Claim Involving Nonforeign Differential and Cost-of-Living Allowance

A civilian employee of the Department of the Navy requested reconsideration of his claim for cost-of-living allowance (COLA) in lieu of nonforeign differential for periods he was detailed from his post of regular assignment in Hawaii to Guam, both nonforeign areas. A nonforeign COLA was established for the employee's regular post of duty in Hawaii during the time he was assigned to Guam. Having aggregated more than 42 days on detail away from Hawaii, the claimant became concurrently entitled to the 25 percent nonforeign differential prescribed for Guam. In any case, the total amount of allowances and differentials payable is restricted to 25 percent of the employee's basic pay. To accommodate the 25 percent aggregate limitation, the Navy paid the employee only the 25 percent nonforeign differential for Guam. The claimant did not dispute the amount paid, but suggested that it should have been paid as a l5 percent COLA and a reduced 10 percent differential. The composition of the 25 percent amount is significant, not in terms of gross pay, but because the COLA is not taxable whereas the differential is subject to Federal income taxation. In appealing the statement of the Claims Division, the employee stated that the basis was unclear. He noted that his duty station was at all times in Hawaii, and he took exception to the statement that he was detailed to Guam. The term "detail" is defined to mean the temporary assignment or temporary duty of an employee away from his post of regular assignment. The employee's contention was consistent with this definition. The Claims Division concluded that, because the employee was entitled to the 25 percent differential for Guam, the 25 percent ceiling on aggregate payments of COLA and differential precluded his receipt of any amount as a COLA. It is the view of GAO that the applicable regulations are not clear on this point. Absent any specific directive and given the statutory restrictions on payments aggregating more than 25 percent, there is nothing to preclude the Navy from designating the payment to the employee as nonforeign differential for Guam to the exclusion of any amount for COLA. The tax consequence of the payment is a matter between the employee and the Internal Revenue Service. The denial of the claim by the Claims Division was affirmed.