Government Watchdog Says COLA Calculations are Inaccurate
The Department of Defense fails to provide accurate cost-of-living allowances or COLA for over a quarter million service members due to flawed data collection practices and inconsistent policies from base to base, according to a Government Accountability Office report released in April 2026.
That report says DoD methods for calculating these payments rely on unreliable sampling and poor communication. The report also urges the Department of Defense to adopt random sampling and protect the quality of life for people stationed in expensive areas.
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Government Watchdog Says COLA Calculations are Inaccurate
According to the GAO report, “DOD assigns its 1.4 million active-duty service members to over 3,500 locations worldwide. DOD provides a COLA to assist service members with nonhousing expenses, such as food, in high-cost areas.”
The cost-of-living allowance is offered to those assigned to locations where non-housing costs exceed the national average. In 2024, the Department of Defense distributed over $1.2 billion in payments to approximately 225,000 people stationed outside the continental United States. Another 25,000 people inside the continental United States received about $33 million.
The Government Accountability Office found that the process used to set these rates is inaccurate.
How COLA Works
The Department of Defense uses three methods to determine the annual COLA. Pending data from the Bureau of Labor Statistics is used to establish a baseline for household expenses. The DoD provides surveys to identify where and how service members shop and collects retail price data for goods and services in specific locations.
The Department of Defense then compares these local prices against a national average.
The Government Accountability Office identified a flaw in the shopping pattern surveys. At press time, the Department of Defense uses convenience sampling rather than random sampling, meaning it relies on people who choose to participate rather than a representative sample.
Because the participants do not reflect the entire military population, the GAO report argues that this method fails to produce statistically valid results and yields allowance rates that do not match the actual costs families face.
Auditor site visits highlighted the human cost of these errors. Researchers spoke with service members in Hawaii, Japan, Alaska, Germany, and Virginia. People in nine out of seventeen discussion groups reported that their payments fluctuate so much that they cannot use the money for budgeting. In some cases, families resorted to restricted diets to make ends meet.
Disparities between domestic and overseas policies further complicate the situation. The Government Accountability Office found that the Department of Defense uses different rules for dependent-based compensation depending on the location.
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Higher COLA Overseas
Service members overseas often receive higher COLA for their families than those in high-cost areas within the United States. The report recommends that the Department of Defense make changes to these two systems to ensure every person receives fair treatment.
Many service members told auditors they did not understand why their pay changed from month to month. Some commands provided detailed briefings, while others offered no information at all, and it’s this lack of transparency that leaves families unable to plan for sudden drops in income.
The Government Accountability Office suggests that the Department of Defense should require all local commands to provide clear, consistent information about allowance programs.
The future of these allowances depends on whether the Department of Defense implements the four recommendations provided in the report. The Government Accountability Office advises the department to switch to random sampling for its surveys and to apply location-specific expense data more consistently. The report also says local military leaders must improve how they communicate pay information to their teams.
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About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
