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Defense Department Never Been Audited

Investigation Reveals A Military Payroll Rife With Glitches

Defense Department Never Been Audited

Image courtesy of Wikimedia Commons

A new investigative report from Reuters says payroll errors in the military are widespread. And that “once mistakes are detected, getting them corrected — or just explained — can test even the most persistent soldiers.”

In “How the Pentagon’s Payroll Quagmire Traps America’s Soldiers,” Reuters special enterprise correspondent Scot Paltrow and his colleague Kelly Carr report on how the antiquated and error-ridden computer system of the Defense Finance and Accounting System has at times erroneously cut soldiers’ paychecks because, it claimed, the service men and women owed money or were overpaid. In some cases, Paltrow and Carr report, the military has hired collection agencies to try to recover these mistakenly charged overpayments. It has also garnisheed wages at new civilian jobs, and ruined soldiers’ credit ratings.

One large part of the problem, says Paltrow, is the technology the agency uses to manage the military’s payroll.

Paltrow tells Fresh Air’s Dave Davies that DFAS relies “on an ancient computer system that’s more than 40 years old, dates basically from the dawn of the computer age, and it runs on COBOL, which is one of the first computer languages and [is] so old that it can’t be updated and consequently there are a tremendous number of mistakes.”

The Defense Department developed a new computer system, but according to Paltrow, “They worked on it for roughly 10 years and ended up spending a billion dollars on it, and in 2010 they decided it had been a failure, that it just wasn’t going to work. They pulled the plug on it and so the billion dollars spent on the program went down the tubes, and the military was left with this antiquated system that hadn’t been updated at all in more than a decade because everyone was anticipating this new, now canceled, system to come online.”

Interview Highlights

On what happened to Army Chief of Staff Peter Schoomaker

“He was a four-star general who actually retired and when the Iraq War started, Secretary of Defense [Donald] Rumsfeld persuaded him to come back to active duty to be the Army chief of staff, which is the highest military rank in the Army, and so he duly signed on and came back to serve his country and discovered very quickly that he wasn’t getting paid. And it turned out that he had been on the retirement payroll, and he was correctly removed from the retirement payroll. However, the retirement payroll computers were set automatically to believe that when someone was removed from them the reason was that they had died and so the computers sent out a computer-generated condolence letter to his wife on his death, but of course he was very much alive. And meanwhile it took months for the Defense Finance and Accounting Service to straighten things out so that he could put back onto the active duty payroll, and then additional months before he was paid the money that he hadn’t been paid when he first started.”

On why the Department of Defense does not get audited annually like the rest of the federal agencies

“For years every other federal agency has been [audited] and, with very rare exceptions, has passed their audits. The Defense Department has never been audited and the reason is … it’s not only that it can’t pass an audit, but its books are in such disarray and the records so screwed up that it simply can’t be audited. The Defense Department simply reports to Congress every year that, ‘Our books and records have so many problems that we can’t pass an audit.’ ”

On how the military is vigilant about overpayments but not underpayments

“What’s interesting is that there are also apparently many cases where the soldiers are accidentally underpaid and they don’t notice that and the Defense Finance and Accounting Service confirmed to us that they do not conduct any regular checks or audits to determine if soldiers were underpaid. They only check for overpayments. So, for example, if the Defense Department owes military personnel money … unless the individual soldier discovers it, they’ll probably never get paid.”

On what happened to Air Force veteran George Koffler

“He was in the Air Force for 25 years. He retired at the end of the 25 years. During the last five years he had the rank of master sergeant, and he volunteered for extra duty as what they call a ‘first sergeant,’ which involves advising the commander and overseeing the welfare and well-being of the airmen. And it’s a job that entitled him to special duty pay of $150 per month, so during his last five years of service … he got this pay. And then, a few months after he retired, he got a bill from the Defense Finance and Accounting Service for almost the entire amount back, and the only explanation they gave was that he hadn’t earned the pay. …

“His efforts to find out from DFAS and the Air Force met with no success, and the DFAS ended up actually garnishing his wages at his new civilian job and turned the debt over to a private collection agency. And we ended up finding his commanders who all said that, ‘Yes, he had served as a first sergeant and that yes, he absolutely was entitled to that money.’ But when we called the Air Force secretary’s office we were told that, ‘Well, it’s his problem to solve it and he should go back and follow the proper procedures, and we’re not going to do anything on our own to investigate or correct the problem.’ ”

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

TERRY GROSS, HOST:

This is FRESH AIR. I’m Terry Gross. Despite the nearly universal respect Americans hold for those who served in our armed forces, we’ve seen disturbing reports of long delays that await wounded veterans seeking help from the Veterans Administration. Now an investigation by Reuters exposes another case of government dysfunction that affects many active duty servicemen and women.

