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Military Compensation: Additional Actions Are Needed to Better Manage Special and Incentive Pay Programs

GAO-17-39 Published: Feb 03, 2017. Publicly Released: Feb 03, 2017.
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Highlights

What GAO Found

The Department of Defense's (DOD) special and incentive (S&I) pay obligations for active duty servicemembers decreased from fiscal years 2005 through 2015 from $5.8 billion to $3.4 billion (about 42 percent) in constant 2015 dollars (see fig.). DOD officials attributed the decrease to a combination of reduced overseas contingency operations, a reduced annual average strength of the force, and a favorable recruiting climate. DOD does not collect and report complete S&I obligation data for the reserve components because, according to officials, there is no requirement to do so and the services would likely need to make changes to their financial and personnel systems to separately track the obligations. However, according to officials, DOD has not explored cost-effective approaches to collect and report this information, which would better position the department to know the full cost of its S&I pay programs.

Active Duty Personnel Special and Incentive Pay Program Obligations and Total Active Duty Average Strengths, Fiscal Years 2005 - 2015

Active Duty Personnel Special and Incentive Pay Program Obligations and Total Active Duty Average Strengths, Fiscal Years 2005 - 2015

The military services largely applied key principles of effective human capital management in the design of their S&I pay programs for nuclear propulsion, aviation, and cybersecurity occupations. However, the application of these key principles varied by service and occupation. Only the Navy's S&I pay programs for nuclear propulsion and aviation fully addressed all seven principles; programs for other occupations and services generally exhibited a mixture of full and partial application. GAO found that, according to officials, DOD and the services had not taken steps to fully ensure consistent application of the principles. For example, DOD has not reviewed the extent to which its S&I pay programs have incorporated principles of effective human capital management and used resources efficiently. DOD also has not established related measures to ensure efficient use of resources. Without such measures, DOD and the services generally assess the effectiveness of S&I pay programs by the extent to which they achieve desired staffing targets. However, this approach does not ensure that S&I pay programs are using resources in the most efficient manner, as DOD guidance requires. Until DOD reviews the extent to which S&I pay programs have incorporated human capital management principles and used resources efficiently—and develops related measures for efficient use of resources—DOD and the services may lack assurance that S&I pay programs are effective and that resources are optimized for the greatest return on investment.

Why GAO Did This Study

DOD uses S&I pay programs to compensate and incentivize servicemembers for occupations that are dangerous, less desirable, or require special skills. Senate Report 114-49 included a provision for GAO to review the effectiveness of DOD's S&I pay programs. This report assesses (1) trends in DOD obligations for S&I pay programs for fiscal years 2005 through 2015 and the extent to which DOD reports such obligations department-wide; and (2) the extent to which the military services applied key principles of effective human capital management in the design of S&I pay programs for selected high-skill occupations for fiscal years 2010 through 2015.

GAO analyzed DOD S&I pay obligations for fiscal years 2005 through 2015; reviewed a nongeneralizable sample of S&I pay programs for nuclear propulsion, aviation, and cybersecurity occupations, chosen based on their pay programs' attributes; compared DOD and service policies and documents with key principles of effective human capital management; and interviewed DOD officials.

