Department of Defense:

Process Improvements Needed in Recouping Overpayments to Service Members

GAO-19-61: Published: Feb 15, 2019. Publicly Released: Feb 15, 2019.

Additional Materials:

Contact:

Alicia Puente Cackley
(202) 512-8678
CackleyA@gao.gov

 

Asif A. Khan
(202) 512-9869
KhanA@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Department of Defense sometimes makes errors and overpays service members. DOD has acknowledged that its collections for overpayments have placed an undue burden on service members and, at times, damaged credit scores and led to garnished wages.

DOD has streamlined its debt collection regulation but key parts of it were incomplete and unclear—and the services didn’t consistently follow it. For example, some service members were not properly notified of their debt or the right to dispute it.

We made 5 recommendations to help ensure DOD's debt collection regulations, policies, and procedures are clear and carried out consistently.

 

An aerial photo of the Pentagon

An aerial photo of the Pentagon

Additional Materials:

Contact:

Alicia Puente Cackley
(202) 512-8678
CackleyA@gao.gov

 

Asif A. Khan
(202) 512-9869
KhanA@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Key aspects of the Department of Defense's (DOD) Debt Collection Regulation—which includes rules for recoupment of service member overpayments—are incomplete or unclear. For example, the regulation requires that certain pieces of information be included in the letter notifying service members of DOD-related debts. However, we found that the letter's template in the Debt Collection Regulation is missing two of the required pieces of information, including that any portion of a debt remaining at the time of separation may be collected from the service member's final pay and allowances. Additionally, the regulation does not clearly state whether or when to suspend collection actions during the review process for service members formally disputing their debt. As a result, the military services (Army, Navy, Air Force, and Marine Corps) and the Defense Finance and Accounting Service (DFAS)—which carry out the regulation—do not have clear direction when administering debt collection activities, which has led to inconsistent application. Further, service members may not be fully informed of the rights and protections to which they are entitled.

GAO also found that the military services' debt collection policies and procedures do not consistently follow the DOD Debt Collection Regulation. Specifically, debt notification letters that GAO reviewed did not consistently include all 18 pieces of information required by the DOD Debt Collection Regulation. For example, letters did not explain service members' right to a written decision of a review or their right to inspect and copy records related to the debt. Further, the military services' policies and procedures often were not current, complete, or clear. As a result, some service members may not have been properly notified of their debt, their rights to dispute it, or the potential consequences of inaction, such as involuntary payroll deduction. Unless the military services and DFAS fully incorporate the DOD Debt Collection Regulation into their respective policies and procedures, service members will likely continue to receive inaccurate and incomplete information about their debts and related rights and protections.

Elements of Department of Defense (DOD) Debt Collection Process for Service Members and DOD Civilian Employees

Elements of Department of Defense (DOD) Debt Collection Process for Service Members and DOD Civilian Employees

Why GAO Did This Study

DOD sometimes overpays service members due to errors in administrative processing of pay and allowances, and calculating pay and leave. Nearly 400 Debt Collection Offices in DOD are responsible for the recovery and collection of debts (see figure for basic elements of the debt collection process). DOD has acknowledged that collection actions related to overpayments have placed undue burden on service members and their families, such as financial hardship, garnished wages, and damaged credit scores.

House Report 115-200 accompanying the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to study DOD's process for recoupment of service member overpayments. This report evaluates the extent to which (1) the DOD Debt Collection Regulation is clear, and (2) military services' and DFAS policies and procedures follow DOD Debt Collection Regulation. GAO reviewed DOD regulations on debt collection, interviewed DOD officials, and examined non-generalizable samples of debt notification letters sent to serving and separated service members between January 2016 and May 2018.

What GAO Recommends

GAO is making five recommendations to DOD to help ensure its debt collection regulations, policies, and procedures are clear and carried out consistently. DOD concurred with all of the recommendations.

For more information, contact Alicia Puente Cackley at (202) 512-8678 or CackleyA@gao.gov or Asif A. Khan at (202) 512-9869 or KhanA@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Under Secretary of Defense (Comptroller) should revise the service member debt notification letter template to include all of the information required by DOD Financial Management Regulation Volume 16. (Recommendation 1)

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Under Secretary of Defense (Comptroller), in coordination with DFAS, should revise DOD Financial Management Regulation Volume 16 and the DFAS website to clearly state whether and when collection action should be suspended during the review process for service members who dispute their debt. (Recommendation 2)

    Agency Affected: Department of Defense

  3. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Under Secretary of Defense (Comptroller) should ensure that cross-references within each chapter related to debt collection functions in the FMR are current, relevant, and updated in a timely fashion. (Recommendation 3)

    Agency Affected: Department of Defense

  4. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should direct the Secretaries and Commandant of the military services, and the Director of DFAS where these responsibilities are shared, to review and update outdated debt collection procedures; update service level debt notification letter templates; and clarify debt and due process procedures applicable to the recoupment of DOD overpayment debts from service members for consistency with DOD Financial Management Regulation Volume 16 and other applicable areas of the Financial Management Regulation. (Recommendation 4)

    Agency Affected: Department of Defense

  5. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should direct the Secretaries and Commandant of the military services, and the Director of DFAS, to ensure that all of the information required by DOD Financial Management Regulation Volume 16 is included in debt notification letters sent to service members. (Recommendation 5)

    Agency Affected: Department of Defense

 

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