Reuters found multiple examples of pay mistakes affecting active-duty personnel and discharged soldiers. Some are erroneously shortchanged on pay. Others are mistakenly overpaid and then see their earnings drastically cut as DFAS recoups the money, or, like Aiken, they are forced to pay money that was rightfully theirs.

Precise totals on the extent and cost of these mistakes are impossible to come by, and for the very reason the errors plague the military in the first place: the Defense Department's jury-rigged network of mostly incompatible computer systems for payroll and accounting, many of them decades old, long obsolete, and unable to communicate with each other. The DFAS accounting system still uses a half-century-old computer language that is largely unable to communicate with the equally outmoded personnel management systems employed by each of the military services.

Source: April 2012 GAO report

In a December 2012 report on Army pay, the Government Accountability Office said DFAS and the Army have no way to ensure correct pay for soldiers and no way to track errors. These deficiencies, it said, "increase the risk that the nearly $47 billion in reported fiscal year 2011 Army active duty military payroll includes Army servicemembers who received pay to which they were not entitled and others who did not receive the full pay they were due."

In a written response to the report, Robert Hale, the Defense Department's comptroller, said, "I agree that we need to strive to improve payroll accuracy," but added that the GAO had overstated the problem and mischaracterized some of the debts as errors.

NO-ACCOUNT ACCOUNTING

IN THE DARK: When Shawn Aiken sought answers about the deductions from his pay, "they couldn't even tell me what the debts were from," he says. REUTERS/Ivan Pierre Aguirre

Pay errors are part of a larger phenomenon that Reuters will explore in a series of articles: the Defense Department's endemic failure to keep track of its money - how much it has, how much it pays out and how much is lost or stolen.

The department's authorized 2013 budget, after sequester, totals $565.8 billion - by far the largest chunk of the annual federal budget approved by Congress. Yet the Pentagon is literally unable to account for itself. As proof, consider that a law in effect since 1992 requires annual audits of all federal agencies - and the Pentagon alone has never complied. It annually reports to Congress that its books are in such disarray that an audit is impossible.

In this series, Reuters will delve into how an organization that fields the most sophisticated technology in the world to fight wars and spy on enemies has come to rely on an accounting system of antiquated, error-prone computers; how these thousands of duplicative and inefficient systems cost billions of dollars to staff and maintain; how efforts to replace these systems with better ones have ended in costly failures; and how it all adds up to billions of taxpayer dollars a year in losses to mismanagement, theft and fraud.

For all its errors, Pentagon record-keeping is an expensive endeavor. For fiscal 2012, ended Sept. 30, the Defense Department requested $17.3 billion to operate, maintain and modernize the more than 2,200 systems it uses to manage finances, human resources, logistics, property, and weapons acquisitions, according to an April 2012 GAO report. That amount does not include billions of dollars more in each of the military services' "operations and maintenance" budgets used for upkeep of the systems. Nor does it cover all of DFAS's $1 billion-plus budget.

The issue has yet to garner much attention in the political arena, despite continuing debate over the U.S. government's deficits and efforts to restore fiscal order. More immediately, the mess in Pentagon pay in particular carries implications for national security. In its December 2012 report, the GAO recognized that fielding soldiers burdened with pay errors "may pose financial hardship for the soldiers and detract from their focus on mission."

Officers complain that the difficulty of keeping track of personnel makes it harder to deploy men and women in times of war. Retired four-star Navy Admiral William J. Fallon says that while serving in 2007 and 2008 as chief of the U.S. Central Command, overseeing joint military operations in Afghanistan and Iraq, he had to maintain "an incredibly bloated staff" from each of the services to keep him informed of the numbers and availability of troops. "It is an incredibly inefficient, wasteful way of doing business," he says.

This way of doing business has also proved resistant to change. A recalcitrant bureaucracy, competing priorities - war, among others - and until recently, congressional indifference have stymied any efforts to impose order. Most notable among those efforts: a project to install a new, unified pay- and personnel-management system that eventually ate more than $1 billion before the Pentagon killed it.

"If you look at the things this country has done, how hard is this?" says Daniel Denning, assistant secretary of the Army for manpower and Reserve affairs from 2002 to 2007 and now a consultant at MBO Partners LLC in McLean, Virginia. "If someone could put something like Facebook together or Google, one would think that bringing these decades-old military personnel and pay systems into the 2012 world shouldn't be that hard."

