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Aviation Continuation Pay: Some Bonuses Are Inappropriate Because of Prior Service Obligations -- GAO/NSIAD-95-30
Aviation Continuation Pay: Some Bonuses Are Inappropriate Because of Prior Service Obligations (Letter Report, 10/14/94, GAO/NSIAD-95-30).
In 1989, the House Armed Service Committee expressed concern about the large number of pilots who had testified at hearings that they had accepted aviation retention bonuses--known as aviation continuation pay--because the obligation they incurred ran concurrently with existing service commitments. Despite congressional directives that such payments should be avoided, the Department of Defense (DOD) continues to pay bonuses for time that service members already have commitments. In fiscal years 1992, and 1993, 58 percent and 69 percent, respectively, of the new aviation continuation pay contractors went to aviators with preexisting commitments. Overlapping commitments average 15 months and cost DOD about $15 million in fiscal year 1992 and $11 million in fiscal year 1993. Payment of such bonuses is not only inconsistent with congressional direction but is not a prudent use of taxpayer dollars.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-95-30 TITLE: Aviation Continuation Pay: Some Bonuses Are Inappropriate Because of Prior Service Obligations
DATE: 10/14/94
SUBJECT: Flight training
Military reenlistment bonuses
Military personnel
Aircraft pilots
Military compensation
Dual compensation
Employee incentives
Military aviation
Oversight committees
IDENTIFIER: DOD Aviation Officer Continuation Bonus Program
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Report to the Chairman, Subcommittee on Military Forces and Personnel, Committee on Armed Services, House of Representatives October 1994
AVIATION CONTINUATION PAY - SOME BONUSES ARE INAPPROPRIATE BECAUSE OF PRIOR SERVICE OBLIGATIONS
GAO/NSIAD-95-30
Aviation Continuation Pay
Abbreviations=============================================================== ABBREV
ACP - Aviation Continuation Pay
DOD - Department of DefenseLetter
=============================================================== LETTER
B-257335
October 14, 1994
The Honorable Ike Skelton
Chairman, Subcommittee on Military Forces and Personnel
Committee on Armed Services
House of Representatives
Dear Mr. Chairman:In 1989, when extending the existing authority for the aviation retention bonuses known as Aviation Continuation Pay (ACP), the House Armed Services Committee expressed concern about the large number of pilots who had testified at hearings that they had accepted the bonus because the obligation they incurred ran concurrently with already existing service commitments.\1 As part of a broader review of the Department of Defense's (DOD) special and incentive pays, we assessed how well the services were complying with the House Armed Services Committee's direction that aviator retention bonuses were not to be given to service members for time that they were already committed to serve. Specifically, our objectives were to determine the (1) extent and amount of overlapping commitments and (2) reasons for preexisting commitments.
--------------------
\1 H. Rept. 121, 101st Congress, 1st Session 278 (1989).RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
DOD is paying ACP bonuses for time that service members already have commitments despite direction from the House Armed Services Committee to avoid such payments. In fiscal years 1992 and 1993, 58 percent and 69 percent, respectively, of the new ACP contracts went to aviators with preexisting commitments. These overlapping commitments stemmed from commitments incurred mainly in connection with receipt of additional training or permanent change of station moves. Overlapping commitments averaged 15 months and cost DOD approximately $15 million in fiscal year 1992 and $11 million in fiscal year 1993. Paying bonuses to entice aviators to commit to serve for periods of time for which they are already committed is not only inconsistent with the House Armed Services Committee direction, but is not a prudent use of taxpayer funds.BACKGROUND
------------------------------------------------------------ Letter :2
In the late 1970s, DOD and the Congress found significant problems with aviator retention. In 1980, the Congress initially authorized aviator bonuses under 37 U.S.C. 301b. The bonuses were intended to be used to improve retention and reduce shortages of flight personnel. The bonus program, referred to as Aviation Officers Continuation Pay, was reauthorized in some form from fiscal years 1981-82 and again in 1984-88.\2 For fiscal year 1989, the Congress authorized a new aviation bonus program as a provisional retention program to replace the Aviation Officers Continuation Pay program. The National Defense Authorization Act for fiscal years 1990 and 1991 (P.L. 101-189) authorized the present ACP program. Under the ACP program, the services are authorized to pay bonuses of up to $12,000 for each year of additional commitment to aviators who have completed at least 6 years but less than 13 years of active duty service.\3 The commitment period cannot extend beyond their 14th year. Each of the services, with the exception of the Army,\4 is using the ACP program to pay retention bonuses to aviators.--------------------
\2 The program ended on September 30, 1982, in accordance with the sunset provision in the Uniformed Services Pay Act of 1981 (P.L. 97-60, 113, 95 Stat. 989, 995 (1981)). The Senate Armed Services Committee found that the bonus was "an inappropriate solution to long-term retention problems" with military aviators (S. Rept. 97-146 (Committee on Armed Services), p. 10, accompanying S.1181, 97th Congress, 1st Session, 1981). The hiatus in the program ended with the passage of the DOD Authorization Act of 1984 (P.L. No. 98-94, 904(a), 97 Stat. 614, 635-636 (1983)).
