[Applicability of Dual Compensation Restrictions to Retired Military Member Employed by Federal Reserve System]

An Army official asked whether: (1) a retired Army officer was subject to reductions in his military pay under the dual compensation restrictions prescribed by Federal regulations because of his civilian employment with the Board of Governors of the Federal Reserve System; (2) reinstatement of reductions of the Army officer's retirement pay account was proper; and (3) overpayments of retired pay received by the retired officer must be collected. The employee contended that his employment with the Federal Reserve Board should not be covered by the dual compensation restrictions since he was not a civil service employee, was not paid from appropriated funds, and the Board is an entity wholly independent of the legislative and executive branches of the Government. Although the appointment and compensation of Board employees is exempted from civil service laws and Board employees are not paid from appropriated funds, GAO found that retired military officers who seek civilian employment with the Board are subject to the dual compensation restrictions. The legislative history of the act shows that Congress intended that it cover employment in any civilian office or position in the Government, including employment with Government corporations or nonappropriated fund instrumentalities. GAO found that the reduction of the officer's retired pay would not result in a nullification or revocation of any provision of the Federal Reserve Act or interfere with the Board's independence. Because the Army failed to make the prescribed reductions in military pay caused by the officer's civilian employment, GAO found that the retired officer received erroneous overpayments for which he is liable unless he applies for and is granted an indebtedness waiver.