DOD components are responsible for making LQA eligibility  determinations for individual job applicants or employees, and for  ensuring that employees are paid LQA properly, in accordance with  DOD’s LQA Instruction and the DSSR. DOD Has Taken Steps to Clarify Requirements for LQA Eligibility, but Is Not Monitoring LQA Eligibility Determinations Made by Its Components

		DOD and Its Components Have Taken Some Steps to Clarify LQA Eligibility Requirements

DOD, through its components and DCPAS, has taken some steps to  clarify LQA eligibility requirements, particularly as they relate to the single  employer interpretation and the definition of a U.S. hire. In addition, DOD components have taken steps to clarify LQA eligibility  requirements, including issuing memorandums and adopting new  procedures for making LQA eligibility determinations. Similarly, U.S.  Air Forces in Europe developed a flow chart to help local human resource  specialists determine whether overseas job applicants are eligible for  LQA. DOD Has Not Monitored DOD Components’ LQA Eligibility Determinations

DOD has not monitored DOD components’ LQA eligibility determinations  for civilian employees overseas to help ensure the consistent application  of DOD’s LQA Instruction across the department. In implementing the Office of the  Inspector General’s recommendation, DCPAS charged the heads of DOD  components with conducting periodic quality assurance reviews. Agencies Have Missed Opportunities to Help Ensure Consistent Determinations of LQA Eligibility Requirements

		DOD Has Not Discussed with State Its Concerns about DSSR LQA Eligibility Requirements

DOD, through DCPAS, has not discussed its concerns related to the  DSSR with State’s Office of Allowances to determine whether LQA  eligibility requirements should be revised, notwithstanding DOD  components’ concerns that some of those requirements are ambiguous or  outdated. According to State officials, they have done so when other federal  agencies have initiated the collaboration. OPM Has Not Posted Its Compensation Claim Decisions in a Timely Fashion

Until recently, past OPM compensation claim decisions have not been  widely available to federal agencies, including DOD, and the public. OPM officials told us that they are implementing a new web application  for posting compensation claim decisions to the OPM website in a more  timely manner. Until OPM  develops and implements timeframes for posting individual LQA-related  compensation claim decisions online in a timely manner, it cannot ensure  that agencies, including DOD, have access to the most up-to-date  information to provide accurate guidance on issues relating to LQA  eligibility determinations to their employees. Conclusions

Since DOD’s 2013 audit determined that 680 of its civilian employees  assigned overseas had erroneously received LQA because of  misinterpretations of eligibility requirements, DCPAS and DOD  components have taken steps to clarify the eligibility requirements  outlined in DOD’s LQA Instruction. Recommendations for Executive Action

To ensure that DCPAS and DOD components are determining LQA  eligibility consistently with DOD’s LQA Instruction, the DSSR, and OPM  compensation claim decisions, we recommend that the Secretary of  Defense direct the Under Secretary of Defense for Personnel and  Readiness to take the following two actions:  require the Deputy Assistant Secretary of Defense for Civilian  Personnel Policy or DCPAS, as delegated, to monitor reviews of LQA  eligibility determinations conducted by DOD components; and discuss with State its concerns related to the DSSR to determine  whether LQA eligibility requirements should be revised and then, as  appropriate based on those discussions, request that State make any  revisions deemed necessary, particularly with regard to the  requirement for “substantially continuous employment by such  employer” and the definition of a U.S. hire. To evaluate the extent to which DOD has clarified its LQA eligibility  requirements and is monitoring its components’ LQA eligibility  determinations, we reviewed DOD Instruction 1400.25, Volume 1250,  DOD Civilian Personnel Management System: Overseas Allowances and  Differentials and a related September 2013 policy advisory. We also  reviewed the Department of State (State) Standardized Regulations  (DSSR) and selected Office of Personnel Management (OPM)  compensation claim decisions to determine if DOD had incorporated into  DOD’s current LQA Instruction OPM’s interpretation of the DSSR’s  requirement for federal overseas civilian employees to be in “substantially  continuous employment by such employer” prior to their current job. To evaluate the extent to which DOD, State, and OPM have helped  ensure consistency in the interpretation of LQA eligibility requirements,  we interviewed officials from DCPAS, DOD components, and the local  human resource offices to determine the extent to which DOD has  communicated with State and received and disseminated OPM  compensation claim decisions with implementation instructions during  and since the 2013 LQA audit. For example, a team from the Defense Finance and Accounting Service  traveled to local human resource offices in the U.S. European Command  and U.S. Pacific Command areas of responsibility to directly assist  employees who were determined to have been erroneously paid LQA  with preparing requests for waivers of debt.
Why GAO Did This Study