Our guest, Reuters special enterprise correspondent Scot Paltrow, reports that the payroll system for the U.S. military is ancient and error-ridden, at times erroneously cutting the soldiers’ paychecks and causing terrible hardship. Paltrow and Reuters colleague Kelly Carr report on what soldiers are up against when they try to correct the errors in their pay. In some cases, they report, the military hires collection agencies to try and recover mistakenly charged overpayments from servicemen and women.

The Reuters report called “Wounded in Battle, Stiffed by the Pentagon” is the first in a series on financial problems in the Defense Department. Scot Paltrow spoke with FRESH AIR contributor Dave Davies.

DAVE DAVIES, HOST:

Well, Scot Paltrow, welcome to FRESH AIR. I want to start with this Army medic, Shawn Aiken, who you write about in the story. First of all, just tell us about his service and his experience.

SCOT PALTROW: Well, he joined the Army very shortly after he graduated from high school. He had taken care of his mother, who died of stomach cancer. She was a nurse. And when he joined the Army he was sort of inclined to pursue medical specialty, and trained as a combat medic.

And he served as a combat medic in Iraq, and then he reenlisted and served also in Afghanistan, and was in some very hairy situations where he was all by himself to treat large numbers of severely injured soldiers and civilians. And then he ended up getting blown up himself by a rocket-propelled grenade.

And even though he was badly injured, he was so – he was a sergeant. He was so loyal to his men that he didn’t want to be medevaced. His commanders wanted him to be medevaced out of there to the hospital in Landstuhl, Germany that takes care of, you know, seriously injured from Afghanistan and Iraq.

So he stayed with his unit, which was due to be rotated out in a few weeks, anyway. He went with his unit back to Germany. The doctors at his unit in Germany took one look at him and saw that, you know, he was severely injured and had severe problems and sent him to Landstuhl hospital, where he arrived by bus.

Well, the way things are set up, the Defense Finance and Accounting Service – which, at Landstuhl, is supposed to designate people officially as wounded warriors, and who are therefore entitled to all sorts of financial benefits. They only do it for soldiers who are medevaced by air and arrive by air at Landstuhl. Well, Shawn Aiken didn’t arrive by air. He arrived by bus from his unit, and so he was never designated as a wounded warrior…

DAVIES: Right.

PALTROW: …until much later, and after we had made inquiries about it.

DAVIES: So this guy, who served with distinction, because he came in on a bus, there’s something that’s missed, a technicality in his pay record. He gets to Fort Bliss, where he is recovering and being treated for traumatic brain injury and, you know, PTSD and other things. And then what happens to his pay?

PALTROW: Well, as soon as he arrived there, the officials at the base, actually from the – this Defense Finance and Accounting Service, audited his pay record. They, for some reason, never noticed that he had not been designated a wounded warrior, even though he was being assigned to a wounded warrior battalion at Fort Bliss.

They did, however, notice that it appeared he owed the military money for a variety of reasons, for things – like they claimed, and this is in dispute, that he had reported his divorce late, which resulted, they said, in him continuing to receive family and spouse benefits that he wasn’t entitled to for a period of time.

And there were also reimbursements for meals that he had received and deserved, but they claimed that he hadn’t deserved them, and so they determined that owed a big debt back to the military. And almost immediately, money started disappearing from his bi-weekly paychecks, and not just a little bit, but for several months, he received almost nothing.

In the month of December 2011, his total pay for the entire month was $117. And the result of this was that rather than getting help, being able to get help from the Wounded Warrior Battalion and the Army, he had to go to – so that his family could eat, they had to go to church food pantries. He ended up pawning his possessions, including the medic bag that he had used in Iraq and Afghanistan.

