GAO: Defense underestimates costs of housing allowance

The Defense Department significantly underestimates the amount of money it needs to pay for service members' housing allowances when preparing its annual budget request, according to a new report from the Government Accountability Office.

Since 2006, the Pentagon has miscalculated the total costs of paying the housing allowance to service members by $820 million to $1.3 billion each year -- or about 6 percent to 11 percent of the amount estimated, GAO found. "As a result of consistently underestimating the amount needed to pay the allowance -- which is an entitlement for service members and must be paid -- DoD has had to shift funds that were budgeted for other programs, which could disrupt the funding of the other programs," the report said.

Several factors contributed to inaccurate estimates, including the timing of annual budget proposals, changes in planned force structure and housing policy revisions, such as service members' eligibility for housing allowances. The military services start the process of planning budgets more than a year before housing allowance rates actually take effect, and the president submits his overall budget to Congress about a year before such figures are known.

Defense paid active-duty personnel more than $18 billion in housing allowances in fiscal 2010; the Defense Travel Management Office sets rates annually based on market costs of rent, utilities and renter's insurance -- rates that vary across geographic locations. Defense issues a single number for each rate, so installations and service members do not know the individual amounts of the three criteria factored into that figure. "While we did not identify specific concerns with the accuracy of these databases or the rental data collected by the contractor, installation officials we interviewed raised concerns that they do not have access to information that would allow them to help ensure the accuracy of the costs and the resulting housing allowance rates," GAO said.

The watchdog found the Pentagon's overall process for determining housing allowance rates to be sound, but recommended the department share more information with installations and service members (including those in the other services) about the specific costs included in calculating the overall figure and improve its method for estimating rates during the annual budget process.

The supply and demand for service member housing have been affected by Defense initiatives, such as Grow the Force and the latest round of base closures, as well as by the shaky economy. Twenty-six domestic installations in particular will be affected significantly by the growth in military populations, Defense found. About two-thirds of military personnel and their families stationed in the United States live off-base in local communities.

Defense generally agreed with GAO's recommendations.