Source: Center for Strategic and Budgetary Assessments (top); Office of Management and Budget

"FINGER-GAPPING"

The mistakes in soldiers' pay may seem small - $1,000 here, a few hundred there. But for an Army private first class making a base annual salary of about $23,000, or a wounded veteran on disability, they can be devastating. Former soldiers have had their civilian wages and their Veterans Administration benefits garnished. They have been pursued by private collection agencies and forced to pay tax penalties. In other cases, too, deserters have continued to be paid for months, and sometimes years, after disappearing.

The Pentagon's record-keeping tangle not only increases the potential for errors; it also forces DFAS to depend heavily on "manual workarounds," another source of errors. Neither the Pentagon or DFAS or the military services can specify how many workers are used to handle these tasks, but "it takes a massive amount of human effort," says Roy Wallace, an Army assistant deputy chief of staff.

"At last count, there were 167 manual workarounds" for the 40-year-old pay system used by DFAS and all the services except the Marines, he says. As a result, staff often must transcribe information from one system onto paper, carry it to another office, and hand it off to other workers who then manually enter it into other systems - a process called "finger-gapping" that Wallace faults as a further source of errors.

Another sort of workaround was a main reason for Aiken's hardships at Fort Bliss. Injured by a rocket-propelled grenade in Afghanistan, Aiken was eventually sent to an Army hospital in Landstuhl, Germany. Upon arrival there, he should have been designated as a "wounded warrior," a status that would have automatically forgiven all debts related to the overpayments DFAS later claimed and entitled him to benefits he didn't receive.

Lacking a unified, automated system to process soldiers arriving from combat zones, DFAS had to post staff at Landstuhl to do the work in person, by hand - but only for those soldiers arriving by air. Aiken, who had already moved with his unit from Afghanistan to another location in Germany, arrived by bus.

BATTLE FATIGUE: With severe PTSD, traumatic brain injury, a damaged hip and other war-related damage, Shawn Aiken was undergoing treatment and therapy as he limped from office to office at Fort Bliss, texas, seeking relief from the Pentagon's deductions from his pay. REUTERS/Ivan Pierre Aguirre

"We're not out to screw our own people," said Defense Department Comptroller Hale, to whom DFAS reports. "The military pay system is just very complex."

DFAS said pay errors are extremely rare. Based on a self-audit, it said, its accuracy for pay and calculation of benefits for military personnel in the nine months through July 2012 was 99.76 percent. The agency also said it had undergone partial audits for pay accuracy by the inspector general of the Defense Department and by the GAO.

But a spokeswoman for the Defense Department inspector general and a senior GAO official said their respective offices hadn't audited the overall accuracy of DFAS pay in the past five years, and neither could recall any such audit ever having been conducted.

Further, in a report issued in February this year, the Defense Department inspector general found "significant deficiencies" in DFAS's own internal auditing organization. These included failure to "exercise sufficient professional judgment," ineffective quality-control monitoring and failure to comply with required accounting standards.

DFAS Director Teresa McKay declined to be interviewed for this article and declined to allow Reuters to interview any other DFAS personnel. Her boss, Pentagon Comptroller Hale, backed that decision. The agency accepted only written questions.

Source: DFAS

"In general, what we often find and what we are trying to do a better job of explaining to our customers, is they are not familiar with (and in some cases, not happy with) the time needed for us to process and correct errors," DFAS spokesman Thomas LaRock said in an email. "Each case and any associated documentation must be reviewed by DFAS and the military service before a final decision on the validity of the debt or claim can be made."

WALKING DEAD

When the U.S. invaded Iraq in 2003, retired four-star general Peter Schoomaker heeded a call from Defense Secretary Donald Rumsfeld to return to active duty - as Army chief of staff, the highest military rank in the Army.

Schoomaker returned to work, but he didn't get paid. DFAS had - correctly - stopped Schoomaker's monthly retirement checks when he resumed active duty. But its computers weren't able to restart pay for a soldier returning from retirement.

It took months for Schoomaker to start receiving his pay, and even more to get reimbursed for the months he had been stiffed.

In the meantime, soon after Schoomaker's return to active duty, a computer-generated letter arrived at his home, addressed to his wife and offering condolences on the general's death. DFAS's computers were programmed to assume that when a retiree was taken off the rolls, that person had died.

The letter didn't cause any undue alarm at the Schoomaker home; the general was living there at the time. He did notice that the letter spelled his name three different ways.

