B-141025, AUG 3, 1973, 53 COMP GEN 75

B-141025, AUG 3, 1973, 53 COMP GEN 75

CHECKS - DELIVERY - BANKS - RETIRED PAY ALTHOUGH THE PERMISSIVE AUTHORITY IN 31 U.S.C. 492(B) FOR THE ISSUANCE BY DISBURSING OFFICERS, IN ACCORDANCE WITH REGULATIONS PRESCRIBED BY THE SECRETARY OF THE TREASURY, OF COMPOSITE CHECKS TO BANKS OR FINANCIAL INSTITUTIONS FOR CREDIT TO THE ACCOUNTS OF PERSONS REQUESTING IN WRITING THAT RECURRING PAYMENTS DUE THEM BE HANDLED IN THIS MANNER INCLUDES THE ISSUANCE OF MILITARY RETIRED PAY CHECKS, COMPOSITE CHECKS SHOULD NOT BE ISSUED WITHOUT A DETERMINATION, PURSUANT TO REGULATIONS TO BE PRESCRIBED BY THE SECRETARY, OF THE CONTINUED EXISTENCE AND/OR ELIGIBILITY OF THE PERSONS COVERED, AND IF PROVIDED BY REGULATION DEPOSITS MAY BE MADE TO JOINT ACCOUNTS AS WELL AS SINGLE ACCOUNTS.

TO THE SECRETARY OF DEFENSE, AUGUST 3, 1973:

BY LETTER OF MARCH 27, 1973, THE HONORABLE DON R. BRAZIER, ACTING ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER), REQUESTED OUR DECISION ON QUESTIONS PRESENTED IN COMMITTEE ACTION NO. 472 OF THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE, WHICH WAS TRANSMITTED WITH SUCH LETTER.

THE QUESTIONS PRESENTED ARE AS FOLLOWS:

1. IS IT THE INTENT OF PL 92-366, AUTHORITY FOR AGENCY HEADS TO DRAW CHECKS IN FAVOR OF FINANCIAL ORGANIZATIONS, THAT COMPOSITE MILITARY RETIRED PAY CHECKS BE ISSUED WITHOUT THE REQUIREMENT FOR REPORTS OF EXISTENCE FROM RETIRED MEMBERS, EXCEPT AS INDICATED IN PARAGRAPH 2, DISCUSSION BELOW?

2. MAY A COMPOSITE CHECK DRAWN PAYABLE TO A BANK (OR FINANCIAL ORGANIZATION) AND CREDITED TO THE ACCOUNTS OF RETIREES INVOLVED BE DEPOSITED TO JOINT ACCOUNTS, IF SO DIRECTED BY THE RETIREES?

PUBLIC LAW 92-366, APPROVED AUGUST 7, 1972, 86 STAT. 506, AMENDED SECTION 3620 OF THE REVISED STATUTES, AS AMENDED (31 U.S.C. 492), BY ADDING A NEW SUBSECTION (D) THERETO, AS FOLLOWS:

(D) PROCEDURES AUTHORIZED IN SUBSECTION (B) OF THIS SECTION, FOR THE MAKING OF A PAYMENT IN THE FORM OF A CHECK DRAWN IN FAVOR OF A FINANCIAL ORGANIZATION, MAY BE EXTENDED TO ANY CLASS OF RECURRING PAYMENTS, UPON THE WRITTEN REQUEST OF THE PERSON TO WHOM PAYMENT IS TO BE MADE AND IN ACCORDANCE WITH REGULATIONS TO BE PRESCRIBED BY THE SECRETARY OF THE TREASURY UNDER AUTHORITY OF SUCH SUBSECTION.

THE AMENDMENT EXTENDED, ON A PERMISSIVE BASIS, TO "ANY CLASS OF RECURRING PAYMENTS," THE AUTHORITY CONTAINED IN 31 U.S.C. 492(B) FOR THE HEAD OF AN AGENCY, UPON THE WRITTEN REQUEST OF THE PERSON TO WHOM PAYMENT IS TO BE MADE, TO AUTHORIZE A DISBURSING OFFICER TO MAKE THE PAYMENT BY SENDING TO A FINANCIAL ORGANIZATION DESIGNATED BY THE PERSON A CHECK DRAWN IN FAVOR OF SUCH ORGANIZATION FOR CREDIT TO THE ACCOUNT OF THE PERSON AND, IF MORE THAN ONE PERSON DESIGNATES THE SAME FINANCIAL ORGANIZATION, SEND ALL SUCH PAYMENTS IN ONE COMPOSITE CHECK DRAWN IN FAVOR OF THE ORGANIZATION FOR DEPOSIT TO THE ACCOUNTS OF SUCH PERSONS. ALL SUCH AUTHORITY IS TO BE EXERCISED IN ACCORDANCE WITH REGULATIONS TO BE PRESCRIBED BY THE SECRETARY OF THE TREASURY.

