B-197876.OM, APR 20, 1981

B-197876.OM: Apr 20, 1981

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THE CASES DEVELOP WHEN (1) TREASURY ISSUES SUBSTITUTE CHECKS ON PAYEES' CLAIMS OF NON-RECEIPT OF THE ORIGINALS AND BOTH CHECKS ARE ULTIMATELY NEGOTIATED. (2) GOVERNMENT CHECKS ARE NEGOTIATED ON A FORGED ENDORSEMENT AND STTTLEMENT CHECKS ARE ISSUED TO THE PAYEES. MOST OF WHICH HAVE ALREADY BEEN DISCUSSED EXTENSIVELY WITH MR. THE SECRETARY OF THE TREASURY IS AUTHORIZED TO ISSUE SUBSTITUTE CHECKS (AGAINST FUNDS AVAILABLE FOR PAYMENT OF THE ORIGINAL CHECK) TO PAYEES WHO CLAIM THAT THEIR ORIGINAL CHECKS WERE LOST. SUBSTITUTE CHECKS MAY NOT BE ISSUED IF THE ORIGINAL WAS PAID. AFTER THE AGENCY VERIFIES THAT THE CLAIMANT WAS ENTITLED TO A PAYMENT. THE DISBURSING OFFICE RESPONSIBLE FOR PREPARING THE CHECK IS NOTIFIED.

B-197876.OM, APR 20, 1981

SUBJECT: THE TREASURY DEPARTMENT'S HANDLING OF SUBSTITUTE CHECKS, DUPLICATE PAYMENTS, AND CHECK FORGERIES

ASSOCIATE GENERAL COUNSEL - ROLLEE H. EFROS:

A RECENT SECRET SERVICE REPORT DISCLOSED THAT A LARGE BACKLOG OF UNRESOLVED DUPLICATE PAYMENT AND FORGERY CASES EXISTS WITHIN TREASURY'S DIVISION OF CHECK CLAIMS (DCC). GENERALLY, THE CASES DEVELOP WHEN (1) TREASURY ISSUES SUBSTITUTE CHECKS ON PAYEES' CLAIMS OF NON-RECEIPT OF THE ORIGINALS AND BOTH CHECKS ARE ULTIMATELY NEGOTIATED, AND (2) GOVERNMENT CHECKS ARE NEGOTIATED ON A FORGED ENDORSEMENT AND STTTLEMENT CHECKS ARE ISSUED TO THE PAYEES. THE PUBLICITY SURROUNDING THE PROBLEM LED TO A REQUEST FROM REPRESENTATIVE THOMAS B. EVANS FOR A GAO AUDIT. TO FULLY RESPOND TO THE REQUEST, WE NEED YOUR HELP IN EXAMINING CERTAIN LEGAL ISSUES, MOST OF WHICH HAVE ALREADY BEEN DISCUSSED EXTENSIVELY WITH MR. RICHARD T. CAMBOSOS OF YOUR STAFF. TO ENABLE US TO COMPLETE OUR WORK ON A TIMELY BASIS, IT WOULD BE HELPFUL TO RECEIVE YOUR REPLY BY LATE MARCH 1980.

SUBSTITUTE CHECKS AND DUPLICATE PAYMENTS

UNDER 31 U.S.C. 528, THE SECRETARY OF THE TREASURY IS AUTHORIZED TO ISSUE SUBSTITUTE CHECKS (AGAINST FUNDS AVAILABLE FOR PAYMENT OF THE ORIGINAL CHECK) TO PAYEES WHO CLAIM THAT THEIR ORIGINAL CHECKS WERE LOST, STOLEN, OR DESTROYED. SUBSTITUTE CHECKS MAY NOT BE ISSUED IF THE ORIGINAL WAS PAID. NORMALLY, THE PAYEE FILES A CLAIM WITH THE AGENCY WHICH AUTHORIZED THE PAYMENT. AFTER THE AGENCY VERIFIES THAT THE CLAIMANT WAS ENTITLED TO A PAYMENT, THE DISBURSING OFFICE RESPONSIBLE FOR PREPARING THE CHECK IS NOTIFIED. IF THE DISBURSING OFFICE (USUALLY TREASURY) DETERMINES THAT THE ORIGINAL CHECK HAS NOT BEEN CASHED, RETURNED, OR CANCELLED, A SUBSTITUTE CHECK IS ISSUED. ONE EXCEPTION TO THIS PROCEDURE IS MADE FOR SUPPLEMENTAL SECURITY INCOME PAYMENTS, WHERE TREASURY DOES NOT VERIFY THE STATUS OF THE ORIGINAL CHECK IF A CLAIM IS FILED IN THE SAME MONTH THAT THE ORIGINAL CHECK WAS ISSUED.

