combat zone tax exclusion benefits that 
he was no longer entitled to receive after he left his designated 
overseas deployment location early as a result of severe illness 
incurred during his active duty mobilization.

* One soldier received a duplicate basic allowance for housing 
allowance payment of $6,600.

948th Forward Surgical Team, Southfield, MI: 

Number of mobilized unit soldiers' pays audited: 20: 

Period of mobilization: January 2003 to September 2003: 

Principal deployment location: Kandahar, Afghanistan: 

Deployment duties: Provide emergency medical care to soldiers and 
civilians in the field: 

Number of unit soldiers with at least one problem with active duty pay 
and allowance entitlements: 20 of 20: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 5 of 20.

Phase: Deployed; 
Number of soldiers with pay problems: 20 of 20.

Phase: Demobilization; 
Number of soldiers with pay problems: 18 of 20.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $20,700 (20): 

Late payments identified (number of soldiers affected): $5,600 (20): 

Underpayments identified (number of soldiers affected): $2,000 (5): 

Combat zone tax exclusion benefit problems identified: All 20 unit 
soldiers deployed overseas received their combat zone tax exclusion 
benefits at least 1 month late, totaling $15,300. In addition, we 
identified $130 that was over-withheld.

Examples of specific problems identified: 

* After arriving in Afghanistan, (1) 19 soldiers waited 47 days to 
receive their initial hostile fire pay, (2) 19 soldiers received their 
February hardship duty pay in April, and (3) 20 soldiers waited 67 days 
before receiving their initial combat zone tax exclusion benefit.

* A sergeant spent 100 hours in late April 2003 attempting to resolve 
the unit's pay problems. Several soldiers were forced to borrow money 
to meet financial obligations.

* Nineteen soldiers continued to receive hardship duty pay for a period 
ranging from 1 to 5 months after leaving Afghanistan.

443rd Military Police Company, Owings Mills, MD: 

Number of mobilized unit soldiers' pays audited: 121: 

Period of mobilization: February 2003 to January 2004: 

Principal deployment location: Camp Cropper, Baghdad Airport, Iraq: 

Deployment duties: Guard Iraqi prisoners at Camp Cropper: 

Number of unit's soldiers with at least one problem with active duty 
pay and allowance entitlements: 119 of 121: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 70 of 121.

Phase: Deployed; 
Number of soldiers with pay problems: 114 of 121.

Phase: Demobilization; 
Number of soldiers with pay problems: 17 of 121.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $25,000 (48): 

Late payments identified (number of soldiers affected): $20,000 (110): 

Underpayments identified (number of soldiers affected): $15,000 (114): 

Combat zone tax exclusion benefit problems identified: One hundred 
twelve of the 114 unit soldiers deployed overseas received their combat 
zone tax exclusion benefits at least 1 month late, totaling an 
estimated $33,000. In addition, we identified $600 in under-withholding 
and $400 over-withholdings.

Examples of specific problems identified: 

* Bi-weekly trips to Kuwait were required for 5 months to address unit 
pay issues.

* One hundred thirteen soldiers did not receive their last month's 
hardship duty pay.

* Six unit soldiers were paid beyond their date of separation from the 
Army, including 1 soldier who was overpaid about $10,500.

FORSCOM Support Unit Finksburg, MD: 

Number of mobilized unit soldiers' pays audited: 1: 

Period of mobilization: March 2003 to May 2003: 

Principal deployment location: Camp Doha, Qatar: 

Deployment duties: Provided briefings to the Air Force's 379th 
Expeditionary Force on the status and positions of Army and other 
coalition ground forces: 

Number of unit soldiers with at least one problem with active duty pay 
and allowance entitlements: 1 of 1: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 0 of 1.

Phase: Deployed; 
Number of soldiers with pay problems: 1 of 1.

Phase: Demobilization; 
Number of soldiers with pay problems: 1 of 1.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $8,000 (1): 

Late payments identified (number of soldiers affected): $300 (1): 

Underpayments identified (number of soldiers affected): $0 (1): 

Combat zone tax exclusion benefit problems identified: This soldier 
received his combat zone tax exclusion benefit after he demobilized, an 
estimated $2,500 late.

