B-192567.3, Aug 1, 1990
B-192567.3: Aug 1, 1990
This Office will reverse a prior decision denying an accountable officer relief where the prior decision was based on a material error of fact or law. The facts supporting our prior decisions are summarized as follows. McMurray was a full time. The cash would have to be removed from the file cabinet and placed in a security safe before day's end. The District Cashier was not notified about the cash and no arrangements were made to remove the cash to the security safe. McMurray told her that it was too late to bring the money to the security safe. McMurray was the only employee who knew the combinations to the bar-locking cabinet and the two heavy duty metal safes located in the same room. It was discovered that $4.
B-192567.3, Aug 1, 1990
APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Liability - Statutes of limitation - Effective dates - Illegal/improper payments DIGEST: 1. In the absence of any indication in the statute or its legislative history to the contrary, a statute governing government employees applies to former employees who fell within its scope during employment. Therefore, Department of Treasury's authority under 26 U.S.C. Sec. 7803(c) (1988) to recover amounts collected by an employee in connection with the internal revenue laws for which the employee has failed to account does not lapse once the employee leaves Treasury employment. No statute of limitations applies to an action against an accountable officer under Internal Revenue Code section 7803(c). APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Illegal/improper payments - Liability restrictions - Compromises 2. An agency's agreement with an accountable officer to settle adverse personnel action has no affect on the accountable officer's liability to the United States in the amount of the loss and does not restrict the agency's authority to recover that amount from the accountable officer by taking appropriate collection action. APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Relief Illegal/improper payments - GAO decisions - Reconsideration 3. This Office will reverse a prior decision denying an accountable officer relief where the prior decision was based on a material error of fact or law. An accountable officer's good faith and lack of willful intent to disregard established procedures do not preclude a finding of negligence and, thus, provide this Office with no basis on which to reverse a previous denial of relief.
Honorable Richard J. Durbin
Member, United States
House of Representatives:
This responds to your March 28, 1990 request that we address several issues raised by Ms. Patti Drake McMurray in her letter dated March 15, 1990.
As you know, we previously found that Ms. McMurray had been negligent in the performance of her duties and that her negligence resulted in a loss of $4,352.80. Therefore, we recommended that the Department of the Treasury (Treasury) commence collection action against Ms. McMurray. B-192567, Aug. 4, 1983. Treasury requested that we reconsider our decision on March 7, 1988. In B-192567, June 21, 1988, we affirmed our prior determination that Ms. McMurray had been negligent and denied relief. The facts supporting our prior decisions are summarized as follows.
In 1980, Ms. McMurray was a full time, permanent teller at the Springfield District Office of the Internal Revenue Service, Kansas City Service Center (IRS). On the morning of December 30, 1980, an alternate teller received a cash payment of $3,856.00 from a taxpayer. Ms. McMurray instructed the teller to lock the cash in the teller's cash box and to place the cash box in a bar-locking file cabinet. Ms. McMurray also told the teller that under established procedures for the disposition of cash in amounts exceeding $1,000, the cash would have to be removed from the file cabinet and placed in a security safe before day's end. However, contrary to usual procedures, the District Cashier was not notified about the cash and no arrangements were made to remove the cash to the security safe. In addition, when the teller reminded Ms. McMurray about the cash at the end of the day, Ms. McMurray told her that it was too late to bring the money to the security safe. Ms. McMurray instructed the teller to lock the cash box and store it in the bar-locking cabinet. Ms. McMurray was the only employee who knew the combinations to the bar-locking cabinet and the two heavy duty metal safes located in the same room. On the morning of December 31, 1980, it was discovered that $4,352.80 ($4,172.02 in revenue receipts and $180.78 in funds for change making) had been stolen from the cabinet.
As the only individual with access to the cash at the time it was stolen, Ms. McMurray had custody of the funds and, thus, was accountable for them. 59 Comp.Gen. 113 (1979). An accountable officer with physical custody of government funds is liable, regardless of fault, for the loss of the funds. 54 Comp.Gen. 112 (1974). This Office has the authority to grant relief to accountable officers for the physical loss of funds when we agree with an agency determination that the loss occurred while the officer was acting in the discharge of her duties and that the loss occurred without fault or negligence on the officer's part. 31 U.S.C. Sec. 3527(a) (1982).
