A-75322, JULY 15, 1936, 16 COMP. GEN. 25

A-75322: Jul 15, 1936

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THE EXCHANGE RATES FOR USE ARE THE RATES IN EFFECT ON THE DATES THE PAYMENTS ACCRUE TO THE EMPLOYEES. WHEN THE LOSSES HAVE BEEN DETERMINED UPON SUCH BASIS. THE RATES FOR CONVERSION FOR MAKING PAYMENTS IN UNITED STATES CURRENCY ARE THE RATES ON THE DATES THE PAYMENTS ARE ACTUALLY MADE. AS FOLLOWS: REFERENCE IS MADE TO PREVIOUS CORRESPONDENCE CONCERNING THE COMPUTATION OF EXCHANGE LOSSES SUSTAINED DUE TO THE APPRECIATION OF FOREIGN CURRENCIES IN THEIR RELATION TO THE AMERICAN DOLLAR. IT IS DESIRED TO DIRECT YOUR ATTENTION TO A SITUATION WHICH HAS ARISEN IN CONNECTION WITH THE PROMULGATION OF EXECUTIVE ORDER NO. 6928 OF DECEMBER 24. THESE SUSPENSIONS ARE FOR EXCHANGE LOSS PAYMENTS ON SALARIES AND ALLOWANCES WHICH ACCRUED ON DECEMBER 31.

A-75322, JULY 15, 1936, 16 COMP. GEN. 25

EXCHANGE - LOSS BY - OFFICERS AND EMPLOYEES IN FOREIGN COUNTRIES LOSSES DUE TO APPRECIATION OF FOREIGN CURRENCIES BEING PRIMARILY FOR ASCERTAINING IN FOREIGN CURRENCY, THE EXCHANGE RATES FOR USE ARE THE RATES IN EFFECT ON THE DATES THE PAYMENTS ACCRUE TO THE EMPLOYEES, BUT, WHEN THE LOSSES HAVE BEEN DETERMINED UPON SUCH BASIS, THE RATES FOR CONVERSION FOR MAKING PAYMENTS IN UNITED STATES CURRENCY ARE THE RATES ON THE DATES THE PAYMENTS ARE ACTUALLY MADE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF STATE, JULY 15, 1936:

THERE HAS BEEN CONSIDERED YOUR LETTER OF MAY 14, 1936, AS FOLLOWS:

REFERENCE IS MADE TO PREVIOUS CORRESPONDENCE CONCERNING THE COMPUTATION OF EXCHANGE LOSSES SUSTAINED DUE TO THE APPRECIATION OF FOREIGN CURRENCIES IN THEIR RELATION TO THE AMERICAN DOLLAR, AND IT IS DESIRED TO DIRECT YOUR ATTENTION TO A SITUATION WHICH HAS ARISEN IN CONNECTION WITH THE PROMULGATION OF EXECUTIVE ORDER NO. 6928 OF DECEMBER 24, 1934, AND THE PAYMENT OF EXCHANGE LOSSES THEREUNDER, PARTICULARLY AS APPLICABLE TO THE FIRST PAYMENTS MADE WITHIN FISCAL DISTRICTS.

THE DISTRICT ACCOUNTING AND DISBURSING OFFICER AT PARIS HAS BROUGHT TO THE DEPARTMENT'S ATTENTION THE RECEIPT OF THIRTY-EIGHT NOTICES OF EXCEPTIONS INVOLVING OVER 500 INDIVIDUAL SUSPENSIONS OF ACCOUNTS MADE UNDER THE NEW BASIC RATES ESTABLISHED BY THE EXECUTIVE ORDER OF DECEMBER 24, 1934.

THESE SUSPENSIONS ARE FOR EXCHANGE LOSS PAYMENTS ON SALARIES AND ALLOWANCES WHICH ACCRUED ON DECEMBER 31, 1934. SUCH SALARIES AND ALLOWANCES WERE PAID BY CHECKS DATED JANUARY 1, 1935, AND CASHED ON OR AFTER JANUARY 1, 1935. THE DATING OF THE PAY CHECKS BY THE DISBURSING OFFICER AS OF THE FIRST OF THE MONTH NEXT FOLLOWING RATHER THAN ON THE LAST DAY OF THE MONTH ON WHICH SALARIES AND ALLOWANCES ACCRUE, IS, OF COURSE, IN ACCORD WITH REGULATIONS, AND FOR ADMINISTRATIVE REASONS NECESSARY TO GIVE DISBURSING OFFICERS SUFFICIENT TIME IN WHICH TO OBTAIN PAY ROLLS AND ACCOUNTS FROM THE SEVERAL OFFICES IN THEIR DISTRICTS AND TO PREPARE THE ACCOUNTS AND RETURNS BEFORE THE EXPIRATION OF THE LEGAL PERIOD.

