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Report to the Honorable Richard J. Durbin, U.S. Senate: 

April 2005: 

Military Personnel: 

More DOD Actions Needed to Address Servicemembers' Personal Financial 
Management Issues: 

GAO-05-348: 

GAO Highlights: 

Highlights of GAO-05-348, a report to the Honorable Richard J. Durbin, 
U.S. Senate: 

Why GAO Did This Study: 

Congress and the Department of Defense (DOD) are concerned about the 
financial conditions of servicemembers and their families, particularly 
in light of recent deployments to Iraq and Afghanistan. Serious 
financial issues can negatively affect unit readiness. According to 
DOD, servicemembers with severe financial problems risk losing security 
clearances, incurring administrative or criminal penalties or, in some 
cases, face discharge. Despite increases in compensation and DOD 
programs on personal financial management (PFM), studies show that 
servicemembers, particularly junior enlisted personnel, continue to 
report financial difficulties. 

GAO assessed (1) the extent deployment impacts the financial condition 
of active duty servicemembers and their families, (2) whether DOD has 
an oversight framework for evaluating military programs designed to 
assist deployed and non-deployed servicemembers in managing their 
finances, and (3) the extent junior enlisted servicemembers receive 
required PFM training. 

What GAO Found: 

The financial conditions of deployed and non-deployed servicemembers 
and their families are similar, but deployed servicemembers and their 
families may face additional financial problems related to pay. In both 
a 2003 DOD-wide survey and non-generalizable focus groups that GAO 
conducted on 13 military installations in the United States and 
Germany, servicemembers who were deployed reported similar financial 
conditions as those who were not deployed. Some of GAO’s focus group 
participants also noted that they—like Army Reservists in GAO’s 2004 
report, Military Pay: Army Reserve Soldiers Mobilized to Active Duty 
Experienced Significant Pay Problems—had not received their $250 family 
separation allowance each month during their deployment. Pay record 
data showed that almost 6,000 deployed servicemembers had received more 
than the prescribed $250 in January 2005, and 11 of them received a 
$3,000 catch-up, lump sum payment—the equivalent of 12 months of the 
allowance. This pay problem was due, in part, to service procedures 
being confusing and not always followed. Families who do not receive 
this allowance each month may experience financial strain caused by 
additional expenses such as extra childcare. 

DOD lacks an oversight framework—with results-oriented performance 
measures and reporting requirements—for evaluating the effectiveness of 
PFM programs across the services. DOD’s 2002 human capital strategic 
plan stated that a standardized evaluation system for PFM programs is a 
desired goal; however, DOD does not currently have such a system. In 
2003, GAO reported that DOD had included evaluative reporting measures 
in a draft of its PFM instruction to the services. However, the final 
PFM instruction issued by DOD in 2004 did not address outcome measures 
or contain a requirement that the services report program results to 
DOD because the services objected to these additional reporting 
requirements. Without a policy requiring evaluation and a reporting 
relationship between DOD and the services, DOD and Congress do not have 
the visibility or oversight needed to address issues related to the PFM 
programs. 

Some junior enlisted servicemembers are not receiving PFM training that 
is required in service regulations. While each of the services 
implements PFM training differently, all of the services have policies 
requiring that PFM training be provided to junior enlisted 
servicemembers. Moreover, the extent to which the PFM training is not 
received is unknown because most of the services do not track the 
completion of PFM training at the service level. Only the Army 
collected installation-level data and could provide a service-wide 
estimate of PFM training completed by junior enlisted servicemembers. 
Senior Army officers said PFM training had not been a priority given 
the need to prepare for current operations. Top-level DOD officials 
have repeatedly stated that financial issues directly affect 
servicemembers’ mission readiness and should be addressed. Therefore, 
units whose servicemembers do not receive required PFM training risk 
jeopardizing their ability to meet mission requirements. 

What GAO Recommends: 

GAO is making four recommendations to enhance servicemembers’ financial 
conditions and the effectiveness of PFM programs and training. DOD did 
not provide comments by the time the final report went to print. 

www.gao.gov/cgi-bin/getrpt?GAO-05-348. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Derek Stewart at (202) 
512-5559 or stewartd@gao.gov. 

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

Financial Conditions Similar for Deployed and Non-Deployed 
Servicemembers, but Pay Administration and Communication Problems Exist 
for Deployed Members: 

DOD Does Not Have the Oversight Framework Needed to Assess the 
Effectiveness of PFM Programs: 

Some Junior Enlisted Servicemembers Are Not Receiving Required PFM 
Training: 

Conclusions: 

Recommendations for Executive Actions: 

Agency Comments: 

Appendixes: 

Appendix I: Scope and Methodology: 

Sampling Error and Non-Sampling Error: 

Appendix II: Findings from GAO-led Focus Groups Held at 13 
Installations: 

Appendix III: Resources Available to Assist Servicemembers with 
Financial Issues: 

Financial Management Training: 

DOD's Financial Readiness Campaign Resources: 

Military Service Resources: 

Resources Available Outside of DOD: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Hypothetical Examples of Monthly Cash Compensation for 
Servicemembers Deployed to Iraq: 

Table 2: January 2005 Payments of the $250 per Month Family Separation 
Allowance to Servicemembers Deployed and Receiving Hostile Fire Pay: 

Table 3: Characteristics of Each Service's Required PFM Training for 
Junior Enlisted Servicemembers: 

Table 4: Installations in the United States and Germany Where GAO 
Conducted Site Visits from May to October 2004: 

Figures: 

Figure 1: Financial Management Assistance and Training Available to 
Servicemembers: 

Figure 2: Self-Reported Financial Condition of Servicemembers Who Were 
and Were Not Deployed for at Least 30 Days at the Time They Completed 
the 2003 DOD Survey: 

Figure 3: Negative Financial Events for Servicemembers Who Were and 
Were Not Deployed for at Least 30 Days at the Time They Completed the 
2003 DOD Survey: 

Letter April 26, 2005: 

The Honorable Richard J. Durbin: 
United States Senate: 

Dear Senator Durbin: 

The finances of servicemembers and their families have been an ongoing 
concern of Congress and the Department of Defense (DOD), especially in 
light of more frequent deployments to support the war on terrorism and 
conflicts in Iraq and Afghanistan. DOD's Social Compact,[Footnote 1] 
which is part of DOD's human capital strategic plan, notes that mission 
readiness and quality of life depend on whether servicemembers use 
their financial resources responsibly. Some adverse effects that may 
result when servicemembers experience serious financial problems 
include loss of security clearances, criminal or non-judicial 
sanctions, or adverse personnel actions including possible discharge 
from the military. Servicemembers with serious financial issues may 
also adversely impact the readiness of the unit. For example, 
servicemembers' financial problems may take the servicemembers and 
possibly their unit commanders away from their primary duties in order 
to address problems with creditors. In a 2002 report to Congress, the 
Navy identified an estimated $250 million in productivity and salary 
losses due to servicemembers' poor personal financial 
management.[Footnote 2]

Congress and DOD have taken steps to decrease the likelihood that 
deployed and non-deployed servicemembers will experience financial 
problems. Since 1999, DOD has requested and Congress has granted annual 
increases in military basic pay for all active duty servicemembers and 
increases in special pays and allowances for deployed servicemembers, 
such as the family separation allowance and hostile fire/imminent 
danger pay. In addition, out-of-pocket housing expenses for active duty 
military members living in private-sector housing have decreased since 
1999. Also, the military has developed personal financial management 
(PFM) programs to provide servicemembers with financial literacy 
training, financial counseling, and other assistance to avoid or 
mitigate the adverse effects associated with personal financial 
problems.[Footnote 3]

Despite the added compensation and the assistance provided through the 
PFM programs, studies in recent years by DOD and others show that 
active duty servicemembers continue to report financial problems. For 
example, a 2002 study[Footnote 4] noted that 20 percent of junior 
enlisted servicemembers reported that they struggled to make ends meet 
financially and another 4 percent regarded themselves as "in over their 
heads" with respect to their finances. 

The information in this report supplements our February 2004 report to 
you on bankruptcies among active duty servicemembers.[Footnote 5] As 
agreed with your office, this report answers three questions: (1) To 
what extent does deployment impact the financial condition of active 
duty servicemembers and their families? (2) Does DOD have an oversight 
framework for evaluating military programs that assist both deployed 
and non-deployed servicemembers in managing their personal finances? 
and (3) To what extent are junior enlisted servicemembers receiving 
required personal financial management training? We also are reporting 
on the prevalence and effect of predatory lending on servicemembers to 
fulfill your request for information on the financial conditions of 
active duty servicemembers.[Footnote 6]

In conducting this review, we limited the scope of our work to active 
duty servicemembers, particularly those recently returning from 
deployments.[Footnote 7] Emphasis was also given to junior enlisted 
servicemembers, since DOD and service officials have indicated that 
this subgroup is more likely to encounter financial problems. Numerous 
methods were used to gather and assess information for this work. We 
examined DOD, service, and installation policies on PFM program 
requirements, as well as management guidance provided in the Government 
Performance and Results Act of 1993.[Footnote 8] In addition, we 
reviewed reports by GAO, other congressional research offices, DOD, and 
other organizations. We constructed, pre-tested, and administered an e- 
mail survey to 225 installation-level PFM managers. During site visits 
to 13 military installations located in the United States and Germany, 
we requested documents pertaining to the implementation and evaluation 
of each installation's PFM programs, and we used structured interviews 
to gather data from a variety of personnel on the 13 installations: 
command leaders, the manager of the PFM programs, financial counselors, 
DOD civilian and military attorneys in the Judge Advocate General 
corps,[Footnote 9] chaplains, and staff from the relief/aid societies; 
and separate discussion groups composed of 232 officers, senior 
enlisted personnel, and junior enlisted personnel who had recently 
returned from deployment and 112 who had not deployed, as well as 76 
spouses of servicemembers who had not deployed or had recently returned 
from a deployment to address all three questions. While information 
from these discussion groups is not generalizable to the entire DOD 
population of active duty servicemembers, it provides context for 
findings in the report. The in-depth information about the PFM programs 
on the 13 installations was supplemented with information obtained from 
3 group discussions with a total of 50 personnel affiliated with the 
PFM programs while they attended a November 2004 conference. We 
obtained and reviewed other information such as service and 
installation PFM training materials and installation accreditation 
reports. We reviewed and analyzed DOD's 2003 active duty survey to 
obtain information on the impact of deployment on servicemembers' 
finances. The March 2003 survey had a response rate of 35 percent. DOD 
has conducted and reported on research to assess the impact of this 
response rate on overall estimates. They found that, among other 
characteristics, junior enlisted personnel (E1 to E4), servicemembers 
who do not have a college degree, and members in services other than 
the Air Force were more likely to be non-respondents. We have no reason 
to believe that potential non-response bias not otherwise accounted for 
by DOD's research is substantial for the variables we studied in this 
report. Therefore, we concluded the data to be sufficiently reliable to 
address our objectives. Further details regarding our scope and 
methodology are presented in appendix I. Data obtained from our 
discussion groups at the 13 installations are summarized in appendix 
II. We performed our work from March 2004 through February 2005 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

The financial conditions of deployed and non-deployed servicemembers 
and their families are similar, but deployed servicemembers and their 
families may face additional financial problems in receiving their 
family separation allowance and communicating with creditors. In a 2003 
DOD survey, responses from servicemembers who were deployed for at 
least 30 days were similar to those of their non-deployed peers with 
regards to their overall financial conditions. Moreover, while not a 
generalizable sample, 90 percent of the 232 recently deployed 
servicemembers in our focus groups indicated that their financial 
situations either improved or remained about the same after a 
deployment. Some of the recently deployed servicemembers in our focus 
groups also noted that they--like Army reservists in our 2004 
review[Footnote 10]--had not received their $250 family separation 
allowance on a monthly basis. Pay records showed that nearly 6,000 
servicemembers received more than the prescribed $250 for January 2005, 
and 11 of those servicemembers received a $3,000 catch-up, lump sum 
payment--the equivalent of 12 months of the allowance. The failure to 
pay the family separation allowance each month is occurring, in part, 
because the services' procedures for initiating the allowance are 
confusing or not always followed. For example, the Army's regulation 
implies that soldiers will receive their allowance after returning from 
deployment; however, in practice some installations allow 
servicemembers to receive the allowance during deployment. Not 
receiving this compensation each month to help defray household costs 
such as extra childcare expenses can place a financial strain on the 
family when the servicemembers are deployed. In addition, DOD and 
installation officials as well as servicemembers told us that problems 
communicating with creditors during deployment can cause other 
financial difficulties. Servicemembers told us that limited Internet 
access, the high cost of calling from overseas, and delays in the 
delivery of mail often prevented them from promptly contacting 
creditors. Failure to avoid or promptly correct serious financial 
problems can result in consequences for these servicemembers, such as 
bad credit ratings or adverse effects on unit readiness and morale. 

DOD does not have an oversight framework that includes results-oriented 
performance measures and the reporting requirements needed to evaluate 
the effectiveness of DOD and service programs that assist 
servicemembers in managing their personal finances. The principles of 
the Government Performance and Results Act of 1993 offer federal 
agencies a sound methodology for establishing such a framework. While 
DOD's 2002 human capital strategic plan stated that a standardized 
evaluation system to measure the effectiveness of the PFM programs is a 
desired goal, DOD does not currently have such a system. One factor 
contributing to the absence of adequate outcome measures and a 
standardized evaluation system is the lack of DOD guidance to measure 
or report on the programs' results. Although DOD had included 
evaluative reporting measures in a draft of its PFM instruction to the 
services, the final instruction issued in 2004 did not contain outcome 
measures or reporting requirements because the services objected to the 
additional requirements. Without a policy requiring the evaluation and 
reporting relationship between DOD and the services, DOD has limited 
visibility and oversight to make improvements in the program and 
limited ability to achieve a standardized evaluation system. Moreover, 
Congress does not have the visibility or oversight it needs to address 
issues related to DOD's PFM programs. 