And when Christmas rolled around, he had to rely on a charity to provide one Christmas present to each of his children. So the effect was quite severe on him, and he had to try to deal with this and get answers and get it straightened out while he simultaneously was suffering from traumatic brain injury and PTSD. And he was in significant pain from various injuries and had, you know, occasional outbursts. And it just proved impossible for him to get this straightened out.

DAVIES: So these errors occur that he wasn’t even aware of. I mean, like, somebody in Germany – because he comes in on a bus and not a plane – doesn’t give him credit for being a wounded warrior. And these clerical errors, in effect, are set in motion. But when his pay gets reduced, it’s not as if there’s any explanation, right? He just sees his paycheck shrinking, and there are all these mysterious accounting codes on his paystub.

PALTROW: Exactly. I mean, the military paystubs are large and very difficult to read and understand, filled with abbreviations. They gave him no explanation whatsoever. It’s just, all of a sudden, he noticed that the money being deposited automatically into his bank account had dwindled to practically nothing, and he had no idea why.

DAVIES: Had he been properly designated as a wounded warrior in Germany, what difference would that have made?

PALTROW: Well, he instantly would have been entitled to special financial benefits paid to wounded warriors. And in addition to that, he would have been eligible to have virtually any debt owed to the military canceled. But because he did not receive that designation, he fell through the cracks. They went after him for all of these supposed debts, a number of which clearly were erroneous.

DAVIES: Now he was – he had the help of a reporter. You got involved in his case. Were things straightened out? How long did it take?

PALTROW: Well, when we learned about his case and began piecing together the details, we went to the Defense Finance and Accounting Service and asked for an explanation. And for the first time, they assigned a group of auditors to sit down and look through his entire pay record. And they found, lo and behold, that number one, he should have been designated as a wounded warrior, and secondly, that, in all, there are about 14 mistakes that had been made in his pay and in collection of debt.

DAVIES: And was it eventually squared up? Did they really pay him everything they owed?

PALTROW: Basically, they did, ultimately. It took – after we inquired, it took two to three months for that to all be worked out. But yes, ultimately, they did.

DAVIES: OK, so your story is, in part, about the fact that this is not so uncommon, and that there are serious problems in military pay and other aspects of military finances. Let’s kind of talk about this. What’s the agency that’s responsible for getting all these paychecks out? And why are there so many mistakes?

PALTROW: It’s called the Defense Finance and Accounting Service. No one outside has heard of it, but everyone inside the military knows about it, because that’s where their pay comes from. It’s known as DFAS by its abbreviation, and it was created in 1991, actually, by then-Secretary of Defense Dick Cheney. And the idea was to save money by consolidating pay functions from all of the different military services.

But it has a number of severe problems. One of the biggest ones is that it has to rely on an ancient computer system that’s more than 40 years old, dates basically from the dawn of the computer age. It runs on COBOL, which is one of the first computer languages, and it’s so old that it can’t be updated. And consequently, there are a tremendous number of mistakes. And…

DAVIES: Millions of lines of computer code that, basically, most people can’t write anymore, right?

PALTROW: Right. And filled with corrupted data, also.

DAVIES: And then there’s also the fundamental problem that it is – it’s creating paychecks for every branch, right? I mean, Army, Navy, Air Force, Marines, right? But…

PALTROW: Yeah.

DAVIES: …it – but they all have separate personnel systems.

PALTROW: Exactly. Well, that’s the other main problem. When they created DFAS, they gave it responsibility for payroll – in other words, issuing the paychecks and determining the specific amounts. But it left all of the personnel functions in the hands of the individual military services, personnel functions being things like promotions in rank, special duty, combat duty, all things that require additional pay, changes in pay.

And so what happens is these changes have to be communicated from each of the services to DFAS for the pay to be updated and corrected. And the information goes through sort of ancient computer pipelines. Each of the services has about 14 or 15 different ones, none of which work exactly the same. And so you have this bifurcation of two roles that should be put together, but instead are a great source of mistakes.

And when soldiers call up, or airmen call up DFAS and say, look. There’s a mistake. You know, I’m owed so much money. Can you get it corrected? They’re often told – referred back to their commanders to get the problem solved.

