oversight

Potential for Improvement in the Naval Reserve Drill Pay System

Published by the Government Accountability Office on 1971-08-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Potential For Improvement In The
Naval Reserve Drill Pay System
                                    8.725037


Department   of the Navy




UNITED STATES
GENERAL ACCOUNTING         OFFICE
                                 UNITED STATES GENERAL ACCOUNTING OFFKE
                                              WASHINGTON,       D.C.   20548



DEFENSE   DIVISION


          B-125037

          Dear       Mr.   Secretary:

                  The accompanying     report summarizes    the findings,  conclusions,
          and recommendations       based on our review   of the Naval Reserve      Drill
          Pay Sys tern.   Our review    was made pursuant    to the Budget and Ac-
          counting   Act, 1921 (31 U.S.C. 53), and the Accounting      and Auditing   Act
          of 1950 (31 U.S.C.   67).

                 Appropriate     corrective      action has been taken or promised          by
      1 the Department        of the Navy on most of our recommendations.                 The Navy           !
     *. disagreed,     however,     that a sign-in      and sign-out    procedure    should be
        adopted for attendance         at drills    and that the Naval Audit Service        should
        review periodically        the adequacy of command           inspections   and the ef-
        fectiveness      of the Naval Reserve         Drill  Pay System.      We believe   that
        both of these matters         deserve     reconsideration.

                   Your attention   is invited to section 236 of the Legislative        Reorga-
          nization    Act of 1970 which requires       that you submit written     statements
          of the action taken with respect       to the recommendations.         The state-
          ments are to be sent to the House and Senate Committees                on Govern-              _ ’ I’
          ment Operations       not later than 60 days after the date of this report         and         _
          to the House and Senate Committees            on Appropriations     in connection                  ‘>’
          with the first    request for appropriations       submitted    by your agency
          more than 60 days after the date of this report.

                Copies        of this report    are being sent to the Director,           Office    of
          Management          and Budget,    and the Secretary   of the Navy.

                                                                   Sincerely   yours,




                                                                   Director,   Defense   Division
          The Honorable
                                                            /
          The Secretary          of Defense       :




                                         50 TH ANNIVERSARY             1921- 1971
<REPORi TO THE                               POTENTIAL FOR I~~PROVE~ENTIN THE NAVAL
'SECRETARYOF DEFENSE                         RESERVE DRILL PAY SYSTEM
                                             Department    of the Yavy B-125037


 DIGEST
 _-----


 WHY THE REVIEW WAS MADE

         The centralized    Naval Reserve Drill   Pay System processes over one
         million  checks annually.     Reserve units submit monthly drill    reports
         to the Navy Finance Center which prepares       the paychecks.   Payments
         totaling   over $73 million   were made in fiscal   year 1970 to over
         100,000 reservists    in 2,800 reserve   units.

         The General Accounting   Office    (GAO) reviewed the Naval Reserve Drill    *
         Pay System to determine   whether it was-operating     effectively  and
         whether reservists   were receiving    proper drill  payments and retirement
         credits.


 FINDINGS AND CONCLUSIONS

         The basic documents--attendance           records    and drill    reports--for       the
         Naval Reserve Drill       Pay System contain discrepancies            in the number
         of drills    performed by reservists.          The absence of uniform          attendance
         procedures    and a standard      attendance     form contributed       to the discrepan-
         cies.     As a result,    erroneous     payments were made to reservists             and er-
         roneous credit      was recorded     for retirement     benefits.

         GAO reviewed payments to 130 reserve units made during July 1969 and
         found erroneous   payments totaling about $113,000.   Follow-up  reviews
         at certain  units in June and July 1970 found similar   mispayments.
          (See pp. 6 to 11.)

         Rone of the erroneous     payments that GAO found were a result       of the
         functions    performed by the Naval Finance Center.      The Center is ef-
         fective    in processing  drill  reports and maintaining    pay records for
         reservists    on the basis of the drill   reports   that it receives.

         The Navy should review the controls       and procedures            used by the re-
         serve units to record and report    drills    performed.             The procedures
         used by the %avy Finance Center in processing         drill          payments also
         should be reviewed.

         GAO believes  that tiavy internal reviews--primarily    command inspec-
         tions--have  not ensured the accuracy of these payments.       Furthermore
         the Naval Audit Service has never made a comprehensive      review of the
         Naval Reserve Drill   Pay System.   (See pp. 11 to 14.)

         Two automated systems--       the drill  pay and personnel    management sys-
         terrE~~eWst-aTorig wjth       a manual reserve  officer  retirement   record

Tear Sheet                                            1
                                                                         AUG.18J9-71
-.-  ___
    sys tern. All three     systems         use the drill          report         as a basic       source-          s
    of information.

    A March 1969 Navy report     concluded that automating    the posting of
    drills  performed by officers     to their retirement  records was fea-
    sible and should increase the accuracy of data recorded.          The re-
    port noted, however, that automating       the system would be too costly,
    despite its benefits.

    GAO believes    that the Navy should reconsider  automating   officers'
    retirement   records and combining this function   with either     the drill
    pay system or the personnel management information      system.      (See
    pp. 14 to 16.)