Examples of specific problems identified: 

* Nearly a year of an estimated 20 phone calls, faxes, and letters to 
DFAS and Army customer service representatives at five locations were 
required to identify and resolve an overpayment of $8,000.

* Did not receive any hostile fire pay until after he demobilized.

* Soldier continued to receive active duty pays and allowances for a 
month after demobilizing.

629th Transportation Detachment Fort Eustis, VA: 

Number of mobilized unit soldiers' pays audited: 24: 

Period of mobilization: March 2003 to January 2004: 

Principal deployment location: Kuwait: 

Deployment duties: Tracking logistics supplies in and out of Kuwait: 

Number of unit soldiers with at least one problem with active duty pay 
and allowance entitlements: 24 of 24: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 5 of 24.

Phase: Deployed; 
Number of soldiers with pay problems: 24 of 24.

Phase: Demobilization; 
Number of soldiers with pay problems: 1 of 24.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $3,000 (24): 

Late payments identified (number of soldiers affected): $14,000 (23): 

Underpayments identified (number of soldiers affected): $2,000 (24): 

Combat zone tax exclusion benefit problems identified: While we did not 
attempt to quantify, nearly all soldiers deployed overseas received 
their combat zone tax exclusion benefit at least 1 month late.

Examples of specific problems identified: 

* Twenty-three of 24 soldiers deployed to Kuwait received duplicate 
payments of $75 for hostile fire pay during their initial month of 
deployment.

* Twenty-three of 24 soldiers were underpaid hardship duty pay for 1 to 
2 months during their overseas deployment.

3423rd Military Intelligence Detachment New Haven, CT: 

Number of mobilized unit soldiers' pays audited: 11: 

Period of mobilization: December 2002 to December 2003: 

Deployment location: Ft. Belvoir, Virginia: 

Deployment duties: Analyzed intelligence information for U.S. Army 
Intelligence and Security Command: 

Number of unit soldiers with one (or more) problems with pay and 
allowance entitlements associated with active duty mobilization: 11 of 
11: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 10 of 11.

Phase: Deployed; 
Number of soldiers with pay problems: 9 of 11.

Phase: Demobilization; 
Number of soldiers with pay problems: 9 of 11.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $18,500 (10): 

Late payments identified (number of soldiers affected): $5,000 (9): 

Underpayments identified (number of soldiers affected): $4,000 (6): 

Combat zone tax exclusion benefit problems identified: None, because 
the soldiers were not eligible for this benefit.

Examples of specific problems identified: 

* Nine soldiers erroneously began receiving the overseas cost of living 
allowance, rather than the continental U.S. cost of living allowance, 
at the beginning of the mobilization. This created $3,500 in 
overpayments and $700 in late payments for the unit.

* Nine soldiers continued to receive their active duty pays and 
entitlements for 13 to 28 days after demobilization, resulting in 
$14,000 in overpayments.

431st Chemical Detachment Johnstown, PA: 

Number of mobilized unit soldiers' pays audited: 10: 

Period of mobilization: January 2003 to July 2003: 

Principal deployment location: Kuwait and surrounding locations: 

Deployment duties: Monitor battlefields for sign of nuclear, 
biological, or chemical agents: 

Number of unit soldiers with at least one problem with active duty pay 
and allowance entitlements: 10 of 10: 

Pay and Allowance Problems Identified (by Phase): 

Phase: Mobilization; 
Number of soldiers with pay problems: 2 of 10.

Phase: Deployed; 
Number of soldiers with pay problems: 10 of 10.

Phase: Demobilization; 
Number of soldiers with pay problems: 0 of 10.

Source: GAO.