THE PERMISSIVE AUTHORITY GRANTED BY PUBLIC LAW 92-366 WOULD CLEARLY INCLUDE THE ISSUANCE OF MILITARY RETIRED PAY CHECKS. HOWEVER, THERE IS NOTHING IN THE STATUTE OR IN THE PROVISION OF LAW AMENDED THEREBY INDICATING AN INTENT THAT COMPOSITE RETIRED PAY CHECKS SHOULD BE ISSUED WITH NO REGARD TO THE CONTINUED EXISTENCE AND/OR ENTITLEMENT OF THE PERSONS INCLUDED THEREIN. ON THE CONTRARY, THE LEGISLATIVE HISTORY OF THE ACT CLEARLY REVEALS THAT THIS WAS ONE OF THE PRINCIPAL ADMINISTRATIVE PROBLEMS CONTEMPLATED DURING COMMITTEE CONSIDERATION OF H.R. 8708, 92D CONGRESS, WHICH BECAME PUBLIC LAW 92-366. IN ITS REPORT ON SAID BILL, REPORT NO. 92-977, THE SENATE COMMITTEE ON GOVERNMENT OPERATIONS STATED (PAGE 3) AS FOLLOWS:

THE HEARING RECORD ALSO CONTAINS COMMUNICATIONS FROM THE U.S. CIVIL SERVICE COMMISSION, THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, THE VETERANS' ADMINISTRATION, AND THE RAILROAD RETIREMENT BOARD, INDICATING CERTAIN ADMINISTRATIVE PROBLEMS WHICH ENACTMENT OF THE LEGISLATION WOULD CAUSE, BUT STATING THAT THESE COULD BE OVERCOME AND THAT THEY HAD NO OBJECTION TO ENACTMENT.

THE ADMINISTRATIVE PROBLEMS REFERRED TO WOULD RESULT FROM LOSS OF DIRECT CONTACT WITH THE BENEFICIARIES CONCERNED WITH RESPECT TO THOSE WHOSE CHECKS WERE SENT DIRECTLY TO DESIGNATED BANKS. IT WAS NOTED THAT DIRECT CONTACT THROUGH MONTHLY CHECK MAILINGS IS THE AGENCY'S PRIMARY MEANS OF (1) KEEPING INFORMED OF THE CURRENT ADDRESSES OF BENEFICIARIES; (2) REACHING THEM WITH PROMPT NOTICE OF CHANGES IN THEIR STATUS; (3) OBTAINING PROMPT NOTICE OF DEATH OF A BENEFICIARY; AND (4) LEARNING OF DEPARTURE OF BENEFICIARIES FROM THE COUNTRY. IN ADDITION, THERE WOULD BE A LOSS OF CERTAIN ADVANTAGES IN COMPLIANCE WITH THE PROVISIONS OF EXISTING LAW ON CONTINUING ELIGIBILITY FOR BENEFITS, WHICH, UNDER PRESENT METHODS, IS ACCOMPLISHED BY THE INDIVIDUAL'S ENDORSEMENT OF HIS CHECK WHICH ATTESTS TO HIS CONTINUING ELIGIBILITY.

DESPITE THESE PROBLEMS, THE AGENCIES CONCERNED STATED THAT THE POTENTIAL BENEFITS DERIVED FROM THESE PROCEDURES, IN THE FORM OF POTENTIAL ECONOMIES TO THE GOVERNMENT AND IMPROVED SERVICE TO BENEFICIARIES, WERE GREATER THAN THE ADMINISTRATIVE PROBLEMS INVOLVED. THEY STATED FURTHER THAT THE BASIC PROBLEM OF DIRECT CONTACT COULD BE OVERCOME BY MAINTAINING TWO ADDRESS SYSTEMS - ONE FOR CHECK WRITING AND DEPOSITS, AND THE OTHER FOR OFFICIAL CORRESPONDENCE.

THERE IS ALSO FOR CONSIDERATION THE FACT THAT THE AUTHORITY GRANTED BY PUBLIC LAW 92-366 IS PERMISSIVE ONLY, NOT MANDATORY, AND BY EXPRESS PROVISION OF THE ACT IS TO BE EXERCISED ONLY "IN ACCORDANCE WITH REGULATIONS TO BE PRESCRIBED BY THE SECRETARY OF THE TREASURY UNDER AUTHORITY OF SUCH SUBSECTION." THERE IS NO REQUIREMENT THAT THIS AUTHORITY BE USED IN LIEU OF ANY EXISTING AUTHORITY. ON PAGE 3 OF THE REPORT CITED ABOVE, THE COMMITTEE STATED IN THIS REGARD AS FOLLOWS:

