Employees in DoDDS-Pacific/DDESS-Guam who receive Living Quarters Allowance (LQA) enjoy an important benefit that few other Federal employees receive. For most of our workforce, LQA covers the full cost of their rent and utilities. While our employees enjoy many other benefits, including COLA, travel entitlements, health and life insurance, Thrift Savings Plan, and the retirement program, clearly the entitlement giving the greatest immediate economic benefit is the LQA.

LQA is a reimbursement of actual housing expenses, and because employees do not receive more than their expenses, the IRS deems LQA to be non-taxable income. The LQA reconciliation process ensures that employees receive LQA equivalent to their housing expenses. We used to require employees to reconcile LQA each year. Now, employees are only required to reconcile LQA after their first year of residency in a housing unit. Reconciliations after this first one are optional for the employee. However, the first year reconciliation is mandatory and employees must comply with this requirement if they wish to continue to receive LQA.

The reason that employees must reconcile after the first year is because, when the employee moves into the quarters and starts the grant of LQA, s/he is only able to estimate utility expenses. There is no historical baseline to determine utilities usage. Through the reconciliation process, DoDEA compares the first year actual expenses with the amount the employee was paid based on the estimate. Employees will either receive a check to make up the difference if they were underpaid, or a notice of indebtedness if they were overpaid. LQA for the subsequent years will then be based on the actual expenses from the first year.

We have recently seen a significant number of employees who are indebted several thousand dollars because they did not reconcile at the end of the first year, or because they significantly overestimated their utilities costs, or, the worst case scenario, did both. In some cases, the employee submitted a reconciliation in a timely manner, but the processing was held up at DoDEA. For these reasons, DoDEA entered into a Memorandum of Understanding (MOU) with FEA to enforce the reconciliation process and provide more information to teachers on the procedures and requirements of LQA reconciliation. Now, employees will sign an MOU outlining their responsibilities for reconciliation at the time the LQA is initiated. They will also receive a reminder 45 days before the end of the first year and another reminder at the end of the first year. If the employee does not submit the reconciliation within 45 days after the end of the first year in the quarters, or does not make arrangements with DoDEA for an extension of time to submit the reconciliation, the payment of the utility portion of the LQA will be suspended until the reconciliation is received. While DoDEA does not want to suspend payment for utilities, we must take aggressive action to eliminate the extensive overpayments and indebtedness cases that have occurred over the past year. The DoDEA Human Resources Center has also assured us that they will process current and future reconciliations in a timely manner.

The Pacific spends over $40 million annually to reimburse employees for housing costs. The money that is used to pay DoDEA employees in the Pacific for LQA and other allowances, i.e., Temporary Quarters Subsistence Allowance (TQSA), Post Allowance (COLA), and Post Differential, comes from the same funding that is used for other programs, such as incentive awards, Extra Duty Pay for teachers, travel, and training. It is important that we efficiently manage the funds expended for LQA in order to minimize the adverse impact on these other important programs.

Every employee in the Pacific who receives LQA needs to understand the reconciliation process and follow the procedures that have been outlined. It helps us to appropriately manage this important quality of life program and helps the employee to keep reimbursements in line with expenses, avoiding overpayments and indebtedness. I would also ask that each of you do whatever you can to contain LQA and TQSA costs so we can use these funds for other worthwhile educational priorities in the Pacific. Thank you for your understanding and support.

Nancy C. Bresell
Director, DoDDS-Pacific/DDESS-Guam