DAVIES: Right. You also write that there are some parts of the system where people literally are copying data from one system, and then other people have to enter it into another part of the system – finger-gapping, they call it.

PALTROW: Yeah. Right. That goes on quite a bit. There are – is a tremendous number of what they call manual workarounds, because these systems are so antique. And, for example, at a particular base, if someone is promoted, rather than that being passed along automatically, in many cases, the office that does the promotion will have to print out a piece of paper, walk it down the hallway to the office where the payroll people are, from the Defense Finance and Accounting Service, hand it to them and count on them to manually enter the data correctly into their own computers.

DAVIES: We’re speaking with Scot Paltrow. He is a special enterprise correspondent for Reuters. We’ll talk more after a short break. This is FRESH AIR.

(SOUNDBITE OF MUSIC)

DAVIES: This is FRESH AIR, and our guest is Scot Paltrow. He’s a special enterprise correspondent for Reuters. He has a new piece with Kelly Carr called “Wounded in Battle, Stiffed by the Pentagon,” about problems with the payroll services in the America military.

It’s not just enlisted men or officers and women who have these problems. There’s this remarkable story of the Army Chief of Staff Peter Schoomaker. Tell us that.

PALTROW: Well, he was a four-star general who actually retired. And when the Iraq War started, Secretary of Defense Rumsfeld persuaded him to come back to active duty to be the Army chief of staff, which is the highest military rank in the Army. And so he duly signed on and came back to serve his country, and discovered very quickly that he wasn’t getting paid.

And it turned out that he had been on the retirement payroll, and he was correctly removed from the retirement payroll. However, the retirement payroll computers were set automatically to believe that when someone was removed from them, the reason was that they had died. And so the computer sent out a, you know, computer-generated condolence letter to his wife on his death. But, of course, he was very much alive.

And meanwhile, it took months for the Defense Finance and Accounting Service to straighten things out so that he could be put back onto the active-duty payroll, and then additional months before he was paid the money that he hadn’t been paid when he first started.

DAVIES: So you have a general here, the Army chief of staff, not getting paid. I presume this is a guy that can make phone calls to powerful people, and he couldn’t get his pay started.

PALTROW: That’s correct. And as he said, you know, if that can happen to me, imagine what happens to an ordinary private.

DAVIES: You say in this piece that pay errors are widespread. Do you know how widespread?

PALTROW: Well, they seem to be quite widespread, based on the multiple interviews that we’ve had with soldiers, airmen, sailors and so on who have experienced problems, also individuals who have recently been discharged and dunned erroneously for debts, also from former officials who actually worked in the area and know what went on inside.

A big problem is that there is no way, actually, to quantify it because the payroll has never been audited. The Defense Finance and Accounting Service claims that it has an extremely high accuracy rate, but when you look more closely, you discover that no outside organization has ever conducted an audit – not the Government Accountability Office, not the Defense department’s own inspector general.

So, you know, there have been small audits of small pieces by the GAO which have shown significant errors, such as in Army pay and debts, but no one really knows.

DAVIES: You write that there’s a law that’s been in effect since 1992 which requires, you know, annual audits of these agencies. This doesn’t happen here.

PALTROW: That’s right, and there Chief Financial Officers Act required that every federal agency be audited annually by its inspector general. And for years, every other federal agency has been, and with very rare exceptions, has passed their audits. The Defense Department has never been audited, and the reason is – I mean, it’s not only that it can’t pass an audit, but its books are in such disarray and the records so screwed up, that it simply can’t be audited.

And the Defense Department simply reports to Congress every year that our books and records have so many problems, that we can’t pass an audit. Now, Secretary Panetta, when he was there, and also Congress, set deadlines for the Defense Department to become audit-ready, and supposedly there’s a lot of work going on towards that, but there are reasons to be skeptical about whether that’s really going to happen.

DAVIES: Now, you cite a lot of cases in which this, you know, central payroll processing agency, the Defense Finance and Accounting Service, inaccurately made deductions from soldiers’ pay or dunned them for debts that they shouldn’t have owed. What about the other side? Does it ever pay people money they aren’t entitled to?

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