THE COMMITTEE IS MINDFUL OF THE FACT THAT IMPLEMENTATION OF THESE PROCEDURES WILL NECESSITATE ADMINISTRATIVE ADJUSTMENTS BY AGENCIES CONCERNED. HOWEVER, SINCE IMPLEMENTATION IS PERMISSIVE AND NOT MANDATORY, THE AGENCIES WILL HAVE AMPLE OPPORTUNITY TO WORK OUT THE DETAILS WITH THE TREASURY DEPARTMENT, AND THE ULTIMATE BENEFITS TO BE DERIVED BY BOTH THE GOVERNMENT AND THE PAYEES SHOULD MORE THAN JUSTIFY THE ADDITIONAL EFFORT REQUIRED TO INSTITUTE THESE PROCEDURES.

CHAIRMAN JOHN S. MONAGAN OF THE LEGAL AND MONETARY AFFAIRS SUBCOMMITTEE OF THE HOUSE COMMITTEE ON GOVERNMENT OPERATIONS STATED ON PAGE 4 OF THE HEARINGS ON H.R. 8708 BEFORE HIS SUBCOMMITTEE ON SEPTEMBER 29, 1971, THAT:

H.R. 8708 WOULD ALLOW EXTENSION OF THE DIRECT-DEPOSIT TECHNIQUE TO RECURRING PAYMENTS MADE TO THE PUBLIC - SUCH AS THOSE FOR SOCIAL SECURITY BENEFITS, VETERANS' BENEFITS, AND CIVIL SERVICE AND RAILROAD RETIREMENT BENEFITS. IT DOES NOT REQUIRE IMPLEMENTATION - IT DOESN'T REQUIRE IMPLEMENTATION - BUT MERELY PAVES THE WAY FOR VOLUNTARY ADOPTION IF AND WHEN THE TREASURY AND THE PROGRAM AGENCIES DETERMINE IT TO BE FEASIBLE. WE THINK IT DESIRABLE, HOWEVER, TO HAVE THE OPTION AVAILABLE AT THE EARLIEST POSSIBLE TIME SO THAT THE PROCEDURE COULD BE READILY IMPLEMENTED IF AND WHEN THE JOINT AGENCY-TREASURY STUDIES SHOW IT TO BE POSSIBLE.

IN THE SAME HEARINGS, MR. DAVID MOSSO, COMMISSIONER, BUREAU OF ACCOUNTS, DEPARTMENT OF THE TREASURY, STATED (PAGE 6):

THE TREASURY DEPARTMENT WOULD AGAIN HAVE THE RESPONSIBILITY FOR ISSUING THE REGULATIONS NECESSARY TO IMPLEMENT THE PROCEDURE AUTHORIZED BY THE PROPOSED LEGISLATION. IT GOES WITHOUT SAYING THAT WE WOULD NOT USE THE PERMISSIVE AUTHORITY FOR ANY PROGRAM UNTIL ALL PROCEDURAL AND ADMINISTRATIVE ELEMENTS HAD BEEN EXHAUSTIVELY STUDIED AND CONCLUSIONS REACHED THAT THE PROCEDURE COULD BE APPLIED WITHOUT HAVING AN ADVERSE IMPACT ON THE PAYEES, THE PROGRAM, OR THE TREASURY.

IN THAT CONNECTION, WE HAVE BEEN PARTICIPATING WITH THE SOCIAL SECURITY ADMINISTRATION IN A FEASIBILITY STUDY OF PROVIDING A DIRECT DEPOSIT OPTION TO SOCIAL SECURITY BENEFICIARIES. THERE ARE A NUMBER OF ISSUES IN THESE PUBLIC PAYMENT PROGRAMS THAT ARE NOT PRESENT IN THE APPLICATION TO FEDERAL SALARY PAYMENTS.

HENCE, IT IS OUR VIEW THAT IT IS NOT THE INTENT OF PUBLIC LAW 92-366 THAT COMPOSITE CHECKS BE ISSUED THEREUNDER WITHOUT THE USE OF SOME MEANS OF DETERMINING THE CONTINUED EXISTENCE AND/OR ELIGIBILITY OF THE PERSONS COVERED THEREBY, AND THAT THE PROCEDURES TO BE USED AND THE EXTENT OF SUCH DETERMINATIONS TO BE REQUIRED ARE, IN THE FIRST INSTANCE, FOR THE CONSIDERATION OF THE SECRETARY OF THE TREASURY IN THE REGULATIONS HE PRESCRIBES IN ACCORDANCE WITH THE ACT.

