Military Personnel:

Better Debt Management Procedures and Resolution of Stipend Recoupment Issues Are Needed for Improved Collection of Medical Education Debts

GAO-08-612R: Published: Apr 1, 2008. Publicly Released: Apr 1, 2008.

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Military physicians and other health care professionals are needed to support operational forces during war or other military conflicts and to maintain the well-being of the forces during nonoperational periods. These professionals also provide health care services to military retirees and dependents. The Department of Defense (DOD) acquires its health care professionals primarily through two programs--the Armed Forces Health Professions Scholarship Program and the Financial Assistance Program--with which it recruits and trains military health care providers who fill medical specialty positions. These programs offer participants reimbursement for tuition, books, fees, other education expenses, and a stipend, which is a fixed amount of money given to the participants on a monthly basis, in return for an active duty service obligation. Recruiting and retaining highly qualified health care professionals, however, is becoming more challenging for each of the military services. The added stresses of repeated deployments and the general perceptions of war, along with the potential for health care providers to earn significantly more money outside of DOD, have caused some professionals to choose to separate themselves from military service, even after DOD has paid for all or part of their medical education. Because DOD medical training programs can take years and are a costly investment, DOD is negatively affected both financially and operationally when individuals do not fulfill their active duty obligations. The Conference Report accompanying the National Defense Authorization Act for Fiscal Year 2008 directed the Comptroller General of the United States to report to the congressional defense committees by April 1, 2008, on the number of Health Professions Scholarship Program or Financial Assistance Program participants who do not enter active duty following completion of the program of studies for which they were enrolled, including the extent to which the military services have sought and received reimbursement for stipends or annual grants paid. Accordingly, we examined the extent to which (1) participants in the Health Professions Scholarship Program or Financial Assistance Program fail to enter active duty service, as obligated; (2) DOD has procedures in place to recoup expenditures paid under the Health Professions Scholarship Program or Financial Assistance Program to participants who failed to meet their contractual obligations; and, (3) DOD has specifically sought and received reimbursement for stipends.

Only a small percentage of the participants in the Armed Forces Health Professions Scholarship Program and Financial Assistance Program have failed to complete their education or serve their active duty service obligation. Our analyses of service and DFAS data showed that, for fiscal years 2003 through 2007, fewer than 1 percent (171) of the total number of participants (19,921) withdrew from the programs or, alternatively, graduated but did not go on to active duty service. The most common reasons cited by these participants were voluntary withdrawal from the program, medical disqualification, and academic failure. Upon withdrawal or release from the program, participants are obligated to reimburse the government for all or some portion of their medical education expenses unless relieved of that obligation by their respective service secretary. DOD has procedures in place to recoup medical education expenditures from participants who fail to complete their education or serve their active duty obligation, and many cases we reviewed were processed in a timely manner. However, in some cases, it took more than 5 years from the time recoupment actions on individuals' debts were initiated until the time DFAS established an official debt account and began collection efforts. Until DOD takes steps to clarify the roles and responsibilities for initiating debt recoupment actions, follow established debt collection procedures, and improve communications, its collection of medical education debts will be hindered by confusion and inconsistency. DOD's practice of seeking reimbursement for stipends has changed over time, and the department's efforts to recoup money are diminished by conflicting views among the services and DFAS over DOD's legal authority to recoup stipends. Without a clear determination regarding the recoupability of stipends and communication of this determination to all program participants, DOD is not in a position to ensure that it is collecting all of the money to which it is authorized or collecting reimbursements consistently across the services. Further, program participants do not have full and accurate information regarding DOD's recoupment policies.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In April 2008, we reported that the Defense Finance and Accounting Service (DFAS) and the Services were not in agreement as to whether stipends paid under the Health Professions Scholarship Program or the Financial Assistance Program could be recouped from those who fail to complete either the program or their active duty commitment. We recommended that a review and determination be made as to whether stipends were legally eligible for recoupment and to clearly communicate this determination to the Services and DFAS. In order to clearly communicate whether stipends were legally eligible for recoupment, a table was added to the DOD Financial Management Regulation Volume 7A Chapter 2 based on an Under Secretary of Defense (Personnel & Readiness) May 21, 2008 memo. This table clearly identifies the circumstances by which unearned portions of bonuses, special pay, educational benefits, or stipends will be disbursed by a service member. Based on this guidance DFAS and the Services should have a clearer understanding of when stipends maybe legally recouped.

    Recommendation: To provide greater assurance that the correct legal sums of money are recouped from program participants who do not fulfill their active duty service obligations and to fully disclose debt collection expectations, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness, in coordination with the Under Secretary of Defense, Comptroller, the Assistant Secretary of Defense for Health Affairs, and DOD General Counsel, to review and determine whether stipends are legally eligible for recoupment and clearly communicate this determination to the services and DFAS.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In April 2008, we reported that both Defense Finance and Accounting Service (DFAS) and service officials explained that little communication occurs between them concerning the status of the recoupment effort after DFAS accepts and records a debt package in its Defense Debt Management System. Officials from each of the military services said that they would like to know more about the status of the debts sent to DFAS. Service officials indicated that they could benefit from more frequent and clearer communication. Therefore, we recommended that the Director of DFAS establish a procedure to periodically communicate with the services the status of debt recoupment packages that DFAS had officially accepted and established within its Debt Management System so that any discrepancies among the services records could be reconciled in a timely manner. In September 2010, DFAS revised its Financial Management Regulation to require its Deputy Chief Management Officer to provide feedback to the applicable DOD components upon request.