THE REASON FOR THESE 500 SUSPENSIONS IS APPARENTLY THAT SINCE THE SALARIES AND ALLOWANCES ACCURED ON DECEMBER 31, 1934, THE LOSS ALSO ACCRUED AS OF THAT DATE, IRRESPECTIVE OF EITHER DATE OF THE CHECKS OR THE DATE WHEN THE CHECKS WERE CASHED.

IF THIS IS TO BE YOUR FINAL INTERPRETATION OF THE TERMS OF THE ACT, I SHALL APPRECIATE BEING SO INFORMED IN ORDER THAT THE REGULATIONS MAY BE AMENDED AND INSTRUCTIONS PREPARED ADVISING A VERY LARGE NUMBER OF OFFICERS THAT THEY ARE ENTITLED TO FILE CLAIM FOR ADDITIONAL LOSSES, PAYABLE UNDER THE PREVIOUS BASIC RATES ESTABLISHED FOR THE PERIOD PRIOR TO JANUARY 1, 1935.

THE PRESENT REGULATIONS AND PRACTICE WHICH YOUR PRESENT DECISION WOULD CHANGE IF IT IS TO STAND HAVE BEEN BASED ON WHAT WAS UNDERSTOOD TO BE YOUR VIEWS AS EXPRESSED IN YOUR DECISION NO. A-56276 OF JULY 1, 1934, WHICH QUOTED FROM AND CONFIRMED YOUR DECISION NO. A-44014 OF MAY 4, 1934, STATING THAT "* * * THE COMPUTATION OF THE AMOUNTS DUE SHOULD BE CONVERTED INTO UNITED STATES CURRENCY AS OF THE DATE OR DATES OF PAYMENT," AND YOUR DECISION NO. A-56761 OF JULY 27, 1934, STATING THAT "* * * THE ONLY LOSSES WHICH MAY BE REIMBURSED TO FOREIGN SERVICE OFFICERS AND EMPLOYEES IN RUSSIA ARE THOSE ARISING FROM THE CONVERSION OF THE PORTION OF THEIR SALARIES AS MAY BE CONVERTED INTO PAPER RUBLES.'

WHEN, THEREFORE, IN DECEMBER 1934 THE PARIS DISBURSING OFFICER AND OTHERS CONCERNED INQUIRED, THEY WERE INSTRUCTED THAT SINCE THE EXECUTIVE ORDER BECAME EFFECTIVE JANUARY 1, 1935, THE COMPUTATION OF AMOUNTS DUE SHOULD BE CONVERTED INTO UNITED STATES CURRENCY AS OF THE DATE OR DATES OF PAYMENT, AND ALL LOSSES ON SUCH SALARY OR ALLOWANCE CHECKS CASHED ON OR AFTER JANUARY 1, 1935, WERE TO BE COMPUTED IN ACCORDANCE WITH THE NEW BASIC RATES ESTABLISHED AND THEN IN FORCE BY VIRTUE OF THAT ORDER.

ASIDE FROM THIS QUESTION OF WHICH BASIC RATE SHOULD BE USED FOR THE COMPUTATION OF LOSSES ON SALARIES AND ALLOWANCES WHICH ACCRUED ON DECEMBER 31, 1934, THE PRESENT RULING UNDER DISCUSSION THUS RAISES THE QUESTION OF THE VALIDITY OF THE POLICY FOLLOWED EVER SINCE EXCHANGE RELIEF HAS BEEN AVAILABLE, OF USING THE RATE OF EXCHANGE ON THE DATE THE CHECKS WERE CASHED TO COMPUTE THE CURRENCY APPRECIATION LOSS AGAINST THE BASIC RATE.

IF THE PRESENT RULING AS UNDERSTOOD IS TO BE YOUR FINAL INTERPRETATION OF THE TERMS OF THE ACT, I SHALL APPRECIATE BEING INFORMED WHETHER FOR COMPUTATION OF LOSSES YOU WILL REQUIRE THE USE OF THE EXCHANGE RATE AS OF THE LAST DAY OF THE MONTH THE SALARY ACCRUES RATHER THAN THE DATE ON WHICH THE CHECK IS CASHED, AND IF SO WHETHER YOUR DECISION IS TO BE RETROACTIVE.

