A-25972, MARCH 8, 1929, 8 COMP. GEN. 477

A-25972: Mar 8, 1929

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CHECKS - OUTSTANDING LIABILITIES WHEN THE PROCEEDS OF AN OUTSTANDING GOVERNMENT CHECK COVERING ALLOTMENT AND ALLOWANCE HAVE BEEN COVERED INTO "OUTSTANDING LIABILITIES" UNDER SECTION 306. THERE IS NO AUTHORITY OF LAW FOR THE RESTORING OF THE AMOUNT THEREOF TO THE CREDIT OF THE APPROPRIATION OR APPROPRIATIONS FROM WHICH ORIGINALLY DRAWN UNTIL THE CHECK HAS BEEN PRESENTED BY THE BONA FIDE HOLDER OF THE SAME OR UNTIL A BOND OF INDEMNITY HAS BEEN FURNISHED BY THE PERSON CLAIMING THE PROCEEDS THEREOF. AS FOLLOWS: HEREWITH IS INCLOSED FOR YOUR CONSIDERATION. WHICH CHECK IS UNPAID AND ITS AMOUNT HAS BEEN CREDITED TO "OUTSTANDING LIABILITIES. " ONLY $3.50 OF WHICH IS DUE THE PAYEE WHO PRESUMABLY DOES NOT CARE TO GIVE A BOND OF INDEMNITY IN ORDER TO OBTAIN PAYMENT.

A-25972, MARCH 8, 1929, 8 COMP. GEN. 477

CHECKS - OUTSTANDING LIABILITIES WHEN THE PROCEEDS OF AN OUTSTANDING GOVERNMENT CHECK COVERING ALLOTMENT AND ALLOWANCE HAVE BEEN COVERED INTO "OUTSTANDING LIABILITIES" UNDER SECTION 306, REVISED STATUTES, THERE IS NO AUTHORITY OF LAW FOR THE RESTORING OF THE AMOUNT THEREOF TO THE CREDIT OF THE APPROPRIATION OR APPROPRIATIONS FROM WHICH ORIGINALLY DRAWN UNTIL THE CHECK HAS BEEN PRESENTED BY THE BONA FIDE HOLDER OF THE SAME OR UNTIL A BOND OF INDEMNITY HAS BEEN FURNISHED BY THE PERSON CLAIMING THE PROCEEDS THEREOF.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE TREASURY, MARCH 8, 1929:

THERE HAS BEEN RECEIVED BY YOUR DIRECTION LETTER FROM THE ASSISTANT CHIEF OF THE DIVISION OF BOOKKEEPING AND WARRANTS OF THE TREASURY DEPARTMENT, DATED JANUARY 29, 1929, AS FOLLOWS:

HEREWITH IS INCLOSED FOR YOUR CONSIDERATION, COPY OF A LETTER DATED JANUARY 11, 1929, FROM THE ASSISTANT DIRECTOR OF THE U.S. VETERANS' BUREAU, RELATIVE TO CHECK NO. 19482579, DRAWN MAY 1, 1919, BY C. C. VARGAS, DISBURSING CLERK, SYMBOL 11555, IN FAVOR OF ALICE TOOMBS, FOR $20.00, WHICH CHECK IS UNPAID AND ITS AMOUNT HAS BEEN CREDITED TO "OUTSTANDING LIABILITIES," ONLY $3.50 OF WHICH IS DUE THE PAYEE WHO PRESUMABLY DOES NOT CARE TO GIVE A BOND OF INDEMNITY IN ORDER TO OBTAIN PAYMENT, AND INQUIRING WHETHER THE ENTIRE AMOUNT MAY BE REPAID, UPON A SETTLEMENT, TO THE CREDIT OF THE APPROPRIATIONS FROM WHICH THE CHECK WAS ORIGINALLY DRAWN.