\3 Pilot training commitments were changed to 7 years in 1987 and 8 years in 1988. Aviators are not eligible for ACP until their undergraduate training commitment has been completed.
\4 Army officials stated that they have been able to retain sufficient numbers of aviators without the ACP program and do not want to single out one segment of officers for treatment that is different from that provided its other officers.ACP PAID TO AVIATORS WITH
PREEXISTING COMMITMENTS
------------------------------------------------------------ Letter :3
Using data provided by the services, we determined that ACP was being paid for periods of time for which aviators had preexisting commitments for military service. In fiscal years 1992 and 1993, DOD committed to pay $94.6 million and $75.6 million, respectively, in ACP. Of those totals, approximately $15 million (16 percent) in fiscal year 1992 and $11 million (15 percent) in fiscal year 1993 were for periods of time that the aviators were already committed to serve. Of the 2,278 new ACP contracts in fiscal year 1992 and the 1,104 contracts in fiscal year 1993, about 58 percent and 69 percent, respectively, went to service members with preexisting commitments. Table 1 provides more detailed information on ACP payments for periods of preexisting commitments during fiscal years 1992 and 1993.Table 1 ACP Costs and Overlaps for Fiscal Years 1992 and 1993 (Dollars in millions) Marine Air Navy\a Corps\a Force\b DOD total ------------------ -------- -------- -------- ---------- New fiscal year 1992 ACP contracts ============================================================ Total number 621 680 977 2,278 ============================================================ Total cost $11.8 $8.0 $74.8 $94.6 Contracts with 232 334 755 1,321 overlap (37%) (49%) (77%) (58%) Average overlap 13 16 14 14 (months) Longest overlap 67 24 59 67 (months) Cost of overlap $1.9 $2.7 $10.5 $15.1 (16%) (34%) (14%) (16%) New fiscal year 1993 ACP contracts ============================================================ Total number 137 168 799 1,104 ============================================================ Total cost $10.1 $2.0 $63.5 $75.6 Contracts with 75 (55%) 77 (46%) 612 764 (69%) overlap (77%) Average overlap 14 16 16 16 (months) Longest overlap 60 24 60 60 (months) Cost of overlap $1.0 $0.6 $9.6 $11.2 (10%) (30%) (15%) (15%)------------------------------------------------------------
\a Figures on overlapping commitments do not include commitments that are the result of tuition assistance (service payments for voluntary education programs). The Navy and the Marine Corps did not provide this data because it would have required an extensive manual review of records. Consequently, the data shown in the table understates the extent of overlapping commitments for those services. In the Air Force, tuition assistance accounted for 4 percent of overlapping commitments in fiscal year 1992 and 7 percent in fiscal year 1993.
\b Figures on overlapping commitments do not include commitments occurring shortly before the ACP contract dates due to limitations in Air Force data archives. Consequently, the data shown in the table understates the extent of overlapping commitments. A study conducted by a War College student using the same methodology as this one found that 90 percent of the pilots who accepted ACP in fiscal year 1989 already had commitments to extend their service. (See Mestemaker, Michael J., "The Aviation Career Improvement Act and Its Impact on Retention," Carlisle Barracks, Pennsylvania: U.S. Army War College, 1991.)REASONS FOR PREEXISTING AND
OVERLAPPING COMMITMENTS
------------------------------------------------------------ Letter :4
Aviators contracting for ACP may have preexisting commitments resulting from a variety of circumstances, including flight training and permanent change of station moves. Activities such as these sometimes bring with them requirements for the continued service of the individual for a specified period of time. The following composite illustrations show some of the main reasons for preexisting commitments and the degree of overlap.