    Recommendation: To help strengthen debt collection procedures, the Secretary of Defense should direct the Director, Defense Finance and Accounting Service, to establish a procedure to periodically communicate with the services the status of debt recoupment packages that DFAS has officially accepted and established within its Defense Debt Management System so that any discrepancies among the services' records can be reconciled in a timely manner.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: We reported that, at least for debt recoupment packages from a certain Air Force organization, the Defense Finance and Accounting Service (DFAS) had not been adhering to established procedures where those packages were concerned. The DOD Financial Management Regulation requires the military services to prepare and submit a debt transmittal letter to DFAS to process the delinquent debts. Use of the transmittal letter helps control the transmission of debt cases and to identify all attached debt case files by name, social security number, and monetary amount. However, DFAS officials noted they accepted hand-carried Air Force debt packages without transmittal letters which came from an office co-located with DFAS in the same building. The informality of this practice increases the potential for errors in transferring and tracking these debt packages between DFAS and the Air Force. Therefore, we recommended that the Director of DFAS follow the established regulation requiring transmittal letters as part of debt recoupment packages transferred from the military services. As a result of our review, the Chief of the Debt Management Operations Division in the Directorate of Debt and Claims Management of DFAS, sent a letter on March 28, 2008, to the Air Reserve Personnel Center stating that in accordance with the DOD Financial Management Regulation, a transmittal letter must accompany all debt recoupment packages. This reiteration of policy guidance should help put DOD in a better position to more consistently and thoroughly collect reimbursements across the services.

    Recommendation: To help strengthen debt collection procedures, the Secretary of Defense should direct the Director, Defense Finance and Accounting Service, to follow the established regulation requiring transmittal letters as part of debt recoupment packages transferred from the military services.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In April 2008, we reported that, while DOD has established procedures to recoup medical education expenditures from participants who fail to complete their education or serve their active duty service obligation, confusion existed between the military services and DFAS as to who was responsible for initiating the debt recoupment actions. According to DFAS officials, the services were supposed to not only issue the initial bill, invoice, notice, or demand for payment letter, but also attempt to collect on the debt and to take appropriate follow-up action before transferring the debt. However, responsible officials from the Army, Navy, and Air Force all told us that they do not attempt any initial collection of funds because they have neither (1) the debt collection authorities that DFAS has, nor (2) the resources to dedicate to this task. We recommended that the roles and responsibilities for initiating the debt recoupment collection process be clarified and the DOD Financial Management Regulation be revised as necessary. In September 2010, DOD updated a chapter within its Financial Management Regulation entitled Management and Collection of Individual Debt to more clearly state the roles and responsibilities of both the services and DFAS in debt collection actions. This policy guidance clarification should help put DOD in a better position to more consistently and thoroughly collect reimbursements across the services.

    Recommendation: To help strengthen debt collection procedures, the Secretary of Defense should direct the Under Secretary of Defense, Comptroller, and the service secretaries to clarify the roles and responsibilities of Defense Financial and Accounting Service (DFAS) and the services for initiating the debt recoupment collection process and revise the DOD Financial Management Regulation as necessary.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In April 2008, we reported that the Defense Finance and Accounting Service (DFAS) and the Services were not in agreement as to whether stipends paid under the Health Professions Scholarship Program or the Financial Assistance Program could be recouped from those who fail to complete either the program or their active duty commitment, and there was confusion regarding the possibility of recouping stipends. We recommended that the Secretary of Defense direct the Assistant Secretary of Defense for Health Affairs and the service secretaries to determine whether specific language needed to be included in program participants' service agreements in order to accurately reflect the policy regarding recoupable expenses, once that determination was made, and include specific language in the agreements if found to be necessary. In the DOD Financial Management Regulation Volume 7A, Chapter 2 a descriptive table was developed based on Under Secretary of Defense (Personnel and Readiness) memos to specify how disposition of Unearned Portions of Bonuses, Special Pay, Educational Benefits, or Stipends will be handled for members under a written agreement for a pay or benefit. This table in the regulation should help put DOD in a better position to more consistently, accurately, and thoroughly collect reimbursements across the services.

    Recommendation: To provide greater assurance that the correct legal sums of money are recouped from program participants who do not fulfill their active duty service obligations and to fully disclose debt collection expectations, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs and the service secretaries to determine whether specific language needs to be included in program participants' service agreements in order to accurately reflect the policy regarding recoupable expenses, once that determination is made, and include specific language in the agreements if found to be necessary.

    Agency Affected: Department of Defense

 

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