Investigation Reveals A Military Payroll Rife With Glitches A new investigative report from Reuters special enterprise correspondent Scot Paltrow details how the antiquated and error-ridden payroll system for the U.S. military is erroneously cutting soldiers' paychecks and causing terrible hardship.
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Investigation Reveals A Military Payroll Rife With Glitches

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Investigation Reveals A Military Payroll Rife With Glitches

Investigation Reveals A Military Payroll Rife With Glitches

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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.


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...


DAVIES: - 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.


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?

PALTROW: Well, see, that's the problem. They often do pay money - people money they're not entitled to. Because it comes in small amounts on each paycheck, soldiers often don't notice it, and then, you know, all of a sudden months later, they're hit with an enormous debt to pay back the money that the Defense Department had erroneously overpaid them.

But 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, in other words, if the Defense Department owes military personnel money, unless the individual soldiers discovers it, they'll probably never get paid.

DAVIES: There seem to be so many mistakes in the system, and yet it does seem, from your description, as if the military is pretty vigilant about finding if a soldier might have been overpaid, given an extra meal allowance, and then going after them when they think there's a debt owed.

PALTROW: Right. Well, it takes them a long time to catch up with what they think, at least, are mistakes. And then once they do, they go after them very aggressively. However, interestingly enough, as they confirmed, they don't take steps to find out if a soldier had been underpaid. They simply leave that up to the soldier him or herself to discover that they had - that they were missing pay, and then come and try to collect it.

There's a lot of pressure, of course, for the Defense Department to collect debts that it's owed, and so they do have quite an aggressive program to recoup money. For soldiers who have been recently discharged, they typically garnish salaries, withhold money from their tax refunds, turn the debts over to private collection agencies and notify credit agencies of these debts.

DAVIES: Now, you write that kind of the heart of the problem is this central payroll system, this thing the Defense Finance and Accounting Service, which a lot of people in the military call DFAS. Just tell us a little bit about it. Is it in a - is it in one big, huge building in the middle of the country?

PALTROW: Well, it's based in Indianapolis, in an enormous building. It's actually the second-largest Defense Department building, after the Pentagon. And overall, it has about 12,000 employees, and there are also satellite offices in Cleveland, in Columbus, in Rome, New York.

DAVIES: And do they respond when people have problems? Do they have an operation that's set up when GIs, you know, when military people don't think they're getting the right pay? Are they set up to answer questions and deal with it?

PALTROW: Well, they have what they call customer care centers, which are really call centers. And the problem is that the people who are handling those calls often don't have access to the information or the capability right there fixing the problems. And, in addition, DFAS itself is not able to fix the problems because the problems may have originated in the particular military service.

So people will call up, they're told to - you know, when they receive a debt notice, for example, they're told to call the call center for information, but typically, or very often, they don't get help. They're simply referred back to their own military commanders to try to get the problem straightened out.

GROSS: FRESH AIR contributor Dave Davies will continue his interview with Reuters special enterprise correspondent Scot Paltrow in the second half of the show. I'm Terry Gross, and this is FRESH AIR.


GROSS: This is FRESH AIR. I'm Terry Gross. Let's get back to the interview FRESH AIR contributor Dave Davies recorded with Reuters special enterprise correspondent Scot Paltrow about his investigation into problems in the Pentagon's payroll system that are resulting in many active-duty service men and women getting shortchanged in their paychecks. The soldiers affected are finding it very difficult to correct the errors in their pay.

DAVIES: You tell the story of an Air Force veteran named George Koffler. Tell us what happened with his pay and how he tried to fix it.

PALTROW: Well, he was in the Air Force for 25 years. He retired at the end of the 25 years. During the last five years, he was - well, 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 sort of overseeing the welfare and well-being of the airmen, and it's a job that entitled him to special duty pay of $150 a month. And so during his last five years of service, while he was serving as a first sergeant, he got this pay and then a few months after he retired he got a bill from Defense Finance and Accounting Service for almost the entire amount back and the only explanation they gave was that he didn't - that he had earned the pay and there was never any further explanation. His efforts to find out from DFAS, from the Air Force, met with no success. And the Defense Finance and Accounting Service 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 that 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.

DAVIES: Wow. This, of course, ruined his credit too, because he was, he had a private collection agency after him to collect military debts.

PALTROW: Right. They went - he and his wife went to buy some furniture and they had arranged for financing and then the salesman went and checked their credit rating and, lo and behold, it had been dropped - it had dropped considerably because the Defense Finance and Accounting Service itself, through a special program, had actually reported the debt to the credit agencies.

DAVIES: So the Air Force didn't help when you contacted them. What happens when you contact the Defense Finance and Accounting Service, the central payroll organization yourself? Are they responsive?

PALTROW: Well, what we wanted to do from the very beginning was to be able to talk directly with the director, Teresa McKay, and with the key employees because obviously, it was a very complicated subject and we wanted to be sure that we could understand it and have the back-and-forth to clear up any possible misunderstandings, and they completely refused. They insisted that we send written questions, which we did in fairly large numbers and which they did answer although often it would take weeks or sometimes a few months before they would get back to us.

DAVIES: And did they end up answering the questions - explaining what happened, for example, to - for Sergeant Koffler?

PALTROW: They said they didn't know what happened to him and they suggested we call the Air Force. And we called the Air Force and they suggested that we call DFAS.


PALTROW: So we were sort of stuck in the same position that Koffler was.

DAVIES: And was his ever straightened out? Was the debt reduced?

PALTROW: No, it has not been straightened out. The two other individuals after we inquired who, the two other individuals in the series that we wrote about, their problems were straightened out after we made inquiries, but the Air Force did not seem inclined to help Mr. Koffler, and I guess that left DFAS in a position where it could do anything either.

