B-152680 October 28, 1966

B-152680: Oct 28, 1966

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Was promoted from Machined Parts Inspector. It was determined that Mr. Was. In error and that properly he should have been placed in step 2. McCormick was notified by letter dated April 11. Is recoverable from the recipient of the overpayment. The courts consistently have held that they are bound in equity and good conscience to make restitution. Whenever an employee is advanced without a break in service from one Wage Board job to another of higher grade. His pay rate shall be fixed at the lowest step of the new grade which exceeds the last earned rate.* * *" We were informed by the Chicage Procurement District. It is a well-established rule that all monies paid for salary in excess of the lawful amount.

B-152680 October 28, 1966

Dear Senator Mondale:

Your letter of October 14, 1966, transmitted a copy of S. 2283, 88th Congress, entitled " A BILL For the relief of Melvin B. McCormick," requested a report thereon, and inquired whether recent legislation allowing the Government to absorb such obligations as described therein has taken care of the matter.

Our records indicate that on July 15, 1962, Mr. McCormick, a wage board employee with the United States Army Ordinance District Chicago, Illinois, was promoted from Machined Parts Inspector, W-9, step 3 ($2.96 per hour) to Machined Parts Inspector Leader, step 3 ($3.26 per hour). Subsequently, it was determined that Mr. McCormick's promotion to step 3, L-9, was, in fact, in error and that properly he should have been placed in step 2, L-9 ($3.10 per hour). As a result thereof, Mr. McCormick was notified by letter dated April 11, 1963, that an overpayment in his gross salary had occurred amounting to $288.16 less adjustment on retirement deductions of $14.98. In response to Mr. McCormick's letter dated April 23, 1963, appealing that determination, our Claims division on September 6, 1963, stated, inter alia, as follows:

"An erroneous payment of public funds made by an officer of the Government, with or without jurisdiction, whether made under mistake of fact or law, is recoverable from the recipient of the overpayment. Persons receiving money erroneously paid by a Government agency acquire no right thereto, and the courts consistently have held that they are bound in equity and good conscience to make restitution. Wisconsin Central Railroad Company v. United States, 164 U.S. 190, and United States v. Wurts, 303 id. 414."

Part 3-3 of the Civilian Personnel Regulations, issued by the Department of the Army, in effect at the time, provides as follows:

"3-3. a. Except as provided in b below, whenever an employee is advanced without a break in service from one Wage Board job to another of higher grade, his pay rate shall be fixed at the lowest step of the new grade which exceeds the last earned rate.* * *"

We were informed by the Chicage Procurement District, United States Army, that the administrative error in this case resulted from using Mr. McCormick's previously held higher grade of W-10, step 3 (3.08 per hour) as a basis for computing his new salary, rather that his last earned rate in W-9, step 3, of $2.96 per hour, as required by the regulations.

It is a well-established rule that all monies paid for salary in excess of the lawful amount, must be refunded to the Government, regardless of whether the employee was at fault in accepting the erroneous payments. See 31 Comp. Gen. 177, and court cases cited therein; also the cases of United States v. Sutton Chemical Company, 11 F. 2d 24; Grand Trunk Western Railroad v. United Sttes, 252 U.S. 112, 40 S. Ct. 309; and United States v. Bentley, 107 F. 2d 382, wherein the court held:

"* * * The supposed hardship of refunding what the defendant may have spent, cannot stand against the injustice of keeping what never righfully belonged to him at all.* * *"

Our office generally does not favor the enactment of special bills granting relief from liability to the Government on the basis that such bills constitute preferential treatment for the party or parties involved as against the numerous otheres who have been or will be held liable under similar circumstances. There is nothing in the record before us to indicate that Mr. McCormick is equitably more entitled to relief that any other person so situated. Whether there are facts in this particular case, however, to warrant enactment of legislation along the lines of S. 2283 is a matter of policy for determination of the Congress.

We believe the recent legislation to which your refer is the Federal Claims Collection Act of 1966, approved July 19, 1966, Pub. L. 89-508, 80 Stat. 308. Moreover, this act does not permit the Government to "absorb" an indebtedness owed to the United States. Subsection 3(b) of the act authorizes the "head of an agency or his designee, pursuant to regulations prescribed by him and in conformity with such standards as may be promulgated jointly by the Attorney General and the Comptroller General" to "(1) compromise any such claim, or (2) cause collection action on any such claim to be terminated or suspended where it appears that no person liable on the claim has the present or prospective financial ability to pay any significant sum thereon or that the cost of collecting the claim is likely to exceed the amount of recovery."

The standards referred to in the act have been promulgated and were published in the Federal Register for Saturday, October 15, 1966, Volume 31, No. 201, at 13381. Part 103 of such standards permits compromise of a claim of the United States only when: the debtor is unable to pay the full amount within a reasonable time; the Government is unable to enforce collection in full within a reasonable time by enforced collection proceedings; there is a real doubt concerning the Government's ability to prove its case in court for the full amount claimed; or the cost of collecting the claim does not justify the enforced collection of the full amount. Part 104 permits termination of collection only when: the Government cannot collect or enforce collection of a significant amount from the debtor because of his financial condition; the debtor cannot be located, there is no security to be liquidated, the statute of limitation has run, and prospects of collection by offset are remote; cost of further collection action will exceed the amount recoverable thereby; it is determined that the claim is legally without merit; or the claim cannot be substantiated by evidence. Unless there can be shown some valid basis action thereon, under the cited standards, there is not alternative under the act to collection of the full amount of the debt.

However, should you introduce a private relief bill in Mr. McCormick's behalf, we would not insist upon the continuation of collection action by the Chicago Procurement District, United States Army, Chicago, Illinois, pending the completion of action on such bill or the expiration of the first session of the next Congress, whichever occurs first.

Sincerely yours,

FRANK WEITZEL Assistant Comptroller General of the United States