October 24, 1995


SUBJECT: Change in Nonappropriated Fund (NAF) Personnel Policy on Payment of Living Quarters Allowance (LQA)

Under a waiver granted by OSD in 1987, Army was authorized to pay LQA to NAF employees locally recruited in the foreign area for recruitment and retention purposes. The DoD Inspector General in a 1993 report expressed concern that this policy waiver created disparate treatment between NAF and Appropriated fund employees and should be reconsidered. As a result of the IG report, the House of Representatives National Security Committee included in the Defense Authorization Act for FY 1996 a requirement that eligibility for LQA be in conformance with State Department regulations. In response to both the Inspector General and the Congress, DoD has directed that the delegation of authority to waive Department of State Standardized Regulations (DSSR) requirements pertaining to local hire LQA is rescinded. All grants of LQA for NAF local hire employees must meet the eligibility requirements of DSSR Section 031.11 and 031.12 as further detailed in DoD 1400.24-M, DoD Civilian Personnel Policy Manual. To bring LQA payment into conformity with the new policy, addresses will take the following actions.

  1. Evaluate all current payments of LQA to NAF local hires. The eligibility criteria of the DSSR will be applied on an individual, case-by-case basis to determine whether each employee is eligible to continue to receive those payments. The results of each individual evaluation will be documented. All evaluations must be completed by September 30, 1996.

  2. Payments of LQA to NAF local hires who do not meet the DSSR eligibility requirements will be terminated on September 30, 1997. Employees will be notified, in writing, of the determination and the date LQA will be terminated. In those situations where a bon-fide retention problem exists, the payment of a retention allowance may be considered.
Addresses will report the following information to this office, Attn: NAF Personnel Program, by the dates indicated.

  1. November 30, 1995: The number of NAF local hires who are receiving LQA.

  2. October 1, 1996:

    1. The number of cases reviewed.

    2. The number of local hire employees who did not meet the eligibility requirements.

    3. The total annual dollar amount of LQA to be terminated.

    4. The number of local hire employees who meet the eligibility requirements.

    5. The total annual dollar amount of LQA to be continued under the provisions of the DSSR.

  3. October 1, 1997: The number of employees who had LQA terminated on September 30, 1997.
Questions may be referred to Pat Turner, DSN 221-7763 or commercial (703) 325-7763.

//original signed//
Carol Ashby Smith
Deputy Assistant Secretary
(Civilian Personnel Policy)/
Director of Civilian Personnel

Addendum - POC Update - 01/29/01

Questions may be referred to Mr. Bill McCune, DSN 221-7764 or commercial 703-325-7764.


David L. Snyder
Deputy Assistant Secretary
(Civilian Personnel Policy)