"If the Chief of Staff of the Army is treated that way," Schoomaker says, "you can imagine how a private is treated."

James Watkins, assistant secretary of the Army for financial management, said the system has been reprogrammed to fix the glitch that prompted the condolence letter: "We would catch that today," he said.

The same can't be said for the pay error that affected Schoomaker. The reason lies in the origins of DFAS.

Source: Peter Schoomaker

The agency was born in the push to realize savings in defense spending after the Cold War. To that end, then-Defense Secretary Dick Cheney in 1991 approved a plan to create DFAS by consolidating into one entity some of the overlapping pay and accounting functions that had been performed separately by each of the military services.

But the consolidation wasn't complete. While the newly created DFAS would handle payroll duties across all branches of the military, personnel responsibilities would remain with each of the services. That decision haunts the Pentagon to this day.

Information handled by the personnel departments of the military branches plays a big part in determining how much a soldier is paid. This information includes promotions, discharges, assignment changes, marriages and divorces.

Congress has made it even more complicated in recent decades by establishing a multitude of pay levels. There is basic pay, plus "entitlements" for everything from serving in a combat zone to housing allowances to re-enlistment bonuses. An individual's pay can change several times in a day.

With the creation of DFAS, ensuring correct pay for soldiers required speedy, efficient communication between the new agency handling payroll and the different military branches, each still running its own personnel operations. No one was prepared.

DFAS, for its part, inherited a pay operation that even at the time was an antique - a 20-year-old Air Force system that DFAS renamed the Defense Joint Military Pay System, or DJMS. It ran, and still runs, on Cobol, a computer language that dates to 1959. Most of the Cobol code the Pentagon uses for payroll and accounting was written in the 1960s, according to 2006 congressional testimony by Zack Gaddy, director of DFAS from May 2004 to September 2008.

Source: GAO

Wallace, the Army assistant deputy chief of staff, says the system has "seven million lines of Cobol code that hasn't been updated" in more than a dozen years, and significant parts of the code have been "corrupted." The older it gets, the harder it is to maintain. As DFAS itself said: "As time passes, the pool of Cobol expertise dwindles."

Further, the system is nearly impossible to update because the documentation for it - explaining how it was built, what was in it, and how it works - disappeared long ago, according to Kevin McGraw. He retired recently after working 30 years in DFAS's Cleveland office, most of that time responsible for maintaining the part of DJMS that handles Navy pay. "It's hard to make a change to a program if you don't know what's in there," McGraw says.

Most of the personnel systems that each of the military services operates are just as old and obsolete. Typically, within each branch, different systems handle different categories of active-duty soldiers, while still others handle Reserve and National Guard personnel. Most of these systems can't talk to each other. And each has its own pipeline into DFAS, with its own way of translating data into a form that DFAS can use in its separate systems for active-duty and for Reserve and Guard personnel.

Donald Shycoff, deputy comptroller at the Defense Department when DFAS was formed two decades ago, says that the intention of establishing the agency was to save money, and that there was no discussion then about the potential impact of separating pay and personnel functions.

Cheney, through a spokesman, declined to comment.

To catch mistakes, the Army relies mainly on local commanders to review monthly pay figures and report any errors. The GAO found that the Army doesn't enforce the requirement. From October 2011 through March 2012, it said, 26 percent of the monthly reports were turned in late or not at all. At some bases, the rate was as high as 40 percent.

Source: DFAS; Shawn Aiken

The heavy reliance on paperwork in the absence of unified pay and personnel systems also means that money continues to flow to soldiers who are absent without leave and others who shouldn't get it.

Spokesmen for the military services said that when an individual goes AWOL, the name and other identifying information are sent to the Defense Manpower Data Center, an office under the secretary of defense. A spokeswoman for the secretary of defense's office said the center does not check with DFAS to make sure that pay to AWOL personnel is stopped. It's up to the individual services to notify DFAS, she said, which "is a proven means of doing business."

Commanders often don't bother to notify DFAS about an AWOL soldier, though they are required to do so, according to the December GAO report. Similarly, National Guard and Reserve personnel who leave active duty but don't fill out the required paperwork may continue to receive pay.

Beginning in November 2009, Carl W. Marquis of Burke, Virginia, then a commander in the Navy Reserves, spent three months on active duty at the Patuxent River Naval Air Station in Maryland. When his tour ended, he didn't sign out. DFAS continued depositing full active-duty pay into his bank account for 15 months, totaling $159,712.