IN THIS CONNECTION, IT MAY BE STATED THAT THE DEPARTMENT DOES NOT CONSIDER IT TO BE GOOD PRACTICE FOR A PORTION OF A CHECK, THE AMOUNT OF WHICH HAS BEEN CREDITED TO "OUTSTANDING LIABILITIES," TO BE PAID UPON A SETTLEMENT UNLESS AT THE SAME TIME THE ENTIRE AMOUNT OF THE CHECK IS SIMILARLY DISPOSED OF. AS THE SETTLEMENT AND ADJUSTMENT OF SUCH MATTERS IS WITH YOUR OFFICE, AND AS OTHER AND SIMILAR QUESTIONS ARE LIKELY TO ARISE, AN EXPRESSION OF YOUR VIEWS ON THE SUBJECT WOULD BE APPRECIATED.

SECTION 306, REVISED STATUTES, AS AMENDED BY THE ACT OF MAY 29, 1920, 41 STAT. 654, PROVIDES THAT WHEN CHECKS ISSUED BY THE TREASURER OF THE UNITED STATES OR ANY DISBURSING OFFICER OF THE GOVERNMENT UPON THE TREASURY OR ANY GOVERNMENT DEPOSITARY HAVE REMAINED OUTSTANDING AND UNPAID FOR THREE FISCAL YEARS OR MORE THE AMOUNT THEREOF SHALL BE COVERED INTO THE TREASURY AND "CARRIED TO THE CREDIT OF THE PARTIES IN WHOSE FAVOR SUCH * * * CHECKS WERE RESPECTIVELY ISSUED, OR TO THE PERSONS WHO ARE ENTITLED TO RECEIVE PAY THEREFOR, AND INTO AN APPROPRIATION ACCOUNT TO BE DENOMINATED "OUTSTANDING LIABILITIES.'" WHEN THE THE PROCEEDS OF STATUTES, PROVIDES THAT THE PAYEE OR BONA FIDE HOLDER OF SUCH CHECK "SHALL ON PRESENTING THE SAME TO THE PROPER OFFICER OF THE TREASURY, BE ENTITLED TO HAVE IT PAID" THROUGH THE PROCEDURE OF SETTLEMENT OF AN ACCOUNT AND THE ISSUING OF A WARRANT. IF THE CHECK IS AVAILABLE THE PROCEDURE IS SIMPLE AND PAYMENT OF THE PROCEEDS THEREOF MAY BE OBTAINED BY THE PAYEE UPON THE MERE PRODUCTION OF THE UNINDORSED CHECK, OR BY ANOTHER PERSON UPON PROPER SHOWING OF BONA FIDE OWNERSHIP.

WHEN THE CHECK IS LOST OR THE PRESENTATION OTHERWISE IS IMPOSSIBLE, NO REMEDY IS PROVIDED UNDER SECTION 308, AND IN SUCH CASES IT HAS BEEN HELD THAT THE MATTER SHOULD BE TREATED THE SAME AS ANY OTHER CASE OF A CHECK LOST, STOLEN, OR DESTROYED, AND PAYMENT MADE ONLY AFTER THE EXECUTION OF A SURETY BOND TO INDEMNIFY THE UNITED STATES, AS PROVIDED BY SECTION 3648, REVISED STATUTES, AND REGULATIONS MADE IN PURSUANCE THEREOF, DECISION JANUARY 2, 1926 (A-11066), EXCEPT IN UNUSUAL CASES IN WHICH THE NONPRODUCTION OF A TREASURY DRAFT IS SUFFICIENTLY ACCOUNTED FOR BY PROOF THAT IT WAS STOLEN AND HAS NOT BEEN HEARD OF FOR A NUMBER OF YEARS, IN WHICH EVENT PAYMENT MAY BE MADE UNDER SECTION 308 WITHOUT BOND OF INDEMNITY. WAYNE V. UNITED STATES, 26 CT.CLS. 274.