RECOMMENDATIONS
             OR SUGGESTIONS
    The Secretary   of the Navy, to ensure                 that         attendance          data   are ac-
    curate,  should prescribe

        --uniform     procedures      for     observing          and recording              attendance
           at drills;

        --a   standard    attendance         form for      all     reserve         units;

        --sign-in      and sign-out         requirements          for     reserve      units,       where prac-
           ticable;     and

        --procedures      for   verifying        drill     reports         with      attendance          records.

    To facilitate internal          review in the management of the drill                                pay
    system, the Secretary          should require that

        --reserve     commands issue uniform and specific                            guidelines          for
           inspecting    all types of reserve units and

        --the Naval Audit Service review periodically                               the adequacy of
            command inspections and the effectiveness                             of the drill  pay
            system.

    The Secretary also should reconsider    automating                            officers'  retirement
    records and combining them with either     the drill                           pay system or the
    personnel management information   system.                                                                          I


AGENCYACTIONSAND UNRESOLVED
                          ISSUES                                                                                        I
                                                                                                                        I
                                                                                                                        I
    The Navy agreed with most of GAO's recommendations                                and stated          that
    action would be taken to correct the situation.
        The Navy disagreed     that a sign-in,        sign-out     procedure would be
        needed if a standard       attendance    form were developed and if pro-
        cedures were implemented         to ensure accurate         attendance    data.
        GAO continues     to believe     that a sign-in,       sign-out     procedure would
        provide greater     assurance that attendance            data were accurate.
        Also this procedure would protect           individual       reservists    from the
        results   of errors   made by others.

        The ?!avy disagreed      also that the Naval Audit Service should make
        periodic    reviews of the adequacy of command inspections               and of
        the effectiveness      of the pay system.        The !;iavy believed     that its
        periodic    reviews of segments of the system served the same purpose
        and required      less resources    than the recommended comprehensive            re-
        view.    GAO, however, believes        that limited    reviews of segments of
        the pay system may not disclose           the magnitude of system deficiencies
        and that comprehensive        reviews are necessary from time to time to
        apprise top management of the system's            overall   effectiveness.




Tear Sheet                                       3
                        Contents

                                                         Page
DIGEST                                                     1
CHAPTER
  1        INTRODUCTION

  2        REPORTINGATTENDANCEAT DRILLS
              Discrepancies  in reporting drills per-
                formed
              Lack of uniform attendance procedures
                and standard attendance form
              Conclusion
              Recommendations
              Agency comments and GAO evaluation
           INTERNAL REVIEWAND AUDIT OF DRILL PAY
           SYSTEM                                         11
               Conclusion                                 12
               Recommendations                            12
               Agency comments and GAO evaluation         12
           AUTOMATINGRETIREMENTRECORDS                    14
              Conclusion                                  15
              Recommendations                             15
              Agency comments                             15
           SCOPEOF REVIEW                                 16
APPENDIX
  I        Letter from the Assistant Secretary of the
             Navy (Financial Management) dated May 24,
             1971, to the General Accounting Office       21
     I




REPORTTO THE                         POTENTIAL FOR IKPROVEMENT   IN THE tlAVAL
SECRETARY0F DEFmsE                   RESERVE DRILL PAY SYSTEM
                                     Department of the ?Javy B-125037


DIGEST
__----

WHYTHE REVIEW WASMDE
    The centralized    Naval Reserve Drill   Pay System      processes over one
    million  checks annually.     Reserve units submit       monthly drill    reports
    to the Navy Finance Center which prepares the           paychecks.     Payments
    totaling   over $73 million   were made in fiscal       year 1970 to over
    100,000 reservists    in 2,800 reserve units.

    The General Accounting Office      (GAO) reviewed the Naval Reserve Drill
    Pay System to determine whether it was operating       effectively  and
    whether reservists   were receiving    proper drill  payments and retirement
    credits.


FINDINGS AND COKLUSIONS
     The basic documents--attendance       records and drill      reports--for    the
     Naval Reserve Drill Pay System contain discrepancies             in the number
     of drills    performed by reservists.      The absence of uniform attendance
     procedures    and a standard attendance      form contributed      to the discrepan-
     cies.     As a result,    erroneous payments were made to reservists         and er-
     roneous credit      was recorded for retirement    benefits.

     GAO reviewed payments to 130 reserve units made during July 1969 and
     found erroneous payments totaling   about $113,000.   Follow-up  reviews
     at certain  units in June and July 1970 found similar   mispayments.
     (See pp. 6 to 11.)

     None of the erroneous payments that GAO found were a result          of the
     functions    performed by the Naval Finance Center.     The Center is ef-
     fective    in processing  drill reports and maintaining    pay records for
     reservists    on the basis of the drill  reports   that it receives.

     The Navy should   review the controls  and procedures         used by the re-
     serve units to record and report drills    performed.          The procedures
     used by the Navy Finance Center in processing      drill       payments also
     should be reviewed.

     GAO believes  that Navy internal  reviews--primarily    command inspec-
     tions--have  not ensured the accuracy of these payments.       Furthermore
     the Naval Audit Service has never made a comprehensive      review of the
     Naval Reserve Drill   Pay System.   (See pp. 11 to 14.)