- Case 1: In January 1992, an Air Force strategic airlift pilot completed the advanced flight courses required to become a C-5 crew commander. In return for this training, the pilot incurred a 2-year service obligation. In October 1992, the pilot signed a 6-year ACP contract for $72,000, which overlapped with the 15 months remaining on the pilot's flight training commitment. Thus, the pilot was paid $15,000 for a 15-month period of service (from October 1992 through December 1993) already owed to the Air Force.
- Case 2: In January 1992, following a tour of duty aboard an aircraft carrier, a Navy aviator accepted an assignment that involved a permanent change of duty station to a shore-based training squadron. By making this move, the aviator became obligated for 2 additional years in the Navy. In November 1992, 10 months later, the aviator signed a 7-year ACP contract for a bonus of $84,000. The aviator was therefore paid $14,000 for the 14-month period for which he was already obligated to serve because of the move.
- Case 3: A Marine Corps aviator had been flying A-6 aircraft for a number of years. However, because that aircraft was being phased out, the aviator volunteered to be retrained as a Harrier (AV-8B) pilot. The retraining obligated the aviator to 3 years of additional service. A year later, the aviator signed a 2-year ACP contract for $12,000. As a result, he was paid $12,000 to commit for a 24-month period for which he was already committed.
Data provided by the services shows that the primary reason for preexisting commitments in fiscal years 1992 and 1993 was flight training in the Air Force and permanent change of station moves in the Navy and the Marine Corps. Table 2 shows the reasons for preexisting commitments for each of the services in those fiscal years.
Table 2 Reasons for Preexisting Commitments in Fiscal Years 1992 and 1993 (Figures in percentages) Fiscal Reason for preexisting Marine Air year obligation Navy Corps Force ---------- ------------------------ ------ ------ ------ 1992 Flight training 1 18 57 Permanent change of 93 62 33 station <h1yb> Other 6 20 10 1993 Flight training 0 31 51 Permanent change of 97 64 29 station Other 3 5 20------------------------------------------------------------
RECOMMENDATION
------------------------------------------------------------ Letter :5
The payment of ACP bonuses without reductions for periods of service for which aviators have preexisting commitments is inconsistent with congressional committee expectations and is not a prudent use of resources. We recommend that the Secretary of Defense establish internal controls to ensure that the services do not pay aviators for periods of preexisting service obligations.AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :6
DOD partially agreed with our findings but did not agree with our recommendation. DOD recognized that offering retention bonuses to aviators who have an existing service obligation may appear, when taken in isolation, imprudent. However, DOD stated that this practice needs to be considered in relation to the underlying objectives of the program. DOD's comments are included in their entirety in appendix I.
DOD stated that permanent changes of station and advanced training primarily benefit the service and the resulting commitments are imposed for different purposes than the ACP commitments. DOD noted that personnel are moved to different duty stations to fulfill validated service needs and the resulting service obligation is imposed as a means of reducing the turbulence and cost that result from moves that occur too frequently. The service commitment attached to advanced training is intended to ensure that the service is able to recoup its additional investment. The intent of the ACP commitment requirement, on the other hand, is to ensure that experienced aviators will remain in the service between the end of their initial training commitments (6 to 8 years) and the point (about 14 years) at which the lure of retirement benefits exerts greater influence on retention.
While we recognize that the various types of service commitments may have been imposed for different reasons, the effects of such commitments are the same--the aviator is obligated to remain in the service for a certain period of time. Paying a retention bonus to an aviator when that aviator was already committed to remain in the service is not a prudent use of scarce resources. For example, we found that some Marine Corps aviators who had a preexisting service commitment requiring them to remain in the service for 24 months were given ACP to remain in the service for those same 24 months. In effect, ACP did nothing to increase the retention of those aviators who were already obligated to stay for the entire period. DOD also raised a concern that small differences in timing could have large dollar consequences for individual aviators. That is, receipt of permanent change of duty orders immediately before ACP bonus eligibility would cause the aviator to lose a substantial amount of money. This, however, is true of any program that has specific eligibility periods. If perceived inequity resulting from the timing of ACP eligibility becomes a problem, it could be addressed by suspending the unexpired portion of a preexisting service commitment and reimposing it at the end of the ACP commitment period. That is, if an aviator had 16 months of service commitment remaining from either a permanent change of station or some advanced training, the aviator could receive ACP and the 16 months could be reinstated at the expiration of the commitment imposed under the ACP program. DOD stated that if it required preexisting commitments to be completed before an aviator could accept a retention bonus, resulting attrition would cost more money than enforcing those commitments would save. DOD's rationale was that some aviators would refuse to accept a relocation if it cost them some bonus money and then would have to be separated from the service. DOD said that since the average training cost for an experienced aviator is about $5 million, the loss of only a couple of aviators would more than offset the projected savings.
