Military Personnel:

More DOD Actions Needed to Address Servicemembers' Personal Financial Management Issues

GAO-05-348: Published: Apr 26, 2005. Publicly Released: May 26, 2005.

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Congress and the Department of Defense (DOD) are concerned about the financial conditions of servicemembers and their families, particularly in light of recent deployments to Iraq and Afghanistan. Serious financial issues can negatively affect unit readiness. According to DOD, servicemembers with severe financial problems risk losing security clearances, incurring administrative or criminal penalties or, in some cases, face discharge. Despite increases in compensation and DOD programs on personal financial management (PFM), studies show that servicemembers, particularly junior enlisted personnel, continue to report financial difficulties. GAO assessed (1) the extent deployment impacts the financial condition of active duty servicemembers and their families, (2) whether DOD has an oversight framework for evaluating military programs designed to assist deployed and non-deployed servicemembers in managing their finances, and (3) the extent junior enlisted servicemembers receive required PFM training.

The financial conditions of deployed and non-deployed servicemembers and their families are similar, but deployed servicemembers and their families may face additional financial problems related to pay. In both a 2003 DOD-wide survey and non-generalizable focus groups that GAO conducted on 13 military installations in the United States and Germany, servicemembers who were deployed reported similar financial conditions as those who were not deployed. Some of GAO's focus group participants also noted that they--like Army Reservists in GAO's 2004 report, Military Pay: Army Reserve Soldiers Mobilized to Active Duty Experienced Significant Pay Problems--had not received their $250 family separation allowance each month during their deployment. Pay record data showed that almost 6,000 deployed servicemembers had received more than the prescribed $250 in January 2005, and 11 of them received a $3,000 catch-up, lump sum payment--the equivalent of 12 months of the allowance. This pay problem was due, in part, to service procedures being confusing and not always followed. Families who do not receive this allowance each month may experience financial strain caused by additional expenses such as extra childcare. DOD lacks an oversight framework--with results-oriented performance measures and reporting requirements--for evaluating the effectiveness of PFM programs across the services. DOD's 2002 human capital strategic plan stated that a standardized evaluation system for PFM programs is a desired goal; however, DOD does not currently have such a system. In 2003, GAO reported that DOD had included evaluative reporting measures in a draft of its PFM instruction to the services. However, the final PFM instruction issued by DOD in 2004 did not address outcome measures or contain a requirement that the services report program results to DOD because the services objected to these additional reporting requirements. Without a policy requiring evaluation and a reporting relationship between DOD and the services, DOD and Congress do not have the visibility or oversight needed to address issues related to the PFM programs. Some junior enlisted servicemembers are not receiving PFM training that is required in service regulations. While each of the services implements PFM training differently, all of the services have policies requiring that PFM training be provided to junior enlisted servicemembers. Moreover, the extent to which the PFM training is not received is unknown because most of the services do not track the completion of PFM training at the service level. Only the Army collected installation-level data and could provide a service-wide estimate of PFM training completed by junior enlisted servicemembers. Senior Army officers said PFM training had not been a priority given the need to prepare for current operations. Top-level DOD officials have repeatedly stated that financial issues directly affect servicemembers' mission readiness and should be addressed. Therefore, units whose servicemembers do not receive required PFM training risk jeopardizing their ability to meet mission requirements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The military pay operations notified field activities to emphasize the importance of timely input of family separation allowance documents. The notification also explained that the field activities should input the family separation allowance transaction immediately upon receipt so that the allowance is started within 30 days of deployment if it is certain the member would be on temporary duty for more than 30 days.

    Recommendation: To address issues related to servicemembers' financial management, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to take the necessary steps, in conjunction with the Defense Finance and Accounting Service and the services, to ensure servicemembers receive family separation allowances on a monthly basis during deployments. These steps might include those recommended in our prior review of Army Reserve pay, such as clarifying and simplifying procedures and forms implementing family separation allowance entitlements or having DOD and the operational components of the services work together to ensure family separation allowance entitlement eligibility form is received by the Defense Finance and Accounting Service to start the allowance when the servicemember is entitled to it.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD indicated that the recommendation is closed. In commenting on this recommendation, DOD noted that "Although the report cites the Servicemembers would like additional opportunities to communicate with creditors through increased internet and toll-free phone access, the decision to provide additional communication capability must be retained by the field commander. In all situations additional communication capability, particularly with creditors, may not be appropriate due to operational requirements. By policy, Service members are to establish an extended absence plan for their personal finances to ensure their obligations will be adequately covered. Additionally, the Service Member Relief Act (SCRA) was established to allow Service members in training and on a deployment, the opportunity to set aside personal financial concerns to focus on the mission at hand. And finally, in situations where unforeseen issues arise that were not covered in the Service member's plan, or covered by the SCRA, deployed units maintain a rear echelon to work these types of issues for deployed Service members. Communication is an important morale factor for troops in the field, but should not be considered as an essential for Service members to maintain their financial wellbeing while in deployed situations."

    Recommendation: To address issues related to servicemembers' financial management, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to identify and implement, with the services, steps that can be taken to allow deployed servicemembers better communications with creditors. These steps may include increasing Internet access and providing tollfree telephone access for deployed servicemembers when they need to address personal financial issues.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: 9/15/09: DOD indicated that the recommendation would be closed. After numerous followup, the point of contact continuously provided information from OUSD(P&R), which was not applicable to the recommendation. For example, the information covered servicemember's enrollments in Thrift Savings and not DOD's oversight role.

    Recommendation: To address issues related to servicemembers' financial management, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to develop and implement, in conjunction with the services, a DOD-wide oversight framework with a results-oriented evaluation plan for the PFM programs and formalize DOD's oversight role by including evaluation and reporting requirements in the PFM instruction.

    Agency Affected: Department of Defense

  4. Status: Closed - Not Implemented

    Comments: DOD indicated that the recommendation is closed. In describing its planned actions, DOD noted "USD (P&R) has established policy and sufficient procedures within DODI 1342.17 to allow the Military Departments to accomplish their responsibilities. The policy and procedures have been written to provide the Military Services flexibility in their approach to having Service members 'demonstrate a basic understanding' of important personal financial topics. The Military Departments are delegated responsibility for achieving the requirements listed in the Instruction and it is their responsibility to monitor fulfillment of the policy. The Department will continue to monitor the behavior of Service members as the outcome of the training and evaluation accomplished by the Military Services." Those policies were in effect when GAO prepared its report and noted problems with the monitoring of training completion.

    Recommendation: To address issues related to servicemembers' financial management, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to require the services to develop and implement a tactical plan with timebased milestones to show how the appropriate service policy office will monitor financial management training and thereby ensure that junior enlisted servicemembers receive the required training.

    Agency Affected: Department of Defense


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