Issues Raised by Ms. McMurray
The director of the Kansas City Service Center sent Ms. McMurray a letter dated February 5, 1990, demanding payment of $4,352.80 within 10 days under section 7803(c) of the Internal Revenue Code. 26 U.S.C. Sec. 7803(c) (1988). Ms. McMurray argues that section 7803(c) did not authorize the IRS' collection action against her because she was not a Treasury employee when the action was taken. Section 7803(c) authorizes Treasury to recover amounts collected or received by a Treasury employee in connection with the internal revenue laws for which the employee has failed to account. Section 7803(c) requires the Secretary of the Treasury to issue a notice and demand for payment to such an employee. Upon the employee's failure to pay the amount demanded within the time specified in the notice, the amount is deemed imposed upon the employee and is assessed as of the date of the notice and demand. The Kansas City Service Center received Ms. McMurray's check for $4,352.80, dated March 2, 1990, on March 7, 1990.
Although Ms. McMurray is not currently a Treasury employee, she was a Treasury employee collecting money in connection with the internal revenue laws at the time of the loss. She did not resign until January 1985 and therefore was a Treasury employee at the time of our initial determination that she had been negligent. Further, neither section 7803(c) nor its legislative history suggests that Treasury's authority to collect from a delinquent employee lapses once the employee leaves Treasury employment and we are unaware of any judicial decisions reaching such a conclusion. Moreover, federal courts and this Office have repeatedly applied statutes and regulations governing employees to former employees who fell within their scope during employment. /1/ Accordingly, we conclude that Treasury properly took collection action against Ms. McMurray under section 7803(c).
Second, Ms. McMurray expresses concern over the timeliness of the assessment against her and what she characterizes as a denial of her right to plead her case. Ms. McMurray implies that the IRS improperly took action under section 7803(c) in 1990 because the loss occurred in 1980. We are unaware of any statute of limitations applicable to collection action under section 7803(c). In addition, section 7803(c) governs the timing of Treasury's actual assessment against Ms. McMurray. Under section 7803(c), when the employee fails to pay the amount due within the time specified in the notice and demand letter, the amount is assessed against the employee as of the date of the letter. The IRS' letter of February 5, 1990 demanded payment within 10 days of that date. Upon her failure to make payment within that period, Ms. McMurray was automatically assessed a charge of $4,352.80 which, we observe, she has now paid. addition, section 7803(c) states that "all other provisions of law relating to the collection of assessed taxes" apply to amounts assessed under that section. Had Ms. McMurray not paid the assessment, the IRS would have had 6 years from the date of the assessment to collect the amount due by levy or court proceeding under Internal Revenue Code, section 6502(a)(1). 26 U.S.C. Sec. 6502(a)(1).
Moreover, although considerable time elapsed between the date of the loss and the date of Treasury's collection action, the file indicates that the delay was due, in substantial part, to the consideration by various IRS officials of whether and on what basis to obtain relief for Ms. McMurray. In addition, correspondence contained in the file among those officials, as well as the communication between the IRS and the National Treasury Employee's Union on Ms. McMurray's behalf, strongly suggests that arguments in support of Ms. McMurray have been adequately considered.
We also believe that we issued both our initial decision and our response to Treasury's request for reconsideration in a timely manner. The loss occurred on December 30, 1980. Treasury requested relief for two other IRS employees in connection with the loss on May 28, 1982. We relieved both accountable officers from liability in our decision of August 4, 1983, but found that Ms. McMurray had been negligent. In a letter dated March 7, 1988, Treasury requested that we reconsider that decision and we issued our reconsideration of the matter on June 21, 1988. There is no statute of limitations for requests for relief in physical loss cases. Comp.Gen. 674 (1981).