     Two automated- - _-.
                      systems --the drill pay and personnel      management sys-
     tems--exist   along with a manual reserve officer      retirement   record

                                              1
    sys tern. A11 three          systems         use the drill          report         as a basic        source       '   ,
    of information.

    A March 1969 Navy report     concluded that automating    the posting of
    drills  performed by officers     to their retirement  records was fea-
    sible and should increase     the accuracy of data recorded.      The re-
    port noted, however, that automating       the system would be too costly,
    despite its benefits.

    GAO believes    that the Navy should reconsider  automating    officers'
    retirement   records and combining this function   with either      the drill
    pay system or the personnel management information      system.       (See
    pp. 14 to 16.)


RECOiWEflDATIOii'S
                 OR SUGGESTIONS
    The Secretary       of the Navy, to ensure                  that         attendance          data   are ac-
     curate, should prescribe
         --uniform     procedures          for     observing       and recording                 attendance
            at drills;

         --a   standard    attendance             form for      all reserve             units;

         --sign-in      and sign-out             requirements          for     reserve      units,      where prac-
            ticable;     and

         --procedures      for     verifying          drill     reports         with      attendance          records.

    To facilitate internal           review in the management of the drill                                    pay
    system, the Secretary           should require that

        --reserve      commands issue uniform and specific                               guidelines           for
            inspecting    all types of reserve units and

        --the Naval Audit Service review periodically                                    the adequacy of
            command inspections and the effectiveness                                  of the drill  pay
            system.

    The Secretary also should reconsider    automating                                 officers'  retirement
    records and combining them with either     the drill                                pay system or the
    personnel management information   system.


AGENCYACTIONSAND UNRESOLVED
                          ISSUES
    The Navy agreed with most of GAO's recommendations                                     and stated          that
    action would be taken to correct the situation.
The Navy disagreed     that a sign-in,      sign-out     procedure would be
needed if a standard      attendance   form were developed and if pro-
cedures were implemented to ensure accurate              attendance    data.
GAO continues    to believe     that a sign-in,      sign-out    procedure would
provide greater    assurance that attendance          data were accurate.
Also this procedure would protect         individual      reservists    from the
results   of errors made by others.

The Navy disagreed       also that the Naval Audit Service should make
periodic    reviews of the adequacy of command inspections               and of
the effectiveness      of the pay system.        The Xavy believed       that its
periodic    reviews of segments of the system served the same purpose
and required      less resources    than the recommended comprehensive            re-
view.    GAO, however, believes        that limited    reviews of segments of
the pay system may not disclose           the magnitude of system deficiencies
and that comprehensive        reviews are necessary from time to time to
apprise top management of the system's            overall   effectiveness.




                                         3
                                              CHAPTER        1


                                          INTRODUCTION

        In 1965 the Navy developed                  a centralized          Naval     Reserve
Drill     Pay System which            processes       over one million           checks
annually.          Payments     totaling       over     $73 million        were made in
fiscal     year     1970 to over         100,000      Naval    reservists        for     at-
tending     drills      at about        2,800    reserve    units       located      through-
out the United          States.

         The General            Accounting          Office         reviewed       the      Naval        Re-
serve     Drill  Pay           System    to      determine

         --how    drills         performed    by reservists                     were      observed            and
            recorded           by the reserve    unit,

         --which    naval          organizations            administered                various      phases
            of the drill             pay system       and how these                    organizations
            carried    out         their     responsibilities,

         --how      accurate          payments       were        for   attendance             at    drills,

         --how    reservists            were given           credit       for     retirement                ben-
            efits    for     drills        performed,           and

         --what      internal    reviews             and     audits       were         made    of     the
            drill      pay system.

          As conceived,          the drill         pay system          is procedurally
simple.            When a reservist          performs         a drill,       the reserve          unit
records          the drill      on monthly         drill      reports--one         for     officers
and one for            enlisted     members.            These drill        reports       are for-
warded         to the Navy Finance              Center      in Cleveland,          Ohio (Comp-
troller          of the Navy),        which      processes         a check       to pay the re-
servist          for   drills    performed.              In addition       to being        paid
for     drills       performed,       a reservist           receives       credit      for     these
drills         for   retirement       benefits.

        Drill reports      are preprinted          monthly       by the Personnel
Accounting    Machine      Installation,          Bainbridge,       Maryland   (Bu-
reau of Naval      Personnel),           and are sent      to each reserve      unit.
These reports      contain      current      personnel        data  for   each
member in        the unit.        Space      is provided            on the        report      for
recording        drills    performed         and personnel            data        changes.

      A drill  report       is an important      document.         It provides
basic  data not only       for   the drill    pay system        but also     for
the manpower   and personnel          management    information       system     and
the reservist    retirement        system.    Copies     of a completed
drill  report  are sent        to the

        --Personnel          Accounting       Machine          Installation           to     update
           personnel         files;

        --Navy        Finance     Center     for       processing        drill      payments;

        --Naval        Officer     Record     Support      Activity,               Omaha, Ne-
           braska        (officers     only),     for    recording               drills   per-
           formed       for retirement         benefits;        and

        --cognizant          military      commands          for    information.

The reserve      units    retain     a copy of the report                         to record
drills   for   retirement        benefits   in the service                        records   of
enlisted     members.