Some junior enlisted servicemembers are not receiving the required PFM 
training. While each service implements PFM training differently, all 
of the services have policies requiring that PFM training must be 
provided to junior enlisted servicemembers. Moreover, the extent to 
which the PFM training is not received is unknown because most of the 
services do not track the completion of PFM training at the service 
level. The Army was the only service that collected installation-level 
data and could provide a servicewide estimate of PFM training completed 
by junior enlisted servicemembers. Senior Army officers at most of the 
Army installations we visited acknowledged the need for PFM training, 
but noted that PFM training was not a priority because current 
deployment schedules limit the time available to prepare soldiers for 
their warfighting mission. Top-level DOD officials, however, have 
repeatedly stated that financial issues directly affect unit readiness 
and morale and should be addressed. Thus, units whose servicemembers do 
not receive required PFM training risk jeopardizing their ability to 
meet mission requirements. 

We are making four recommendations to DOD to enhance the financial 
conditions of deployed servicemembers and improve the effectiveness of 
PFM programs: (1) take steps to provide deployed servicemembers with 
their family separation allowance on a monthly basis, (2) take steps to 
provide better communications access for deployed servicemembers with 
their creditors, (3) develop a DOD-wide oversight framework with an 
evaluation plan for the PFM programs and formalize DOD's oversight role 
in the evaluation by including evaluation and reporting requirements in 
the PFM instruction, and (4) develop and implement a tactical plan with 
time-based milestones to show how the appropriate service policy 
offices will monitor and ensure required financial management training 
is provided to junior enlisted servicemembers. On March 17, 2005, we 
provided a draft of this report to DOD for review and comment. As of 
the time this report went to final printing, DOD had not provided 
comments as requested. 

Background: 

Because large numbers of Americans lack knowledge about basic personal 
economics and financial planning, U.S. policymakers and others have 
been focusing on financial literacy, i.e., the ability to make informed 
judgments and to take effective actions regarding the current and 
future use and management of money.[Footnote 11] While informed 
consumers can choose appropriate financial investments, products, and 
services, those who exercise poor money management and financial 
decision making can lower their family's standard of living and 
interfere with crucial long-term goals. 

One vehicle for promoting the financial literacy of Americans is the 
congressionally created Financial Literacy and Education 
Commission.[Footnote 12] Created in 2003, the Commission is charged 
with (1) developing a national strategy to promote financial literacy 
and education for all Americans; (2) coordinating financial education 
efforts among federal agencies and among the federal government, state 
and local governments, non-profit organizations, and private 
enterprises; and (3) identifying areas of overlap and duplication among 
federal financial literacy activities. 

To minimize financial burdens on servicemembers, DOD has requested and 
Congress has increased cash compensation for active duty military 
personnel over the last 5 years. For example, the average increases in 
military basic pay have exceeded the average increases in private- 
sector wages for each of the past 5 years.[Footnote 13] Also, DOD has a 
plan to totally eliminate out-of-pocket expenses that servicemembers 
pay when living in private-sector housing from 19 percent in fiscal 
year 2000 to zero in fiscal year 2005.[Footnote 14]

Furthermore, in April 2003, Congress increased the family separation 
allowance from $100 to $250 per month and hostile fire/imminent danger 
pay from $150 to $225 per month for eligible deployed 
servicemembers.[Footnote 15] The family separation allowance[Footnote 
16] is designed to provide compensation for servicemembers with 
dependents for the added expenses incurred because of involuntary 
separations such as deployments in support of contingency operations 
like Operation Iraqi Freedom. The expenses include extra childcare 
costs, automobile maintenance, or home repairs the deployed 
servicemember would normally do while home. Hostile fire/imminent 
danger pay provides special pay for "duty subject to hostile fire or 
imminent danger" and is designed to compensate servicemembers for 
physical danger.[Footnote 17] Iraq, Afghanistan, Kuwait, Saudi Arabia, 
and many other nearby countries have been declared imminent danger 
zones.[Footnote 18] In addition to these special pays, some or all 
income that active duty servicemembers earn in a combat zone is tax 
free.[Footnote 19]

Since at least the 1980s, the military services have offered PFM 
programs to help servicemembers address their financial conditions. 
Among other things, the PFM programs provide financial literacy 
training to servicemembers, particularly to junior enlisted personnel 
during their first months in the military. The group-provided financial 
literacy training is supplemented with other types of financial 
management assistance, often on a one-on-one basis. For example, 
servicemembers might obtain one-on-one counseling from staff in their 
unit or legal assistance attorneys at the installation. 

In May 2003, the Office of the Under Secretary of Defense for Personnel 
and Readiness,[Footnote 20] DOD's policy office for the PFM programs, 
established its Financial Readiness Campaign, with objectives that 
include increasing personal readiness by, among other things, (1) 
increasing financial awareness and abilities and (2) increasing savings 
and reducing dependence on credit.[Footnote 21] The Campaign attempts 
to accomplish these objectives largely by providing on-installation PFM 
program providers with access to national-level programs, products, and 
support through links from DOD's Web site (www.dodpfm.org) to other Web 
sites, tools, and contacts.[Footnote 22]

Figure 1 illustrates some of the major types of financial management 
training and assistance available to servicemembers (see app. III for 
additional details). For instance, most active duty military 
installations have an on-site manager who implements the service's PFM 
programs. Among other things, PFM program managers and others teach 
classes and offer counseling on financial issues, ranging from basic 
budgeting and checkbook management to purchasing a car. In addition, 
the PFM program managers might work closely with the services' 
relief/aid societies. The relief/aid societies offer grants or no 
interest loans for emergency situations. Figure 1 also shows that 
servicemembers may choose to use non-DOD resources if, for example, 
they do not want the command to be aware of their financial conditions 
or they need products or support not offered through DOD, the services, 
or the installation. 

Figure 1: Financial Management Assistance and Training Available to 
Servicemembers: 

[See PDF for image] 

Sources: GAO analysis of DOD data; Image Art Explosion. 

[End of figure] 

Financial Conditions Similar for Deployed and Non-Deployed 
Servicemembers, but Pay Administration and Communication Problems Exist 
for Deployed Members: 

DOD-wide survey data suggest that the financial conditions of deployed 
and non-deployed personnel are similar, but problems were found with 
the administration of a special pay to deployed personnel, as well as 
the ability of deployed servicemembers to communicate with creditors. 
Servicemembers who were deployed for at least 30 days reported similar 
levels of financial health or problems as those who had not deployed 
when they responded to a 2003 DOD-wide survey. However, some deployed 
servicemembers are not obtaining their family separation allowance on a 
monthly basis while they are deployed and separated from the families. 
And, problems communicating with creditors--caused by limited Internet 
access, few telephones and high fees, and delays in receiving ground 
mail--can affect deployed servicemembers' abilities to resolve 
financial issues. 

Data Suggest Financial Conditions of Deployed Servicemembers and Their 
Families Similar to Non-Deployed Servicemembers and Their Families: 

Data from DOD suggest that the financial conditions for deployed and 
non-deployed servicemembers and their families are similar. Figure 2 
shows estimates of servicemembers' financial conditions based on their 
responses to a 2003 DOD-wide survey.[Footnote 23] For each of the five 
response options, the findings for servicemembers who were on a 
deployment for at least 30 days were very similar to those of 
servicemembers who had not deployed during that time. An additional 
analysis of the responses for only junior enlisted personnel showed 
similar responses for the two groups. For example, 3 percent of the 
deployed group and 2 percent of the non-deployed group indicated that 
they were in "over their heads" financially; and 13 percent of the 
deployed group and 15 percent of non-deployed group responded that they 
found it "tough to make ends meet but keeping your head above water" 
financially. These responses are consistent with the findings that we 
obtained in a survey of all PFM program managers and during our 13 site 
visits. In the survey of PFM program managers, about 21 percent 
indicated that they believed servicemembers are better off financially 
after a deployment; about 54 percent indicated that the servicemembers 
are about the same financially after a deployment; and about 25 percent 
believed the servicemembers are worse off financially after a 
deployment. Also, 90 percent of the 232 recently deployed 
servicemembers surveyed in our focus groups[Footnote 24] said that 
their financial situations either improved or remained about the same 
after a deployment. 

Figure 2: Self-Reported Financial Condition of Servicemembers Who Were 
and Were Not Deployed for at Least 30 Days at the Time They Completed 
the 2003 DOD Survey[A]: 

[See PDF for image] 

[A] Sampling errors of estimates for servicemembers who were not 
deployed do not exceed +/-2 percentage points. Sampling errors of 
estimates for servicemembers who were deployed do not exceed +/-5 
percentage points. These sampling errors do not include errors due to 
other sources, such as potential bias attributable to the overall 35 
percent response rate. DOD conducted research to assess the impact of 
this response rate on overall estimates. We have no reason to believe 
that potential non-response bias not otherwise accounted for by DOD's 
research is substantial for the variables we studied in this report. 

[End of figure] 

The special pays and allowances that some servicemembers receive when 
deployed, particularly to dangerous locations, may be one reason for 
the similar findings for the deployed and non-deployed groups. The 
hypothetical situations shown in table 1 demonstrate that deployment- 
related special pays and allowances can increase servicemembers' total 
cash compensation by hundreds of dollars per month. Moreover, as we 
noted previously in the Background section of this report, some or all 
income that servicemembers earn while serving in a combat zone is tax 
free. 

Table 1: Hypothetical Examples of Monthly Cash Compensation for 
Servicemembers Deployed to Iraq: 

Base compensation; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: $1,641; 
Hypothetical situation 2: (E-3)[A], Years of service: 3, Dependents, 
On- installation housing: $1,641; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $1,641; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $2,687; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $4,729. 

Basic allowance for housing; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: In kind (living in barracks); Hypothetical situation 
2: (E-3)[A]: Years of service: 3: Dependents: On- installation housing: 
In kind (living in on-base housing); Hypothetical situation 3: (E-
3)[A], Years of service: 3, Dependents, Private-sector housing: $622; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $793; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $923. 

Basic allowance for subsistence; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: In kind (eating in mess halls); Hypothetical 
situation 2: (E-3)[A]: Years of service: 3: Dependents: On- 
installation housing: $267; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $267; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $267; 
Hypothetical situation 5: (O-3)[A]: Years of service: 10: Dependents 
Private-sector housing: $175. 

Subtotal: Basic military compensation; Hypothetical situation 1: (E- 
3)[]: Years of service: 3: No dependents Barracks housing: $1,641; 
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents: 
On- installation housing: $1,908; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $2,530; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $3,747; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $5,827. 

Family separation allowance; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: $0; 
Hypothetical situation 2: (E-3)[A], Years of service: 3, Dependents, 
On- installation housing: $250; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $250; 
Hypothetical situation 4: (E-6)[A]: Years of service: 10: Dependents: 
Private- sector housing: $250; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $250. 

Hostile fire/Imminent danger pay; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: $225; 
Hypothetical situation 2: (E-3)[A], Years of service: 3, Dependents, 
On- installation housing: $225; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $225; 
Hypothetical situation 4: (E-6)[A]: Years of service: 10: Dependents: 
Private- sector housing: $225; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $225. 

Per diem; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: $105; 
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents: 
On- installation housing: $105; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $105; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $105; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $105. 

Hardship duty pay; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: $100; 
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents: 
On- installation housing: $100; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $100; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $100; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $100. 

Subtotal: Deployment related compensation; Hypothetical situation 1: (E-
3)[A], Years of service: 3, No dependents, Barracks housing: $430; 
Hypothetical situation 2: (E-3)[A]: Years of service: 3: Dependents: 
On- installation housing: $680; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $680; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $680; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $680. 

Total; 
Hypothetical situation 1: (E-3)[A], Years of service: 3, No dependents, 
Barracks housing: $2,071; 
Hypothetical situation 2: (E- 3)[A]: Years of service: 3: Dependents: 
On-installation housing: $2,588; 
Hypothetical situation 3: (E-3)[A], Years of service: 3, Dependents, 
Private-sector housing: $3,210; 
Hypothetical situation 4: (E-6)[A], Years of service: 10, Dependents, 
Private-sector housing: $4,427; 
Hypothetical situation 5: (O-3)[A], Years of service: 10, Dependents, 
Private-sector housing: $6,507. 

Source: GAO analysis of DOD data. 

[A] E = enlisted servicemember, O = Officer. 

Note: Some values are rounded to the nearest whole dollar. Also, 
housing data are for Fort Campbell, Kentucky. 

[End of table]

The 2003 DOD survey also asked servicemembers whether they had 
experienced various types of negative financial events. The differences 
in percentages were small between the deployed and non-deployed groups. 
As figure 3 shows, the largest of the three differences was 4 
percentage points and pertained to falling behind in paying bills. 

Figure 3: Negative Financial Events for Servicemembers Who Were and 
Were Not Deployed for at Least 30 Days at the Time They Completed the 
2003 DOD Survey[A]: 

[See PDF for image] 

[A] Sampling errors of estimates for Servicemembers who were not 
deployed do not exceed +/-2 percentage points. Sampling errors of 
estimates for Servicemembers who were deployed do not exceed +/-5 
percentage points. These sampling errors do not include errors due to 
other sources, such as potential bias attributable to the overall 35 
percent response rate. DOD conducted research to assess the impact of 
this response rate on overall estimates. We have no reason to believe 
that potential non-response bias in the estimates not otherwise 
accounted for by DOD's research is substantial for the variables we 
studied in this report. 

[End of figure] 

Several Thousand Deployed Servicemembers Not Receiving Family 
Separation Allowance Promptly: 

Based on DOD data for January 2005, almost 6,000 of 71,000 deployed 
servicemembers who have dependents did not obtain their family 
separation allowance[Footnote 25] in a timely manner. The family 
separation allowance of $250 per month is designed to compensate 
servicemembers for extra expenses that result when they are 
involuntarily separated from their families. Servicemembers in our 
focus groups told us that the family separation allowance helps their 
families with added costs encountered during their absence such as 
childcare costs, automobile maintenance, and home repairs. Delays in 
obtaining family separation allowances could cause undue hardship for 
some families faced with such extra expenses. 

