The Chief of NGB, among other responsibilities, acts as  the official channel of communication between the Department of the  Army and the 54 states, territories, and the District of Columbia in which  ARNG has personnel assigned and is responsible for ensuring that  ARNG personnel are accessible, capable, and trained to protect the  homeland and to provide combat resources to the Army. The ARNG program, called the Selected Reserve Incentive Program,  includes cash bonuses and other payments. Improper Payments in the California ARNG

A 2008 California National Guard audit revealed that Selected Reserve  Incentive Program incentives, including student loan repayments, were  being improperly paid to numerous California ARNG soldiers and that  some of these cases were results of fraud. ARNG Has Implemented Internal Controls to Prevent Improper Payments but Has Not Planned for Future Significant Changes That Could Affect Its Internal Controls ARNG Has Implemented Internal Controls to Prevent Improper Incentive Payments

ARNG has implemented internal controls, including automated and  manual reviews, to prevent improper incentive payments, and it also  reviews its incentive programs on a periodic basis. ARNG has also implemented automated rules in the Guard Incentive Management System—known as monitor rules—that continuously  monitor a soldier’s eligibility for an incentive. The system does this by  comparing the data it receives from multiple personnel systems against  the soldier’s contract. If any issues are found, the Guard Incentive  Management System will flag the incentive case for review by the state  incentive manager and will stop future payments until the issue is  resolved. For example, in Nebraska we observed an incentive manager  using the Guard Incentive Management System to verify a soldier’s  contract period, unit assignment, and physical fitness test scores, among  other items, to confirm the soldier’s eligibility to receive a payment. For example,  ARNG officials in Nevada had evaluated and certified the internal controls  of their incentive program in 2017, and ARNG officials in Delaware told us  that they plan to request an external evaluation of their incentive program  in 2018. ARNG Has Taken Steps to Address Some Weaknesses Affecting Its Internal Controls but Has Not Planned for Future Significant Changes

ARNG took steps to address some identified weaknesses to its internal  controls for managing soldier incentive contracts, but has not developed  and implemented a plan for future significant changes that could affect its  internal controls. As another example, in April 2017, ARNG issued the fiscal year 2017  Selected Reserve Incentive Program policy. According to  ARNG officials, approximately 8,000 incentive contracts are affected by  this requirement. ARNG officials told us that a  separate transition of vendors for the Reserve Component Manpower  System that began in 2016 had delayed their ability to update the Guard  Incentive Management System with the fiscal year 2017 policy. ARNG officials also told us that they are currently  developing the fiscal year 2018 policy and would update the Guard  Incentive Management System with this policy when it is ready. Standards for Internal Control in the Federal Government states that  management should identify, analyze, and respond to significant changes  that could affect the entity’s internal control system. Because conditions  affecting the entity and its environment continually change, management  can anticipate and plan for significant changes by using a forward-looking  process to prepare for change. However, ARNG officials have been unable to  demonstrate their planning efforts to identify, analyze, and respond to any  significant changes to ARNG’s internal controls that may arise if, for  example, the contract is awarded to a new vendor or as the Reserve  Component Manpower System fully interfaces with the Integrated  Personnel and Pay System – Army. Without taking action to plan for  potentially significant changes to its internal controls for the Reserve  Component Manpower System, ARNG is at risk of not being prepared for  these changes that could contribute to the potential for making improper  payments. DOD Components Have the Authority to Waive Soldier Incentive Debt, and DOD Has Improved the Availability of Documentation to Adjudicate Waiver Cases Two DOD Components Have the Authority to Waive ARNG Soldier Incentive Debts for Military Pay and Allowances

The Defense Finance and Accounting Service (DFAS) and the Defense  Office of Hearings and Appeals (DOHA) have the authority to waive  erroneous incentive debts for ARNG soldiers. For  example, the system stores incentive payment and eligibility  documentation, which may help to reduce delays in the adjudication of  waivers associated with missing documentation. Before making an  incentive payment, state incentive managers are required to inspect case  documentation in the Guard Incentive Management System to validate  the payment. DOD also updated its Financial Management Regulation to improve the  availability of documentation. Recommendation