Source: DFAS

DFAS and Navy officials learned of the mistake only after an administrator with Marquis's Reserve unit in Virginia questioned why his name was missing from the unit's rolls. By then, he had spent all but $25,000 of the money, court records show. In December 2011, Marquis pleaded guilty to a "concealment" charge and was sentenced to four months in jail.

Marquis, now a fitness trainer in Reston, Virginia, declined to comment.

"ONE OF OUR HEROES"

Gary J. Pfleider II had been through rehab for drug addiction and was working at a Wal-Mart and a pizza restaurant when he joined the Oregon National Guard in October 2001. He says he wanted to "do something for my country" after the Sept. 11, 2001, terrorist attacks and keep his life on the right track for his two little girls.

INSULT, AFTER INJURY: Wounded warrior Gary J. Pfleider II couldn t afford to stay in his apartment after the Pentagon moved aggressively to collect erroneous debts from him, forcing him to move into a shack behind his parents' house in Lebanon, Oregon. REUTERS/Steve DiPaola

Repeatedly denied deployment to Iraq because of his drug record, he wrote a letter in pencil on lined paper to then-First Sergeant Michael Amen "beging (sic) and pleading with you to please let me deploy out. … This deployment is all I have left."

Amen acceded, and wasn't disappointed. "Gary was a tremendous soldier and asset to the unit," Amen says. Capt. Stephen Bomar, who also was with Pfleider in Iraq, says, "He is one of our heroes."

Pfleider (pronounced FLY-der) was a specialist in a National Guard unit assigned to fill craters blasted into roads by improvised explosive devices. On Sept. 24, 2007, his platoon was working on "Route Tampa," 43 miles from a military base in Balad, central Iraq, when a sniper's bullet tore through his left thigh, severing arteries before punching out a six-inch-long exit wound.

In the ensuing days, he nearly bled to death three times. Recovery was slow. He lost a big chunk of thigh muscle to gangrene.

In February 2009, five months after his discharge, Pfleider was back in his hometown of Lebanon, Oregon, when he received from DFAS a bill for $3,136.73 and a warning that he had 30 days to pay. In subsequent bills, the amount increased steadily, mainly from interest and penalties.

DFAS moved aggressively to collect. By March 2010, the Treasury, on DFAS's behalf, had clawed back $1,630 by withholding Pfleider's 2009 tax refund and garnishing his federal benefits. After keeping $97 in administrative fees, it turned over $1,533 to DFAS. The Treasury then handed off the balance of Pfleider's debt - about $2,100 - to a private collection agency, which Pfleider says hasn't tried to recoup the money since sending an initial debt notice.

The 36-year-old Pfleider, a lean 6 foot 2 with a buzz cut, a beard and a ring in each ear, doesn't work. He often walks with a cane, is usually in pain, and suffers from severe PTSD, with flashbacks, panic attacks, occasional fits of rage, and night terrors. His only income is from Social Security and VA benefits, totaling $1,992 a month.

Unable to afford the rent on his apartment, Pfleider moved into a workshop in back of his parents' house. He doesn't drive, and lack of money makes it hard to visit his two daughters, who live with their mother in Washington state.

Around the time DFAS was dunning him, Pfleider received a separate surprise from the Oregon National Guard: an itemized demand for $1,400, representing the value of equipment - a helmet, a sleeping bag and the like - that he didn't return before he was medevacked out of Iraq.

"What was I supposed to do?" he says. "Stop and gather up all my gear and make sure I brought every piece with me on the plane?"

Television station KVAL in Eugene, Oregon, did a story about that equipment bill in May 2010. The next day, the Guard said it had dropped the claim.

He got no such relief from DFAS. Pfleider says he didn't see wording on the first DFAS bill stating that the $3,136.73 debt was for three weeks the agency had erroneously paid him after his discharge. Later bills said nothing about the source of the debt.

It turns out that nearly all of Pfleider's debt resulted from errors by the Army, DFAS and the Oregon National Guard. Pfleider was mistakenly paid for the extra three weeks because the Army had reported his discharge a month late, DFAS said. He also was overpaid after Army officials demoted him several months before his discharge.

The demotion resulted from a failed drug test after Pfleider returned from a weekend with family in Lebanon. Documents related to the demotion say Pfleider tested positive for methamphetamine; Pfleider says he took methadone, an old prescription from earlier treatments, to relieve leg pain when a missed bus forced to him to sleep on a station floor.

