By Phil Stewart and Roberta Rampton
WASHINGTON (Reuters) - A private U.S. charity struck a deal with the Pentagon on Wednesday to advance a "death gratuity" to families of American troops who die during the government shutdown, after the Defense Department determined it was legally unable to make the $100,000 payment.
Defense Secretary Chuck Hagel announced the agreement after returning from Dover Air Force Base, where he attended a ceremony marking the return of the bodies of four U.S. soldiers killed by insurgents in Afghanistan on Sunday.
Leaving grieving military families without the death benefit during the shutdown triggered outrage and finger-pointing by Republicans and Democrats. It thrust relatives of those killed in Afghanistan into the media spotlight and Washington's political feud over the federal budget.
"I am offended, outraged, and embarrassed that the government shutdown had prevented the Department of Defense from fulfilling this most sacred responsibility in a timely manner," Hagel said in a statement.
The White House said President Barack Obama was "very disturbed" when he heard about the lapse and had directed lawyers at the Defense Department and White House budget office to find a way to immediately resume the payments.
Under the agreement, Fisher House Foundation will advance the death benefit to military families using its own funds until the Pentagon can reimburse it once the shutdown ends.
Relatives of the four soldiers killed by a Taliban bomb attack gathered at Dover Air Force Base in Delaware on Wednesday to attend the solemn ceremony commemorating the return of the remains of their loved ones to the United States.
They included 24-year-old Sergeant Joseph Peters of Springfield, Missouri.
"It is upsetting because my husband died for his country, and now his family is left to worry," NBC quoted his widow, Ashley Peters, as before the Pentagon announcement.
"My husband always said if something happened to him we would be taken care of."
Republican Senator John McCain said on Tuesday that members of Congress should be "embarrassed" and "ashamed" for the lapse.
The House voted unanimously on Wednesday for a resolution that would ensure that death benefits to families of fallen troops will be disbursed during the government shutdown.
On Tuesday, the House passed an act ordering that all military pay and allowances - including the death benefit - would continue to be disbursed.
Even with death gratuity payments resolved, the impact of a prolonged government shutdown could still be felt acutely by veterans throughout the country, U.S. officials say.
Those injured in the Iraq and Afghanistan wars are among those who could see monthly disability and other benefits cut-off from November 1 due to projected cash crunch, the Department of Veterans' Affairs warned Congress on Wednesday.
More than 5 million people are expecting payments next month and all of them are threatened, it said.
"It's not a game," VA Secretary Eric Shinseki told the hearing. "There are veterans and service members, families, children counting on this. And they expect us to deliver."
(This story is corrected to death benefit in paragraph 13)
(Additional reporting by Mark Felsenthal, Roberta Rampton, David Alexander and Patricia Zengerle.; Editing by Christopher Wilson)