Military Personnel:

Actions Needed to Strengthen Management of Imminent Danger Pay and Combat Zone Tax Relief Benefits

GAO-06-1011: Published: Sep 28, 2006. Publicly Released: Sep 28, 2006.

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Servicemembers who are assigned, deployed, or travel on temporary duty to certain foreign areas are eligible for special pays and benefits including (1) imminent danger pay (IDP) when the Department of Defense (DOD) determines that members are subject to the threat of physical harm or imminent danger and (2) combat zone tax relief (CZTR) benefits, which allow members to exclude earned income from federal taxes. If travel to IDP- or CZTR-designated areas begins during one month and concludes during another (known as cross-month travel), members could receive 2 full months of benefits. GAO conducted this review under the Comptroller General's authority to initiate such reviews. GAO evaluated DOD's (1) process for reviewing IDP areas and (2) internal controls over servicemembers' temporary duty travel to areas designated for IDP and CZTR benefits. GAO is also providing information on the reporting of IDP and CZTR data. GAO analyzed legislation, guidance, travel vouchers, and internal control standards and interviewed appropriate officials.

DOD's processes for reviewing existing IDP areas could be improved. While combatant commanders have taken the initiative periodically to make recommendations to designate or terminate IDP areas, DOD has not conducted annual reviews of existing IDP designations in accordance with its guidance to ensure that conditions in these areas continue to warrant such designation. Also, DOD has not updated its guidance to reflect current responsibilities for initiating annual reviews or to include factors used to determine when conditions in foreign areas pose the threat of physical harm or imminent danger to servicemembers on duty in these locations. DOD conducted 6 annual reviews between 1992 and 2006. When conducting reviews, DOD has queried combatant commanders using a set of factors to determine the nature of threats to servicemembers. However, DOD has not incorporated these factors into its guidance. By conducting annual reviews in accordance with its guidance, DOD could strengthen its oversight of IDP designations to ensure that conditions in designated areas continue to pose the threat of physical harm or imminent danger to servicemembers and that these areas should continue to be designated. Internal controls over servicemembers' temporary duty travel to areas designated for IDP or CZTR benefits need to be strengthened. While two DOD components have instituted policies to regulate and monitor cross-month travel to these areas, there is no similar departmentwide policy to ensure that travel to areas designated for IDP or CZTR benefits needs to cross calendar months. Data limitations prevented GAO from determining the full extent of temporary duty travel to areas designated for IDP and CZTR benefits, as well as how much of this travel crosses calendar months. The U.S. Central Command and U.S. Army, Europe--which collectively account for 62 percent of IDP areas and 86 percent of CZTR benefit areas--have developed policies and controls to monitor and regulate cross-month travel to areas designated for IDP and CZTR benefits to preclude, in their view, the appearance of abuse of these benefits. By establishing internal controls such as a departmentwide policy and periodic audits to monitor cross-month travel, DOD could ensure all areas are covered and further strengthen its management of IDP and CZTR benefits. DOD tracks IDP costs and servicemembers' compensation that qualifies for CZTR benefits. While DOD reports the cost of IDP to Congress as part of its budget request, the department does not report servicemembers' compensation that qualifies for CZTR benefits. Combat zone tax relief benefits could allow servicemembers to exclude a significant portion of their income from federal taxes. Reporting data on CZTR benefits to Congress could provide information on the extent of this benefit and aid Congress in its oversight role.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matter for Congressional Consideration

    Matter: In light of the substantial tax benefits that servicemembers receive when performing duty in combat zones, Congress may wish to consider requiring DOD to periodically report the amount of servicemembers' total compensation that qualifies for combat zone tax relief benefits to Congress.

    Status: Closed - Not Implemented

    Comments: This matter has not been considered by Congress.

    Recommendations for Executive Action

    Recommendation: To strengthen DOD's internal controls and management of imminent danger pay and to monitor cross-month travel, the Secretary of Defense should direct the Under Secretary of Defense (Personnel and Readiness) to establish departmentwide policies and internal controls that include periodic audits to monitor cross-month travel to ensure that the travel needs to cross calendar months.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: DOD did not concur with this recommendation. DOD believes that these actions would add unnecessary bureaucracy and cost to DOD's travel system. Further, DOD commented that existing DOD travel procedures require thorough review and management of the necessity and cost-effectiveness of travel by DOD personnel. The Joint Travel Regulations and the Joint Federal Travel Regulations already include requirements to authorize only travel that is necessary to accomplish the mission and when the mission cannot be met by other means. DODD 4500.54, "Official Temporary Duty Travel Abroad," adds additional requirements to ensure that foreign travel is even more closely scrutinized by adding country and/or theater clearance requirements. These existing requirements already adequately control and monitor cross-month travel.

    Recommendation: To strengthen DOD's internal controls and management of imminent danger pay and to monitor cross-month travel, the Secretary of Defense should direct the Under Secretary of Defense (Personnel and Readiness) to request the designated organizations to conduct reviews of areas designated for imminent danger pay in accordance with DOD's guidance, and, if necessary, update its guidance to reflect the appropriate time period for conducting these reviews.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In April 2007, DOD completed a review of areas designated for imminent danger pay. As a result of the review DOD designated one new area and terminated the imminent danger pay area designation for 6 areas including (1) Bosnia-Herzegovina, (2)Croatia, (3)Macedonia, (4) Georgia, (5)Angola, and (6)Sierra Leone. Public Laws 104-117 and 106-21 designated Bosnia-Herzegovina, Croatia, and Macedonia as qualified hazardous duty areas. While serving in these areas, servicemembers are entitled to exclude most, if not all, of the pay they earn from federal taxation. However, this tax exclusion only applies if the servicemember is also entitled to imminent danger pay or hostile fire pay when serving in the area. Therefore, effective November 1, 2007, servicemembers in Bosnia-Herzegovina, Croatia, and Macedonia will no longer be entitled to exclude income earned in these areas from federal income taxation. Servicemembers serving in Serbia and Montenegro will continue to qualify for tax exclusion because Executive Order 13119 separately designated Serbia and Montenegro as combat zones.

    Recommendation: To strengthen DOD's internal controls and management of imminent danger pay and to monitor cross-month travel, the Secretary of Defense should direct the Under Secretary of Defense (Personnel and Readiness) to update DOD's imminent danger pay guidance to (1) reflect the office responsible for reviewing and designating imminent danger pay areas and (2) incorporate factors that clearly define what constitutes the presence of imminent threat or dangers to servicemembers on duty in foreign areas.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD has an informal process for designating and reviewing imminent danger pay. This informal process is contained in draft DOD Instruction 1340.9, "Special Pay for Duty Subject to Hostile Fire or Imminent Danger Pay," and provides guidance as to what factors are considered in designating and reviewing imminent danger pay area designations. DOD concurred that the informal policy should be updated to reflect the office currently responsible for the review and to provide additional clarification and guidance as to what factors are considered in determining whether imminent danger pay is warranted. As of April 2010, DOD has updated and issued DODI 1340.09.

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