DFAS records show that after the Army demoted Pfleider in February 2008, the Oregon National Guard mistakenly promoted him. After confused communications between the Army and the National Guard, the Guard then demoted and re-promoted Pfleider several times. Because Pfleider was on active duty, the Guard had no legal authority to change Pfleider's rank or pay; only the Army did. DFAS erroneously accepted the promotions and demotions the Guard reported, raising and lowering Pfleider's salary accordingly.

Most of the salary overpayments were recouped by DFAS when it docked Pfleider's pay before he left the service. Even so, DFAS said Pfleider still owed $1,098.87 for such overpayments when he was discharged in September 2008.

In response to inquiries from Reuters, DFAS accountants reviewed Pfleider's pay records and sent to Reuters a four-page analysis that, among other things, found additional debts charged to Pfleider by mistake and benefits not paid.

Sources: DFAS; Fort Bliss Wounded Warrior Battalion staff; Shawn Aiken

DFAS confirmed that most of the debts charged to Pfleider should have been canceled because of his status as a wounded warrior and other reasons. DFAS couldn't erase the $1,098.87 Pfleider still owed for salary overpayments because Defense Department rules forbid cancellation of any debts related to a demotion under the Uniform Code of Military Justice - even if those debts result from payments made in error.

Pfleider's revised total debt of $1,098.87 was less than the $1,533 the Treasury had already collected from him on behalf of DFAS. After accounting for other, smaller underpayments to Pfleider, as well as interest and penalties, DFAS said his final total debt came to $815.50 - or only about 25 percent of what it had claimed when it started sending bills to him. DFAS deducted that from the $1,533 it already had collected and in mid-April, a month after Reuters inquired about his case, paid him the balance of $717.50.

When soldiers like Pfleider and Aiken seek explanations about pay problems, getting answers is tough. It's hard for DFAS to find answers, too. Because of the division between pay and personnel, the agency must submit requests to personnel staff at the relevant branch of the military when it wants questions answered. The wait can take weeks or longer.

DFAS debt notices tell soldiers to address any questions or challenges to the agency. But DFAS admits it often doesn't investigate errors, and generally refers military personnel back to their units, telling them to provide documentary proof to support their claims. Likewise, DFAS said it does not review for potential underpayments the pay records of personnel as they prepare to leave their branch of service or after they leave.

DFAS does operate call centers. In 2011, it said, those centers received 726,680 calls from current and former military personnel, mostly with routine inquiries. The agency said it often refers callers to their units.

Pavlos Kaltsas was a Navy officer who held several senior positions at DFAS through 2005, including overseeing a call center for Navy personnel in Cleveland, Ohio. Staff were limited in what they could do, he says, because they were unable to retrieve the necessary information or make the necessary changes on the computers in front of them. Kaltsas says call center staff often told military personnel to check back in a few weeks - in "the hope that the member just gives up."

Every few days, he says, a Navy officer who had paid his way to Cleveland would show up, refusing to leave until his pay problem was fixed. Kaltsas, assigned to deal with some of them, says that despite his efforts, he often wasn't able to get DFAS to resolve mistakes.

Craig Arndt, a Navy captain, was one of those who showed up. While stationed in Kuwait from 1999 through 2002, he called DFAS to ask that it pay him the special allowances and entitlements he should have been receiving. He got nowhere.

Source: Kevin McGraw, retired DFAS employee of 30 years

Later, while on leave in 2003 and again in 2005, he paid his own airfare from his home in Florida to Cleveland to demand what he was owed. Arndt says that at the end of his second visit, with the issue still unresolved, Karl Bernhardt, a senior pay official, told him that DFAS staff had already spent an inordinate amount of time on Arndt's case.

Arndt persisted. "They couldn't push me around because I was a captain," he says.

Arndt, who retired in 2011 after 30 years in the Navy, eventually accepted a settlement of $15,000. "I don't even know if that was all of it," he says, because of the difficulty of calculating all of the various entitlements he says he was owed. DFAS denied his separate claim of $2,000 to cover an increase in life-insurance premiums after the agency switched his coverage without telling him.

Bernhardt, the senior pay official, said he doesn't recall Arndt or the incident or any time when an officer paid his or her way to Cleveland to complain about a pay error and attempt to get it fixed.