WITH REGARD TO THE QUESTION AS TO DEPOSITING A COMPOSITE CHECK ISSUED UNDER THE AUTHORITY OF PUBLIC LAW 92-366 TO THE CREDIT OF JOINT ACCOUNTS, THIS MATTER ALSO WOULD BE FOR CONSIDERATION BY THE SECRETARY OF THE TREASURY IN THE REGULATIONS TO BE PRESCRIBED BY HIM UNDER THE ACT. HOWEVER, IT MAY BE NOTED IN THIS CONNECTION THAT TREASURY DEPARTMENT CIRCULAR NO. 1076 (FIRST REVISION), ISSUED NOVEMBER 27, 1968 (31 CFR 209), ENTITLED "PAYMENTS TO FINANCIAL ORGANIZATIONS FOR CREDIT TO ACCOUNTS OF EMPLOYEES," WHICH WAS ISSUED UNDER 31 U.S.C. 492 PRIOR TO THE ENACTMENT OF PUBLIC LAW 92-366 AND APPLIES ONLY TO SALARIES OR WAGES PAYABLE TO CIVILIAN EMPLOYEES OF THE GOVERNMENT, PERMITS THE CREDIT OF AMOUNTS PAID THEREUNDER TO EITHER SINGLE OR JOINT ACCOUNTS. SAID CIRCULAR ALSO PROVIDES AS FOLLOWS (31 CFR 209.8):

SEC 209.8 FINANCIAL ORGANIZATION AS AGENT.

A FINANCIAL ORGANIZATION WHICH RECEIVES CHECKS UNDER THE PROCEDURE SET OUT IN SECS 209.3 AND 209.4 DOES SO IN EACH CASE AS THE AGENT OF THE EMPLOYEE WHO HAS DESIGNATED THE FINANCIAL ORGANIZATION TO RECEIVE THE CHECK AND CREDIT HIS ACCOUNT. THE DEATH OF THAT EMPLOYEE REVOKES THE AUTHORITY OF THE FINANCIAL ORGANIZATION TO CREDIT THE AMOUNT TO THE ACCOUNT OF THAT EMPLOYEE. IN THE CASE OF A CHECK COVERING A PAYMENT TO ONE EMPLOYEE, THE PROCEEDS OF WHICH CANNOT BE CREDITED TO THE ACCOUNT BECAUSE OF DEATH OR ANY OTHER REASON, THE FINANCIAL ORGANIZATION SHALL PROMPTLY RETURN THE CHECK TO THE ISSUING DISBURSING OFFICER OR REMIT ITS OWN CHECK IN AN EQUAL AMOUNT, WITH A STATEMENT IN EITHER CASE IDENTIFYING THE REASON THEREFOR AND THE EMPLOYEE. IN THE CASE OF A CHECK COVERING PAYMENT TO MORE THAN ONE EMPLOYEE, A PORTION OF WHICH CANNOT BE CREDITED TO AN ACCOUNT BECAUSE OF DEATH OR FOR ANY OTHER REASON, THE FINANCIAL ORGANIZATION SHALL PROMPTLY REMIT TO THE AGENCY RESPONSIBLE FOR MAKING PAYMENT A CHECK IN AN AMOUNT EQUAL TO THAT PORTION WHICH COULD NOT BE PROPERLY CREDITED TO THE ACCOUNT, WITH A STATEMENT IDENTIFYING THE EMPLOYEE AND THE REASON FOR REFUND.

THE TREASURY DEPARTMENT HAS NOT YET ISSUED THE REGULATIONS REQUIRED BY PUBLIC LAW 92-366. HOWEVER, WE HAVE BEEN ADVISED INFORMALLY BY THAT DEPARTMENT THAT A REVISION OF DEPARTMENT CIRCULAR NO. 1076 INCORPORATING THAT ACT IS UNDER CONSIDERATION AND WILL BE ISSUED AS SOON AS PRACTICABLE. THE DEPARTMENT ALSO ADVISED US INFORMALLY THAT SUCH REVISION WILL NOT SPECIFICALLY ADDRESS THE PROBLEM OF DETERMINING THE CONTINUED EXISTENCE AND/OR ELIGIBILITY OF THE PERSONS INVOLVED, BUT THAT THE IN- DEPTH STUDY OF THE SOCIAL SECURITY ADMINISTRATION MENTIONED HEREINABOVE, WHICH WOULD COVER SUCH PROBLEM, WAS NEARING ITS CONCLUSION AND IT WAS EXPECTED THAT REGULATIONS COVERING THE PROBLEM WOULD BE ISSUED THEREAFTER. THE DEPARTMENT FURTHER INDICATED ITS INTENT TO MAKE STUDIES OF OTHER DEPARTMENTS AND AGENCIES HAVING SIMILAR PROBLEMS WITH A VIEW TO RESOLVING SUCH PROBLEMS TO THE MUTUAL SATISFACTION OF BOTH THE TREASURY DEPARTMENT AND THE DEPARTMENT OR AGENCY INVOLVED.

THE QUESTIONS PRESENTED ARE ANSWERED ACCORDINGLY.