Table 2 shows the amount of family separation allowance received in 
January 2005 by servicemembers who were deployed and receiving hostile 
fire pay. No Marines received more than the prescribed $250 monthly 
allowance for January, but approximately 10 percent of the Army and 
Navy servicemembers and nearly 5 percent of the Air Force personnel who 
were entitled to the $250 monthly allowance received more than that 
prescribed amount. This indicates that servicemembers for three of the 
services had not received the $250 allowance on a monthly basis and 
were given catch-up, lump sum payments. In total, almost 6,000 
servicemembers received more than the prescribed $250 monthly 
allowance, with 11 servicemembers (1.5 percent) receiving a $3,000 
catch-up, lump sum payment--the equivalent of 12 months of family 
separation pay.[Footnote 26] We have previously reported similar 
findings for the administration of family separation allowance to Army 
Reserve soldiers and recommended that the Secretary of the Army, in 
conjunction with the DOD Comptroller, clarify and simplify procedures 
and forms for implementing the family separation allowance entitlement 
policy.[Footnote 27]

Table 2: January 2005 Payments of the $250 per Month Family Separation 
Allowance to Servicemembers Deployed and Receiving Hostile Fire Pay[A]: 

Amount of payment: $500-$3,000[C]; 
Army: Number[B]: 2,479; 
Army: Percentage: 6; 
Navy: Number[B]: 545; 
Navy: Percentage: 6; 
Marine Corps: Number[B]: 0; 
Marine Corps: Percentage: 0; 
Air Force: Number[B]: 28; 
Air Force: Percentage: 2; 
Total: Number[B]: 3,052; 
Total: Percentage: 4. 

Amount of payment: $251-$499[C]; 
Army: Number[B]: 2,335; 
Army: Percentage: 5; 
Navy: Number[B]: 401; 
Navy: Percentage: 4; 
Marine Corps: Number[B]: 0; 
Marine Corps: Percentage: 0; 
Air Force: Number[B]: 43; 
Air Force: Percentage: 3; 
Total: Number[B]: 2,779; 
Total: Percentage: 4. 

Amount of payment: $250[D]; 
Army: Number[B]: 40,120; 
Army: Percentage: 89; 
Navy: Number[B]: 8,727; 
Navy: Percentage: 90; 
Marine Corps: Number[B]: 12,672; 
Marine Corps: Percentage: 85; 
Air Force: Number[B]: 1,168; 
Air Force: Percentage: 94; 
Total: Number[B]: 62,687; 
Total: Percentage: 88. 

Amount of payment: $1-$249[E]; 
Army: Number[B]: 89; 
Army: Percentage: 0; 
Navy: Number[B]: 21; 
Navy: Percentage: 0; 
Marine Corps: Number[B]: 2,201; 
Marine Corps: Percentage: 15; 
Air Force: Number[B]: 9; 
Air Force: Percentage: 1; 
Total: Number[B]: 2,320; 
Total: Percentage: 3. 

Amount of payment: Total; 
Army: Number[B]: 45,023; 
Army: Percentage: 100; 
Navy: Number[B]: 9,694; 
Navy: Percentage: 100; 
Marine Corps: Number[B]: 14,873; 
Marine Corps: Percentage: 100; 
Air Force: Number[B]: 1,248; 
Air Force: Percentage: 100; 
Total: Number[B]: 70,838; 
Total: Percentage: 99. 

Source: GAO analysis of DOD data. 

[A] DOD supplied information on servicemembers who were eligible to 
receive family separation allowance while in Afghanistan, Algeria, 
Angola, Arabian Sea, Bahrain, Belarus, Bosnia and Herzegovina, 
Colombia, Croatia, Democratic Republic of the Congo, Djibouti, Egypt, 
Eritrea, Ethiopia, Georgia, Gulf of Aden, Haiti, Indonesia, Iraq, 
Israel, Jordan, Kenya, Kuwait, Kyrgyzstan, Lebanon, Liberia, Macedonia, 
Malaysia, Oman, Pakistan, Palestine, Persian Gulf, Philippines, Qatar, 
Red Sea, Saudi Arabia, Serbia, Sierra Leone, South Africa, Tajikistan, 
Turkey, United Arab Emirates, Uzbekistan, Yemen, and 30 locations that 
were simply identified as "other locations."

[B] The Defense Finance and Accounting Service identified the number of 
servicemembers who were receiving hostile fire and eligible to receive 
family separation allowance. 

[C] Amounts in these rows represent the number of servicemembers who 
received a catch-up, lump sum payment that exceeded the $250 per month. 

[D] Amounts in this row represent the number of servicemembers who 
received the prescribed $250 per month family separation allowance. 

[E] Amounts in this row represent the number of servicemembers who 
received partial payment for the $250 per month family separation 
allowance. 

[End of table]

The services have different procedures that servicemembers must perform 
to obtain the family separation allowance, and some of these procedures 
are confusing and are not always followed. For example, an Army 
regulation[Footnote 28] states that soldiers must file a DD Form 1561 
(Statement to Substantiate Payment of Family Separation Allowance) to 
substantiate eligibility to receive the allowance, along with a copy of 
the travel voucher to indicate the period of entitlement--which implies 
family separation allowance is received after deployment because 
substantiating documents are generally provided upon completion of 
travel with a voucher. The Army's pay manual, however, states that only 
a DD Form 1561 is required to receive family separation 
allowance.[Footnote 29] Officials at the Defense Finance and Accounting 
Service and Army Finance Office stated that, although they were 
following this regulation, they were requiring the DD Form 1561 prior 
to departure so soldiers could receive family separation allowance 
during deployment, which is contrary to the Army regulation.[Footnote 
30] In contrast, Defense Finance and Accounting Service procedures for 
Air Force servicemembers[Footnote 31] state that servicemembers may 
substantiate eligibility to receive family separation allowance prior 
to departure, using the travel order and the DD Form 1561. By using the 
travel order, Air Force servicemembers can receive family separation 
allowance during deployment. However, elsewhere in the Defense Finance 
and Accounting procedures, it notes that most Air Force members are 
paid family separation allowance upon returning from deployment. In 
April 2003, Air Force officials attempted to clear up any confusion 
over how Air Force personnel should initiate payments of family 
separation allowance, by sending a message to a Defense Finance and 
Accounting official stating that family separation allowance paperwork 
should be filed before servicemembers depart for deployment.[Footnote 
32] Despite this subsequent change, Air Force servicemembers in our 
June 2004 focus group noted that they had not received the family 
separation allowance during their deployments. An August 2004 message 
from the Defense Finance and Accounting Service reminded Air Force 
finance officials of this policy change. 

DOD officials suggested many factors other than policy-implementation 
differences to explain why some eligible servicemembers are not 
receiving their family separation allowance on a monthly basis. 
Officials at the Defense Finance and Accounting Service and at service 
finance offices suggested that servicemembers might not obtain the 
allowance monthly because they are not aware of the benefit, they do 
not file the required eligibility form, they file incorrect 
documentation, or errors or delays occur when the unit enters the 
information into the pay system. Others noted that servicemembers may 
elect to receive the allowance as a one-time lump sum payment.[Footnote 
33]

Problems Communicating with Creditors and Families During Deployment 
May Cause Financial Difficulties: 

Servicemembers may experience financial difficulties as a result of 
communication constraints while deployed. In our March 2004 testimony, 
we documented some of the problems associated with mail delivery to 
deployed troops. With regard to deployed servicemembers' financial 
management, our focus group participants, surveyed PFM program 
managers, and interviewed installation officials noted that delays in 
receiving correspondence from creditors have resulted in late payments 
and possibly longer-term problems for servicemembers. The longer-term 
problems might include negative information about the late payments 
being entered in one's financial credit report, which could make it 
more difficult or expensive for servicemembers to obtain credit in the 
future. Similarly, limited access to telephones or Internet can have 
negative financial effects such as (1) delaying or preventing contact 
with a creditor when a financial issue arises, (2) making it impossible 
to electronically transfer money from a financial institution to a 
creditor, and (3) incurring overdraft expenses because the spouse could 
not be informed in a timely manner about a cash advance that the 
servicemember requested. 

Individuals in our focus groups suggested that the access to Internet 
and telephones may not be the same across the pay grades and services. 
For example, some servicemembers noted that deployed junior enlisted 
personnel sometimes had less access to Internet than did senior 
deployed personnel, making it difficult for the former to keep up with 
their bills. In addition, some Army servicemembers told us that they 
(1) could not call stateside toll-free numbers because the numbers were 
inaccessible from overseas or (2) incurred substantial costs--sometimes 
$1 per minute--to call stateside creditors. In contrast, Air Force 
servicemembers in Germany said that the cost of calls to stateside 
creditors from Iraq or Afghanistan was not an issue for them because 
the Air Force had provided telephone calling cards that could be used 
to make such calls free of charge. 

Failure to avoid or promptly correct financial problems can result in 
negative consequences for servicemembers. This includes increased debt 
for servicemembers, bad credit histories, and poor performance of their 
duties when distracted by financial problems. In addition, 
servicemembers who cannot stay on top of their finances, while 
deployed, may require assistance from officials in their chain of 
command to address financial problems, which takes those officials from 
their normal military duties. This can translate into adverse effects 
on a unit's readiness and morale. 

DOD Does Not Have the Oversight Framework Needed to Assess the 
Effectiveness of PFM Programs: 

DOD lacks the results-oriented, departmentwide data needed to assess 
the effectiveness of its PFM programs and provide the necessary 
oversight. The principles of the Government Performance and Results Act 
of 1993 offer federal agencies a methodology to establish a results- 
oriented framework that includes strategic plans for program activities 
that identifies, among other things, program goals, performance 
measures, and reporting on the degree to which goals are met.[Footnote 
34] These principles would assist DOD in shifting the focus of 
accountability for its PFM program from outputs, such as the number of 
training classes provided, to outcomes, such as impact of training on 
servicemembers' financial behavior. 

The November 2004 DOD instruction that provides guidance to the 
services on servicemembers' financial management does not address 
program evaluation or the reports that services should supply to DOD 
for its oversight role.[Footnote 35] However, an earlier draft of the 
instruction included these requirements. In our 2003 report,[Footnote 
36] we noted that the earlier draft instruction emphasized evaluating 
the programs and cited metrics such as the number of delinquent 
government credit cards, servicemembers with wages garnished, and 
administrative actions for financial indebtedness and irresponsibility 
taken under the Uniform Code of Military Justice. When asked what 
caused the evaluation and oversight reporting requirements to be 
dropped from the finalized instruction, DOD officials said that they 
were eliminated because of objections voiced by the services. The DOD 
officials told us that the services did not want the additional 
reporting requirements. 

DOD's 2002 Social Compact noted that the impact of efforts to improve 
financial literacy cannot be determined without effective evaluation. 
The Social Compact also stated that a systematic approach to measuring 
PFM programs is needed to identify best practices and improved program 
performance. Currently, the only DOD-wide evaluative data available for 
assessing the PFM programs and servicemembers' financial conditions are 
obtained from a general-purpose annual survey that focuses on the 
financial conditions of servicemembers as well as a range of other non- 
related issues. The data are limited because DOD policy officials for 
the PFM programs can only include a few financial related items to this 
general-purpose survey. Additionally, a response rate of 35 percent on 
the March 2003 active duty survey leads to questions about the 
generalizability of the findings. Furthermore, DOD has no means for 
confirming the self-reported information for survey items that ask 
about objective events such as filing for bankruptcy. Without a policy 
requiring common evaluation DOD-wide and reporting relationships among 
DOD and the services, DOD will continue to have limited oversight to 
make improvements in the PFM programs and limited ability to achieve a 
standardized evaluation system. In addition, Congress will not have the 
visibility or oversight it needs to address issues related to DOD's 
financial management training and assistance to servicemembers. 

Currently, service-specific efforts to assess the PFM programs are 
largely in their early stages. The services told us that they are 
developing outcome measures for evaluating their PFM programs, but none 
was operational at the time of our review. In Spring 2005, the Navy 
plans to develop and refine Navy-wide metrics such as the number of 
sailors performing good and poor financial behaviors, e.g., 
participating in the government's retirement plan, filing for 
bankruptcy, and bouncing checks. Similarly, in the third quarter of 
fiscal year 2005, Army officials said they expect to implement outcome 
measures for assessing programs such as Financial Readiness, Family 
Advocacy, and Relocation Readiness. The Marine Corps and Air Force did 
not provide details for their plans to develop results-oriented data or 
indicate when evaluation systems would be operational. Additionally, 
our visits to 13 installations in the United States and Germany 
revealed much variability with regard to the use of performance 
metrics. The installations that provided us with their metrics often 
used output measures such as the number of people trained, rather than 
results-oriented outcome measures. 

Some Junior Enlisted Servicemembers Are Not Receiving Required PFM 
Training: 

Some junior enlisted servicemembers are not receiving the required PFM 
training. While each of the services implements PFM training 
differently, all of the services have policies requiring that PFM 
training must be provided to junior enlisted servicemembers. At the 
time of our review, the services' policies varied on where and when the 
initial training should occur. For example, the Army, Marine Corps, and 
Air Force regulations required the training at the servicemembers' 
first duty station; however, the Navy guidance required such training 
prior to the servicemembers' first duty station. 