THE TRANSFERRING OF AMOUNTS OF CHECKS TO THE APPROPRIATION ACCOUNT "OUTSTANDING LIABILITIES" UNDER SECTION 306, REVISED STATUTES, AND THE PROVISIONS OF SECTION 308 MAY BE REGARDED AS CREATING A TRUST TO WHICH FULL FORCE AND EFFICACY SHOULD ORDINARILY BE GIVEN; UNITED STATES V. WARDWELL, 172 U.S. 52; ALTHOUGH, LIKE OTHER TRANSACTIONS CREATING TRUSTS, IT MAY BE RESCINDED FOR FRAUD, AND AN ACT REPEALING THE APPROPRIATION FROM WHICH THE CHECK WAS ORIGINALLY DRAWN MAY OPERATE AS A DISAVOWAL OF THE TRUST. RUSSELL V. UNITED STATES, 37 CT.CLS. 113; 7 COMP. DEC. 130. BUT UNLESS SOME SUCH CONDITIONS EXIST THE AMOUNTS IN THE APPROPRIATION ACCOUNT "OUTSTANDING LIABILITIES" ARE HELD IN TRUST AS PROVIDED IN SECTION 306, REVISED STATUTES, FOR EITHER THE PAYEE OF THE CHECK OR THE BONA FIDE OWNER OF THE SAME. (1 COMP. GEN. 215.) WHEN THE CHECK IS NOT PRESENTED IT CAN NOT BE DETERMINED WHETHER OR NOT IT HAS BEEN NEGOTIATED OR OTHERWISE DISPOSED OF BY THE PAYEE THEREOF, AND THE TAKING OF ANY ACTION IN CONNECTION WITH THE DISPOSITION OF THE PROCEEDS OF ANY SUCH CHECK PRIOR TO THE ASCERTAINING OF SUCH MATERIAL FACTS CLEARLY WOULD BE IMPROPER.

FURTHERMORE, IN CASES INVOLVING CHECKS FOR ALLOTMENT AND ALLOWANCE ISSUED BY THE VETERANS' BUREAU THERE ARE, ALSO, FOR CONSIDERATION THE PROVISIONS OF SECTION 17 OF THE ACT OF AUGUST 9, 1921, 42 STAT. 153, WHICH READ:

* * * THAT WHENEVER AN AWARD OF ALLOTMENT OR ALLOWANCE, OR BOTH, COVERING ANY PERIOD HAS BEEN PAID TO, OR ON BEHALF OF, A PERSON DESIGNATED BY THE ENLISTED MAN AS BENEFICIARY OF HIS ALLOTMENT, NO RECOVERY OF THE ALLOTMENTS PAID IN SUCH CASES SHALL HEREAFTER BE MADE FOR ANY REASON WHATSOEVER; AND NO RECOVERY OF THE ALLOWANCES PAID IN SUCH CASES SHALL HEREAFTER BE MADE FOR ANY REASON WHATSOEVER EXCEPT WHERE IT IS SHOWN THAT THE PERSON RECEIVING THE ALLOWANCE DOES NOT BEAR THE RELATIONSHIP TO THE ENLISTED MAN WHICH IS REQUIRED BY THE WAR RISK INSURANCE ACT, AND EXCEPT, ALSO, IN CASES OF MANIFEST FRAUD.

IN A DISCUSSION OF THIS SECTION AND ITS APPLICATION TO CASES IN WHICH CHECKS THE PROCEEDS OF WHICH HAVE BEEN DISPOSED OF, UNDER SECTION 306, REVISED STATUTES, IT WAS STATED IN 1 COMP. GEN. 146:

IN ADDITION TO DECIDING THESE TWO SPECIFIC CASES THE SUBMISSION INCLUDES A GENERAL DECISION TO THE EFFECT THAT WHERE A CHECK CORRECTLY ISSUED FOR AN AMOUNT LAWFULLY DUE ON AN ALLOTMENT AND ALLOWANCE HAS BEEN LOST, CLAIM FOR THE AMOUNT THEREOF MUST BE ALLOWED IN FULL, NOTWITHSTANDING AN OVERBALANCE AND PAYMENT OF SOME OTHER INSTALLMENT OF THE ALLOTMENT AND ALLOWANCE; SECTION 17 OF THE ACT OF AUGUST 9, 1921, HEREINBEFORE QUOTED BEING A BAR TO RECOVERY OF SUCH OVERALLOWANCE AND PAYMENT. THIS DECISION IS APPROVED.

