Objective
This audit was conducted in response to a hotline complaint. We determined whether the Troops‑to‑Teachers (TTT) program properly paid participants, withheld and reported taxes, collected payments from those that failed to meet program requirements, and managed the grant program that provides funding to support the TTT program.
Background
The TTT program provides assistance to eligible military participants interested in becoming teachers.1 The program provides counseling and referral services for participants to help them meet education and licensing requirements to teach and subsequently helps them secure teaching positions. In addition, the program provides financial assistance in the form of stipend payments paid to offset the cost of obtaining a teaching certification, as well as bonuses for participants who teach in an eligible or high need school.2 In 2015, the TTT program paid 1,374 participants $3.7 million in stipends and bonuses. The Assistant Secretary of Defense for Readiness, through the Office of the Under Secretary of Defense (Personnel and Readiness) (OUSD [P&R]), is responsible for providing policy and funding for the TTT program. The DoD a ssigned the daily operations of the TTT program to the Defense Activity for Non‑Traditional Education Support (DANTES), an activity within the Naval Education and Training Command (NETC). DANTES personnel also manage a grant program that provided $4.4 million in 2015 to states to support recruiting efforts aimed at prospective participants.
Finding
The OUSD (P&R), DANTES, and Defense Finance Accounting Service (DFAS) did not manage the TTT program adequately. We nonstatistically sampled 63 stipends and bonuses paid by DANTES personnel, valued at $212,000, and found that 25 payments, valued at $87,000, were improperly paid. These payments were improper because DANTES personnel either incorrectly approved participants who did not meet program eligibility requirements or failed to obtain sufficient documentation to determine whether participants met those requirements. Specifically, DANTES improperly paid 14 stipends valued at $45,000 and 11 bonuses valued at $42,000. This occurred because OUSD (P&R) did not develop policy to implement 10 U.S.C. §1154 (2015) (TTT Program Law). In addition, DANTES management operated the program on draft standard operating procedures that were not fully in accordance with the TTT program law and that had not been subject to a legal review. Furthermore, DANTES management did not provide training to personnel on the requirements and procedures for determining applicant eligibility for the TTT program. As a result, there is no assurance that participants were eligible to receive the stipends and bonuses awarded by DANTES personnel.
In addition, DANTES and DFAS personnel reported the TTT stipend and bonus payments as wages to the participants on their Internal Revenue Service (IRS) Forms W-2s but did not withhold Federal income tax from the payments as required by Internal Revenue Code, U.S.C. Title 26. This occurred because DANTES and DFAS systems were not configured with the capability to withhold taxes. In addition, DANTES and DFAS management did not have a memorandum of agreement (MOA) that assigned the organizational roles and responsibilities for implementing Federal income tax withholding requirements. As a result, DFAS may owe penalties for the taxes it failed to withhold.
DANTES personnel also did not establish a debt collection process with DFAS for participants who did not fulfill program requirements. This occurred because there was no mutual understanding or communication between DANTES management and DFAS of their roles and responsibilities for collecting debt. As a result, $381,000 for stipends and bonuses paid to participants who failed to fulfill program requirements remains uncollected.
Finally, DANTES management did not establish the TTT grant program in accordance with DoD grant regulations and compare the states’ expenditures and results to the states’ desired goals and objectives. This occurred because DANTES management did not follow laws and regulations when they established the grant program and the OUSD (P&R) did not develop policy to implement, manage, and oversee the TTT grant program. As a result, it is unclear whether the TTT grant program achieved the desired results in assisting transitioning service members with meeting the requirements necessary to become teachers.
Recommendations
We recommend that the Assistant Secretary of Defense for Readiness develop and implement policies to clearly define the TTT program requirements, to include the implementation, management, and oversight of the TTT grant program.
In addition, we recommend that the Commander, Naval Education and Training Command direct TTT management to:
- develop procedures that align with newly developed policy and provide training for all government and contract employees within the TTT program after new policy and procedures are created;
- review standard operating procedures in coordination with management officials and the Office of General Counsel to ensure they are in accordance with TTT program law requirements to determine participant eligibility while new policy is being developed;
- continue to work with DFAS to finalize corrective actions to withhold Federal income taxes on payments, and develop roles and responsibilities for tax withholding and debt collections;
- review all applications for stipends and bonuses submitted between October 1, 2014, and the date of this report, and bring into compliance applications determined to be incomplete and collect payments from participants determined to be ineligible;
- maintain a database of current addresses for participants;
- submit debt collection packages to DFAS for outstanding debt; and
- complete corrective action plans in process for collections and the grant program.