[End of table]

Overpayments identified (number of soldiers affected): $12,000 (10): 

Late payments identified (number of soldiers affected): $1,000 (8): 

Underpayments identified (number of soldiers affected): $2,000 (10): 

Combat zone tax exclusion benefit problems identified: While we were 
unable to quantify, nearly all soldiers deployed overseas received 
their combat zone tax exclusion benefit at least 1 month late.

Examples of specific problems identified: 

* While deployed to Kuwait, (1) 8 of 10 soldiers did not receive their 
first month's hostile fire pay and (2) all 10 soldiers did not receive 
hardship duty pay for the first month after arrival overseas.

* All 10 soldiers continued to receive hardship duty pay payments for 
up to 7 months following their return home, despite the unit 
administrator's attempts to get the pay stopped through the unit's 
chain of command. The unit administrator also accessed the pay hotline 
at 888-PAY-ARMY, but was placed on hold for such a long time that she 
gave up.

(192140): 

FOOTNOTES

[1] Other requestors for this audit were Chairman Tom Davis of the 
House Committee on Government Reform, Chairman Christopher Shays of the 
Subcommittee on National Security, Emerging Threats and International 
Relations of the House Committee on Government Reform, and Congressman 
Ed Schrock. 

[2] Because of the lack of supporting documents, we were unable to 
determine the amounts involved for some of the active duty entitlements 
we audited and consequently, did not count these as errors. In 
addition, because our objective was to provide perspective on our case 
study units' pay experiences and not to make exact calculations of 
active duty entitlements, we likely did not identify all of the pay 
problems related to the active duty mobilizations of our case study 
units. 

[3] For the pay problems we identified, we defined over-and 
underpayments as those pays or allowances for mobilized Army Reserve 
soldiers during the period from August 1, 2002 through January 31, 
2004, that were in excess (overpayment) or less than (underpayment) the 
entitled payment. We considered as late payments any active duty pays 
or allowances paid to the soldier over 30 days after the date on which 
the soldier was entitled to receive such pays or allowances. As such, 
these payments were those that, although late, addressed a previously 
unpaid entitlement. We did not include any erroneous debts associated 
with these payments as pay problems. In addition, we used available 
data to identify about $19,000 in collections against identified 
overpayments through February 2004. We did not attempt to estimate 
payments received against identified underpayments. We have provided 
documentation for the pay problems we identified to cognizant DOD 
officials for further research to determine whether additional amounts 
are owed to the government or the soldier.

[4] These reports provide summaries of pay-and personnel-related 
information on soldiers in the unit. 

[5] DOD's FMR defines within a reasonable commuting distance as within 
50 miles one way, unless the soldier is commuting daily. The FMR also 
permits the commander to authorize a soldier to receive FSA payments, 
even though the soldier's dependents live within 50 miles of the 
soldier's duty station, based on a determination that the required 
commute is not reasonable.

[6] For this unit, the unit administrator did not deploy with the unit. 
Consequently, the unit's pay management responsibilities were assigned 
to a finance sergeant deployed with the unit.

[7] U.S. General Accounting Office, Military Pay: Army National Guard 
Personnel Mobilized to Active Duty Experienced Significant Pay 
Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003).

[8] 26 U.S.C. Section 112.

[9] GAO-04-89

[10] The law makes a distinction between the terms "pays" and 
"allowances" which together make up a service member's overall 
compensation package. Generally, the term pay includes basic pay, 
special pay, retainer pay, incentive pay, retired pay, and equivalent 
pay, but does not include allowances. 37 U.S.C. Section 101(21). DOD 
defines allowance as "a monetary amount paid to an individual in lieu 
of furnished quarters, subsistence, or the like." DOD Financial 
Management Regulation, vol. 7A, Definitions, para. 15 (February 2001). 
While generally items considered as "pay" are taxable for federal 
income tax purposes, except for the cost of living allowance for the 
continental United States, most allowances, such as those for housing, 
subsistence, and family separation, are not. 

[11] Transactions to initiate and terminate pays for all mobilized Army 
Reserve soldiers entitled to receive special medical and dental pay 
entitlements are entered and processed centrally at DFAS-IN.