STUTTGART, Germany - An estimated 2,000 Defense Department civilian employees working in Europe might be receiving housing allowances in error and could be obligated to repay years' worth of the benefits to the government, according to a U.S. European Command memo obtained by Stars and Stripes.

Late last year, EUCOM learned that in some cases regulations governing who gets Living Quarters Allowances, or LQA, were being misinterpreted.

"We estimate that as a result, up to 2,000 DOD employees within the USEUCOM AOR [Area of Responsibility] may suddenly be determined ineligible for continued LQA and become indebted for all prior LQA," wrote Vice Adm. Charles Martoglio, EUCOM deputy commander, in the May 9 memo to Pentagon officials, a hard copy of which was made available to Stars and Stripes.

At issue is an Office of Personnel Management decision in July 2011 related to an LQA claim filed by a DOD civilian worker in Stuttgart. In that case, OPM pointed out that State Department rules dictate that Living Quarters Allowances are permitted only in cases in which a locally-hired employee previously worked for no more than one non-government employer overseas before joining government service.

When EUCOM officials learned about the case, they realized it could have widespread implications. According to the memo, EUCOM discovered that several commands had been misinterpreting the rule.

Last December, EUCOM convened a theater-wide meeting on the issue, pulling together personnel from numerous units, including U.S. Africa Command, the services components and the Army Civilian Human Resources Agency, which EUCOM said would be the organization responsible for conducting an audit if a formal inquiry is ordered into LQA disbursements, according to the memo. The majority of Defense Department workers in Europe, including those at EUCOM, are Army civilians.

"All agreed this is a serious issue for all organizations and affected employees," the EUCOM memo stated.

Now, officials at EUCOM are hoping to obtain a blanket waiver from DOD for affected personnel, who, in some cases, could be facing substantial levels of debt, depending on how much housing allowance they've received over the years.

A decision by DOD's office of personnel and readiness is pending, according to EUCOM.

"Our request is to exempt those employees affected for up to one year and to waive any indebtedness they may have incurred," said John Tomassi, a EUCOM spokesman, in a prepared statement.

The Defense Department declined to say when a decision will be made, nor would officials discuss the consequences if the waiver is not granted.

"I can tell you that no decision has been made as the requisite interagency coordination is ongoing," said Cmdr. Leslie Hull-Ryde, a spokeswoman for the Defense Department's Office of Personnel and Readiness, in an email earlier this month.

According to the State Department rules, which govern all U.S. Government employees stationed overseas, allowances are not permitted when a U.S. citizen hired locally overseas worked for more than one non-government employer overseas before taking a government job, according to the EUCOM memo.

For example, if an intelligence analyst who worked for a defense contractor in Europe takes a job with another contractor in Europe before taking a government service job, that worker is ineligible for a housing allowance.

For affected workers, the fiscal consequences could be considerable if EUCOM's bid to obtain a blanket waiver fails and workers are required to pay back the benefits.

Housing allowances at duty stations in Europe can amount to as much as $50,000 per year to subsidize rental and utility costs, according to the State Department.

EUCOM also has requested that workers be granted a one-year grace period, during which they would continue to receive LQA while they make other living arrangements or look for other work.

"The immediate cessation of LQA and the resulting indebtedness will create serious hardship for affected employees as well as our DOD organizations faced with the loss of valuable members of their workforce who possess critical expertise," Martoglio wrote in the memo to the DOD Undersecretary of Defense for Personnel and Readiness. "I urge your swift and favorable consideration of this request."

U.S. Pacific Command did not respond to questions about whether commands in the Far East have discovered similar LQA errors.

DOD says it doesn't intend to raise awareness about the problem with other commands since what is at issue involves a misinterpretation of an old rule, not a new policy.

"The policy related to LQA eligibility has not changed for DOD's overseas locations, and no decision has been made that would require notification," Hull-Ryde said in a statement.

Regarding EUCOM's effort to obtain a blanket waiver, Hull-Ryde said: "I can tell you that there is no such thing as a blanket waiver of indebtedness."

"Each waiver is decided as an individual case, on its own merits," she said.

Meanwhile, EUCOM said it was awaiting guidance on how to proceed.

No audit has been conducted to determine precisely how widespread the problem is, although the Army's Civilian Human Resources Agency has the capacity to perform such a review, according to EUCOM.

EUCOM did not say how it determined that 2,000 workers could be affected. Officials confirmed that no steps have been taken to notify employees about the potential LQA problem. Meanwhile, those affected could be accumulating debt without knowing it.

If a waiver is granted, an audit of all locally hired employees would be done to locate the recipients, according to EUCOM.

It remains unclear how DOD, combatant commands and the service components will proceed if the waiver is not granted. At the moment, EUCOM is unaware of any workers having their LQA cut off, according to Tomassi, the EUCOM spokesman.

However, military personnel offices would be compelled to enforce the regulations upon learning about individual cases by ceasing payment of LQA and seeking reimbursement for previous payments, according to a source familiar with the regulations. For that reason, the best course of action for employees could be to sit tight in the hopes that a waiver is granted, the source said.

Neither a combatant command nor its components has the authority to make exceptions to policy in excess of $1,500, according to the EUCOM memo. Only the Defense Office of Hearings and Appeals can make special exceptions in such cases, the memo says.

With an abrupt termination of LQA, unit missions could be affected since many of the locally hired workers could feel forced to resign in the face of exorbitant housing costs.

"We are acutely aware of the financial hardship this could cause individuals," Tomassi said.

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John covers U.S. military activities across Europe and Africa. Based in Stuttgart, Germany, he previously worked for newspapers in New Jersey, North Carolina and Maryland. He is a graduate of the University of Delaware.

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