DOD provides LQA as an incentive to recruit eligible individuals for civilian employee assignments overseas. In 2014 DOD spent almost $504 million on LQA for about 16,500 civilian employees to help defray overseas living expenses, such as rent and utilities. GAO was asked to review DOD's implementation of LQA policies for overseas employees. This report evaluates the extent to which (1) DOD has clarified its LQA eligibility requirements and is monitoring its components' LQA eligibility determinations; and (2) DOD, State, and OPM have helped ensure consistency in the interpretation of LQA eligibility requirements.
GAO reviewed the DSSR, DOD's LQA Instruction, and OPM compensation claim decisions. GAO interviewed DOD, State, and OPM officials responsible for overseeing, implementing, or interpreting LQA eligibility requirements, including a nongeneralizable sample of 15 DOD local human resource offices in the U.S. European Command and U.S. Pacific Command areas of responsibility selected based on the number of employees determined to have been erroneously paid LQA in DOD's 2013 LQA audit.

What GAO Found

The Department of Defense (DOD) and its components have taken steps to clarify living quarters allowance (LQA) eligibility requirements for civilian employees overseas, but DOD has not monitored its components' LQA eligibility determinations. DOD and its components are to make LQA eligibility determinations in accordance with Department of State (State) Standardized Regulations (DSSR) as well as department-wide and component-level guidance. However, after conducting an audit in 2013, DOD determined that 680 of its civilian employees had erroneously received LQA. Most erroneous LQA payments were attributed to misinterpretations of eligibility requirements. This determination was based in part on a 2011 interpretation of a DSSR eligibility requirement for LQA by the Office of Personnel Management (OPM), which settles federal employee compensation claims. After the audit, DOD issued a memorandum and point paper to implement OPM's interpretation and clarify LQA eligibility requirements. DOD is also updating its LQA Instruction, DOD Instruction 1400.25, Volume 1250, to incorporate OPM's 2011 interpretation. Some DOD components also issued clarifying guidance and adopted new procedures for making LQA eligibility determinations. For example, U.S. Air Forces in Europe developed a flow chart to help human resource specialists determine whether overseas job applicants are eligible for LQA. DOD's LQA Instruction directs DOD components to conduct periodic quality assurance reviews of LQA eligibility and payments, but according to DOD and component officials, they have not consistently done so. Further, the Deputy Assistant Secretary of Defense for Civilian Personnel Policy is responsible for monitoring the implementation and effectiveness of DOD's LQA Instruction and administers this responsibility through the Defense Civilian Personnel Advisory Service. However, this office has not monitored its components' reviews of LQA eligibility determinations. Without such monitoring, DOD cannot ensure that LQA eligibility determinations are being made in accordance with applicable regulations and policies.
Agencies have missed opportunities to ensure consistent interpretation of LQA eligibility requirements.
DOD components have raised concerns that some DSSR LQA eligibility requirements are ambiguous or outdated, but DOD has not discussed these concerns with State to determine whether the DSSR should be revised. State officials told GAO that they have collaborated with DOD and other agencies on eligibility issues for other allowances in the past and would be open to future discussions. Without communicating its concerns to State, DOD cannot ensure that State has the information it needs to make any adjustments to the DSSR, if appropriate.
Until recently, OPM had not made its compensation claim decisions widely available to federal agencies, including DOD, and the public because of limited funding. OPM is implementing a new web application for posting compensation claim decisions to its website, but has not established timeframes to routinely post individual decisions. In the absence of doing so, OPM cannot ensure that agencies will have timely access to the most up-to-date information on LQA eligibility issues.

What GAO Recommends

GAO recommends DOD monitor components' reviews of LQA eligibility determinations and discuss concerns about DSSR LQA eligibility requirements with State. GAO also recommends that OPM develop timeframes for the timely web posting of its decisions. DOD and OPM concurred with GAO's recommendations.