Management Comments and Our Response
An official, performing the duties of the Under Secretary of Defense for Personnel and Readiness, agreed to establish an instruction within 24 months that will assign responsibilities and prescribe procedures for determining participant eligibility, and implement, manage, and oversee grants for the TTT program in accordance with 10 U.S.C. § 1154 (2015). Therefore, the recommendations are resolved but will remain open. We will close the recommendations once we verify that the Office of Under Secretary of Defense for Readiness, Force Education and Training, has developed and implemented program policy in accordance with 10 U.S.C. § 1154 (2015).
The Commander, NETC, agreed with aligning procedures with OUSD policy once that policy is developed. Furthermore, DANTES is actively engaged with the Office of General Counsel to have TTT standard operating procedures reviewed to ensure compliance with the TTT legislation. DANTES has also trained TTT personnel on processes and procedures that have been reviewed and determined to comply with 10 U.S.C § 1154 (2015). Therefore, these recommendations are resolved but will remain open. We will close the recommendations once we verify that the OUSD developed program policy and TTT procedures align with the policy; the NETC Office of General Counsel has reviewed TTT procedures; the Office of Under Secretary of Defense for Readiness, Force Education and Training has reviewed the procedures; and we reviewed the new contract and verify that personnel have been trained.
The Commander, NETC, while agreeing in principle with the recommendation to correct the tax withholding problem, stated that DANTES cannot ensure DFAS will complete the system changes needed. DANTES implemented a systems change effective March 2017 in its current Financial Management System delineating the tax portion required to be paid to the IRS. The Director, Finance Standards and Customer Services, DFAS, also provided comments on the recommendation to correct system deficiencies for tax withholding. The Director stated that DFAS completed the required system changes and that tax withholding has been implemented for the TTT payments. Additionally, DFAS validated that the tax withholding capability is available in the Defense Agency’s Initiative system to support the program migration to the Defense Human Resources Activity (DHRA) in October 2017. Therefore, this recommendation is resolved but will remain open. We will close the recommendation once we verify that tax withholding is automated and occurring in the Automated Disbursing System for current payments and the Defense Agencies Initiative System for payments made after October 1, 2017.
The Commander, NETC, stated that DANTES conducted a review of TTT participant records to substantiate participant eligibility for stipend and bonuses. He also recommended that DFAS send the required IRS tax forms to participants at the end of the year. He further stated that an MOA was established between DANTES and DFAS and that DANTES is working with the DHRA to determine whether updates need to be made to the current MOA. He stated that DANTES maintained a database of addresses for participants to allow them to review and update their records as required. Furthermore, debt collection packages have been submitted to DFAS for collections. In addition, DANTES formally established the TTT grant program, and grants have been awarded to participating State Departments of Education. Therefore, these recommendations are resolved but will remain open. We will close these recommendations once we verify that the DFAS tax office sent the required IRS forms to participants at the end of the calendar year along with the W‑2’s; the database is maintaining participant’s current addresses; the debt collection packages have been submitted to DFAS, and the TTT grant program has been established and grants have been awarded to participating State Departments of Education.
1 Military retirees, reservists, or active duty military within one year of retirement may apply to be considered an eligible participant.
2 According to section 1154 (a)(2), title 10, United States Code (10 U.S.C. §1154 (a)(2) [2015]), eligible schools are defined as public and charter schools in which at least 30 percent of students enrolled in the schools are from families with incomes below 185 percent of poverty level; or at least 13 percent of the students enrolled in the school qualify for assistance under part b of the individuals with disabilities education act; or a bureau‑funded school. Additionally, under 10 U.S.C. §1154 (a)(3) [2015], the definition of a high‑need school includes an elementary or middle school in which at least 50 percent of the enrolled students are from low-income families or a high school in which at least 40 percent of enrolled students are from low‑income families.
This report is a result of Project No. D2017-D000FS-0040.000.