         The drill        pay system   is administered         by the Comptroller
of the Navy.            The manpower      and personnel       management    infor-
mation      system      and the reservist      retirement        system  are ad-
ministered        by    the Bureau   of Naval      Personnel.




                                                   5
                                             CIHAPTER 2


                            REPORTING      ATTENDANCE          AT DRILLS

          The basic       documents--attendance             records  and drill       re-
ports--for         the Naval       Reserve       Drill   Pay System   contain      dis-
crepancies         in the number           of drills     performed   by reservists.
The absence          of uniform        attendance      procedures    and a standard
attendance         form    contributed         to the discrepancies.          As a re-
sult,      erroneous       payments        were made to reservists--$113,000
in.July        1969 --and     erroneous        credits    for drills    were re-
corded       for   retirement        benefits.

DISCREPANCIES           IN REPORTING           DRILLS         PERFORMED

         From reserve       units     in the United         States,      we statisti-
cally     selected      130 units       for    our review.         These included
70 shore,        30 air    squadron,        and 30 ship      units.       Of the 130
reserve      units,     22  units     did    not   provide     us   with   attendance
records.         Some units       did not maintain          attendance       records;
others      had destroyed         or discarded        them.

       Our comparison         of July     1969 drill     reports    with    the at-
tendance       records    for   108 units     showed that       182 discrepancies
had been made in recording              the drills      performed     on drill    re-
ports    of 46 units.         As a result,       overpayments      and underpay-
ments    totaling      $5,065    were made.

       About        89 percent   of the           $5,065      (78        percent     of the    dis-
crepancies)          were overpayments             for   drills.              For   example:

        In one reserve        unit     14 reservists           were paid     for
        drills   which     were recorded           on the drill       report
        as being    performed        by these       reservists.         The at-
        tendance    record,       however,       did not show that           these
        drills   were performed.              Overpayments         of about      $580
        were made to these           reservists.

From our       sample        we estimate         that    errors      in      payments     made    to
reservists       for        1 month,    July       1969,     totaled         $113,000.

         Because      the      drill      reports      were     used      to record       drills    in
the reservists’              retirement          records,       these       discrepancies        also
resulted       in    crediting          the reservists            with      either     too many or


                                                   6
too few drills           for retirement             purposes.                 This     could     ulti-
mately affect          the reservists’              eligibility                for     retirement.

       We also      reviewed       1970 drill    payments    and found       similar
problems.        For example,         our review    of attendance       records
and drill      reports      for    the period    June and July      for    20 units
showed    that    similar       discrepancies     occurred.       As a result,
erroneous      payments       were made to reservists          in 12 units.

         None of the erroneous      payments       that    we found     were at-
tributable      to the functions      performed       by the Navy Finance
Center.       We found  that    the Center      was effectively         process-
ing drill      payments   and maintaining         pay records      for    reserv-
ists     on the basis   of the drill       reports      that    it received.

LACK OF UNIFORM ATTENDANCE PROCEDURES
AND STANDARD ATTENDANCE FORM

        Reserve    units   used different         methods     to observe    and
record    attendance     at drills       because      uniform   attendance     pro-
cedures     and a standard       attendance       form had not been pre-
scribed     by the Navy.       This,     in our opinion,        contributed      to
the discrepancies        in the drill        reports.

Uniform       attendance         nrocedures         needed

          Neither      the Naval        Reserve       Training     Command (responsible
for    ship and shore            reserve      units)       nor the Naval        Air    Reserve
Training        Command (responsible                for    air  squadron      reserve
units)       issued      uniform      procedures         for recording        attendance
at drills.           Instead,       intermediate           commands     issued      numerous
different         procedures        for    observing         and recording        attendance
at drills.

       Our analysis              of the     procedures        issued  by 20 intermedi-
ate   commands   and           in effect       in July       1969 showed  that

          --15   commands        issued       instructions              for      recording          at-
             tendance  ;

          --12   commands        specified        methods         for         taking       attendance,
             such as roll         call     or    observation;

          --lo     commands      required        that  a designated                    official           su-
              pervise    the     taking       of attendance;


                                                    7
         --five      commands         required         attendance           to be taken           at      the
             beginning     and        end of      drill;       and

         --three         commands     required        drill       reports             to be verified
             against       attendance        records.

In our opinion,               the use       of numerous           nonstandard             procedures
increases   the           likelihood          of errors         in recording              attendance
at drills.

Standard        attendance          record       needed

       Currently      many different         attendance        forms    are being
used.      Some units     are not maintaining             records     for     both    of-
ficers     and enlisted       members     and others        are using       different
procedures       in preparing      attendance        records.        Specifically,
our analysis       of attendance        records      of 108 units         showed that

         --39    different          forms     were       used    to    record          attendance;

         --17     units     did not maintain     attendance                      records       for        of-
            ficers,       even though   attendance       records                    were      main-
            tained      for    enlisted members;

         --attendance           records  at 44 units       were                 not      signed      or
             initialed         by an appropriate     official;                        and

         --attendance            records      at 39 units             had    corrections             which
            were not          signed     or   initialed.