Recommendations

GAO is making five recommendations, including that DOD explore reporting reserve S&I pay program data, review the incorporation of human capital management principles and use of resources, and develop related measures. DOD concurred with three recommendations and partially concurred with two. GAO continues to believe that actions to fully address these two recommendations are needed, as discussed in the report.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To facilitate DOD's oversight of the military services' S&I pay programs, and to fully ensure the effectiveness of these programs, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in coordination with the military services, to explore cost-effective approaches to collect and report S&I pay program data for the Reserve Components.
Open
DOD concurred with this recommendation. In its initial response, DOD noted that it will maintain its focus on the recruiting and retention pays for both the active and reserve components, and will continue to work with the Reserve Components to strengthen the collection of the remaining special and incentive pays. In October 2020, DOD stated that the DOD Comptroller was working with the reserve components to strengthen the collection of special and incentive pays. The DOD update added that new pay and personnel systems are under development for the Army, the Navy, and the Air Force. DOD stated that these systems, once deployed, will provide the reserve components with the ability to collect and report special and incentive program data. DOD estimated the deployment of these systems would be completed by January 2025. In April 2023, DOD updated this estimated completion date to January 2027. In February 2024, DOD updated this estimated completion date to January 2028. As of May 20, 2024 DOD has not provided additional information on the status of this recommendation. We will continue to monitor DOD's progress towards implementation of this recommendation.
Department of Defense To facilitate DOD's oversight of the military services' S&I pay programs, and to fully ensure the effectiveness of these programs, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness, in coordination with the military services, to review whether S&I pay programs have incorporated key principles of effective human capital management and used resources efficiently, and prioritize and complete the establishment of measures for the efficient use of resources.
Open
DOD partially concurred with this recommendation. In DOD's initial response, it stated that DOD does use key principles of effective human capital management, and although not articulated as GAO's principles, DOD's and GAO's principles share common goals and results. In addition, DOD stated that it will support the opportunity to review and improve upon the principles and methods to assess the efficiency of its S&I pay programs, and, where appropriate, will incorporate these principles in future DOD policy issuances and updates. In May 2018, DOD stated that it believed it was in compliance with this recommendation and that the action was complete. DOD stated that this assessment was based on our finding that most of the Department's S&I pay programs either met or partially met the key principles of effective human capital management. But our finding was on select pay programs. Further, DOD's response did not document what actions the Department has taken to ensure all programs fully meet the key principles. In April 2021, DOD stated that it had not taken action on this recommendation and reiterated that it did not plan to do so. On August 16, 2023, DOD stated that its position is the department has adopted or incorporated these recommendations and continue to do so today and, therefore, believes these recommendations have been satisfied. As of May 21, 2024 DOD reiterated that it believes no further action is needed to implement this recommendation. We continue to believe that fully implementing the key principles of effective human capital management that we identified would help DOD and the services to ensure that S&I pay programs are effectively designed and that resources are optimized for the greatest return on investment.
Department of Defense To facilitate DOD's oversight of the military services' S&I pay programs, and to fully ensure the effectiveness of these programs, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness, in coordination with the military services, to routinely assess the impact of non-monetary incentive approaches on retention behavior and on the necessary levels of S&I pays.
Open – Partially Addressed
DOD concurred with this recommendation. As of August 2017, DOD had submitted a proposal to conduct a study focused on aviation officers that will examine the military services' methodologies used to accomplish their retention goals to determine the primary reasons aviation officers remain or leave the service and the degree to which these reasons affect their retention decisions. According to DOD officials, a portion of the study will consider the interaction between monetary and non-monetary incentives such as duty assignments, flying opportunities, reduced administrative burdens, and quality of life. In May 2018, DOD stated that the Military Departments continue to utilize non-monetary incentives as their first approach to access and retain quality servicemembers. DOD added that these incentives consist of choice of career path, duty assignment, selective military training, educational benefits, as well as the career intermission program. DOD noted that the Army's Career Satisfaction Program is just one example of using non-monetary pay incentives to improve retention. According to DOD, this program increases the retention of Army officers at no additional cost to the Army by offering academy cadets and senior ROTC cadets the choice of occupational specialty and assignment location upon commissioning in exchange for extending their active duty service obligation for an additional 3 years. DOD also stated that the Navy currently uses both monetary and non-monetary incentives to retain its surface warfare officer (SWO) community to ensure it retains adequate numbers of officers to fill critical SWO Department Head positions in the rank of Lieutenant and Lieutenant Commander. The Department concluded that it believes the recommendation is closed, as it has offered and continues to offer non-monetary incentives as part of its S&l pay program, and continues to encourage the use of non-monetary incentives as an alternative to cash incentives. In April 2021, DOD stated that it had not taken additional action on this recommendation and reiterated that it did not plan to do so. On August 16, 2023, DOD stated that its position is the department has adopted or incorporated these recommendations and continue to do so today and, therefore, believes these recommendations have been satisfied. As of May 21, 2024 DOD reiterated that it believes no further action is needed to implement this recommendation. While the programs DOD mentioned in its response demonstrate progress toward fully implementing our recommendation, we believe that this recommendation should remain open until more progress is made. We continue to believe that an assessment of the effectiveness of non-monetary incentives to retain personnel would help ensure that DOD's approaches are using the most efficient and effective combination of incentives for achieving retention objectives at the lowest possible cost.
Department of Defense To facilitate DOD's oversight of the military services' S&I pay programs, and to fully ensure the effectiveness of these programs, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness, in coordination with the military services, to clarify existing guidance for S&I pay programs regarding the extent to which personnel performance should be incorporated into retention decisions.
Closed – Implemented
DOD concurred with this recommendation. In August 2018 DOD stated that the Department now allows the military services to recognize individual performance as one of several criteria by varying the dollar amount of retention bonuses offered to a member, with high performers being offered more and lower performers being offered less. As this action meets the intent of our recommendation, we consider this recommendation to be implemented.
Department of Defense To facilitate DOD's oversight of the military services' S&I pay programs, and to fully ensure the effectiveness of these programs, the Secretary of Defense should direct the Secretaries of the Military Departments to develop approaches to directly target Selective Reenlistment Bonuses to cybersecurity skill sets.
Closed – Implemented
DOD partially concurred with this recommendation. Since the issuance of GAO-17-39 in February 2017, the military services have created specific enlisted cyber career fields and cyber skill codes, which should allow for the military services to more accurately target Selective Reenlistment Bonuses. For example, in 2018, the Marine Corps established the 17XX Cyberspace Operations Occupational Field, which comprises all personnel with advanced cyber skill sets and training. Starting in fiscal year 2019, the Marine Corps offered the Selected Reenlistment Bonus to these cyber personnel. Similarly, the Air Force transitioned all cyber-support enlisted personnel from 3DXXX to 1D7XX career fields as of November 2021. The Air Force offered the Selected Reenlistment Bonus to certain 1D7XX career fields in April 2022. While the Army and Navy have not created new enlisted cyber career fields since our February 2017 report, they have expanded their targeting of specific cyber skills when offering the Selective Reenlistment Bonus. Additionally, the military services have moved some cybersecurity personnel out of the intelligence and signals career fields and into the appropriate cyber career fields to better align personnel with the jobs they execute. As these action meet the intent of our recommendation, we consider this recommendation to be implemented.

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Defense capabilitiesEmployee incentivesHuman capital managementInternal controlsMilitary compensationMilitary forcesMilitary payMilitary personnelIncentivesCybersecurity