Despite having these policies, some servicemembers have not received 
the required training, but the extent to which the training is not 
received is unknown because servicewide totals are not always 
collected. Table 3 shows how each service monitors PFM training. The 
Marine Corps, for example, only tracks PFM training at the unit level 
and does not tabulate these data for a servicewide total. As shown in 
the table, the Army was the only service that collected installation- 
level PFM data and could provide a rough servicewide estimate of PFM 
training completed by junior enlisted servicemembers. Overall, the Army 
estimates that about 82 percent of its junior enlisted soldiers 
completed PFM training in fiscal year 2003, leaving 18 percent who did 
not receive training. PFM program staff at five of the six Army 
installations we visited told us that required PFM training was not 
being provided to all first-term soldiers. Some of the senior Army 
officers at these installations acknowledged the need to provide the 
PFM training to junior enlisted servicemembers but also noted that 
current deployment schedules limited the time available to prepare 
soldiers for their warfighting mission. The officers said they believed 
that improving servicemembers' ability to perform duties related to 
their mission (e.g., firing a weapon) was more important than improving 
their personal financial literacy. 

Table 3: Characteristics of Each Service's Required PFM Training for 
Junior Enlisted Servicemembers: 

Characteristic: How does the service monitor whether required PFM 
training is completed? 
Army: Monitored at installation level; data then compiled for 
servicewide total; 
Navy: Monitored by Navy Education and Training Command; data are not 
compiled for higher-level total; 
Marine Corps: Monitored at unit level; data are not compiled for 
higher- level total; 
Air Force: Monitored at squadron level; data are not compiled for 
higher-level total. 

Characteristic: Is the number of hours of required training in a 
servicewide regulation? 
Army: No[A]; 
Navy: Yes; 
Marine Corps: No; 
Air Force: No. 

Characteristic: How many hours of PFM training are required, according 
to the service's PFM program oversight office? Army: 12; 
Navy: 16; 
Marine Corps: No minimum requirement; Air Force: No minimum 
requirement. 

Characteristic: When is the PFM training provided to servicemembers? 
Army: 2 hours during basic training, 2 hours during advanced individual 
training, and 8 hours at the first duty station; Navy: 16 hours during 
advanced individual training; Marine Corps: Within 45 days of arrival 
at first duty station; Air Force: Upon arrival at first duty station. 

Source: GAO analysis of DOD data. 

[A] The Army oversight office stated the number of PFM training hours 
it requires is in a 1998 memorandum to the Army Chief of Staff. 

[End of table]

In addition to how the services monitor servicemembers' completion of 
PFM training, table 3 also shows that the services' requirements for 
PFM training for junior enlisted personnel differ on three other 
characteristics: where the requirements are documented, the length of 
training, and when the training is administered. 

* The Navy is the only service that specifies in servicewide 
regulations the number of hours of PFM training that junior enlisted 
servicemembers must complete. The oversight office for the Army 
identified the number of hours of required PFM training for first-term 
soldiers in a 1998 memorandum to the Army Chief of Staff.[Footnote 37] 
The Air Force and Marine Corps do not specify the number of hours in 
servicewide regulations or other documents. 

* The Navy's required length of PFM training for junior enlisted 
servicemembers is 4 hours longer than the Army requirement. The Air 
Force and Marine Corps have no minimum requirement pertaining to the 
length of the PFM training provided on its installations. 

* The services use different schedules for identifying when PFM 
training is to be administered. PFM managers noted that these schedules 
take into account service-specific constraints, such as the length of 
time available for PFM training at servicemembers' first duty station. 

Top-level DOD officials have stated repeatedly that financial issues 
have a direct effect on servicemembers' mission readiness and that the 
lack of basic consumer skills and training in finances sets the stage 
for financial difficulties. For example, we reported in 2003 that a 
2002 Navy report to Congress had identified $250 million in 
productivity and salary losses due to poor personal financial 
management by servicemembers.[Footnote 38] Therefore, units whose 
servicemembers do not receive required PFM training risk jeopardizing 
their ability to meet mission requirements. 

Some services are taking steps to improve their monitoring of PFM 
training. During the second quarter of 2005, the Army officials said 
they hope to implement Army's Client Tracking System that will allow 
the service as well as current and future installations to track the 
financial counseling and training that servicemembers receive. The 
Marine Corps is updating its order on personal services and developing 
a system to track financial management training. While such steps may 
improve the monitoring of PFM training completion--an important output-
-they still do not address the larger issues of training outcomes such 
as whether or not PFM training helps servicemembers to manage their 
finances better.[Footnote 39]

Conclusions: 

Although DOD-wide data show that the financial conditions for deployed 
and non-deployed servicemembers and their families are similar, some 
deployed servicemembers experience delays in obtaining their monthly 
family separation allowance. Not receiving this compensation each month 
to help defray extra household costs incurred when the servicemembers 
are deployed can result in financial hardship for the servicemembers' 
family. Without changes to the administration of the family separation 
allowance, DOD risks placing a further financial strain on 
servicemembers. In addition, problems communicating with creditors 
during deployment can cause financial difficulties for servicemembers. 
Limited Internet access, delays in ground mail, and the high cost of 
calling from overseas often prevent servicemembers from promptly 
contacting creditors when financial issues arise. Delays in responding 
to creditors can result in serious consequences, including bad credit 
ratings for the servicemembers and adverse effects on unit readiness 
and morale. 

While DOD states in its Social Compact that a standardized evaluation 
system to measure the effectiveness of the PFM programs is a desired 
goal, the department does not have an oversight framework that includes 
the performance measures and reporting requirements needed to fully 
measure results from its programs. In addition, the absence of 
evaluation and reporting requirements in DOD's newly issued instruction 
on personnel financial management suggests that DOD will continue to 
have limited visibility and oversight over the PFM programs and little 
ability to require standardized assessments of the PFM programs. These 
deficiencies, in turn, will limit Congress' ability to address issues 
related to DOD's PFM programs. 

While DOD and service officials have acknowledged that the lack of PFM 
training sets the stage for servicemembers having financial 
difficulties later, high deployment levels limit the time available for 
some servicemembers to take the PFM training. The absence of 
servicewide systems for monitoring the completion of this required 
training could result in some servicemembers never being provided such 
training if they are unable to take it at the prescribed time. 
Moreover, the lack of a monitoring system also will hamper efforts to 
improve PFM training since it will be impossible to establish a 
measurable relationship between whether or not someone completed 
training and how well they subsequently managed their finances. 

Recommendations for Executive Actions: 

To address issues related to servicemembers' financial management, we 
recommend that the Secretary of Defense direct the Under Secretary of 
Defense for Personnel and Readiness to take the following four actions 
* Take the necessary steps, in conjunction with the Defense Finance and 
Accounting Service and the services, to ensure servicemembers receive 
family separation allowances on a monthly basis during deployments. 
These steps might include those recommended in our prior review of Army 
Reserve pay,[Footnote 40] such as clarifying and simplifying procedures 
and forms implementing family separation allowance entitlements or 
having DOD and the operational components of the services work together 
to ensure family separation allowance entitlement eligibility form is 
received by the Defense Finance and Accounting Service to start the 
allowance when the servicemember is entitled to it. 

* Identify and implement, with the services, steps that can be taken to 
allow deployed servicemembers better communications with creditors. 
These steps may include increasing Internet access and providing toll- 
free telephone access for deployed servicemembers when they need to 
address personal financial issues. 

* Develop and implement, in conjunction with the services, a DOD-wide 
oversight framework with a results-oriented evaluation plan for the PFM 
programs and formalize DOD's oversight role by including evaluation and 
reporting requirements in the PFM instruction. 

* Require the services to develop and implement a tactical plan with 
time-based milestones to show how the appropriate service policy office 
will monitor financial management training and thereby ensure that 
junior enlisted servicemembers receive the required training. 

Agency Comments: 

On March 17, 2005, we provided a draft of this report to DOD for review 
and comment. As of the time this report went to final printing, DOD had 
not provided comments as requested. 

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time we will provide copies of this 
report to interested congressional committees and the Secretary of 
Defense. We will also make copies available to others upon request. 
This report will be available at no charge on GAO's Web site at 
[Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-5559 ([Hyperlink, stewartd@gao.gov]) or Jack E. 
Edwards at (202) 512-8246 ([Hyperlink, edwardsj@gao.gov]). Other staff 
members who made key contributions to this report are listed in 
appendix IV. 

Sincerely yours,

Signed by: 

Derek B. Stewart: 
Director, Defense Capabilities and Management: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

In addressing the objectives of our engagement, we limited our scope to 
active duty servicemembers because we have previously issued a number 
of reports on the compensation, benefits, and pay-related problems of 
reservists.[Footnote 41] Emphasis was placed on servicemembers who had 
returned from a deployment within the last year because these 
individuals were most likely to have recent personal knowledge of 
deployment-related financial issues, as well as familiarity with 
financial issues of servicemembers serving on installations in the 
United States. During the course of our work, we visited 13 
installations with high deployment levels, as identified by service 
officials[Footnote 42] (see table 4). During these site visits to 
installations in the United States and Germany, special emphasis was 
given to ascertaining the financial conditions of junior enlisted 
servicemembers because DOD and service officials have reported that 
this subgroup is more likely to encounter financial problems. 

Table 4: Installations in the United States and Germany Where GAO 
Conducted Site Visits from May to October 2004: 

Service: Army; 
Installation: Fort Bragg, North Carolina; 
Installation: Fort Campbell, Kentucky; 
Installation: Fort Drum, New York; 
Installation: Fort Lewis, Washington; 
Installation: Fort Stewart, Georgia; 
Installation: Ray Barracks, Friedberg, Germany. 

Service: Navy; 
Installation: Naval Air Station Jacksonville, Florida; 
Installation: Naval Station San Diego, California. 

Service: Marine Corps; 
Installation: Camp Lejeune, North Carolina; 
Installation: ServiceAir Force: Camp Pendleton, California. 

Service: Air Force; 
Installation: Bolling Air Force Base, Washington, D.C; 
Installation: Langley Air Force Base, Virginia; 
Installation: Ramstein Air Base, Germany. 

Source: GAO. 

[End of table]

To address the extent to which there is a financial impact of 
deployment on active duty servicemembers and their families, we 
reviewed and analyzed laws, policies, and directives governing military 
pay, such as the Servicemembers Civil Relief Act[Footnote 43] and DOD's 
Financial Management Regulation 7000.14R, Volume 7A, as well as 
documents related to the tax treatment of military pay, including the 
Internal Revenue Service Armed Forces' Tax Guide: For Use in Preparing 
2003 Returns. We also reviewed and analyzed GAO reports on military 
compensation and deployment and reports from other agencies, including 
DOD, the Congressional Research Service, and the Congressional Budget 
Office. We contacted the Federal Trade Commission to ascertain what 
data were available through Military Sentinel[Footnote 44] on 
servicemembers' financial conditions and complaints. We conducted focus 
groups and surveyed servicemembers and spouses and held individual 
interviews with PFM program managers, non-commissioned officers, and 
legal assistance attorneys at installations we visited to obtain their 
perspectives on the impact of deployment on servicemembers. We also 
compared and contrasted results of our survey of servicemembers and 
spouses with data obtained through DOD-wide active duty surveys from 
2003 for face validity and to identify trends and other indicators of 
financial impact. We assessed the reliability of survey data that DOD 
uses to obtain information on the financial conditions of 
servicemembers and their families. The March 2003 survey had a response 
rate of 35 percent. DOD has conducted and reported on research to 
assess the impact of this response rate on overall estimates. They 
found that, among other characteristics, junior enlisted personnel (E1 
to E4), servicemembers who do not have a college degree, and members in 
services other than the Air Force were more likely to be non- 
respondents. We have no reason to believe that potential non-response 
bias not otherwise accounted for by DOD's research is substantial for 
the variables we studied in this report. Therefore, we concluded the 
data to be sufficiently reliable to address our objectives. Additional 
perspectives regarding the financial impact of deployment were obtained 
in interviews with DOD and service policy officials. Still other 
perspectives were obtained from installation officials using the 
structured interviews and an e-mail survey to all PFM program managers. 
This information was supplemented with information obtained from three 
group discussions with a total of 50 personnel affiliated with the PFM 
programs while they attended a November 2004 conference. We also 
reviewed family separation allowance data from the Defense Finance and 
Accounting Service for servicemembers who were deployed and receiving 
imminent danger pay in January 2005.[Footnote 45]

To facilitate the data gathering process for all three 
questions,[Footnote 46] we developed and pre-tested four types of data 
collection instruments. The content of the instruments was identified 
through review of policies, reports, and other materials, and from 
interviews with DOD and service officials. 

* Structured questionnaires and focus group protocols were used to 
increase the likelihood that the questions were asked and procedures 
were conducted in a standardized manner, regardless of which GAO 
analyst conducted the interviews and focus groups during the 13 site 
visits. While the interviews and focus groups provided valuable 
qualitative data to illustrate important issues, the findings were not 
generalizeable to the population of all active duty servicemembers 
because of the small non-random samples of personnel who participated 
in the data collection sessions. 

* Separate structured interview protocols were created for seven types 
of officials: installation commanders, PFM program managers, senior 
non- commissioned officers (E8 to E9), legal assistance attorneys, 
chaplains, command financial specialists, and officials representing 
service relief/aid societies. While some of the questions were the same 
or very similar for some issues, the content of the structured 
interviews was tailored to the type of official interviewed. 

* A single focus group protocol, with seven central questions and 
follow-up questions, was used to solicit information from each of the 
four types of homogeneous groups: junior enlisted servicemembers (E1 to 
E4), non-commissioned officers (E5 to E9), company-grade officers (O1 
to O3), and spouses of servicemembers who had recently returned from 
deployments. 

* An anonymous survey was administered at the beginning of each focus 
group to obtain specific, sensitive (e.g., financial difficulties 
experienced by the servicemembers and their families) information that 
focus group participants might not feel comfortable discussing with 
other servicemembers present. Administering the survey before the focus 
group questions were asked allowed us to quantify participants' 
perspectives and situations, without the servicemembers being 
influenced by the subsequent discussions. 