THE SUBMISSION ALSO INCLUDES A GENERAL DECISION THAT THE EXISTING PRACTICE IN THE MATTER OF CARRYING THE AMOUNT OF CHECKS WHICH HAVE BEEN OUTSTANDING MORE THAN THREE YEARS TO "OUTSTANDING LIABILITIES" SHOULD BE SO MODIFIED AS TO REQUIRE THAT ALL SUCH CASES BE SUBMITTED TO THE PROPER AUDITING DIVISION OR SECTION OF THE GENERAL ACCOUNTING OFFICE FOR SUCH ACTION AS EACH CASE MAY REQUIRE. THE PURPOSE OF SUCH CHANGE IS STATED TO BE TO AFFORD THE AUDITING DIVISION OR SECTION OPPORTUNITY TO EXAMINE INTO AND DETERMINE THE FACTS, AND MAKE RECOMMENDATION ACCORDINGLY. IF IT IS DETERMINED THAT THERE IS A LEGAL OFFSET AGAINST ANY AMOUNT ABOUT TO BE CARRIED TO OUTSTANDING LIABILITIES IT IS PROPOSED TO DEDUCT THE SAID OFFSET AND COVER IT INTO THE TREASURY, AND CARRY ONLY THE REMAINDER TO OUTSTANDING LIABILITIES.

SECTION 306, REVISED STATUTES, REQUIRES THE TREASURER OF THE UNITED STATES AT THE CLOSE OF EACH FISCAL YEAR TO DEPOSIT IN THE TREASURY ALL AMOUNTS OF MONEYS THAT ARE REPRESENTED BY CHECKS WHICH HAVE BEEN OUTSTANDING MORE THAN THREE YEARS, AND PROVIDES THAT AMOUNTS SO DEPOSITED SHALL BE COVERED INTO "OUTSTANDING LIABILITIES.' I CAN FIND NO AUTHORITY OF LAW FOR AN AUDIT OF THESE AMOUNTS BEFORE THEY ARE COVERED IN, OR IN ADVANCE OF ANY AFTER CLAIM OF THEM BY THE PAYEE, OR BONA FIDE HOLDER OF THE CHECK. IF LESS THAN THE AMOUNT OF THE OUTSTANDING CHECK SHOULD BE COVERED INTO "OUTSTANDING LIABILITIES" THE AMOUNT COVERED WOULD BE INSUFFICIENT TO PAY THE CHECK IF CLAIM IS MADE BY A BONA FIDE HOLDER AGAINST WHOM NO OFFSET CAN LAWFULLY BE CHARGED. ONLY IN CASE A CLAIM FOR AN AMOUNT DEPOSITED TO "OUTSTANDING LIABILITIES" IS MADE BY A PAYEE OR BONA FIDE HOLDER IS IT NECESSARY TO ADJUDICATE THE RIGHT OF ANY PERSON TO RECEIVE AN AMOUNT SO COVERED. IF AT THE TIME OF ANY SUCH SETTLEMENT IT SHALL APPEAR THAT THE CLAIMANT FOR ANY REASON IS NOT ENTITLED TO THE FULL AMOUNT STANDING IN THE OUTSTANDING LIABILITY ACCOUNT, THE RIGHT OF SUCH CLAIMANT MAY THEN BE DETERMINED AND SETTLED, AND IF IT IS FOUND TO BE NECESSARY AND LAWFUL THAT PART ONLY OF THE AMOUNT SHALL BE PAID TO THE CLAIMANT, THE REMAINDER MAY BE TURNED INTO THE GENERAL FUND OF THE TREASURY.