         To simplify            the recording            of attendance,          one standard
attendance            record      should       be prescribed          for use by all           re-
serve       units.         Further,        instructions          should      be issued        ex-
plaining          how the attendance                record     is to be prepared.                 Such
instructions             should       include       a requirement          that    reservists
sign      in and out at drills                   and that     drill      reports      be inde-
pendently          verified         with     attendance       records.          The use of a
standard          attendance         record       not only       would     reduce     the number
of errors           in recording           attendance        but also        would    aid in the
audits       of the reserve              units.

CONCLUSION

         Drill    reports       are the basis   upon which                       pay      is computed
and    retirement        credit     is given  to reservists.                             They can be


                                                     8
only as accurate         as the    attendance              reports       on which       they
are based.

       Currently   there are a sufficient       number of discrep-
ancies between drill      reports   and attendance    records   for
drills   performed    to seriously   affect   the accuracy    of pay-
ments under the Naval Reserve Drill          Pay System.     We believe
that these discrepancies        can be reduced,

RECOMMENDATIONS

     To ensure that attendance    data are accurate,                                 we ret-     .
ommend that the Secretary   of the Navy prescribe

        --uniform   procedures         for       observing           and recording         at-
           tendance   at drills;

        --a standard      attendance         form      for     use by all           reserve
           units ;

        --sign-in      and sign-out   procedures                for      reserve      units,
           where    practicable;    and

        --procedures    for    verifying           drill       reports       with     atten-
           dance records.

AGENCY COMMENTSAND GAO EVALUATION

       In a letter      dated b1ay 24, 1971, the Assistant               Secretary
of the Navy (Financial           Management)       furnished     Navy comments
on the proposals        included      in a draft       of our report.       (See
aPP l
       I.)   The   Navy    agreed    with    our   proposals     for  observing
and recording      attendance       at drills,       for using a standard
attendance     form, and for implementing               procedures    for verify-
ing drill    reports      with attendance        forms.      We were informed
that the Chief of Naval Personnel                would coordinate        the de-
velopment    of a standard        form and would implement            procedures
to ensure accurate         attendance      data.

      The Navy did not concur with our proposal        for reserv-
ists to sign in and sign out at drills.          It was believed
that the development    of a standard     form and implementation
of procedures   to ensure accurate    attendance    at drills    would
make this procedure    unnecessary.



                                             9
       Our view,           however,      is that       a sign-in,          sign-out        re-
quirement      will        not only      provide       greater       assurance         to the
Navy that       drill        attendance        records       are accurate           but also
will   protect         individual        reservists          from    the results           of at-
tendance      errors         made by others.             Such errors          could      result
in a reservist             not being       paid     for drills         attended.           Also
if a reservist             has obligated          service,        such errors          could     re-
sult   in his being              subject     to call       to active         duty    because
of apparent          failure        to attend       the required           number      of drills.

        Consequently      we believe    that    the Secretary                      of the
Navy should      reconsider      our recommendation         that                 he prescribe
sign-in     and sign-out     procedures      for reservists                      attending
drills.




                                                 10
                                   CHAPTER 3


          INTERNAL REVIEW AND AUDIT OF DRILL PAY SYSTEM

        To ensure the accuracy            of drill    reports     and drill    pay-
ments,    internal        reviews     and audits   should     be  made  of  the
controls      and procedures         used by reserve      units    to record     and
report    drills       performed     and by the Navy Finance Center in
processing       drill      payments.     In our opinion,        Navy internal
reviews --primarily            command inspections--have          not adequately
accomplished         this purpose.        Further,    the Naval Audit       Ser-
vice has never made a comprehensive                 review of the Naval Re-
serve Drill       Pay System.

        Inspections  are made by the Naval Reserve Training       Com-
mand for ship and shore units      and by the Naval Air Reserve
Training     Command for air squadron units.    These inspections
are made to determine     whether units  are accomplishing     their
missions.

        Command inspection       guidelines      in effect    in July 1969
were not sufficiently        explicit       to disclose    discrepancies
similar    to those that we identified,              For example,     neither
Command required      inspection        teams to compare attendance
records    with drill    reports      to ensure that attendance          rec-
ords were retained       for audit.         The Naval Reserve Training
Command did revise       its guidelines        in January     1970 to in-
clude these requirements.

       The Naval Air Reserve Training            Command, however,      has
not changed its guidelines            to include   these requirements.
Although    fiscal     year 1970 command inspection        reports     showed
no weaknesses       in controls     over recording     and reporting     drill
attendance,      our review     of air squadron units      for the period
June through       September 1970 showed discrepancies            in record-
ing and reporting        drill   attendance.

       The Naval Audit       Service     has not performed       a comprehen-
sive audit of the drill          pay system since the inception           of
the system in 1965.          In fiscal     year 1971, the Naval Audit
Service    planned    to audit     the reserve      program including     the
drill    pay system at two naval districts.                 We understand
this audit     has been postponed         until   fiscal     year 1972.   Na-
val Audit     Service    reports     for fiscal     year 1970 showed audits
of drill     pay controls      at only five     installations.

                                         11
CONCLUSION

        Internal       rev-iew is a necessary             and vital    function     of
management.           For the drill         pay system,        the command inspec-
tions     fulfill      part of this         function      through   inspections       of
the attendance           procedures       in reserve        units.    These inspec-
tions,     however,       are not the same for all units.                  Without
uniform       inspection        procedures      and comprehensive         audits    by
the Naval Audit            Service,     the Navy lacks an effective              review
of the procedures             for observing,         recording,     and reporting
drills      performed       in the reserve         units.