We believe this is a spurious argument. If it were valid, it would make sense to pay nearly $5 million in order to retain each aviator and avoid incurring a $5-million replacement cost. In reality, the services do not replace such losses by recruiting and training a replacement, but rather they cover retention shortfalls with rated personnel drawn from other year groups or aviators assigned to nonflying positions.SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7
We examined the legislative history of ACP, reviewed DOD's annual reports to the Congress on the program, and reviewed pertinent DOD and service regulations for the program. We also interviewed DOD and service representatives to determine their policies on paying ACP for periods of previously existing commitments and to develop typical examples of such preexisting commitments to illustrate overlaps. We worked with the services to develop methodologies for analyzing the number, duration, and types of preexisting commitments. Using these analyses, we determined the cost of payment for overlapping periods. We did not perform a full reliability assessment of the service databases. However, we compared the information provided to us to that contained in service reports and discussed the information with service officials to determine whether it provided a reasonable and accurate profile of individuals receiving ACP. In determining the length of overlap, we rounded the number of days to the closest month. Our review was conducted from January 1994 to August 1994 in accordance with generally accepted government auditing standards.---------------------------------------------------------- Letter :7.1
As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 10 days from its issue date. At that time, we will send copies to other interested congressional committees and Members of Congress; the Secretaries of Defense, the Air Force, and the Navy; and the Commandant of the Marine Corps. We will also make copies available to other interested parties on request. Please contact me on (202) 512-5140 if you or your staff have any questions concerning this report. Major contributors to this report are listed in appendix II.
Sincerely yours,
Mark E. Gebicke
Director, Military Operations and Capabilities Issues
(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================== Letter
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)The following are GAO's comments on the Department of Defense's (DOD) letter dated August 5, 1994.
GAO COMMENTS
------------------------------------------------------------ Letter :8
1. We calculated the average overlap by averaging the number of months of overlap for only those aviators who had overlapping commitments. DOD is suggesting that the approximately 30 percent of the aviators who had no overlap also be included in the average. Calculating the average overlap in that way would yield a misleadingly lower figure.
2. This argument is similar to the one previously mentioned. According to data provided by the Air Force on the new ACP contracts for fiscal year 1993, there were 612 instances of preexisting commitments, 43 (7 percent) of which were the result of tuition assistance. The 5.5-percent figure suggested by DOD would be based on all Aviation Continuation Pay (ACP) contracts rather than only those ACP contracts with overlaps.
3. The study conducted by the Army War College student shows that the problem of overlapping commitments is not new and provides reasonable assurance that the time periods we used for our review (fiscal years 1992 and 1993) were not periods of abnormally high overlaps. We did not extrapolate any data from that study. Rather, we used data provided by the services.
4. The statement that "every aviator lost with seven years experience will require seven years to replace" is not an accurate portrayal. Retention shortfalls are not filled by recruiting and training a replacement. Rather, aviator shortfalls are filled by drawing from the already-trained aviator pool in other year groups and from those in nonflying positions.MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.-------------------------------------------------------- Appendix II:1
Norman J. Rabkin, Associate Director
William E. Beusse, Assistant Director
OFFICE OF THE GENERAL COUNSEL
-------------------------------------------------------- Appendix II:2
Michael D. Hipple, Attorney-Advisor
NORFOLK REGIONAL OFFICE
-------------------------------------------------------- Appendix II:3
Dudley C. Roache, Jr., Regional Management Representative
Janet Keller, Evaluator-in-Charge
Sharon Reid, Evaluator
Robert Floren, Evaluator
