Military Personnel: DOD Should Improve Processes for Determining Cost-of-Living Allowances
Fast Facts
The Department of Defense assigns military personnel to over 3,500 different locations worldwide. The costs associated with living in these locations vary widely.
DOD pays cost-of-living allowances (COLA) to help military personnel with food, transportation, and other costs in some expensive locations. To calculate COLAs, DOD uses:
Data on military household spending
Location-specific surveys of shopping patterns
Price data for goods and services that military personnel buy
We found ways for DOD to improve how it collects this data, communicates about COLAs to service members, and more.
Our recommendations address these issues.
Military dog tags on a chain laying on top of U.S. currency.
Highlights
What GAO Found
The Department of Defense (DOD) uses three key processes to determine service member cost-of-living allowances (COLA), with separate programs for service members living in the continental U.S. (CONUS) and outside the continental U.S. (OCONUS). These processes include data on military household spending from the Department of Labor’s Bureau of Labor Statistics, location-specific surveys of shopping patterns, and retail price data for the goods and services that service members typically buy. DOD uses these processes to develop comparative prices for locations where it stations service members. DOD uses average CONUS prices as a baseline for determining eligibility for COLA. Using these processes, DOD determines a COLA rate for each eligible location. Payments to service members in these locations vary based on their spendable income and number of dependents. The department also tracks foreign currency fluctuations relative to the dollar to help determine COLA payments in OCONUS locations.
DOD’s Process for Determining COLA Rates, Calendar Year 2024
DOD’s processes for determining COLA rates CONUS and OCONUS have several weaknesses. Additionally, information about COLA rates can be better communicated to service members. Specifically:
- DOD’s survey for determining service members’ shopping patterns does not use sound sampling practices.
- DOD does not consistently use existing processes to capture location-specific expenses.
- DOD has inconsistent processes for determining dependent-based COLA compensation in CONUS and OCONUS.
- DOD posts information about COLA on a publicly available website, but there are inconsistencies in the amount and type of information local commands provide to service members at locations that receive COLA. Further, some service members told GAO that they did not understand their COLA payments.
Taking action to address these issues will help ensure service members are appropriately compensated, which will support their quality of life and their ability to meet mission needs.
Why GAO Did This Study
DOD assigns its 1.4 million active-duty service members to over 3,500 locations worldwide. DOD provides a COLA to assist service members with nonhousing expenses, such as food, in high cost areas.
The conference report accompanying the National Defense Authorization Act for Fiscal Year 2024 includes a provision for GAO to examine DOD’s COLA programs. This report (1) describes the processes DOD uses to determine COLA and payments for service members; and (2) examines the extent to which DOD’s COLA processes are appropriately designed and communicated.
GAO analyzed laws, regulations, policies, and COLA rates. GAO interviewed officials responsible for the COLA program and held discussion groups with service members in five locations in Hawaii, Japan, Alaska, Germany, and Virginia. Most of the site visits GAO held were at OCONUS locations because 97 percent of the COLA payments are OCONUS.
Recommendations
GAO recommends that DOD (1) use random sampling to survey service members on shopping patterns, (2) consistently apply its process for location-specific expenses, (3) consider aligning its CONUS and OCONUS dependent-based compensation, and (4) require local commands to provide information about COLA to service members. DOD concurred with the second and third recommendations, and partially concurred with the fourth recommendation. DOD non-concurred with the first recommendation, stating that its current method enhances survey participation. GAO’s recommendation remains valid as DOD’s current process does not produce statistically representative results.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to ensure that the department uses random sampling for the LPS. (Recommendation 1) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to implement changes in the COLA process for OCONUS, such as using the LPS to consistently identify location-specific expenses and determine whether such expenses should be reimbursed, in accordance with DOD policy. (Recommendation 2) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of Defense | The Secretary of Defense should require the Under Secretary of Defense for Personnel and Readiness to review and determine whether CONUS COLA dependent-based compensation should be adjusted to reflect changes in spendable income for up to five dependents, as the department does with OCONUS COLA. (Recommendation 3) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to develop guidance requiring local commands to provide information about the COLA programs to service members at locations that receive COLA. Such information should include the website where DOD provides information on the COLA programs and the contact information of an office that can answer questions about COLA. (Recommendation 4) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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