DAVIES: You've written about the nature of the problem here - the fact that this central payroll agency, DFAS, the Defense Finance and Accounting Service, handles the payroll for all these different branches who have separate personnel departments and distinct ways of calculating pay, the computer systems are old and outdated. This obviously became known to a lot of people in the military over time.

In the 1990s, there was an effort to fix it. What happened?

PALTROW: Well, the effort to fix it stemmed from the First Gulf War where large numbers of Reserve and the National Guard troops were mobilized and there were just huge numbers of mistakes in getting the mobilized troops onto the active duty payroll and then when they returned home to get them off the active duty payroll and back onto the Reserves. And so they were a huge amount of money lost, huge number of people suffered significant errors that took forever to get straightened out. And so the decision was made to do something about this and to try to rationalize pay and personnel throughout the entire Defense Department and to move to a modern off-the-shelf computer system that like at any major corporation would handle both functions seamlessly and use modern computer equipment. And so they made plans to build a system which was known by the acronym DIMERS - everything in the military, of course, is known by an acronym - and they worked on it for roughly 10 years and ended up spending $1 billion on it. And then in 2010, they decided that 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 cancelled system to come online.

DAVIES: That's staggering. A 10-year effort costing $1 billion and nothing to show for it. Do you understand why?

PALTROW: Well, yeah. One of the main reasons actually, was a tremendous amount of resistance from the individual military services because they did not want to give up their own authority and they did not want to give up their own old systems. So what happened was something that was supposed to be a modern, off-the-shelf system that wouldn't be modified ended up having thousands - literally thousands - of changes or ordered for to meet the requests of the individual military services and the thing became so unwieldy that it just wasn't working. And, of course, the problem was over 10 years the people in charge of it kept changing. Many military personnel were involved and, of course, they get rotated frequently from one place to another. So there was very little continuity in who was working on the project. And then an even bigger problem was that there was not very much interest from the top, from the top generals, from the Defense Department. They're much more concerned with issues of war fighting and modern weapons and issues of accounting and payroll have always taken a backseat. And so no one was there cracking the whip and making sure that it was done in a rational and efficient way.

DAVIES: Wow. You know, if an unknown number of service men and women have been experiencing these problems - but it's not just a few from the basis of your reporting - I assume a lot of them must've gone to their members of Congress or U.S. senators. Has Congress been concerned about this? Have they raised the issue?

PALTROW: Congress raised the issue back in 2006 following, you know, problems with people returning from the Middle East. And there were promises made - all sorts of promises made - that wounded warriors would get the correct benefits and the system would be fixed and then very little actually happened. I mean there were some modifications made, but basically, the answer back then was that well, we're going to have this whole brand-new system in a few years and it will solve all these problems so we have nothing to worry about. And so now here we are without the new system. Interestingly enough, at the time that Secretary of Defense Gates announced the abandonment of the new system at a congressional hearing, no one spoke up and raised any fuss about billion dollars going down the drain.

There are certain senators now - Senator Carper, Senator Coburn and several others are beginning to take a strong interest in this now. But as several congressmen explained to me, I talked to several who until recently had been committee chairmen of various armed services committees and appropriations committees and they said well, you know, there's not a whole lot of interest in it because if I go home to my constituents and say hey, look what I've done for payroll and accounting in the military, their eyes will glaze over and they won't care, so the sense was why should we bother?

DAVIES: There have been a lot of stories about the way veterans have been treated, you know, horrific waiting lists for at the Veterans Administration for people to get benefits and other issues. And it's puzzling because I don't know if there is any class of citizens more respected than military and veterans of our wars. Do you understand how this happens? Does it make any sense to you?

PALTROW: Well, first of all, what we wrote about is entirely separate from the very severe Veterans Administration problem.

DAVIES: Right.

PALTROW: But we're talking, as you say, about people who gave enormous sacrifices, they were grievously wounded in the service of their country. They're going to have to live the rest of their lives with the severe consequences of this, and instead of the military taking care of them, the military has created problems for them and they have to be essentially beg to get what's just their basic due. Why this happens? You know, a combination of bureaucracy, outdated equipment that hasn't been replaced, people with good intentions but not being able to do the right thing, manual errors that creep in and a lack, I think basically overall, a lack of concern from the very top - from the secretary of Defense's office, from the individual service secretaries - the secretary of the Army, for example - to get these problems straightened out.

DAVIES: And do you think that the military gets, I don't know, less scrutiny than other parts of the government on areas like this because they have a special status?

PALTROW: Oh absolutely. You know, the simple fact that the Defense Department has gotten away with not being audited for more than 20 years since the law went into effect just shows that they do tend to get a free ride. And I doubt very much that Congress would've let any other agency get away with that. And it's, of course, very significant because the Defense Department gets by far a larger part of the federal budget than any other federal agency.

DAVIES: Scot Paltrow, thanks so much for spending some time with us.

PALTROW: Thank you very much.

GROSS: FRESH AIR contributor Dave Davies spoke with Reuters special enterprise correspondent Scot Paltrow, co-author of the article "Wounded in Battle: Stiffed by the Pentagon."

A spokesperson from the Defense Department press office emailed us saying quote, "When there are errors we try to fix them quickly. Since 2007, we've made significant improvements in support of our wounded warriors. We now have pay specialists at Landstuhl and other warrior transition units. There's a tremendous effort to ensure our heroes are taking care of. If those paid by the Defense Finance and Accounting Service believes there's an error regarding their pay, they can find a number to call on the DFAS website," unquote. You'll find a link to that website on our website, FRESH

Coming up, Milo Miles considers the legacy of the late gay disco star, Sylvester. There's a new collection of his recordings from 1977 to 1980.

This is FRESH AIR.


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