LIMITED AUTHORITY TO ISSUE SUBSTITUTE CHECKS WAS DELEGATED TO THE SECRETARY OF DEFENSE (SEE ATTACHMENT 1). GENERALLY, THE MILITARY CAN ISSUE SUBSTITUTE PAYCHECKS WITHIN 15 DAYS OF THE DATE OF THE ORIGINAL. AFTER THAT, ANY CLAIMS MUST BE HANDLED BY TREASURY.

IN ISSUING SUBSTITUTE CHECKS, TREASURY MAKES NO ATTEMPT TO STOP PAYMENT ON THE ORIGINAL. THE TREASURY'S VIEW IS THAT NO LEGAL RIGHT EXISTS TO DO SO BECAUSE TREASURY IS BOTH DRAWEE AND MAKER OF THE CHECK. GENERALLY, THE FIRST CHECK RETURNED THROUGH THE BANKING SYSTEM TO TREASURY FOR RECONCILIATION, REGARDLESS OF WHETHER IT IS THE ORIGINAL OR SUBSTITUTE, IS CONSIDERED PAID BY THE GOVERNMENT. AT THIS POINT, ONLY ONE CHECK HAS BEEN CHARGED TO AN APPROPRIATION. WHEN THE SECOND CHECK TURNS UP AS BEING NEGOTIATED, TREASURY ATTEMPTS TO DETERMINE WHETHER A FORGERY OCCURRED OR WHETHER THE PAYEE CASHED BOTH CHECKS. WHILE THIS DETERMINATION IS BEING MADE, TREASURY RECORDS THE SECOND PAYMENT AS A RECEIVABLE, BUT NO APPROPRIATION IS CHARGED. SOME OF THE EXISTING CASES HAVE GONE UNRESOLVED FOR AS MUCH AS 10 YEARS.

TO MAKE ITS DETERMINATION, TREASURY OBTAINS COPIES OF THE CHECKS AND EXAMINES THE ENDORSEMENTS. IF THE SIGNATURES APPEAR TO BE DIFFERENT, THE PAYEE IS SENT A FORM REQUESTING HIM TO CERTIFY THAT HE DID OR DID NOT CASH BOTH CHECKS. IF THE PAYEE CLAIMS RESPONSIBILITY FOR CASHING ONLY ONE CHECK, THE CASE IS REFERRED TO SECRET SERVICE FOR A FORGERY INVESTIGATION AND TREASURY ATTEMPTS TO RECOVER FROM THE BANK WHICH CASHED THE CHECK.

IN CASES WHERE THE PAYEE FAILS TO RETURN THE FORM, OR THE SIGNATURE ON THE CHECKS APPEARS TO BE THE SAME, TREASURY ATTEMPTS TO RECOVER FROM THE PAYEE OR THE AGENCY WHICH AUTHORIZED THE PAYMENT. ALTHOUGH AGENCIES ARE REQUIRED TO TAKE AGGRESSIVE COLLECTION ACTION ON ALL CLAIMS ARISING FROM THEIR ACTIVITIES (4 C.F.R. 102), TREASURY HAS TAKEN THE POSITION THAT OTHER AGENCIES ARE NOT REQUIRED TO ASSIST IN THE COLLECTION OF DUPLICATE PAYMENTS. AGREEMENTS HAVE BEEN REACHED WITH SOME AGENCIES WHICH ALLOW TREASURY TO AUTOMATICALLY CHARGE DUPLICATE PAYMENTS TO THE AGENCIES ONCE THE CASE IS FULLY DOCUMENTED, AN OFTEN LENGTHY PROCESS. IN EXECUTING THE CHARGE BACKS, TREASURY CHARGES THE AGENCY ACCOUNTING STATION CODE AND THE AGENCIES ARE LEFT TO DETERMINE HOW THE CHARGES SHOULD BE HANDLED IN THEIR ACCOUNTS. WE HAVE NOT YET DETERMINED WHETHER THE AGENCIES CHARGE APPROPRIATION ACCOUNTS. BECAUSE OF THE TIME IT TAKES TREASURY TO RESOLVE DUPLICATE PAYMENT CASES, THE CHARGES MAY NOT REACH THE AGENCIES FOR MONTHS OR EVEN YEARS.