* An e-mail survey was administered to the DOD-wide population of 225 
PFM program managers identified by service officials. The response rate 
for the survey was 74 percent. Because we surveyed the population of 
PFM program managers and obtained a sufficiently high response rate, 
the findings from this survey are generalizeable to the population of 
all PFM managers. 

To assess the adequacy of DOD's oversight framework for evaluating 
military programs that assist both deployed and non-deployed 
servicemembers in managing their personal finances, we reviewed DOD's, 
the services', and selected installations' PFM program policies, along 
with DOD's strategic and tactical plans for implementing the PFM 
programs. In addition, we reviewed DOD's 2002 report on Personal and 
Family Financial Management Programs submitted to the House of 
Representatives Armed Services Committee. The Government Performance 
and Results Act of 1993[Footnote 47] and Standards for Internal Control 
in the Federal Government[Footnote 48] provided model criteria for 
determining the adequacy of the oversight framework. We gathered 
perspectives about the outcome measures to evaluate the PFM programs 
from DOD and service-level officials, along with responses from the 
previously mentioned discussion groups at the November 2004 conference 
and the DOD-wide survey of PFM managers. We reviewed and analyzed data 
related to the effectiveness of the PFM programs from DOD-wide active 
duty survey conducted in 2003. We also reviewed accreditation reports 
for installation PFM programs, where available, and other materials 
documenting the use or effectiveness of PFM programs. Finally, we 
attended a GAO-sponsored forum in November 2004, in which a select 
group of individuals with expertise in financial literacy and education 
developed recommendations on the role of the federal government in 
improving financial literacy among consumers.[Footnote 49]

To assess the extent to which DOD and the services provide PFM training 
to junior enlisted servicemembers, we examined the regulations and 
other materials that document PFM training requirements such as the 
number of hours of training provided and when the training should 
occur. We reviewed DOD's, the services', and selected installations' 
PFM training materials, and procedures for monitoring completion of the 
training. We also reviewed reports issued by GAO, DOD, and other 
organizations that addressed the PFM programs or the content and 
delivery of similar programs designed to either increase financial 
literacy or address financial problems. Additionally, we interviewed 
service headquarters, as well as installation PFM officials about 
required training for junior enlisted servicemembers and how it is 
administered and monitored. 

Sampling Error and Non-Sampling Error: 

The e-mail survey that was administered by GAO to the DOD-wide 
population of 225 PFM program managers is not subject to sampling error 
since it was sent to the universe of PFM program managers. With a 
response rate for the survey of 74 percent and no clear differences 
between respondents and non-respondents, the findings from this survey 
are generalizeable to the population of all PFM managers. Our PFM 
survey had differential response rates that were as low as 65 percent 
for the Air Force and as high as 89 percent for the Navy. 

The questionnaire provided to focus group participants was to gather 
supplemental information only and is not generalizable to DOD, but 
rather to those who participated in our focus groups only. 

Because DOD surveyed a sample of servicemembers in its 2003 active duty 
survey, their results are estimates and are subject to sampling errors. 
However, the practical difficulties in conducting surveys of this type 
may introduce other types of errors, commonly known as non-sampling 
errors. Non-sampling errors can include problem(s) with the list from 
which the sample was selected, non-response in obtaining data from 
sample members, and/or inadequacies in obtaining correct data from 
respondents. These errors are in addition to the sampling errors. In 
this survey, the response rate was 35 percent. The estimates obtained 
from the respondents will differ from the population value to the 
extent that values for non-respondents are different, in the aggregate, 
from values for respondents. 

Non-Sampling Error and Data Quality: 

We conducted in-depth pre-testing of the PFM program manager survey, as 
well as the questionnaire disseminated to focus group participants, to 
minimize measurement error. However, the practical difficulties in 
conducting surveys of this type may introduce other types of errors, 
commonly known as non-sampling errors. For example, measurement errors 
can be introduced if (1) respondents have difficulty interpreting a 
particular question, (2) respondents have access to different amounts 
of information in answering a question, or (3) those entering raw 
survey data make key-entry errors. We took extensive steps to minimize 
such errors in developing the questionnaire, collecting the data, and 
editing and analyzing the information. For example, we edited all 
surveys for consistency before sending them for key-entry. All 
questionnaire responses were double key-entered into our database (that 
is, the entries were 100 percent verified), and a random sample of the 
questionnaires was further verified for completeness and accuracy. In 
addition, we performed computer analyses to identify inconsistencies 
and other indicators of errors. 

DOD also pre-tested its questionnaire to minimize measurement error and 
performed analysis to assess non-response error. 

We performed our work from March 2004 through February 2005 in 
accordance with generally accepted government auditing standards. 

[End of section]

Appendix II: Findings from GAO-led Focus Groups Held at 13 
Installations: 

We held focus group sessions at the 13 military installations we 
visited during the course of this engagement to obtain servicemembers' 
perspectives on a broad range of topics, including the impact of 
deployment on servicemembers' finances and the types of lenders 
military families use, along with the PFM training and assistance 
provided to servicemembers by DOD and service programs (see app. I for 
a list of installations visited). Servicemembers who participated in 
the focus groups were divided into three types of groups: junior 
enlisted personnel (E1 to E4), mid-grade and senior enlisted personnel 
(E5 to E9), and junior officers (O1 to O3). Although we requested to 
meet with servicemembers who had returned from a deployment within the 
last 12 months, some servicemembers who had not yet deployed also 
participated in the focus groups. At some installations, we also held 
separate focus groups with spouses of servicemembers. Typically, focus 
groups consisted of 6 to 12 participants. 

We developed a standard protocol, with seven central questions and 
several follow-up questions, to assist the GAO moderator in leading the 
focus group discussions. The protocol was pre-tested during our first 
installation visit and was used at the remaining 12 installations. 
During each focus group session, the GAO moderator posed questions to 
participants who, in turn, provided their perspectives on the topics 
presented. We essentially used the same questions for each focus group, 
with some slight variations to questions posed to the spouse groups. 

We sorted the 2,090 summary statements resulting from the 60 focus 
groups into categories of themes through a systematic content analysis. 
First, our staff reviewed the responses and agreed on response 
categories. Then, two staff members independently placed responses into 
the appropriate response categories. A third staff member resolved any 
discrepancies. 

Below, we have identified the seven questions and sample 
responses/statements associated with each question. The themes and the 
number of installations for which a statement about a theme was cited 
are provided in italics. Also, two examples of the statements 
categorized in the theme are provided. Only those themes cited at a 
minimum of three installations are presented. The number of 
installations--rather than the number of statements--is provided 
because (1) the focus of this engagement was on DOD-wide issues and (2) 
a lengthy discussion in a single focus group may have generated 
numerous comments. 

1. How has deployment affected military families financially in your 
unit?

1.a. Other reason deployment affects families financially 
(N=13)[Footnote 50]

* Example: Financial problems stem from relationship problems. Many 
Marines file for divorce when they return from a deployment. 

* Example: Another sailor said they have to buy a lot of supplies, such 
as stocks of deodorant and other toiletries, to take on the deployment. 
The government does not pay for those supplies. 

1.b. Better financially - increased income (N=13): 

* Example: A soldier stated that his family was barely making ends meet 
when he left for a deployment. However, when he returned, his wife had 
paid off all of the bills and saved some of the money. He and his wife 
look forward to deployments as a way to catch up on expenses and 
savings. 

* Example: Some cited receiving additional hazardous/combat duty pay 
and attendant tax exemptions during deployment as reasons for the 
financial benefits. In addition, some servicemembers mentioned that 
they no longer had to pay rent and incur related household expenses 
such as food and other household goods while deployed. The additional 
money allowed families to pay off debts and outstanding bills. 

1.c. Worse financially - increased needs (e.g., childcare and 
transportation) (N=12): 

* Example: Deployment worsens some servicemembers' finances because 
childcare expenses increased. In many instances, to avoid having 
childcare expenses, one parent will work during the day and one during 
the night. When the servicemember deploys, the remaining spouse must 
find suitable daycare for the children. This is an added expense the 
deployment forces on the family. 

* Example: During a deployment there are more expenses because the 
spouse has to pay for things that the servicemember would usually do 
personally, like house and car repairs. 

1.d. Worse financially - other (N=11): 

* Example: The military encourages soldiers to obtain a power of 
attorney before they deploy, but the power of attorney gives the spouse 
access to all of the soldier's finances. In many cases, the spouse has 
used this power to spend all of the soldier's money. One soldier 
returned from his deployment to find that he only had $80 left in his 
bank account. 

* Example: One unmarried soldier said he was 5 months behind in paying 
his bills because he's single and did not have anyone to help him while 
he was deployed. 

1.e. No change financially because of deployment (N=11): 

* Example: Overall, servicemembers are not really making more money 
when they are deployed. The additional pay and allowances make up for 
the increased spending that a family must do when the servicemember is 
not at home. 

* Example: Another servicemember stated that she was a single parent 
and had to send her child back to the west coast with her parents. She 
stated she came out about even financially because the extra money she 
made was spent on the additional expenses to care for her son. 

1.f. Effect issue - servicemember has dependents (N=11): 

* Example: Single parents face an entirely different set of issues 
during a deployment. For example, in many cases, the member will be the 
only parent for a child; 
therefore, when that member is deployed long- term childcare must be 
arranged. In most situations, the member will arrange for an immediate 
or extended family member to assume the childcare responsibilities. 

* Example: Some Navy servicemembers said that the status of personal 
finances during a deployment will vary based on the marital status of 
the sailor. For example, sailors with dependents will collect more 
entitlements than those who are single. 

1.g. Worse financially - increased wants (N=11): 

* Example: Some soldiers were buying expensive cars with their 
deployment pays. However, when the servicemembers returned from 
deployment to their regular pay they were not able to afford their 
deployment standards of living because the increase in income and tax 
free status no longer applied. 

* Example: The spouse may be depressed during the deployment and spend 
the money the soldier is being paid. In these cases, they have no one 
around telling them to save it or to pay the bills. They shop to fight 
the depression and to make themselves feel better. 

1.h. Better financially - other (N=10): 

* Example: In some cases, the family's finances actually improve 
because the spouse takes control of the bills during the deployment. 

* Example: Another participant stated that she and her husband are more 
financially responsible now compared to when they were younger. Thus, 
they are able to benefit more from the monetary benefits of deployment. 

1.i. Effect issue - personal ability to manage money (N=9): 

* Example: Poor post-deployment spending habits (e.g., buying a new 
expensive car) of some single servicemembers caused them to lose extra 
income earned during deployment. This left them with more debt than 
before they left for the deployment. 

* Example: In many cases, it is when the soldier returns from the 
deployment that families will get into financial troubles. During the 
deployment, there is a significant increase in pay and an increase in 
spending. After the deployment, the servicemember's pay returns to 
normal and the family may have trouble dealing with the loss of income, 
which can encourage increased debt. 

1.j. Effect issue - servicemember does not have dependents (N=7): 

* Example: Single servicemembers seemed to fare better financially 
because they do not incur the same expenses as married couples, such as 
childcare and transportation costs. The single member is more likely to 
be living with roommates and when deployed, he/she only has a small 
amount to pay for rent. The married servicemember, on the other hand, 
still has a mortgage to pay back home, along with the additional 
expenses previously mentioned. 

* Example: Single servicemembers are better off financially because 
they only have to take care of themselves financially. 

1.k. Effect issue - where deployed (N=6): 

* Example: The effect on finances depends on the location to which a 
servicemember is deployed. The pay and allowances that a soldier 
receives vary from location to location. In some places, soldiers can 
make a lot of money; in others, they will not. 

* Example: The financial impact of deployment depends on where an 
officer was deployed. In South Korea, servicemembers pay taxes and do 
not receive extra pay, as did those who served in combat zones. In 
addition, individuals deployed to South Korea lost their Basic 
Allowance for Housing, even though they needed it while deployed. The 
officer needed to live off base because of a lack of housing on base 
there. This meant paying for two households, one on deployment and one 
for the spouse and children at home. 

1.l. Worse financially - loss of income (N=5): 

* Example: Some spouses mentioned that they know of some soldiers that 
had to give up their second jobs when they left on the deployment and 
the loss of this income had a big impact on the family's finances. 

* Example: While at their home station, sailors collect commuted 
rations, also referred to as comrats. Commuted rations are a pay 
allowance given to sailors to cover the cost of meals incurred off base 
when they are not serving on and eating aboard the ship. When a sailor 
goes out to sea, the commuted rations payments are stopped and sea pay 
is started. Also, a sailor is entitled to Career Sea special pay, or 
sea pay, at a monthly rate of up to $750. The actual amount of sea pay 
varies based on the sailor's rank and number of years served and can 
range from $70 to $750 a month. However, younger sailors do not have 
enough time accrued on their sea pay clock to make up for the loss of 
commuted rations pay. Therefore, some families will actually lose money 
during the deployment. 

1.m. Better financially - decreased expenses (N=5): 

* Example: At some deployment locations, there is nowhere to spend the 
extra income. There are no bars, no daily expenses like gasoline, and 
no phone bills. Yet the Marines are being paid the additional 
entitlements and pay. 

* Example: One participant said she thought her family's finances were 
in better shape during her husband's deployment because he was not able 
to spend the extra money he earned and the family was able to save more 
money while he was deployed. 

2. Could you tell me about servicemembers you know who have gone 
through any financial difficulties such as declaring bankruptcy, 
falling behind on bills, or having a car or appliance repossessed?

2.a. Overspending/bad money management (N=13): 

* Example: There were servicemembers who ran into severe financial 
problems after they returned from deployment due to overspending and 
overextending themselves financially while they were deployed. 

* Example: Another participant said that he knew of a few junior 
enlisted servicemembers who spent all their money on expensive cars and 
other things, once they returned from deployment. They did not save any 
of the extra money they received. 

2.b. Other experiences with financial difficulties (N=13): 

* Example: One airman experienced a situation in which a creditor would 
not accept the automatic money transfer that was set up before the 
deployment. 

