Department of Defense--Obligation of Bonuses under Military Service Agreements
B-325526: Jul 16, 2014
- Full Report:
DOD offers recruiting and retention bonuses to prospective and current servicemembers. DOD offers these bonuses in a written agreement and in exchange for a term of military service. DOD generally pays an initial bonus installment to the individual and then pays subsequent installments on an annual basis.
We conclude that DOD incurs an obligation for the full bonus amount when it enters into the agreement. DOD has taken an action that can mature into a legal liability if the servicemember satisfies his or her time commitment. In our view, because DOD cedes control of its fiscal exposure to the servicemember, DOD incurs an obligation for the entire bonus amount when it enters into the agreement. DOD should charge the obligation to an appropriation current at the time of the agreement.
DOD currently records an obligation on an outlay basis, that is, at the time it pays each bonus installment. DOD should change its obligational practices and update its financial management regulations.