IT APPEARS THAT TREASURY, AND PERHAPS THE OTHER AGENCIES INVOLVED, ARE IN VIOLATION OF THE LAW BECAUSE OF THEIR FAILURE TO CHARGE THE DUPLICATE PAYMENTS TO APPROPRIATIONS AS SOON AS THEY ARE IDENTIFIED. THE FAILURE TO FOLLOW SUCH A PROCEDURE IS ALSO IMPRACTICAL BECAUSE WITHOUT IMMEDIATE CHARGE BACKS (A) THE FULL COST OF AGENCIES' ACTIVITIES IS NOT DISCLOSED, AND (B) THE AGENCIES HAVE LESS INCENTIVE TO AID AND ACT EXPEDITIOUSLY IN THE COLLECTION OF THE DUPLICATE PAYMENTS. ALTHOUGH THE DUPLICATE PAYMENT CHARGES TO SOME AGENCIES MAY EVENTUALLY REACH APPROPRIATION ACCOUNTS, THOSE OF OTHER AGENCIES DO NOT BECAUSE TREASURY HAS NO AGREEMENT WITH THEM.

BECAUSE OF THE MANY LEGAL ISSUES INVOLVED, WE WOULD APPRECIATE YOUR ADDRESSING THE FOLLOWING QUESTIONS:

1. SHOULD ALL DUPLICATE PAYMENTS BE CHARGED TO THE APPROPRIATIONS OF THE AUTHORIZING AGENCIES? IF SO,

A. WHEN?

B. DID TREASURY AND THE AGENCIES VIOLATE THE LAW BY NOT DOING SO?

C. HOW CAN THE AGENCIES RETROACTIVELY CHARGE A GIVEN YEAR'S APPROPRIATION WHEN TREASURY DOES NOT INFORM THEM OF A DUPLICATE PAYMENT UNTIL AFTER THE FISCAL YEAR HAS ENDED AND THE APPROPRIATION IS FULLY OBLIGATED?

D. WHAT ABOUT FORGERIES AND DUPLICATE PAYMENTS FROM TRUST FUNDS (I.E., SOCIAL SECURITY) WHICH HAVE NO APPROPRIATION?

IF NOT, HOW SHOULD THEY BE ACCOUNTED FOR?

2. DID TREASURY OR ANY OF THE AGENCIES INVOLVED VIOLATE OR CIRCUMVENT THE ANTI-DEFICIENCY ACT BY NOT CHARGING THE DUPLICATE PAYMENTS TO APPROPRIATIONS?

3. DOES TREASURY OR THE AUTHORIZING AGENCY HOLD PRIMARY RESPONSIBILITY FOR TAKING COLLECTION ACTION ON DUPLICATE PAYMENTS (PAYEE NEGOTIATES BOTH CHECKS) AND FORGERIES (PAYEE NEGOTIATES ONLY ONE OF THE CHECKS)?

4. HOW SHOULD RECOVERED DUPLICATE PAYMENTS BE ACCOUNTED FOR - AS RESTORATIONS TO THE APPROPRIATION TO WHICH THEY WERE CHARGED?

5. IS TREASURY LEGALLY PROHIBITED FROM STOPPING PAYMENT ON CHECKS?

6. IS TREASURY VIOLATING THE LAW BY NOT DETERMINING THE STATUS OF ORIGINAL CHECKS BEFORE ISSUING SUBSTITUTES FOR SSI PAYMENTS?

WE WOULD ALSO LIKE TO KNOW IF ANY OF YOUR ANSWERS WILL REQUIRE CHANGES IN GAO'S POLICY AND PROCEDURES MANUAL FOR GUIDANCE OF FEDERAL AGENCIES, PARTICULARLY TITLE 4.