RECOMMENDATIONS

       To accomplish  the vital  role of internal  review in the
management of the drill     pay system, we recommend that the
Secretary    of the Navy require   that

        --the     reserve   commands issue uniform     inspection                guide-
            lines    for all types of reserve    units    and

        --the    Naval Audit Service   review periodically       the ade-
            quacy of command inspections      and the effectiveness
            of the Naval Reserve Drill      Pay System.

AGENCY COMMENTS AND GAO EVALUATION

        In the letter     of May 24, 1971, the Navy concurred        with
our proposal       that reserve   commands issue uniform    inspection
guidelines      for all types of reserve     units.   We were in-
formed that the commands involved         were reviewing    their    in-
spection     guidelines    for command inspections    and would revise
them as deemed necessary        to conform to our findings.

        The Navy did not agree with our proposal                   that the Na-
val Audit     Service     periodically       review     the adequacy of com-
mand inspections        and the effectiveness             of the Naval Reserve
Drill     Pay System on a comprehensive              basis.     The Navy noted
that the Naval Audit           Service     was performing       effective       peri-
odic audits      of the various         segments of the reserve           drill
pay system and that these audits                had disclosed        the same
type of discrepancies           that we noted.         The Navy believed           that
a more comprehensive           audit    would require       more resources         than
the type of audit being performed                 but would not be more ef-
fective     in disclosing       deficiencies       and the corrective           action
required.

                                            12
        It   was not our intention              that     the Naval Audit     Service
audit     the entire       reserve      drill     pay    system on a periodic       ba-
sis in lieu of the present.periodic                        audits   of segments of
the system made on a cyclical                   basis      at various   naval instal-
lations      and activities.            Reviews of         segments of a system,
however,      are not likely          to disclose          the type and magnitude
of all significant            deficiencies          in   the system.     Consequently
necessary       corrective       action       may not      be taken to achieve
overall      system effectiveness,              either       because there are un-
identified       deficiencies         in portions          of the system not yet
reviewed      or because known deficiencies                    do not appear to be
of sufficient         magnitude       to command         the attention    of appro-
priate     management levels.

        For example,    although    the Navy stated       that its periodic
reviews    of the Naval Audit       Service    had disclosed     discrep-
ancies    similar    to those that we found,         there was no indica-
tion that these findings         had resulted      in any overall      cor-
rective    action    at an appropriate      level    of command as might
be expected       if a more comprehensive       review    of the reserve
drill    pay system had been made and if the results              had been
furnished      to senior management levels.

       We believe      that the        Secretary      of the Navy should recon-
sider    the desirability        of     having     the Naval Audit Service
make servicewide         reviews       of the effectiveness        of the Naval
Reserve Drill       Pay System,          including      the adequacy of command
inspections,      from time to          time to apprise       top management of
the overall     effectiveness           of the system.




                                              13
                                     CHAPTER 4


                      AUTOMATING RETIREMENT RECORDS

      Two automated        systems- -the drill      pay and personnel
management sys terns --exist         along with a manual reserve      of-
ficer  retirement       record    system.     All three systems use the
same basic document,          the drill    report.    One of the auto-
mated systems,       in our opinion,       could absorb the function      of
the reserve     officer     retirement     system.

       Retirement     records    which show the number of drills
performed      by 120,000 reserve       officers     are maintained     manu-
ally   at the Naval Officer         Record Support Activity         in Omaha.
The number of drills         performed      by reserve    officers    and
posted to retirement         records    are derived     from the monthly
drill    reports.     These reports      are the same reports         used in
the drill      pay system at Cleveland           and the personnel     manage-
ment system at Bainbridge.             Thus there are three activities
processing       data from identical        documents.

        In March 1969 the Bureau of Naval Personnel                       studied
the possibility       of automating        the retirement          records.        The
study concluded       that automation          of these records            (1) was
feasible,      (2) should increase         accuracy     in recording          data,
 (3) could reduce manual effort              in recording         data, and (4)
could improve      the updating       of personnel        files.         The study,
however,    concluded      also that automation           would increase           the
staff,    would be costly,       and would result            in a substantial
increase     (49 percent)      in annual operating             costs--all       with-
out improving      service     to officers       and management.

        Estimates    included     the cost of converting         from a manual
system to an automated           system of $273,500.         This would in-
clude preparing        the site for the computer;          system design;
programming;       and purchase      of microfilm,     equipment,     and sup-
plies.      Further,     the estimated     cost of concurrent        operation
of both the manual and mechanized               system until     the mecha-
nized system proved effective            amounted to $215,500.           Addi-
tional    annual costs of $147,000 for personnel,                computer
rental,     and microfilming       would be incurred       after    conversion
to the automated         system.




                                           14
       The study only considered   automating  the system at
Omaha; no consideration    was given to absorbing    this func-
tion into one of the automated     systems at Cleveland   or
Bainbridge.

CONCLUSION

       Long-range     benefits      could accrue to the Navy by auto-
mating the reserve        officer     retirement    system.   It could be
consolidated      with the drill        pay system or the personnel
management information           system,      In our opinion,   the conver-
sion and operating        costs would be less than the Bureau of
Naval Personnel’s       estimate.