DFAS said it has put in place a certification program for call center employees and plans additional improvements for the centers. It also said it has "not had, in recent years, military people show up uninvited at DFAS Offices to request or demand that perceived pay problems be corrected."

JUST ANOTHER ACRONYM

It wasn't until after the start of the first Gulf War, in 1990, that the problem of pay errors took on any urgency as thousands of Reserve and National Guard personnel were mobilized for Operation Desert Storm.

For months, many of the soldiers called up weren't paid because the system couldn't put them on the active-duty payroll, according to Eric Reid, director of the Army Financial Command. Many found themselves on both Reserve and active-duty payrolls, and were thus paid twice. Later, thousands of demobilized soldiers continued to receive their active-duty pay because the systems were unable to remove them from the active-duty rosters.

In 1996, Defense Secretary William Perry and his staff were sufficiently alarmed to ask the Defense Science Board - a group of corporate executives and senior military personnel that advises the Pentagon on technology - to study the problem and offer ideas for fixes.

The board was unsparing in its criticism. The pay system was "obsolete," it said in its report. It concluded that dysfunctions of the system "damage the morale and welfare of the Service members and their families."

The board's recommendation: Scrap the current system. The Pentagon should emulate big corporations and implement a "single, all-Service and all-component, fully integrated personnel and pay system, with common core software."

RECOGNITION DUE: Shawn Aiken was injured while serving in Iraq and Afghanistan, but the Pentagon s pay personnel failed to designate him as a wounded warrior on at least two occasions when doing so would have erased his alleged debts and prevented his family s ordeal. REUTERS/Handout Picture

Thus was born the Defense Integrated Military Human Resources System, or DIMHRS (pronounced DIME-ers). Under the plan, the Defense Department would buy a commercial, off-the-shelf personnel system and install it with minimal modifications. It chose a product from PeopleSoft, the big human-resources and managerial software maker, since acquired by Oracle Corp.

Under this system, when a soldier's status changed, his or her pay and benefits would be updated with a few keystrokes. Soldiers would be able to change certain information - applying for additional pay after getting married, for example. And DIMHRS would combine the separate systems for active-duty and Reserve personnel.

The Pentagon told Congress in 1997 that the new system would cost $577 million. That was cheap, given the savings that would result from eliminating 88 pay and personnel systems, the secretary of defense's office said at the time. It would be phased in quickly, beginning with the Army in 2004.

Soon after development got under way, delays began to mount, and costs began to rise. Staff in the individual services insisted on changes to accommodate their particular needs. They wanted DIMHRS to be grafted on top of existing systems. Months stretched into years. The services were insisting on "15,000 requirements, and they were adding requirements when I left in 2009," says Nelson Ford, former undersecretary of the Army. "I concluded that DIMHRS was not going to work."

Source: DFAS

Tina Jonas, the Pentagon's chief financial officer from 2004 to 2008, and other officials overseeing the project say it wasn't a priority among top brass, who left implementation to lower-level managers, rarely checking in on progress.

In early 2009, the system was still undergoing testing. Deputy Secretary of Defense Gordon England, about to leave office as the new Obama administration was settling in, wanted to make a final decision on whether to continue spending money to impose DIMHRS on a reluctant bureaucracy, or kill it.

At a meeting Jan. 14, 2009, England gathered together the secretaries of the Army, Navy and Air Force and their top-ranking generals and admirals, along with DIMHRS personnel, to discuss the issue. The consensus, according to participants, was that the only way to make it work would be to pull a four-star general from the wars in Iraq and Afghanistan to manage what they saw as a bookkeeping project.

England pulled the plug. After more than a decade of development and more than $1 billion of taxpayer money spent, DIMHRS was dead. England and the military leaders agreed to let each of the military services pick from the remains of the project to update their own, separate systems.

England, now president of defense consulting firm E6 Partners, says he has come to believe that DIMHRS was doomed from the start: "The payroll systems in DOD are hugely complex."

Defense Secretary Robert Gates revealed the decision to dump DIMHRS in testimony before the Senate Armed Services Committee in February 2010. For the money spent, he told the committee, all that the military got was "an unpronounceable acronym."

Roland Burris, who served just 21 months in the Senate after his controversial appointment by disgraced Illinois Governor Rod Blagojevich, was the only senator at the hearing to react to Gates's announcement, saying the U.S. "could save millions and millions of dollars" with a rationalized military pay system.