CHECK FORGERIES

MANY YEARS AGO, CONGRESS AUTHORIZED THE CREATION OF A CHECK FORGERY INSURANCE FUND (CFIF). THE PURPOSE OF THE CFIF IS TO ALLOW THE U. S. TREASURER TO MAKE SETTLEMENT WHICH PAYEES OF GOVERNMENT CHECKS WHICH HAVE BEEN LOST OR STOLEN AND NEGOTIATED ON A FORGED ENDORSEMENT (31 U.S.C. 561). WHEN RECLAMATION FROM THE FORGER OR TRANSFEREES ON THE FORGED CHECK HAS BEEN OR IS EXPECTED TO BE DELAYED, THE TREASURER IS AUTHORIZED TO ISSUE A SETTLEMENT CHECK DRAWN ON THE CFIF PRIOR TO RECLAMATION.

AS A MATTER OF PRACTICE, SETTLEMENT CHECKS ARE ROUTINELY ISSUED IN ADVANCE OF THE RECEIPT OF FUNDS FROM THE ENDORSERS OF THE CHECKS THROUGH THE RECLAMATION PROCESS. THE SETTLEMENT CHECKS ARE CHARGED TO A CHECK FORGERY RECEIVABLE ACCOUNT WHILE RECLAMATION EFFORTS ARE MADE. ABOUT $15 MILLION WAS OUTSTANDING AT THE END OF 1979, AN AMOUNT FAR IN EXCESS OF THAT AVAILABLE IN THE CFIF. IF THE TREASURY DETERMINES THAT THE FUNDS CANNOT BE RECOVERED, ONLY THEN DOES THE CFIF SUSTAIN THE LOSS.

TO HELP US IN OUR ASSESSMENT OF THIS MATTER, WE WOULD LIKE YOU TO ANSWER THE FOLLOWING QUESTIONS:

1. DID TREASURY CIRCUMVENT THE BUDGET PROCESS AND VIOLATE THE LAW BY CHARGING THE SETTLEMENT CHECKS TO THE CHECK FORGERY RECEIVABLE ACCOUNT RATHER THAN SEEKING SUFFICIENT APPROPRIATIONS FOR THE CFIF?

A. IF SO, SHOULD AN APPROPRIATION BE SOUGHT TO COVER THE AMOUNT CURRENTLY IN THE CHECK FORGERY RECEIVABLE ACCOUNT.

SHOULD YOU REQUIRE ANY ADDITIONAL INFORMATION, PLEASE CALL MR. JAMES KRAWCHYK ON 634-5213.

INDORSEMENT

DIRECTOR, FGMSD

RETURNED. YOUR QUESTIONS WILL BE ANSWERED IN THE ORDER ASKED.

SUBSTITUTE CHECKS

1A. ARTICLE 1, SEC. 9, CL. 7. OF THE CONSTITUTION PROVIDES THAT:

"NO MONEY SHALL BE DRAWN FROM THE TREASURY, BUT IN CONSEQUENCE OF APPROPRIATIONS MADE BY LAW ***"

THIS PROVISION WAS INTENDED AS A RESTRICTION ON THE DISBURSING AUTHORITY OF THE EXECUTIVE DEPARTMENT, CINCINNATI SOAP CO. V. UNITED STATES, 301 U.S. 321 (1936), THAT IS, TO PRECLUDE EXPENDITURES OF FUNDS FROM THE TREASURY EXCEPT AS AUTHORIZED BY THE CONGRESS. THIS AUTHORIZATION IS PROVIDED THROUGH VARIOUS LEGISLATIVE ENACTMENTS DENOTED AS "APPROPRIATIONS".