* Example: One soldier's ex-wife took him to court while he was 
deployed in an attempt to obtain additional child support money. 
Because of the additional entitlements and pay that the soldier was 
collecting, the court increased the payments to match. The soldier was 
unable to return home or communicate to prevent the action or mediate 
in the situation. 

2.c. Defense Finance and Accounting Service errors (N=11): 

* Example: One of the airmen had a series of late payments during a 
deployment because Defense Finance and Accounting Service did not 
process an allotment correctly and the money was not getting sent to 
the correct place. 

* Example: Almost all of the airmen knew someone who did not have their 
pay entitlements stopped after returning from the deployment. In most 
instances, Defense Finance and Accounting Service was continuing to pay 
the entitlement for several months; unfortunately, once the problem was 
resolved, Defense Finance and Accounting Service took back the amount 
owed in one lump sum. This left the airmen with paychecks amounting to 
zero dollars. 

2.d. Communication problems (lack of Internet/e-mail/mail/phone) 
(N=10): 

* Example: A servicemember stated that a major issue with deployment 
was not being able to pay bills on time because the infrastructure down 
range (combat zone) was not immediately set up to deliver/send mail. 

* Example: During deployments, the junior enlisted personnel do not 
have as much access to the Internet as the senior Marines. This can 
have a negative impact on their ability to access their checking and 
other financial accounts, thereby impacting their ability to manage 
their finances. 

2.e. Difficulty maintaining checkbook/finances (N=10): 

* Example: Many servicemembers have the mentality that because they 
earn the money it is theirs to manage. When the soldier is at home, he 
or she controls the finances; and when the soldier leaves, the spouse 
does not know how to handle the bills, finances, or budget. 

* Example: In many situations, single sailors may not have someone back 
home to take care of their bills or manage their finances. 

2.f. Car repossessed (N=9): 

* Example: Some soldiers spent their money quickly after they returned 
from the deployment and bought expensive cars. In a few instances, 
these cars were repossessed because the soldiers could not make the 
monthly payments. 

* Example: A soldier stated that some servicemembers' allotments were 
not processed, which resulted in their cars being repossessed. This 
also left the servicemembers with a bad credit rating. 

2.g. Did not experience financial difficulties during deployment (N=6): 

* Example: A participant stated he knew of very few soldiers who were 
negatively affected financially because of deployment. 

* Example: Those who fared well with their finances had relationships 
with helpful people/spouses who were able to manage their finances for 
the servicemembers while they were deployed. 

2.h. Fell behind in bills (N=6): 

* Example: A servicemember said that he and his spouse had fallen 
behind on paying their bills. 

* Example: A soldier said that a servicemember's phone was disconnected 
because his spouse went to another state to visit relatives for 2 
months and the phone bill was not paid. 

2.i. Bankruptcy (N=5): 

* Example: Participants stated that they had heard of very few 
servicemembers who had to file for bankruptcy as a result of 
deployment. 

* Example: One of the officers was aware of a sergeant who had to file 
bankruptcy upon returning from deployment. During the deployment, the 
sergeant's spouse spent all of the extra money and took out "a ton" of 
additional debt. 

2.j. Problems with government credit card (N=4): 

* Example: The government travel card causes more problems than other 
cards. Sailors are traveling back to back with several deployments and 
take out back to back debts. The Travel Processing Center may not 
process the travel claims in 10 days like they are supposed to, so 
people are running up debt on the government travel card that they 
cannot pay off. 

* Example: Sometimes servicemembers have had to pay (their government 
travel card bill) with their own money while waiting for funds to be 
provided/reimbursed by the government. This takes money out of their 
household and can affect their credit rating. It can take up to 2 
months to get their money from the Defense Finance and Accounting 
Service. 

3. During your deployment, how did servicemembers in your unit handle 
situations when there were financial problems at home?

3.a. Used in-theatre resources (chain of command, e-mail, Internet) 
(N=10): 

* Example: Soldiers had to go through their chain of command to take 
care of some of their financial situations and the issues were resolved 
with the assistance of the chain of command. 

* Example: Most of the other participants said they had a non- 
commissioned officer log them onto the Internet to check on their 
bills, and this helped them. 

3.b. Used resources at home (family support center, family readiness 
officer) (N=8): 

* Example: There are many people on base that help spouses during the 
deployment. The key volunteers group that meets once or twice a week is 
a good resource for the families to use if they need assistance during 
the deployment. 

* Example: On Air Force bases, there is an abundance of assistance for 
servicemembers with financial problems. Information is provided 
through: First Term Airman Center, Personal Financial Counseling, Air 
Force Aid Society, Air Force Assistance Fund, First Sergeants, Finance, 
and the Judge Advocate General. These are some of the resources 
available to servicemembers for finance-related issues. 

3.c. Other financial problems on homefront (N=5): 

* Example: Sometimes a single servicemember will leave advance rent 
checks for the landlord of the apartment and the landlord will deposit 
all of the checks at once, which results in overdrafts for the 
servicemember. 

* Example: There are many instances of spouses back home that spend all 
of the additional income that the Marine is making during the 
deployment. When the Marine returns, he or she will find all of their 
money gone and nothing to show for it. 

3.d. Waited until they got home (N=5): 

* Example: Some participants said they just waited to handle the 
problems until after they returned home if they do not have anyone to 
help them and the situation had not been brought to the command's 
attention. They did not want the command involved in their finances. 

* Example: In instances where the servicemember's spouse spends all of 
the money, the member normally is not able to do anything until he or 
she returns from the deployment. 

4. What kind of financial assistance does your service or the military 
need to take care of financial problems when people are deployed?

4.a. Pre-deployment briefs (more information or briefs before 
deployment notice received) (N=11): 

* Example: More financial awareness training prior to the deployment 
would have helped alleviate many problems that individuals experienced. 
The current 2-minute brief is not enough. 

* Example: Even though the base legal office offers a will and power of 
attorney class every Tuesday, some Marines are unable to attend. The 
information in the classes needs to be incorporated into the pre- 
deployment briefings. 

4.b. Other kinds of financial assistance needed (N=9): 

* Example: Small groups, such as married servicemembers with children 
or single servicemembers, should be given specific attention or focus 
when information on finances is distributed because the different 
groups have different needs when it comes to finances. 

* Example: The First Term Airmen Center should give out warnings to new 
airmen about which lenders around base are good to work with and which 
ones are not so good. 

4.c. Sustained training (provided throughout career) (N=7): 

* Example: Financial training should occur upfront and be proactive-- 
not be reactive, like it is now. Currently, classes are required only 
if the soldier has written bad checks. 

* Example: More overall financial education is needed. One soldier was 
enlisted for 5 years before he got any formal financial management 
training, and that was only because he got in trouble. Education is the 
key in improving financial management. 

4.d. Early training (boot camp, Advanced Individual Training) (N=6): 

* Example: The military needs to provide more financial training in 
basic/boot camp to include in-depth discussions of allotments, 
deductions, and leave and earnings statements. One soldier said he did 
not know what a leave and earnings statement was until he came to his 
unit. 

* Example: Financial training courses should be incorporated into basic 
training or technical school. By conducting this training early, DOD 
may have an impact on initial purchase decisions made by 
servicemembers. 

5. What kinds of experiences have your fellow servicemembers or 
subordinates had with predatory lenders?

5.a.Other issues regarding experiences with predatory lenders (N=13): 

* Example: Business representatives will tell young Marines that they 
can buy an item for a certain amount each month. They keep the Marine 
focused on the low monthly payments and not on the interest rate or the 
term of the loan. 

* Example: Some Marines feel that a business would not take advantage 
of them because they are in the military. This leads them to be more 
trusting of the local businesses than they should be, which in turn, 
leads the businesses to take advantage of them. 

5.b. Predatory lender used - car dealers (N=11): 

* Example: Most of the participants stated that the car dealerships 
around the base were the worst predatory lenders because they charge 
high interest rates and often provide cars that are "lemons." They said 
that most of the sales people at the dealerships are former military 
who know how to talk to servicemembers to obtain the members' trust. 
The servicemember does not expect this. 

* Example: One captain had a Marine in his unit who signed a contract 
with a car dealer for a loan with 26 percent interest rate. The captain 
took the Marine to the Marine Credit Union and got him a new loan with 
9.5 percent interest rate. 

5.c. Predatory lender used - payday lenders (N=10): 

* Example: A master sergeant got caught in the check-cashing cycle. He 
would write a check at one payday lender in order to cover a check 
written at another lender during a previous week. 

* Example: One participant told us that when he was a younger Marine he 
got caught up with a payday lender. The problem did not resolve itself 
until he deployed and was not able to go to the lender anymore. 

5.d. Reason for using predatory lender - get fast cash and no hassle 
(N=10): 

* Example: People use payday lenders because they are quick and easy. 
All the soldiers have to do is to provide their leave and earnings 
statement and they get the money. 

* Example: Most of the participants say they know people who have used 
a payday lender, and those soldiers use them because they have bad 
credit and can get quick cash. 

5.e. Predatory lender targeting - close proximity and clustering around 
bases (N=9): 

* Example: It is almost impossible to be unaware of lenders and 
dealerships because many are clustered in close proximity to the 
installation. They also distribute flyers and use pervasive advertising 
in local and installation papers. 

* Example: The stores and car lots near the installation use signs that 
say "E1 and up approved" or "all military approved" to get the 
attention of the military servicemembers. 

5.f. Command role when contacted by creditors (N=8): 

* Example: The non-commissioned officers offer to go with the junior 
enlisted to places like car dealers; but the young soldiers do not take 
them up on these offers. 

* Example: One participant said that debt collectors do call his house 
and the command. He noted that one lender called him nine times in one 
day and his Chief Petty Officer eventually asked the lender to stop 
harassing his sailor. 

5.g. Predatory lender targeting - advertising in installation/local 
newspaper (N=7): 

* Example: Soldiers are being targeted by predatory lenders in a 
variety of ways; for example, flyers are left on parked cars at the 
barracks, advertising is done at installation functions, and words such 
as "military" are used on every piece of advertising to make the 
servicemember believe that the company is part of or supported by the 
military. The servicemember would normally trust lenders associated 
with the military. 

* Example: Most predatory lenders have signs that say "military 
approved" or have commercials that say the same thing or "E1 and above 
approved."

5.h. Reason for using predatory lender - urgent need (N=6): 

* Example: Many soldiers use payday lenders because they are in a bind 
for money and they know these lenders can provide quick cash. 

* Example: Soldiers will use a payday lender because they need money 
for a child, the kids, the house payment, etc. In many cases, it does 
not matter why they need it; they just need it. So, they go where they 
can get cash the fastest and the easiest way possible. 

5.i. Predatory lender used - furniture/rent-to-own (N=6): 

* Example: One of the participants stated that he had obtained a loan 
to purchase a new washer and dryer. The loan had a 55 percent interest 
rate and the appliances cost a lot more than they should have. 

* Example: Rent-to-own businesses are widely used by soldiers. One 
soldier paid $3,000 for an $800 washer and dryer set. 

5.j. No problem with predatory lenders (N=5): 

* Example: There have not been any problems with predatory lenders 
lately. The state of Florida has been using legislation to shut them 
down. 

* Example: The participants said that they had never encountered an 
officer that had to use payday lenders or predatory lenders. Most of 
the officers' problems come when they have a bitter divorce. 

5.k. Reason for using predatory lender - other reasons (N=5): 

* Example: One soldier stated that his credit was so bad that he had no 
other option but to use high interest rate lenders. He stated that, "I 
have bad credit and I will always get bad credit."

* Example: One participant said he has several friends that use payday 
lenders because they are E1s or E2s and don't make much money. 

5.l. Predatory lender targeting - employing former military members 
(N=4): 

* Example: The people running and working for the predatory businesses 
are usually former military servicemembers. They will use their 
knowledge of the system to take advantage of Marines. 

* Example: Many times the predatory lenders are veterans, former 
Marines, or retirees. The participant said that by using these types of 
people, it gives the younger Marines a false sense of trust and then 
the lenders will take advantage of the servicemember or "stab them in 
the back."

5.m. Reason for using predatory lender - command will not know 
financial conditions (N=3): 

* Example: When a soldier needs money, a payday loan can be used 
without notifying the chain of command. Any of the Army forms of 
assistance require a soldier to obtain approval from "a dozen people" 
before they can get any money. 

* Example: The most significant reason that people use payday lenders 
is privacy. The spouses stated that if you try to obtain assistance 
through the Air Force, you must use the chain of command to obtain 
approval. By doing so, everyone in the unit will know your business. 

6. What types of financial services have fellow servicemembers and/or 
subordinates in your unit used?

6.a. Service relief/aid societies (N=13): 

* Example: Servicemembers are often reluctant to approach Army 
Emergency Relief Society because they have to complete too much 
paperwork. Some have concerns that their superiors will find out that 
they used these services and superiors may think this is a sign of 
weakness or failure on the part of the servicemember. 

* Example: One soldier stated that he used the Army Emergency Relief 
Society because he did not have good credit and needed $1,400 as a 
security deposit. He said they gave him a loan and that he is paying 
them back at $60 per month. 

6.b. Other types of services used/aware of (N=13): 

* Example: Assistance is available for Marines with financial problems. 
For example, there is a Key Volunteers Network made up of enlisted and 
officers' wives. 

* Example: One of the sailors was having financial problems and did not 
want the command to know, so he sought help from the Federal Credit 
Union. The credit union was able to help with the $50,000 he had 
accumulated in debt. They contacted the lenders for him and told them 
not to contact anyone in the command about the problem. The debt was 
re- organized and repayment began. All of this was accomplished without 
the help of the Navy. 

6.c. Community service center/family support center's personal 
financial managers (N=13): 

* Example: Some servicemembers who have problems have received help 
from Army Community Services. Army Community Services does not provide 
money or loans but does give some household items such as pots and pans 
and these items do provide some help to those in financial trouble. 