RECOMMENDATIONS

      We recommended that the Secretary            of the Navy recon-
sider automating   officers’     retirement      records   and combin-
ing this function    with either       the drill    pay system or the
personnel   management system.

AGENCY COMMENTS

       On May 24, 1971, the Navy informed      us that the Chief
of Naval Personnel      would conduct an investigation     to deter-
mine whether     it would be feasible   to merge officer     retire-
ment records     with the Naval Reserve Manpower System.           The
Navy stated    that,  if a merger was practicable,      an imple-
mentation   plan would be accomplished.




                                      15
                                   CHAPTER 5


                               SCOPE OF REVIEW

       To evaluate         the Naval Reserve Drill         Pay System,   we
reviewed      the   following    naval activities.

Navy Finance        Center,   Cleveland,        Ohio

       --To determine      if reservists       were paid properly       for
          drills   performed,    we compared drill         reports   for July
          1969 with attendance        records      for 6,558 reservists
          assigned    to 108 selected       training    units,

       --To ascertain     if personnel    and pay information     was
          recorded   properly,   we compared data shown on the
          pay records    of 1,500 reservists    with drill    reports.

Naval Officer   Record        Support      Activity,
Omaha, Nebraska

       --To determine     if credit    for drills      for retirement
          benefits  was being recorded       properly,       we compared
          the number of drills      performed,      as shown in drill
          reports,  with the number of drills            recorded   in re-
          tirement  records   of selected      officers.

Personnel      Accounting     Machine      Installation,
Bainbridge,      Maryland

       --To obtain     information       on how personnel   data were re-
          corded,    we reviewed     the procedures     and controls for
          processing     drill   reports.

Naval Reserve Training       Command, Omaha,
Nebraska,  and Naval Air Reserve Training
Command, Glenview,   Illinois

       --To ascertain    the type and scope of inspections       per-
          formed at reserve    units,  we examined instructions
          issued by these commands for inspections        and the
          reports  showing the results    of the inspections.




                                           16
Various   reserve   units
      --We evaluated the procedures and controls       for observ-
        ing, recording,   and reporting    attendance at drills
        by reservists.    We visited    two reserve units at each
        of the following    naval reserve training    centers and
        naval air stations.
       Naval Reserve
      Training Centers                 Naval Air   Stations

Boston, Massachusetts            Alameda, California
Chicago, Illinois                Glenview, Illinois
New Orleans, Louisiana           New Orleans, Louisiana
Philadelphia,     Pennsylvania   South Weymouth, Massachusetts
San Francisco,     California    Willow Grove, Pennsylvania




                                 17
APPENDIX
                                                                              APPENDIX I


                         DEPARTMENT            OF   THE   NAVY
                           OFFICE     OF THE    SECRETARY
                            WASHINGTON,         D. C. 20350




                                                                          24 MAY 1971

Mr. Charles 14. Bailey
Director,   Defense Division
U. S. General Accounting     Office
Washington,   D. C. 20548

Dear Mr. Bailey:

     The Secretary   of Defense has asked me to reply to your letter
of 22 Karch 1971 which forwarded the GAO draft report on the Naval
Seserve drill    pay system.

    I am enclosing    the l!?avy reply     to the report.

                                                Sincerely        yours,




                                               CHARLESA. BOWSHER
                                               ASSISTANT SECRETARYOF THE NAVY
                                               (FINANCIAL MANAGEMENT)
13x1:
(1) Department of the Navy Reply to GAO DraIft deport of 22 i&r                     1971
      on the Naval Reserve Drill Fay System (OSD Case $3255)
APPENDIX I

                      Department of the Navy Reply

                                     t0

                     GAO Draft Report of March 1971
                                     on
                   The Naval Reserve Drill    Pay System

                            (OSD Case #32SS)
1.   Summary of GAO findings and recommendations
      T'ne General Accounting Office review of the Naval Reserve Drill
Pay .System was made in response to Congressional interest       in military
pay systems.      The examination was made to   determine if the   system is
operating~effectively     and whether Reservists are receiving proper
drill   payments and retirement credits.
     GAO found the basic documents -- attendance records and drill
reports -- for the Naval Reserve Drill Pay System contain discrepancies
 in the number of drills    performed by Reservists.      The absence of
uniform attendance procedures and a standard attendance form contrib-
uted to the discrepancies.       Hence, erroneous payments were made to
Reservists and erroneous credit for drills       was recorded for retire-
ment benefits.      In July 1969, the Navy made erroneous payments total-
ing about $113,000. Follow-up reviews by GAO at certain units in
June-July 1970 disclosed similar deficiencies.         With respect to the
erroneous payments found by GAO, it was stated that "None of the
erroneous payments we found were attributable        to the functions per-
formed by the Navy Finance Center. Ve found that the Center is
effectivepj    crocessinir drill  payments and maintaining pay records
for reservists    based upon reports it receives."

