DoD: Process Improvements Needed in Recouping Overpayments to Service Members

GAO-19-61: Published: Feb 15, 2019.
   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.
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.
   We made 5 recommendations to help ensure DOD's debt collection regulations, policies, and procedures are clear and carried out consistently.
Recommendations for Executive Action
1) 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.
2) 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.
3) 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.
4) 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.
5) 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.
Additional Materials:
Highlights Page: (PDF, 1 page) https://www.gao.gov/assets/700/696927.pdf
Full Report: (PDF, 63 pages) https://www.gao.gov/assets/700/696928.pdf