* Example: When supervisors recognize a subordinate is having financial 
problems, most of them will refer the subordinate to the family support 
center for counseling, budget planning, and basic personal finance 
skills like balancing a checkbook. 

6.d. DOD Financial Readiness Campaign/services' Internet resources 
(N=11): 

* Example: None of the participants had heard of the Financial 
Readiness Campaign. 

* Example: Only one of the 11 participants was aware of the Financial 
Readiness Campaign. The servicemember that did know about it said that 
the information was difficult to sort through and may not be helpful to 
those without a basic knowledge of finances. 

6.e. Servicemembers Civil Relief Act (N=9): 

* Example: One airman said that he used the Servicemembers Civil Relief 
Act to reduce his total indebtedness during his deployment. In fact, 
after returning from the deployment, the credit companies kept the 
interest rates at 6 percent or less. 

* Example: One of the participants talked about how he used the 
Servicemembers Civil Relief Act to get out of a lease prior to 
deployment. 

6.f. No services used or not aware that any service was used (N=7): 

* Example: One participant said that there are financial services 
available but because they are not very well advertised, many 
servicemembers do not know about them. 

* Example: The spouse stated she was not aware of any available 
assistance programs because information about programs does not get 
communicated well at the installation. 

6.g. Legal office (N=6): 

* Example: There is a legal office that can review purchase contracts 
while the sailor is at home and a legal assistance attorney onboard 
ship who can provide assistance. 

* Example: Sometimes the family at home cannot take care of financial 
issues, even if they have power of attorney. The best solution is to 
obtain help from the on base legal office. 

6.h. Command financial specialists (N=5): 

* Example: Soldiers have used the command financial specialist within 
their units to receive counseling, training, and information. 

* Example: Most of the participants said that they had a command 
financial specialist in their unit but did not use these individuals, 
primarily because of a lack of trust. They said that if a servicemember 
talked about financial problems with these people, it would end up 
through the chain of command. If someone were to see a servicemember in 
the command financial specialist's office, then they would know/assume 
the servicemember had a financial problem. 

7. Is there additional assistance that could be provided to 
servicemembers or subordinates by the chain of command or DOD to 
improve the financial condition of military families?

7.a. Additional financial management training at installation and 
throughout career (N=13): 

* Example: Some of the participants said the briefings provided to 
soldiers during base "in processing" are too quick. They normally last 
about 10 minutes and that is not enough time to discuss financial 
matters. 

* Example: There should be financial management training points 
throughout a sailor's career. For example, basic training, Advanced 
Individual Training, reenlistment, and then annual recurring training. 

7.b. Other additional assistance (N=12): 

* Example: A soldier stated that the offices that provide finance 
information are closed when the servicemembers get off work. Their 
hours should be longer because the soldiers' unit will not allow them 
time off to go to the finance centers just to browse and acquire 
general financial information. 

* Example: The military credit unions should be combined into one 
institution. No more Marine, Navy, or Army Federal Credit Unions, just 
one large credit union. This would lead to more lending power and 
better interest rates. 

7.c. More money (N=10): 

* Example: All military members should get pay raises. The pay increase 
should be significant and not just a few dollars every paycheck. People 
are dying every day for their country, so they should get paid well. 

* Example: Servicemembers, particularly in the junior enlisted ranks, 
should be given more pay. 

7.d. Improve timeliness/accuracy of Defense Finance and Accounting 
Service (N=7): 

* Example: Make the finance office provide more timely reimbursement 
for vouchers. One soldier just got back from Iraq and said that 
currently, it takes the Defense Finance and Accounting Service about 6 
months to pay the voucher. 

* Example: The deployment actually messes up the servicemember's 
paychecks. When starting the deployment, the addition of certain pay 
and allowances and the subtraction of other allowances are never done 
quickly and efficiently. Defense Finance and Accounting Service is 
always either overpaying or underpaying the Marine. When they overpay, 
they take the money back in one shot, not over a period of time. 

7.e. Armed Forces Disciplinary Control Board/off-limits list (N=7): 

* Example: When the Armed Forces Disciplinary Control Board does put a 
business on the off-limits list, the word is not put out and it is 
never enforced. 

* Example: The Navy needs to blacklist places that practice predatory 
lending. One participant, who is a legal officer in her unit, does 
provide a list of places to avoid to her sailors when they check in 
even though she is not allowed to do this. She does not understand why 
the Navy is allowed to tell sailors not to go to a porn shop, but is 
not supposed to tell them not to go to predatory lenders. The Navy 
needs some type of list of businesses that have done questionable 
things. It does not necessarily have to be an "off-limits" list. 

7.f. Care packages (N=6): 

* Example: It is common for spouses to send care packages to soldiers 
during a deployment. The expense of shipping these packages is 
significant. In addition, they generally include items for friends of 
soldiers who do not have spouses or families sending items. 

* Example: Care packages can be expensive for the family, especially 
when they have to send equipment that is not supplied by the military. 

7.g. Improve Internet access during deployment (N=5): 

* Example: Navy should have better Internet access on the ships. They 
could provide Internet access in the library. Right now the junior 
enlisted have to ask officers to log them on. 

* Example: The Navy needs to increase the number of computers on ships 
and the access to the Internet. It is not beneficial to have Internet- 
based resources if no one can access the Internet during a deployment. 
Furthermore, when the sailors are at home station, the work computers 
are used for work and not for personal use. Therefore, the sailors 
still cannot access information on the Financial Readiness Campaign. 

[End of section]

Appendix III: Resources Available to Assist Servicemembers with 
Financial Issues: 

Several resources exist to assist servicemembers with financial issues. 
These include military-sponsored PFM training, DOD's Financial 
Readiness Campaign, individual service resources, such as command 
financial specialists and personal financial managers, and resources 
outside of DOD such as those provided through on-and off-installation 
banks and credit unions. 

Financial Management Training: 

All four military services require PFM training for servicemembers, and 
the timing and location of the training varies by service. The Army 
begins this training at initial military, or basic, where soldiers 
receive 2 hours of PFM training. Training continues at Advanced 
Individual Training schools, where soldiers receive an additional 2 
hours of training and at the soldiers' first duty station, where they 
are to receive an additional 8 hours of PFM training. In contrast, Navy 
personnel receive 16 hours of PFM training during Advanced Individual 
Training. The Marine Corps and the Air Force, on the other hand, begin 
training servicemembers on financial issues at their first duty 
stations. 

Events, such as deployment or a permanent change of station, can 
trigger additional financial management training for servicemembers. 
The length of this additional training and the topics covered can vary 
by installation and command. Also, unit leadership may refer 
servicemembers for financial management training or counseling if the 
unit command is made aware of an individual's financial problems. For 
example, the Army requires refresher financial training for personnel 
who have abused check-cashing privileges. 

DOD's Financial Readiness Campaign Resources: 

DOD's Financial Readiness Campaign, which was launched in May 2003, 
supplements PFM programs offered by the individual services. The Under 
Secretary of Defense for Personnel and Readiness stated that the 
department initiated the campaign to improve the financial management 
available to servicemembers and their families and to stimulate a 
culture that values financial health and savings. The campaign allows 
installation-level providers of PFM programs to access national 
programs and services developed by federal agencies and non-profit 
organizations. The primary components of the campaign are the Web-based 
resources and partnerships with federal agencies and non-profit 
organizations. 

DOD's Web-based Resources: 

The primary tool of the Financial Readiness Campaign is a Web 
site[Footnote 51] designed to assist PFM program managers in developing 
installation-level campaigns to meet the financial management needs of 
their local military community. This Web site, which is also available 
to the public, contains important documents for the campaign as well as 
links to partners' Web sites. For example, the DOD Web site contains 
the original memorandum announcing the start of the campaign, overall 
campaign objectives, as well as the names of, agreements with, and 
links to the campaign's 27 partner organizations. DOD's May 2004 
assessment of the campaign[Footnote 52] noted, however, that 
installation-level PFM staffs have made minimal use of the campaign's 
Web site. DOD campaign officials stated that it was early in 
implementation of campaign efforts and that they have been 
brainstorming ideas to repackage information given to PFM program 
managers, as well as servicemembers and their families. For example, 
officials are considering distributing financial information to 
servicemembers and military families at off-installation locations, as 
well as implementing "financial fairs" and "road shows" at military 
communities to increase awareness and encourage financial education. 

Partnerships with 27 Organizations: 

DOD has partnered with 27 organizations that have pledged to support 
DOD in implementing its Financial Readiness Campaign. For example, the 
Association of Military Banks of America is a not-for-profit 
association of banks that operate (1) on military installations, (2) 
off military installations but serving military customers, and (3) 
within military banking facilities designated by the U.S. Treasury. 
That association is supporting the Financial Readiness Campaign by 
encouraging member banks to provide, participate in, and assist DOD 
with financial training events. Another partner, the InCharge Institute 
of America, is producing a quarterly periodical called Military Money. 
The periodical is aimed at promoting financial awareness among the 
spouses of servicemembers. 

Military Service Resources: 

Each military service has several resources available at the 
installation level to assist servicemembers with financial issues. 
These include command financial specialists, the PFM program managers 
and staff, legal services, and service relief/aid societies. 

Command Financial Specialists: 

Command financial specialists are senior enlisted personnel (usually E6 
and above) who are trained by PFM program managers to assist 
servicemembers at the unit level, by providing financial education and 
counseling. These non-commissioned officers may perform the role of the 
command financial specialist as a collateral duty in some units or as a 
full-time duty in others. The Navy, Marine Corps, and Army use command 
financial specialists to provide unit assistance to servicemembers in 
financial difficulties; the Air Force does not use command financial 
specialists within the unit, but has the squadron First Sergeant 
provide first-level counseling. 

PFM Program Managers and Staff: 

Individual servicemembers who require counseling beyond the capability 
of the command financial specialists or First Sergeant in the Air Force 
can see the installation's PFM program manager or PFM staff. The PFM 
program manager is a professional staff member designated and trained 
to organize and execute financial planning and counseling programs for 
the military community. PFM program managers and staff offer individual 
financial counseling as well as group classes on financial issues. 

Army, Navy, and Marine Corps regulations state that each installation 
should have a manager for PFM issues. The Air Force no longer 
designates one staff member as the PFM program manager, but it uses 
"work life consultants" in its family support centers to provide PFM 
training and counseling. The DOD's November 2004 PFM 
instruction[Footnote 53] places certain requirements on staff who 
provide PFM training and counseling. For example, it states that the 
one staff member within a family support center shall be designated and 
trained to organize and execute financial planning and counseling 
programs for the military community. In addition, that staff member 
must receive continuing education on PFM annually and maintain 
professional certification. 

Legal Services: 

Individual installation legal offices also offer financial services to 
servicemembers. For example, the legal assistance attorneys may review 
purchase contracts for large items such as homes and cars. In addition, 
the legal assistance attorneys offer classes on varying financial 
issues including powers of attorney, wills, and divorces. 

Service Relief/Aid Societies: 

Each service has a relief or aid society designed to provide financial 
assistance to servicemembers. The Army Emergency Relief, Navy-Marine 
Corps Relief Society, and the Air Force Aid Society are all private, 
non-profit organizations. These societies provide counseling and 
education as well as financial relief through grants or no-interest 
loans to eligible servicemembers experiencing emergencies. Emergencies 
include funds needed to attend the funeral of a family member, repair 
of a primary vehicle, or funds for food. For example, in 2003, the 
Navy- Marine Corps Relief Society provided $26.6 million in interest- 
free loans and $4.8 million in grants to servicemembers who needed the 
loans for emergencies. 

Resources Available Outside of DOD: 

Servicemembers may utilize financial resources outside of DOD, which 
are available to the general public. These can include banks or credit 
unions for competitive rates on home or automobile loans, commercial 
Web sites for interest rate quotes on other consumer loans, consumer 
counseling for debt restructuring, and financial planners for advice on 
issues such as retirement planning. 

[End of section]

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Jack E. Edwards (202) 512-8246: 

Acknowledgments: 

In addition to the individual named above, Leslie C. Bharadwaja; Alissa 
H. Czyz; Marion A. Gatling; Gregg J. Justice, III; David A. Mayfield; 
Brian D. Pegram; Terry L. Richardson; Minette D. Richardson; and Allen 
D. Westheimer made key contributions to this report. 

[End of section]

Related GAO Products: 

[End of section]

 
 
Military Personnel: DOD Tools for Curbing the Use and Effects of 
Predatory Lending Not Fully Utilized. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-349] Washington, D.C.: April 
26, 2005. 
 
Credit Reporting Literacy: Consumers Understood the Basics but Could 
Benefit from Targeted Educational Efforts. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-223] Washington, D.C.: March 
16, 2005. 
 
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05-93SP] Washington, D.C.: November 15, 2004. 
 
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[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1005] Washington, 
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Military Pay: Army Reserve Soldiers Mobilized to Active Duty 
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Military Pay: Army Reserve Soldiers Mobilized to Active Duty 
Experienced Significant Pay Problems. [Hyperlink, 
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Military Personnel: Survivor Benefits for Servicemembers and Federal, 
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http://www.gao.gov/cgi-bin/getrpt?GAO-04-814] Washington, D.C.: July 
15, 2004. 
 
Military Personnel: DOD Has Not Implemented the High Deployment 
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Short Periods. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04- 
805] Washington, D.C.: June 25, 2004. 
 
Military Personnel: Active Duty Compensation and Its Tax Treatment. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-721R] Washington, 
D.C.: May 7, 2004. 
 
Military Personnel: Observations Related to Reserve Compensation, 
Selective Reenlistment Bonuses, and Mail Delivery to Deployed Troops. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-582T] Washington, 
D.C.: March 24, 2004. 
 
Military Personnel: Bankruptcy Filings among Active Duty Service 
Members. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-465R] 
Washington, D.C.: February 27, 2004. 
 
