The Government Accountability Office published a report Thursday identifying weaknesses and providing reccomendations to the Defense Department on how to improve processes for calculating cost-of-living allowance pay for service members overseas and in the continental U.S. (Elizabeth Caraway/U.S. Army)
The Pentagon program to offset higher location expenses for service members stateside and overseas could benefit from better sampling methods, improved communication and other changes, a new watchdog report says.
At the direction of Congress, the Government Accountability Office did a comprehensive review of how the Defense Department determines cost-of-living allowance rates for U.S. military personnel and their families.
The Pentagon’s data may not always be reflective of actual living costs due to “sampling practices that are not generalizable and may lead to inaccurate results,” the report said.
GAO auditors identified “several weaknesses” with the process, which they outlined in the report released Thursday. It included recommendations the agency says the Pentagon should take to “ensure service members are appropriately compensated.”
COLA is intended to assist service members with non-housing expenses, such as food, in areas that have a high cost of living. The benefit primarily goes to personnel living overseas.
In 2024, the most recent year for which a full set of data was available, 225,000 service members living outside the continental U.S., including in Alaska and Hawaii, received about $1.2 billion in cost-of-living allowance payments.
In comparison, $33 million in benefits went to 25,000 recipients living in the continental United States, according to the GAO report.
Guardians shop at the Vandenberg Space Force Base commissary in California. A government watchdog agency report published Thursday says the Defense Department needs to do a better job of collecting location-specific data on the cost of living. (Latonya Kim/U.S. Space Force)
The Pentagon determines the allowance by first making a list of 150 non-housing goods and services that military households spend the most money on, based on government data.
Next, a voluntary living pattern survey is used to gauge service members’ shopping habits, which are then compared to local retail prices.
That information is then used to compute a rate that is supposed to represent how expensive those items are when compared to the average stateside, according to the GAO report. Foreign currency rates, rank and number of dependents are also calculated into COLA.
The Pentagon does not limit survey responses by subgroup, which could skew the data if one rank participates more than others, the GAO said. The agency also doesn’t ensure that service members responding to the survey are eligible to do so.
Participation rates in the 2024 living pattern survey are also highly variable. Anchorage, Alaska, for example, exceeded its target number of completed surveys by 525%, while in Hawaii, officials said they struggle to meet 30% of their goal, the GAO found.
Likewise, in Germany 93% of service members responded to the survey, compared with 35% in South Korea.
The GAO also said the Pentagon should do a better job capturing location-specific expenses. Service members in Singapore, for example, can receive reimbursement for excessive road taxes and vehicle registration fees, but other locations with unique expenses are not accounted for.
That includes vehicle maintenance costs in Germany, such as snow tires, which are required in winter, and fixing parts that are standard for U.S. vehicles but not European ones.
The review period was from March 2024 to April 2026. The GAO did site visits virtually and in person with officials in Hawaii, Japan, Alaska and Germany and at Fort Belvoir, Va.
Auditors also held discussion groups with service members and spouses at those locations.
Enlisted members and officers in the Washington, D.C., area — who are not eligible for COLA but face financial challenges due to the lack of affordability of the region — said they use food pantries, commute long distances and work extra jobs to make ends meet, according to the report.
To ensure the services have enough money to fund the program stateside, the Pentagon in 2024 set the eligibility threshold to receive a cost-of-living allowance payment at 7% higher than the average cost-of-living expenses in the continental United States. That same limitation is not applied overseas, according to the report.
Volunteers hand out food items during an event at the fotmer Fort Cavazos, Texas, Aug. 1, 2024. Some military families that live in high-cost areas of the U.S. don’t receive additional cost-of-living allowance pay and in some cases have to rely on food banks, according to a recent report by the Government Accountability Office. (Shawn Davis/U.S. Army)
As of August 2024, none of the 10 continental U.S. locations with the largest population of service members received COLA, because the cost of living in each area fell below the 7% threshold, the report said.
About 883,000 service members, or 76%, lived in locations that had a higher cost-of-living than the average for the continental U.S. but did not meet the eligibility threshold of 7% to receive a COLA payment.
Some of the locations that received COLA stateside were New York, San Francisco, Boston and Los Angeles.
The Pentagon should review why dependents stateside are included only as a flat rate increase, while overseas, service members can receive an increase in COLA for every dependent up to five, the report said.
The Defense Department agreed with this recommendation and also with the GAO suggestion that it consistently apply its process for location-specific expenses.
The Pentagon, however, did not agree with the recommendation to use random sampling to survey service members on shopping patterns.
The agency said it wants as many service members as possible to participate in the data collection instead of having small, random samples for the survey.
The DOD partially concurred with a recommendation to develop guidance requiring local commands to provide information about COLA at locations that receive it.
In its response, the DOD said that the Defense Travel Management Office already maintains a website that serves as the official source for such information.
The department also said it does not support a central point of contact to address COLA inquiries, arguing that service members’ chain of command is the most effective channel.
But auditors found that understanding of the allowance was still lacking despite the DOD sources, the report said.