       The opinion was expressed by GAO that, to insure accuracy of
drill     reports, internal reviews and audits should be made of the
controls and procedures used by the reserve units in recording       and
reporting drills      performed, and by the Navy Finance Center in
processing drill      payments. GAO feels that Navy internal reviews --
primarily      command inspections -- have not adequately accomplished
this purpose.      It was further pointed out that theNavalAudit    Service
has never made a comprehensive review of the Naval Reserve Drill Pay
System,

     Additional   comments were made regarding use of the same basic
document, i.e., the drill     report, by the Navy's tz,o automated systems
-- the drill    pay and personnel management information     systems -- and
the manual reserve officer retireTent      record system. GAO suggested
that the Navy reconsider automating officer's      retirement records and
combining this function with either the drill      pay system or the per-
sonnel management information      system.
                                                              Enclosure (1)
                                      22
                                                                APPENDIX I


     Specific recommendations were made by the General Accounting
Office as follows.    To as.y=e that -?rcurD+e attendance data are
submitted for use in the drill    pay system, GAO recommended that
the Secretary of the Navy prescribe uniform procedures for observing
and recordklg attendance at drills,    a standard attendance form for
use by all reserve units , sign-in and sign-out procedures for use by
reserve units where practicable,    and procedures for verifying  drill
reports to attendance records.     In addition, GAOrecommended that
the Secretary of the Navy require the reserve com;nands to issue
uniform and specific inspection guidelines for all types of reserve
units and kinds of personnel, and the Naval Audit Service to review
periodically   the adequacy of the command inspections and the effec-
tiveness of the Naval Reserve Drill Pay System.
2. ..---
     Statement.   The Navy considers that the GAOReview has been
helpful in providing a more comprehensive examination of the data
accuracy of the Mavgl Reserve -Drill Pay System than has beer: zade
previously,   and that many of the GAO proposals for improving the
accuracy of the ,ystem will be helpful.    As indicated in the GAO
Report, some of the proposals were adopted during the review and,
as stated later in this reply, others have been adopted, or are
under consideration.    However, two of the recommendations made by
the General Accounting Office are not concurred in by the Navy and
will not be adopted as stated later in this reply.

     The Navy concurs with the recommendations for observing and
recording  attendance at drills,   a standard attendance form, and
procedures for verifying  drill  reports to attendance records.
The Chief of Naval Personnel will coordinate the development of
a standard form and implement procedures to assure accurate
attendance data.
    The Navy does not concur with the requirement for naval
reservists  to sign-in  and sign-out at drills. It is felt that
the development of a standard form and implementation of procedures
to assure accurate attendance data will nullify   the need for adoption
of this recommendation.
     Navy concurs with the recommendation for reserve commands to
issue uniform and specific      inspection guidelines in the management
of the drill     pay system for all types of reserve units.     The
commands involved are currently reviewing their inspection guide-
lines for command inspections,        and will revise them as deemed neces-
sary to conform to the findings in the GAOReport.          In addition,
special   instructions    are currently being drafted by all commands
emphasizing     uniform procedures for observing and recording attend-
ance at drills.




                                     23
APPENDIX I

        With respect       to the GAO suggestion           that the Navy reconsider
automating      officer's      retirement      records and combining this function
with either      the drill      pay system or the personnel             management infor-
mation system, the following               conhqents are furnished.          As stated in
the CA0 Rcqort,         the Navy has previously            determined    that automation
of reserve participation             recording     at naval Officer        Record Support
Activity      (XORSA), Omaha, Nebraska, was not economically                    practicable.
Studies conducted in the past indicated                    the NORSA functions        by itself
would not justify          the expenditure        of funds for an automated system.
However, it may be that.the               suggestion     that the officer       functions
at NORSA be combined with an already                  existing     automated system has
merit.      In consideration         of the possible         merit of the suggestion,
the Chief of Xaval Personnel will                 conduct an investigation          concerning
the merger of EORSA and the Naval Reserve Nanpower Center (K3U.E).
In addition      to the desirability           of such a consolidation,           savings in
resources      and manpo-f!er fill       be addressed,        as we,ll. as estimated
one-time movement costs.               If the merger is determined           to be practicable,
an implementation          plan will be accomplished.

        The GAO recommended that the Secretary                 of the Navy require            the
Naval Audit Service to periodically                 review the adequacy of the command
inspections      and the effectiveness          of the fi;aval Reserve Drill              Pay
System.     From the discussion           preceding     the recommendation,            it appears
the intent     of this recommendation           is that the entire          drill     pay system,
from the recording          of attendance      at drills     to the payment for these
drills    by the Kav-y Finance Center,            be covered by each periodic               review.
The Naval Audit Service is now performing                   effective      periodic       audits
of the various        segments of the Reserve Drill             Pay System.         These audits
have disclosed        the same type of discrepancies              noted by the GAO in
this report,      i.e.    inaccuracies       in mustering      procedures,        apparent
overpayments      of drill     pay, and a need for a uniform and accurate
reporting    system of drill         attendance.        An all inclusive          (comprehensive)
audit would require          more resources       than the type of audit nvd being
performed    and would not, in the opinion of the Xavy, be more
effective    in disclosing        deficiencies        and the corrective          action
required.      Therefore,      the Navy plans to continue              the present audit
procedures     for this area on the basis that they are the most
economically      effective      application      of available        audit effort.




                                                                               U.S. GAO. Pa&..   D.C.
                                              24
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