B-226120, MAR 27, 1987, OFFICE OF GENERAL COUNSEL

B-226120, MAR 27, 1987, OFFICE OF GENERAL COUNSEL

APPROPRIATIONS/FINANCIAL MANAGEMENT - ACCOUNTABLE OFFICERS - DISBURSING OFFICERS - RELIEF - ILLEGAL/IMPROPER PAYMENTS - SUBSTITUTE CHECKS DIGEST: RELIEF IS GRANTED ARMY DISBURSING OFFICIAL UNDER 31 U.S.C. SEC. 3527(C) FROM LIABILITY FOR IMPROPER PAYMENT RESULTING FROM VENDOR'S NEGOTIATION OF BOTH ORIGINAL AND RECERTIFIED CHECKS. PROPER PROCEDURES WERE FOLLOWED IN THE ISSUANCE OF THE RECERTIFIED CHECK, THERE WAS NO INDICATION OF BAD FAITH ON THE PART OF THE DISBURSING OFFICIAL AND SUBSEQUENT COLLECTION ATTEMPTS ARE BEING PURSUED. HOWEVER, FOR CASES INVOLVING NOTICES OF LOSSES RECEIVED AFTER JUNE 1, 1986, WE WILL DENY RELIEF IF ARMY DELAYS MORE THAN 3 MONTHS IN FORWARDING THE DEBT TO ARMY'S COLLECTION DIVISION.

BRIGADIER GENERAL B. W. HALL DEPUTY COMMANDER FOR OPERATIONS:

THIS RESPONDS TO YOUR REQUEST OF JANUARY 12, 1987, THAT WE RELIEVE LIEUTENANT COLONEL (LTC) J. W. MELLON, FINANCE CORPS, DSSN 6396, FINANCE AND ACCOUNTING OFFICER, 7TH INFANTRY DIVISION AND FORT ORD, FORT ORD, CALIFORNIA, UNDER 31 U.S.C. SEC. 3527(C), FOR AN IMPROPER PAYMENT OF A $3,000 CHECK PAYABLE TO SOUTHERN CONCERTS, INCORPORATED. FOR THE REASONS STATED BELOW, RELIEF IS GRANTED.

THE LOSS RESULTED WHEN THE VENDOR NEGOTIATED BOTH THE ORIGINAL AND A SUBSTITUTE CHECK. BOTH CHECKS WERE IN THE SAME AMOUNT. THE RECERTIFIED CHECK WAS ISSUED ON THE BASIS OF THE VENDOR'S ALLEGATION THAT THE ORIGINAL CHECK HAD NOT BEEN RECEIVED AND AFTER THE FINANCE OFFICER HAD RECEIVED A DAILY ADVICE OF STATUS (DAS) FROM TREASURY INDICATING THAT THE ORIGINAL CHECK WAS STILL OUTSTANDING. BOTH CHECKS WERE ISSUED BY THE ARMY UNDER AUTHORITY DELEGATED BY THE DEPARTMENT OF THE TREASURY. 31 C.F.R. SEC. 245.8 AND TREASURY FISCAL REQUIREMENTS MANUAL FOR GUIDANCE OF DEPARTMENTS AND AGENCIES, BULLETIN NO. 83-28.

IT APPEARS THAT THE ISSUANCE OF A RECERTIFIED CHECK IN THIS CASE WAS WITHIN THE BOUNDS OF DUE CARE. ID. THERE WAS NO INDICATION OF BAD FAITH ON THE PART OF THE DISBURSING OFFICER AND ADEQUATE COLLECTION EFFORTS ARE BEING MADE. ACCORDINGLY, WE GRANT RELIEF.