A spokeswoman for Democratic Senator Carl Levin of Michigan, the committee chairman, said other members were focused on budgeting for the wars in Iraq and Afghanistan and "didn't have time to get to every other issue of importance."

More recently, several lawmakers have been pressing the Pentagon to reform its record-keeping systems. Senator Carper, the Delaware Democrat, and Senator Tom Coburn of Oklahoma, the ranking Republican on the Homeland Security and Government Affairs Committee, have conducted investigations and requested GAO audits of the military - including the audit released in December last year.

"Unfortunately the problem of pay errors at the Department of Defense is widespread and will continue," Carper said, unless Congress, the White House and military leaders make concerted efforts to correct it.

NOTHING TO WORRY ABOUT

On the DFAS website, a page devoted to wounded warriors reassures them of its commitment. "From the moment you leave the combat zone," it says, "our Wounded Warrior Pay Management teams are at work to make sure your pay and other entitlements don't become things that you or your family have to worry about."

Shawn Aiken had a different experience.

The wounded warrior was a high-school student in Blair, Nebraska, a few miles north of Omaha, when his mother was diagnosed with stomach cancer. He helped care for her until her death a year after his graduation. He enlisted in the Army in June 2003, at age 22, after a small business he had started foundered. He was drawn to a medical specialty; with training, he qualified as a combat medic.

Aiken's combat tours began in August 2005, when he was deployed with the 172nd Stryker Brigade to Mosul, Iraq. Three months later, he was the only medically trained soldier accompanying two platoons on patrol outside of Mosul when they were ambushed. Troops traced the gunfire to a nearby house. They fought their way inside. The house blew up. Aiken was alone to treat 23 wounded soldiers until help arrived.

U.S. Army combat medic Shawn Aiken holds up the bag of his prescription medicines at his home in El Paso, Texas on May 20, 2013. REUTERS/Ivan Pierre Aguirre

He ignored the screams of those he knew he couldn't save in order to focus on those he could. "I still see the faces of some of the guys that were laying there, screaming and crying for help," he says.

Aiken retains the boyish face that beams from snapshots taken while he was serving overseas. He speaks haltingly, and stops when his memory fails him. Still, he can't forget when he was standing next to one of his best buddies, a fellow medic, and cracked a joke. His friend burst out laughing and flung his arms in the air - just as a sniper's bullet pierced his armpit and tore through his chest. "All the way to the hospital I did CPR on him, but there was nothing I could do to save him," Aiken says.

In 2006, the Army awarded Aiken an Army Commendation Medal for saving three lives in two days of combat in Iraq.

In 2010, after re-enlisting, Aiken was in Afghanistan when an armored vehicle he was riding in hit an anti-tank mine. Aiken suffered a concussion and neck and back injuries.

Later that year, a rocket-propelled grenade blasted him through the air and sent him slamming head-first onto hard ground.

His commanders wanted to evacuate him to the Army's Landstuhl Regional Medical Center in Germany. He pleaded with them to let him remain because as a sergeant, he says, he felt a responsibility to his men. They relented, but forbade him to go on patrol. Weeks later, Aiken's unit was transferred to Schweinfurt, Germany, where he began visiting Landstuhl for treatment.

U.S. Army combat medic Shawn Aiken is shown during his EKG appointment at the VA Medical Center in El Paso, Texas on May 24, 2013. REUTERS/Ivan Pierre Aguirre

At that point, everyone familiar with Aiken's case agrees, he should have been designated a "wounded warrior." That status entitles soldiers to receive special pay while they are hospitalized or in "warrior transition units." Most debts to the military are to be canceled. And the exemption from income taxes for soldiers in combat zones is extended while they are hospitalized.

But Aiken was taking a bus on his visits to Landstuhl. DFAS staff there, meeting wounded warriors as they arrived by air, never caught him in their system.

Back in Germany after a leave in the United States, Aiken, depressed and still suffering from PTSD, gulped down lethal doses of the drugs Xanax and OxyContin. Just before losing consciousness, he telephoned a friend, who raced over and got him to the hospital in time for staff to save him.

Landstuhl doctors sent him to a VA hospital in North Chicago, Illinois, for specialized treatment for his PTSD. After nearly 15 weeks there, he was discharged and sent back to Germany. In August 2011, he was demoted from sergeant to specialist for having beaten up a fellow soldier in a fight in Afghanistan.