Third, Ms. McMurray claims that a 1981 settlement agreement with IRS resolved the matter and prevented the IRS from taking collection action. The settlement agreement resolved "the differences and controversies between the parties" in connection with a notice of proposed adverse action issued to Ms. McMurray by the IRS in August 1981. By its own terms, the agreement did not affect Ms. McMurray's liability as an accountable officer to the United States for the loss of $4,352.80 and did not restrict the IRS' authority to recover that amount.
Fourth, Ms. McMurray contends that this Office improperly denied her relief for the loss of $4,352.80. In order for us to reverse a prior decision denying an accountable officer relief, we must find that our decision was based on a material error of fact or law. See B-216938, Nov. 12, 1985; B-199790(1), Feb. 24, 1982.
Ms. McMurray rejects our conclusion that she was negligent, but does not present any evidence that our prior decisions were based on a material error of fact or law. For example, she states that there was insufficient time for her to comply with the requirement that cash in excess of $1,000 be locked in a safe and that, under the circumstances, she took steps that she believed to be sufficient to protect the funds. She also states that the action she took on December 30, 1980 had been taken on other occasions and that others in her position would have secured the cash in the same manner. Ms. McMurray thus argues that she acted in good faith and without a willful intent to disregard established procedures. In so arguing, she further argues that she was not negligent. However, Ms. McMurray misapprehends the meaning of negligence which is not characterized by bad faith, but by inadvertence, thoughtlessness, or inattention. Black's Law Dictionary 538 (5th ed. 1983). Therefore, the fact that her actions were based on her good faith judgement, and were not novel, does not preclude a finding of negligence. In the absence of any evidence to the contrary, we must affirm our previous determinations that Ms. McMurray was negligent and find that we properly denied her relief from liability.
Fifth, Ms. McMurray points out that she was bonded when she accepted employment with the IRS and questions its failure to take action against the bonding company. Prior to 1972, the bonding of accountable officers for the protection of the government was required by law. Section 7803(c) of the Internal Revenue Code of 1954, Pub. L. No. 83 591, 68A Stat. 916 (1954), extended the bonding requirement to officers and employees of the IRS. In 1972, Congress repealed the bonding requirements applicable to accountable officers, including the requirement applicable to IRS officers and employees. Pub. L. No. 92 310, 86 Stat. 201 (1972) (31 U.S.C. Sec. 9302). Therefore, at the time of the loss, Ms. McMurray was not required to be bonded. Further, even if Ms. McMurray was bonded in 1980, the terms of the bonding arrangement would dictate what action, if any, the IRS could take against the bonding company.
Finally, Mrs. McMurray requests advice as to further action she may take to resolve this matter. In its letter of February 5, 1990, the IRS informed Ms. McMurray that she could file an administrative claim and suit for refund in federal district court after making payment. No statutory provisions are cited in IRS' letter. We note that section 7803(c) states that "all other provisions of law relating to the collection of taxes" apply to amounts assessed under that section, and that under provisions of the Internal Revenue Code, an individual may file a claim with the IRS to recover an amount wrongfully collected and subsequently file suit in the appropriate federal district court or the Court of Claims. See 26 U.S.C. Sec. 6511(a), 6532(a)(1), 7422(a). We also note that under provisions of the Tucker Act, an individual may file an action against the United States founded upon the Constitution or any Act of Congress in the appropriate federal district court or in the Court of Claims. See 28 U.S.C. Sec. 1346(a); 28 U.S.C. Sec. 1491(a). In the final analysis, the possible courses of action available to Ms. McMurray is a question for her to resolve in consultation with her legal counsel.
We hope this information will serve the purpose of your inquiry.
/1/ See, e.g., United States v. Conlon, 628 F.2d 150 (D.C. Cir. 1980) (concerning the liability of a former federal employee under 18 U.S.C. Sec. 208(a)); Finfer v. Caplin, 344 F.2d 38 (2d Cir. 1965) (concerning the liability of a former federal employee under 18 U.S.C. Sec. 203), cert. denied, 382 U.S. 883 (1965), reh'g denied, 382 U.S. 949 (1965); Mark J. Worst -- Travel and Backpay Claims, B-223026, Nov. 3, 1987 (concerning the award of travel expenses to a former federal employee under volume 2 of the Joint Travel Regulations, paragraph C4552).