IT IS TRUE THAT IN THE CASE OF THE PRESENT 500 SUSPENSIONS THE BASIC RATES OF JANUARY 1, 1935, WERE LESS FAVORABLE TO THE GOVERNMENT. IT IS ALSO TRUE, HOWEVER, THAT IN THE GREAT MAJORITY OF PAYMENTS THESE LATER BASIC RATES ARE MUCH MORE FAVORABLE TO THE GOVERNMENT, SO THAT CLAIMS FOR ADDITIONAL COMPENSATION UNDER THE PREVIOUS BASIC RATES FOR LOSSES ON SALARIES AND ALLOWANCES FOR DECEMBER 1934 WILL VERY CONSIDERABLY EXCEED THE SAVING TO THE GOVERNMENT ARISING FROM THE PRESENT 500 SUSPENSIONS, SOME OF WHICH ARE FOR ONE CENT.

MOREOVER, THE CLERICAL EXPENSE OF RECOMPUTING AND READJUSTING TO THE DATE OF ACCRUAL EVERY LOSS ON FOREIGN EXCHANGE FIGURED AND PAID SINCE JULY 15, 1933, ON THE BASIS OF THE DATE ON WHICH CHECKS WERE CASHED, IS UNDETERMINABLE BUT WOULD SEEM OBVIOUSLY DISPROPORTIONATE TO THE PUBLIC INTEREST INVOLVED.

FOR THE FOREGOING REASONS IT WOULD BE APPRECIATED IF THE MATTER MIGHT BE REVIEWED, AND IF CONSISTENT WITH THE POLICY OF YOUR OFFICE I SHALL BE GLAD IF YOU COULD SEE YOUR WAY CLEAR TO REMOVE THE 500 SUSPENSIONS NOW IN THIS DEPARTMENT.

THE DECISIONS OF MAY 4, 1934, A-44014, AND JULY 11, 1934, A-56276, TO WHICH YOU REFER WERE RENDERED IN RESPONSE TO YOUR REQUESTS FOR DECISION UPON THE SPECIFIC QUESTIONS WHETHER THE EXCHANGE LOSSES CONTEMPLATED BY THE ACT OF MARCH 26, 1934, 48 STAT. 466, AND THE EXECUTIVE ORDERS PROMULGATED PURSUANT THERETO MUST BE PAID IN FOREIGN CURRENCY OR WHETHER PAYMENT MIGHT BE MADE IN UNITED STATES CURRENCY, AND, IF PAID IN UNITED STATES CURRENCY, AS TO THE PROPER RATE TO BE USED IN RECONVERTING THE LOSS INTO SUCH CURRENCY.

YOU WERE ADVISED WITH REFERENCE TO THE FIRST QUESTION THAT, WHILE EXECUTIVE ORDER NO. 6657-A, APPROVED MARCH 27, 1934, PROVIDED THAT EACH EMPLOYEE SHALL BE ENTITLED TO RECEIVE IN FOREIGN CURRENCY SUCH AMOUNT AS HE WOULD HAVE RECEIVED BY CONVERTING INTO SUCH CURRENCY AT THE BASIC RATES SPECIFIED IN SECTION 4 OF THE EXECUTIVE ORDER THAT PORTION OF HIS NET SALARY AND ALLOWANCES DEEMED TO HAVE BEEN CONVERTED AS PROVIDED IN SECTION 3 THEREOF, THERE IS NO REQUIREMENT THAT PAYMENTS BE MADE ONLY IN FOREIGN CURRENCY AND THAT THEREFORE PAYMENT MIGHT BE MADE IN FOREIGN CURRENCY AT THE BASIC RATES FIXED IN THE EXECUTIVE ORDER OR IN UNITED STATES CURRENCY. WITH RESPECT TO THE SECOND QUESTION, YOU WERE ADVISED THAT WHEN REIMBURSEMENT FOR LOSSES IS TO BE MADE IN UNITED STATES CURRENCY THE RATE TO BE USED IN RECONVERTING INTO SUCH CURRENCY THE AMOUNT FOUND TO BE DUE IN FOREIGN CURRENCY IS THAT IN EFFECT ON THE DATE THE PAYMENT IS TO BE MADE BY THE DISBURSING OFFICER, OR WHEN BY SETTLEMENT OF THIS OFFICE THE RATE IN EFFECT ON THE DATE THE SETTLEMENT IS MADE. THESE DECISIONS APPEAR TO HAVE NO BEARING ON THE QUESTION WHICH YOU NOW PRESENT CONCERNING THE PROPER BASIC RATE TO BE USED IN COMPUTING CURRENCY APPRECIATION LOSSES SUSTAINED ON SALARIES AND ALLOWANCES ACCRUING DECEMBER 31, 1934.