Finally, in October 2011, the Army - for "compassionate reasons" - transferred him to Fort Bliss, Texas. There he could be closer to Monica, a former soldier herself, and his two children with the wife he was divorcing, who live in El Paso.

Aiken was now assigned to the warrior transition battalion at Fort Bliss. Upon arrival there, he was "in-processed" by DFAS personnel who, after reviewing Aiken's pay records, determined that he owed several thousand dollars to the Defense Department for earlier overpayments. They put through orders to dock his pay.

The DFAS personnel evidently never noticed that Aiken had not been given wounded warrior status. If they had caught the error, then by law Aiken's debts would have been waived, and he and his family would have been spared their financial ordeal.

DFAS spokesman LaRock said the agency has "no part in designating a soldier as a wounded warrior." That responsibility, he said, rests with the medical department of the relevant military service - in Aiken's case, the Army Medical Department.

Margaret Tippy, a spokeswoman for the Army Medical Department, said she could "say with certainty" that her department doesn't have primary responsibility for designating a soldier as a wounded warrior.

Earlier statements by Pentagon officials indicate it is DFAS's job to designate wounded warriors. In congressional testimony in 2006, then-DFAS Director Gaddy said the agency had developed a "Wounded in Action Pay Management Program," and that "we identify and monitor all battle-injured and non-battle-injured soldiers who have served in a combat zone from October 7, 2001, to the present." At the same hearing, then-Pentagon Comptroller J. David Patterson said oversight of wounded warriors was the responsibility of his office and DFAS.

It wasn't until February 2012 - after Aiken had taken out loans, pawned his belongings and accepted charity to keep him and his family afloat through Christmas and beyond - that his nurse case manager noticed he wasn't listed as a wounded warrior. On Feb. 27, he was officially declared one.

In March, he received small reimbursements for meal expenses. In the following months his pay trended upward, but didn't reach normal levels until June 2012, eight months after the deductions started. But he still wasn't reimbursed for most of the money withheld over the previous months.

Reuters first asked DFAS about Aiken's case in September 2012. In response, the agency reviewed his records and, in mid-November, sent Reuters a summary that detailed 14 errors related to the money clawed back from Aiken. The sums include alleged overpayments of housing and meal allowances for soldiers living off-base, as well as wounded warrior benefits he hadn't received, such as the tax exemption, free hospital meals and special pay for hospitalized wounded warriors.

The summary also includes $1,291 that DFAS charged him for "delayed notice" of his divorce, which was declared final the day he was traveling from Chicago back to Germany. Once there, he says, he reported the divorce, but to his old unit, not the wounded warrior transition unit in Schweinfurt he was joining, and DFAS was never notified. Thus the agency claimed as a debt the benefits he'd been paid as a married soldier with children, from the date of his divorce until his arrival several months later at Fort Bliss.

DFAS declined to provide a figure for the total amount of debt it collected from Aiken. An analysis by Reuters of Aiken's pay records - including monthly pay statements obtained from DFAS under a waiver Aiken signed - shows that from October 2011 through March 2012, DFAS withheld more than $4,700 from his pay.

Aiken says he believes that since the pay review prompted by the Reuters inquiries, DFAS has now fully repaid him for the debts it collected.

A Reuters examination of his records and DFAS responses to questions suggest otherwise.

DFAS said that since October 2012, it has reimbursed Aiken $1,818.31. That amount, plus $490.25 in meal reimbursements he received in March, brings the total repaid to Aiken to only $2,308.55.

At least part of the shortfall is due to "partial" payments of extra pay that wounded warriors receive, known as "Pay and Allowance Continuation." DFAS didn't explain why it didn't pay the full benefit, nor did it list the dollar amount it approved.

DFAS's review of Aiken's pay history did not catch all of the mistakes. His pay records show that DFAS double-billed him for $622.06 in alleged meal overpayments in December and January and mistakenly deducted twice that amount from his pay. Aiken eventually was reimbursed for the original $622.06, but not the remainder.

Today, Aiken and Monica, who married in February last year, live in a small stucco house, one of many like it near Fort Bliss. Their first child, son Mason, was born last November. After two surgeries, Aiken spends most of his days on the base, receiving treatment and counseling. He still has nightmares, flashbacks, chronic pain and other symptoms.

(Edited by John Blanton)

Next, Part 2: Behind the Pentagon’s opaque ledgers, a running tally of epic waste