IT HAS BEEN HELD THAT THE DEPOSIT TO "OUTSTANDING LIABILITIES" OF AN ALLOTMENT AND ALLOWANCE CHECK DOES NOT CONSTITUTE ACTUAL PAYMENT TO THE PERSON DESIGNATED BY AN ENLISTED MAN AS BENEFICIARY OF HIS ALLOTMENT, UNDER SECTION 17 OF THE ACT OF 1921, SUPRA (DECISION OF APRIL 27, 1928, A- 22375), AND, ALSO, THAT WHEN AN ALLOTMENT AND ALLOWANCE CHECK IS DEPOSITED INTO ,OUTSTANDING LIABILITIES" THE SAME CAN NOT THEREAFTER BE SPLIT AND PAID IN PART TO THE ALLOTTEE AND PART TO THE ALLOTTOR BUT THAT THE ENTIRE PROCEEDS SHOULD BE PAID TO THE ALLOTTEE. DECISION OF SEPTEMBER 11, 1924, A-4140. BUT IN ALL SUCH CASES IN WHICH THE CHECK IS NOT PRESENTED THE FACTS IN CONNECTION THEREWITH MUST BE ASCERTAINED BEFORE ANY ACTION MAY BE TAKEN TO DISPOSE OF ITS PROCEEDS HELD IN "OUTSTANDING LIABILITIES.'

THE REASON OR BASIS FOR THE VETERANS' BUREAU'S PROPOSAL IN THIS CASE TO RESTORE TO THE APPROPRIATIONS FROM WHICH ORIGINALLY DRAWN THE FULL AMOUNT OF THE CHECK HERE IN QUESTION IS NOT APPARENT. THERE IS NO AUTHORITY OF LAW FOR THE TAKING OF SUCH ACTION, AND THERE IS NO AUTHORITY FOR THE DISPOSITION OF ANY PART OF THE PROCEEDS OF SUCH A CHECK UNTIL THE CHECK HAS BEEN PRESENTED, OR EXPLANATIONS AS TO ITS WHEREABOUTS AND A BOND OF INDEMNITY HAVE BEEN FURNISHED BY THE PERSON CLAIMING OWNERSHIP. THE PROPOSED PROCEDURE, THE REASON FOR WHICH IS NOT SHOWN, IS NOT ONLY IMPROPER IN THAT IT VIOLATES THE TRUST UNDER WHICH THE FUNDS ARE HELD BUT IS IN DIRECT CONTRAVENTION TO THE PROVISIONS OF SECTION 307, REVISED STATUTES, AS AMENDED BY THE ACT OF JULY 31, 1894, 28 STAT. 210, THAT ALL SUCH MONEYS IN "OUTSTANDING LIABILITIES" "SHALL REMAIN AS A PERMANENT APPROPRIATION FOR THE REDEMPTION AND PAYMENT OF ALL SUCH OUTSTANDING AND UNPAID CERTIFICATES, DRAFTS, AND CHECKS.'

ACCORDINGLY, I HAVE TO ADVISE THAT THE ACTION PROPOSED BY THE ASSISTANT DIRECTOR OF THE UNITED STATES VETERANS' BUREAU IS NOT AUTHORIZED.

IN THIS CONNECTION YOUR ATTENTION IS INVITED TO ATTACHED COPY OF LETTER OF EVEN DATE TO THE DIRECTOR OF THE UNITED STATES VETERANS' BUREAU IN WHICH HE IS ADVISED THAT WHEN, IN SUCH CASES, IT IS FOUND THAT THE PAYEE OF AN OUTSTANDING CHECK THE PROCEEDS OF WHICH HAVE BEEN COVERED INTO ,OUTSTANDING LIABILITIES" IS INDEBTED TO THE UNITED STATES, THE MATTER BE REPORTED TO THIS OFFICE AND TO THE TREASURY FOR PROPER NOTATION ON THE RECORDS AND FOR CONSIDERATION WHEN A CLAIM FOR THE PROCEEDS OF THE CHECK MAY BE SUBMITTED FOR SETTLEMENT.