We are making one recommendation to ARNG:  The Director of the Army National Guard should develop and implement a  plan to identify, analyze, and address any significant changes that could  affect internal controls for its Guard Incentive Management System.
Why GAO Did This Study

ARNG provides trained and equipped units ready to defend life and property in the 54 states, territories, and the District of Columbia. In 2011, the Army Audit Agency reported weaknesses in internal controls over soldier incentive payments in the California ARNG that led to some improper payments. DOD initially took actions to recoup some of these payments, but the National Defense Authorization Act for Fiscal Year 2017 allowed for the waiver or other forgiveness of debt.
The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to assess policies and procedures for minimizing and waiving the recoupment of improper payments. This report (1) evaluates the extent to which ARNG has implemented and planned to adjust the internal controls for its Selected Reserve Incentive Program to prevent improper payments and (2) describes which DOD organizations have the authority to waive ARNG incentive debts and steps taken to improve waiver documentation. GAO conducted site visits to six states based on the value of their incentive programs, reviewed documentation used to manage incentive programs, examined incentive debt waiver cases, and interviewed DOD officials.

What GAO Found

In response to the over $22 million in improper payments the California Army National Guard (ARNG) made in cash bonuses and other soldier incentives from 2004 through 2010, ARNG officials implemented some internal controls to prevent future improper incentive payments. These internal controls include automated and manual checks of soldier incentive contracts to verify soldiers' eligibility for incentive payments. For example, ARNG implemented automated rules in its Guard Incentive Management System—an online system that tracks incentive contracts—to monitor a soldier's eligibility for an incentive by comparing the data received from multiple personnel systems against the soldier's contract. If any issues are found, the Guard Incentive Management System will flag the incentive case for review by state ARNG officials and will stop future payments until the issue is resolved.
While these internal controls have improved accountability over soldier incentive payments, ARNG is still in the process of completing further actions. For example, in April 2017, ARNG issued the fiscal year 2017 Selected Reserve Incentive Program policy. However, ARNG did not incorporate changes as a result of this policy into the Guard Incentive Management System to ensure that the automated checks captured these policy changes—including one that affects approximately 8,000 solider incentive contracts, according to ARNG officials. ARNG officials told us that they had not updated the Guard Incentive Management System with this policy because of technical challenges resulting from a transition in vendors for the Reserve Component Manpower System—an information system that houses the Guard Incentive Management System. ARNG officials also told us that they plan to update the Guard Incentive Management System to include the 2017 policy in February 2018.
GAO also found that ARNG had not developed and implemented a plan for future significant changes that could affect its internal controls over soldier incentive payments. These changes include, for example, the end of the current vendor contract in 2020 to support the Reserve Component Manpower System and the Army National Guard's migration to the Integrated Personnel and Pay System – Army that is scheduled to occur in 2018. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to significant changes that could affect an internal control system. Specifically, because conditions affecting an organization and its environment continually change, management needs to anticipate and plan for significant changes by using a forward-looking process to prepare for those changes. Without taking action to plan for such changes, ARNG puts itself at risk of making improper payments in the future.
The Defense Finance and Accounting Service and the Defense Office of Hearings and Appeals review and adjudicate requests for waivers of incentive debt. DOD has taken two steps to improve the availability of documentation needed to adjudicate waiver cases. First, DOD has clarified the policy in its Financial Management Regulation on the documentation soldiers are required to provide. Second, officials review documentation in the Guard Incentive Management System before validating an incentive payment, which may reduce delays associated with missing documentation when processing waiver requests.

What GAO Recommends

GAO recommends that ARNG develop and implement a plan that identifies, analyzes, and responds to significant changes that could affect internal controls for its Selected Reserve Incentive Program. ARNG concurred with the recommendation and has identified planned actions to address the recommendation.