IT HAS BEEN REPEATEDLY HELD THAT EXCHANGE LOSSES ON SALARIES AND ALLOWANCES ACCRUING ON AND AFTER APRIL 1, 1934, ARE FOR COMPUTATION AS OF THE DATE THE SALARIES OR ALLOWANCES ACCRUE TO THE EMPLOYEE AND DO NOT DEPEND UPON THE RATES OF EXCHANGE AT WHICH THE PAYMENTS WERE ACTUALLY CONVERTED. SEE A-44009, APRIL 17, 1935; 15 COMP. GEN. 212, AND DECISIONS THEREIN CITED. ALSO, IN RESPONSE TO A REQUEST OF THE DISTRICT ACCOUNTING AND DISBURSING OFFICER AT PARIS FOR A DEFINITE RULING AS TO THE MEANING OF THE DATE "ACCRUED," YOU WERE ADVISED IN DECISION OF APRIL 16, 1936, A- 64560, A-72951, 15 COMP. GEN. 914, 916, THAT:

* * * EXCHANGE LOSSES ON SALARIES AND ALLOWANCES, WHICH ARE PAYABLE REGULARLY AT THE EMPLOYEE'S FOREIGN STATION, ARE FOR COMPUTING AS OF THE LAST DATE OF THE PERIOD OVER WHICH SUCH SALARIES AND ALLOWANCES ORDINARILY ACCRUE IRRESPECTIVE OF WHEN PAYMENT THEREFOR IS ACTUALLY ACCOMPLISHED.

WHILE EXECUTIVE ORDER NO. 6928, DATED DECEMBER 24, 1934, AMENDED EXECUTIVE ORDER NO. 6657-A OF MARCH 27, 1934, AND MADE CERTAIN CHANGES IN THE BASIC RATES PRESCRIBED THEREIN FOR USE IN COMPUTING EXCHANGE LOSSES, IT SPECIFICALLY PROVIDED IN PARAGRAPH 6:

THIS ORDER SHALL TAKE EFFECT AS OF JANUARY 1, 1935, AND SHALL BE RETROACTIVE TO JULY 15, 1933, AS TO THE BASIC RATES FOR NEWFOUNDLAND AND TRINIDAD.

ACCORDINGLY, OTHER THAN FOR NEWFOUNDLAND AND TRINIDAD, THE PROPER BASIC RATES FOR LOSSES INCURRED PRIOR TO JANUARY 1, 1935, ARE THE RATES FIXED BY THE ORIGINAL EXECUTIVE ORDER NO. 6657-A, DATED MARCH 27, 1934, AND THE AUDIT ACTION IN BASING THE COMPUTATIONS UPON SUCH RATES WAS CORRECT.

IT APPEARS, HOWEVER, THAT THE COMPUTATIONS WERE OTHERWISE IN ERROR IN THAT THE EXCHANGE RATES USED FOR COMPUTING THE LOSSES IN FOREIGN CURRENCY, AS WELL AS FOR RECONVERTING THE AMOUNTS THUS DERIVED INTO AMERICAN DOLLARS FOR THE PURPOSE OF PAYING THE LOSSES IN SUCH CURRENCY, WERE THOSE AT WHICH THE CHECKS IN PAYMENT OF THE SALARIES AND ALLOWANCES WERE ACTUALLY CASHED. THE PURPOSE OF THE ACT OF MARCH 26, 1934, AND THE EXECUTIVE ORDERS PROMULGATED PURSUANT THERETO, WAS TO GIVE THE EMPLOYEE THE AMOUNT IN FOREIGN CURRENCY SUCH EMPLOYEE WOULD HAVE RECEIVED PRIOR TO THE APPRECIATION OF FOREIGN CURRENCIES IN THEIR RELATION TO THE AMERICAN DOLLAR REGARDLESS OF WHETHER HE IS PAID IN SUCH FOREIGN CURRENCY OR ITS EQUIVALENT IN UNITED STATES CURRENCY, 14 COMP. GEN. 204. THE PROPER EXCHANGE RATES FOR USE IN COMPUTING THE LOSSES, THEREFORE, ARE THE RATES IN EFFECT ON THE DATES THE PAYMENTS ACCRUE TO THE EMPLOYEES, AND, WHEN THE LOSSES HAVE BEEN DETERMINED UPON SUCH BASIS, THE PROPER RATES FOR CONVERTING THEM TO UNITED STATES CURRENCY FOR THE PURPOSE OF MAKING PAYMENTS IN SUCH CURRENCY ARE THE RATES ON THE DATES THE PAYMENTS ARE ACTUALLY MADE.

THEREFORE, THE VOUCHERS HERE IN QUESTION WILL BE REAUDITED, AND THE CURRENCY APPRECIATION LOSSES ACCRUING DECEMBER 31, 1934, WILL BE COMPUTED UPON THE FOREGOING BASIS.