ALTHOUGH WE HAVE GRANTED RELIEF, WE ARE NEVERTHELESS CONCERNED WITH THE COLLECTION ACTION TAKEN IN THIS CASE. TEN DAYS AFTER ISSUING THE RECERTIFIED CHECK, THE FINANCE OFFICER WAS INFORMED BY A DAS FROM TREASURY, DATED SEPTEMBER 30, 1985, THAT THE ORIGINAL CHECK HAD BEEN PAID. UNDER ARMY REGULATIONS, THEN IN EFFECT, THE FINANCE OFFICER "UPON RECEIPT" OF SUCH A DAS "SHOULD ADVISE THE CLAIMANT THAT THE ORIGINAL CHECK WAS NEGOTIATED AND REQUEST REPAYMENT." ARMY'S RECERTIFICATION OF CHECKS DISBURSING AND ACCOUNTING PROCEDURES, LETTER OF INSTRUCTION, ENC. 1,4K, P.7, FEBRUARY 6, 1985. WE ARE INFORMED THAT IT WAS ARMY'S POLICY TO WAIT UNTIL THE PHOTOCOPY OF THE ORIGINAL CHECK AND CLAIM FORM FROM TREASURY WERE RECEIVED BEFORE INSTITUTING COLLECTION ACTIVITY. /1/

ACCORDING TO THE SUBMISSION, THE FIRST COLLECTION LETTER WAS SENT JUNE 30, 1986, 9 MONTHS AFTER THE DAS FROM TREASURY WAS RECEIVED AND 2 MONTHS AFTER THE PHOTOCOPY OF THE ORIGINAL CHECK AND CLAIM FORM FROM TREASURY WERE RECEIVED. IT APPEARS THAT THE FINANCE OFFICER WAITED UNTIL HE RECEIVED THE PHOTOCOPY OF THE RECERTIFIED CHECK FROM TREASURY BEFORE HE TOOK ANY COLLECTION ACTION. WE DO NOT THINK THAT THIS WAS IN ACCORD WITH ARMY'S LETTER OF INSTRUCTION.

A DELAY OF 9 MONTHS IN INSTITUTING COLLECTION ACTION IS ALSO NOT IN ACCORD WITH THE REQUIREMENT OF 31 U.S.C. SEC. 3527(C). WE HAVE DETERMINED THAT THE DILIGENT COLLECTION STANDARD IN 31 U.S.C. SEC. 3527(C) REQUIRES THAT THE FINANCE OFFICER REFER LOSSES TO YOUR COLLECTION DIVISION WITHIN 3 MONTHS FROM THE TIME THAT A NOTICE OF LOSS FROM TREASURY IS RECEIVED. WHEN A FINANCE OFFICER HAS ISSUED A RECERTIFIED CHECK AND THEN RECEIVES A DAS FROM TREASURY INDICATING THAT THE ORIGINAL CHECK HAD BEEN NEGOTIATED, THAT DAS IS A NOTICE OF LOSS.

IN THIS CASE, THE LOSS WAS NOT ESTABLISHED IN YOUR COLLECTION DIVISION UNTIL DECEMBER 10, 1986, OVER 14 MONTHS FROM THE TIME THAT THE FINANCE OFFICER RECEIVED THE DAS FROM TREASURY INDICATING THAT A LOSS HAD OCCURRED. HOWEVER, AS WE HAVE PREVIOUSLY AGREED, WE WILL NOT DENY RELIEF UNDER THIS STANDARD OF DILIGENT COLLECTION ACTION FOR CASES INVOLVING NOTICES OF LOSSES RECEIVED BEFORE JUNE 1, 1986. SINCE THE NOTICE OF LOSS IN THIS CASE WAS RECEIVED BEFORE THAT DATE, WE WILL NOT DENY RELIEF HERE.

/1/ CURRENT REGULATION REQUIRES THAT THE FINANCE OFFICER INITIATE COLLECTION PROCEDURES AGAINST THE PAYEE WHEN THE DAS INDICATES THAT THE ORIGINAL CHECK HAS BEEN NEGOTIATED. ARMY'S RECERTIFICATION OF CHECKS DISBURSING AND ACCOUNTING PROCEDURE LETTER OF INSTRUCTION (LOI), ENCL. 1, 11, P. 10, JULY 17, 1986.