Military Pay: Army National Guard Personnel Mobilized to Active Duty 
Experienced Significant Pay Problems. [Hyperlink, 
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the Progress of the Selective Reenlistment Bonus Program. [Hyperlink, 
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Experienced Significant Pay Problems. [Hyperlink, 
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13, 2003. 
 
Military Personnel: DFAS Has Not Met All Information Technology 
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Military Personnel: Active Duty Benefits Reflect Changing Demographics, 
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bin/getrpt?GAO-02-935] Washington, D.C.: September 18, 2002. 

(350491): 

FOOTNOTES

[1] See Department of Defense, Deputy Assistant Secretary of Defense 
(Military Community and Family Policy), A New Social Compact: A 
Reciprocal Partnership between the Department of Defense, Service 
Members and Families (July 2002). 

[2] See Department of Defense, Report on Personal and Family Financial 
Management Programs (Mar. 31, 2002) in response to a House Committee on 
Armed Services requirement in the National Defense Authorization Act 
for Fiscal Year 2002. 

[3] Army Regulation 608-1, Army Community Service Center (Oct. 20, 
2003). Office of the Chief of Naval Operations Instruction 1740.5A, 
Personal Financial Management Education, Training, and Counseling 
Program (Jan. 30, 2002). Marine Corps Order P1700.24B, Marine Corps 
Personal Services Manual (Dec. 27, 2001), is being revised and will 
have a list of topics that each installation will be required to cover 
during financial literacy training for first-term Marines. Air Force 
Instruction 36-3009, Family Support Center Program (July 1, 1998). 

[4] See RAND, Assessing the Personal Financial Problems of Junior 
Enlisted Personnel, MR-1444-OSD (2002). This report defines junior 
enlisted as those enlisted servicemembers with less than 10 years of 
service. Our report defines junior enlisted as servicemembers in pay 
grades E1 to E4. 

[5] See GAO, Military Personnel: Bankruptcy Filings among Active Duty 
Service Members, GAO-04-465R (Washington, D.C.: Feb. 27, 2004). 

[6] See GAO, Military Personnel: DOD's Tools for Curbing the Use and 
Effects of Predatory Lending Practices Not Fully Utilized, GAO-05-349 
(Washington, D.C.: Apr. 26, 2005). 

[7] Our work focused on active duty servicemembers and DOD surveys of 
the Army, Navy, Marine Corps, and Air Force servicemembers, excluding 
National Guard and Reserve members who (1) have at least 6 months of 
service when the survey is fielded and (2) are below flag rank when the 
sample is drawn 6 months prior to the survey. Information on the 
financial condition of servicemembers in the Reserves and the National 
Guard can be found in GAO, Military Personnel: DOD Needs More Data to 
Address Financial and Health Care Issues Affecting Reservists, GAO-03- 
1004 (Washington, D.C.: Sept. 10, 2003), and GAO, Military Personnel: 
Observations Related to Reserve Compensation, Selective Reenlistment 
Bonuses, and Mail Delivery to Deployed Troops, GAO-04-582T (Washington, 
D.C.: Mar., 24, 2004). 

[8] Pub. L. No. 103-62, (Aug. 3, 1993). 

[9] Hereafter referred to as legal assistance attorneys in this report. 

[10] See GAO, Military Pay: Army Reserve Soldiers Mobilized to Active 
Duty Experienced Significant Pay Problems, GAO-04-911 (Washington, 
D.C.: Aug. 20, 2004). We found that the procedures to determine 
entitlement and to process family separation allowance were not well 
understood by either pay technicians or soldiers themselves. We 
recommended that the Secretary of the Army, in conjunction with the 
Under Secretary of Defense (Comptroller), clarify and simplify 
procedures and forms implementing family separation allowance 
entitlement policy. 

[11] See GAO, Highlights of a GAO Forum: The Federal Government's Role 
in Improving Financial Literacy, GAO-05-93SP (Washington, D.C.: Nov. 
15, 2004). This report resulted from a July 28, 2004, forum that GAO 
hosted to develop recommendations on the role of the federal government 
in improving financial literacy. The forum's participants included a 
select group of individuals with expertise in financial literacy and 
education. They included representatives of federal and state agencies, 
the financial industry, non-profit organizations, and academic 
institutions. 

[12] Pub. L. No. 108-159, Title V, (Dec. 4, 2003). 

[13] See GAO-04-465R. 

[14] See GAO-04-465R. 

[15] Congress in the Ronald Reagan National Defense Authorization Act 
for Fiscal Year 2005 (Pub. L. 108-375, Section 623 (Oct. 28, 2004)) 
made this a permanent increase for servicemembers. 

[16] DOD Financial Management Regulation 7000.14.R, Volume 7A, Chapter 
27, Family Separation Allowance (FSA), (January 2005). 

[17] DOD Financial Management Regulation 7000.14R, Volume 7A, Chapter 
10, Special Pay-Duty Subject to Hostile Fire or Imminent Danger 
(November 2004). 

[18] See Congressional Research Service Report for Congress, Military 
Pay: Controversy Over Hostile Fire/Imminent Danger Pay and Family 
Separation Allowance Rates, (Washington, D.C.: Oct. 8, 2003). 

[19] Department of the Treasury, Internal Revenue Service, Armed 
Forces' Tax Guide: For Use in Preparing 2003 Returns, Publication 3, 
Cat. No. 46072M. This publication noted that all military pay for the 
month is excluded from income when an enlisted service member, warrant 
officer, or commissioned warrant officer served in a combat zone during 
any part of a month or while hospitalized as a result of service in the 
combat zone. The amount of the exclusion for a commissioned officer 
(other than a commissioned warrant officer) is limited to the highest 
rate of enlisted pay, plus hostile fire/imminent danger pay for each 
month during any part of which an officer served in a combat zone or 
while hospitalized as a result of service there. 

[20] The offices with PFM policy responsibility in the services include 
the Army's Community and Family Support Center Directorate, Navy's 
Office of the Deputy Chief of Naval Operations (Manpower and 
Personnel), Air Force's Office of the Deputy Assistant Secretary of the 
Air Force for Force Management and Personnel's Assistant Deputy for 
Family Programs, and the Marine Corps Community Services. 

[21] See Office of the Deputy Under Secretary of Defense (Military 
Community and Family Policy), Initial Assessment and Follow-on Plan for 
the Department of Defense Financial Readiness Campaign (May 27, 2004). 

[22] DOD's 27 Campaign partners are Air Force Aid Society, Army 
Emergency Relief Society, Association of Military Banks of America, 
Better Business Bureau, Consumer Federation of America, Defense Credit 
Union Council, Department of Labor, Department of the Treasury, 
Employee Benefits Research Institute and American Savings Education 
Council, Federal Citizen's Information Center, Federal Deposit 
Insurance Corporation, Federal Reserve Board, Federal Trade Commission, 
Freddie Mac, InCharge Institute of America, Jump$tart Coalition for 
Personal Financial Literacy, Moneywise with Kelvin Boston, National 
Association of Federal Credit Unions, National Endowment for Financial 
Education, National Foundation for Credit Counseling, National Military 
Family Association, Navy and Marine Corps Relief Society, North 
American Securities Administrators Association, Securities and Exchange 
Commission, Social Security Administration, U.S. Department of 
Agriculture Cooperative State Research Education and Extension Service, 
and Women's Institute for Financial Education. 

[23] DOD's March 2003 survey sample consisted of 34,929 individuals 
identified by stratified random sampling procedures. DOD reported that 
completed surveys were received from 10,828 respondents, which resulted 
in an overall weighted response rate for eligibles, corrected for non- 
proportional sampling of 35 percent. 

[24] Findings from our focus groups do not represent the population of 
servicemembers and therefore are not generalizable. 

[25] 37 U.S.C. 427. 

[26] See GAO, DOD Systems Modernization: Management of Integrated 
Military Human Capital Program Needs Additional Improvement, GAO-05-189 
(Washington, D.C.: Feb. 11, 2005) and GAO, Military Pay: Army National 
Guard Personnel Mobilized to Active Duty Experienced Significant Pay 
Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003). We have found 
serious problems in DOD's systems supporting military personnel and 
pay, noting that they were error prone and required manual data 
reconciliation, correction, and entry across nonintegrated systems. 
While we noted that a significant system enhancement project is under 
way to improve military pay, it is likely the department will continue 
to operate with existing system constraints for several more years. 

[27] See GAO-04-911. 

[28] Army regulation 37-104-4, Military Pay and Allowances Policy and 
Procedures Active Component (Sept. 30, 1994). 

[29] Military Pay Procedures Manual, January 1995, Section 4.3.32.25, 
Family Separation Allowance. 

[30] An Army finance official at Fort Bragg, North Carolina, provided 
local guidance, which stated that his installation was allowed to 
obtain substantiating documents for family separation allowance before 
the servicemember's departure. 

[31] See Defense Finance and Accounting Service-DEM 7073-1, Chapter 27, 
Family Separation Allowance (Jan. 15, 1998). 

[32] An April 2003 message from the Air Force Accounting and Finance 
Office requested the change in its current business practice of paying 
family separation allowance to servicemembers at the completion of a 
deployment or temporary duty of 30 days or more. It further stated that 
the Air Force agreed with the Army's and Navy's approaches as to the 
purpose of the allowance--i.e., to defray additional costs incurred 
because of the forced separation and should be paid to the 
servicemembers during temporary duty, which includes deployment. 

[33] Allowing the government to keep the allowance until the end of the 
deployment is contrary to the purpose of the allowance, which is to 
compensate servicemembers for the added monthly expenses incurred due 
to being involuntarily separated from their families. In addition, 
allowing servicemembers to choose to wait until the end of a deployment 
to receive a catch-up, lump sum amount of family separation allowance 
is probably not a prudent financial decision because interim payments 
could have been invested, for example, in the government-sponsored 
Savings Deposit Program. This program guarantees servicemembers that 
they will receive a 10 percent return on money deposited in the program 
during their deployment. According to DOD's Financial Management 
Regulation, Volume 7A, Chapter 51, members of the armed forces serving 
outside the United States or its possessions under arduous conditions 
(as determined by the Secretary of Defense) in connection with a 
designated contingency operation are authorized to make deposits of 
unallocated current pay and allowances and earn interest under this 
program. Amounts up to $10,000 (including accrued interest) can be 
deposited with interest accrual at the rate of 10 percent per year. 

[34] Pub. L. No. 103-62, (Aug. 3, 1993). See GAO, The Results Act: An 
Evaluator's Guide to Assessing Agency Annual Performance Plans, 
GAO/GGD- 10.1.20 (Washington, D.C.: Apr. 1, 1998) for a discussion of 
key performance indicators, the means used to verify and validate the 
measured values, and other characteristics such as those GAO identified 
in its report on assessing an agency's annual performance plans. 

[35] DOD Instruction 1342.17, Personal Financial Management for Service 
Members (Nov. 12, 2004). 

[36] See GAO-03-1004. 

[37] Memorandum for Army Chief of Staff regarding: Proposed Weekly 
Summary Item--Financial Readiness Training for First Term Soldiers 
(Nov. 23, 1998). 

[38] See GAO-03-1004. 

[39] The new DOD Instruction 1342.17, dated November 2004, states that 
"within 3 months after arriving at the first permanent duty station, a 
servicemember shall demonstrate a basic understanding of pay and 
entitlements, banking and allotments, checkbook management, budgeting 
and saving (to include the thrift savings plan), insurance, credit 
management, car buying, permanent change of station moves and 
information on obtaining counseling or assistance on financial 
matters." The instruction, however, does not specify how this is to be 
measured. It simply says that such an understanding means to comprehend 
the underlying principles of a subject and apply them to everyday life 
situations. 

[40] See GAO-04-911. 

[41] Our work focused on active duty servicemembers, with the exception 
of DOD active duty surveys where the survey population included 
reservists serving on active duty assignments for at least 6 months. 
The Related GAO Products section at the end of this report lists 
several products that focus on reservists and their compensation, 
benefits, and pay-related problems that result from deployment. 

[42] Bolling Air Force Base, Washington, D.C., did not have high 
deployment rates; however, Air Force officials suggested we visit this 
installation to quickly obtain information on the financial condition 
of junior enlisted servicemembers in an area with a high cost of 
living. 

[43] 50 U.S.C. App. § 501. 

[44] According to the Federal Trade Commission, Military Sentinel is a 
joint initiative with DOD that aims to improve consumer protection for 
servicemembers. Military Sentinel is designed to centralize the online 
collection of consumer complaints from DOD and military communities, 
which is intended to, among other things, help target law enforcement 
actions. 

[45] Over the years, we found serious problems in DOD's systems 
supporting military personnel and pay. We noted that the systems were 
error prone and required manual data reconciliation, correction, and 
entry across nonintegrated systems. While we noted that a significant 
system enhancement project is under way to improve military pay, it is 
likely the department will continue to operate with existing system 
constraints for several more years. See GAO-05-189 and GAO-04-89. 

[46] In this engagement, we assessed (1) the extent deployment impacts 
the financial condition of active duty servicemembers and their 
families, (2) whether DOD has an oversight framework for evaluating 
military programs designed to assist both deployed and non-deployed 
servicemembers in managing their personal finances, and (3) the extent 
junior enlisted servicemembers receive required PFM training. 

[47] Pub. L. No. 103-62 (Aug. 3, 1993). 

[48] See GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-0021.3.1 (Washington, D.C.: November 1999). 

[49] See GAO-05-93SP. 

[50] N=number of installations out of a possible 13, where the theme 
was cited. 

[51] See http://www.dodpfm.org. 

[52] Office of the Deputy Under Secretary of Defense (Military 
Community and Family Policy), Initial Assessment and Follow-on Plan for 
the Department of Defense Financial Readiness Campaign (May 27, 2004). 

[53] See DOD Instruction 1342.17, Personal Financial Management for 
Service Members (Nov. 12, 2004). 

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