APPROPRIATIONS ARE AVAILABLE ONLY FOR THE OBJECTS OR PURPOSES FOR WHICH THEY ARE MADE, 31 U.S.C SEC. 628, AND WE HAVE CONSTRUED THIS WHICH THEY ARE MADE, 31 U.S.C. SEC. 628, AND WE HAVE CONSTRUED THIS TO MEAN THAT THEY ARE AVAILABLE FOR ALL EXPENSES REASONABLY NECESSARY TO ACCOMPLISH THOSE OBJECTS OR PURPOSES, 58 COMP.GEN. 667 (1979). HOWEVER, THE FACT THAT MONEY WAS PAID OUT OF THE TREASURY DOES NOT MEAN THAT THE EXPENDITURE WAS AUTHORIZED BY AN APPROPRIATION. THE ACT OF MAKING THE PAYMENT IS SEPARATE AND DISTINCT FROM THE ACT OF ACCOUNTING FOR THE PAYMENT (FOR EXAMPLE BY CHARGING IT TO AN APPROPRIATION).

IN THE CASE OF UNAUTHORIZED PAYMENTS (PAYMENTS DEEMED NOT TO BE NECESSARY TO ACCOMPLISH AUTHORIZED AGENCY PURPOSES) OR IMPROPER, ERRONEOUS, OR ILLEGAL PAYMENTS, THERE IS NO APPROPRIATION AGAINST WHICH TO CHARGE THESE PAYMENTS. THIS IS BECAUSE APPROPRIATIONS ARE GENERALLY PRESUMED NOT TO BE AVAILABLE FOR THESE KINDS OF PAYMENTS UNLESS SPECIFICALLY AUTHORIZED BY THE LANGUAGE OF THE LAW OR BY NECESSARY IMPLICATION. THE REASON IS CLEAR: TO HOLD OTHERWISE WOULD REQUIRE OUR SAYING THAT THE CONGRESS IN ENACTING APPROPRIATIONS AUTHORIZES THE MAKING OF EXPENDITURES FOR UNAUTHORIZED, IMPROPER, ERRONEOUS OR ILLEGAL PURPOSES. IF THIS WERE THE CASE THEN NOTHING WOULD BE OUTSIDE THE BOUNDS OF PROPRIETY AND 31 U.S.C. SEC. 628 WOULD BE MEANINGLESS. HOWEVER, EVEN THOUGH THESE PAYMENTS NORMALLY MAY NOT BE CHARGED AGAINST AN APPROPRIATION, THEY STILL MUST BE RECORDED FOR FINANCIAL AND ADMINISTRATIVE PURPOSES (FOR EXAMPLE, FOR COLLECTION PURPOSES).

NORMALLY, THE GOVERNMENT SEEKS TO RECOVER FUNDS FROM INDIVIDUALS WHO HAVE RECEIVED PAYMENTS FROM THE GOVERNMENT THEY WERE NOT ENTITLED TO. HOWEVER, IF RECOVERY CANNOT BE MADE FROM THESE INDIVIDUALS, THEN THE RESPONSIBLE CERTIFYING, DISBURSING OR OTHER ACCOUNTABLE OFFICER OF THE GOVERNMENT IS HELD PERSONALLY ACCOUNTABLE FOR THE REPAYMENT. HOWEVER, CERTAIN PROVISIONS OF LAW HAVE AUTHORIZED THE WAIVER OF PERSONAL LIABILITY FOR CERTAIN PAYMENTS WHEN NOT THE RESULT OF THE PARTICULAR ACCOUNTABLE OFFICER'S NEGLIGENCE. FUTHERMORE, SOME OF THE PROVISIONS OF LAW AUTHORIZE THE WRITING OFF OF THE DEBTS WHICH HAVE BEEN RECORDED AGAINST INDIVIDUALS FOR COLLECTION PURPOSES, BUT WHICH COULD NOT BE CHARGED TO APPROPRIATIONS (FOR THE REASONS DISCUSSED ABOVE). GENERALLY, THIS IS ACCOMPLISHED BY CHARGING THEM TO SOME CURRENTLY AVAILABLE APPROPRIATION OF THE AGENCY INVOLVED. SEE FOR EXAMPLE, 31 U.S.C. SECS. 82A-1 AND 82A-2. HOWEVER, THE PROVISION UNDER WHICH THE TREASURER (WHO IS HELD PERSONALLY ACCOUNTABLE FOR PAYMENT OF BOTH CHECKS) IS RELIEVED OF PERSONAL LIABILITY FOR DUPLICATE CHECK PAYMENTS, 31 U.S.C. SEC. 156 DOES NOT AUTHORIZE THIS. FURTHERMORE, WE HAVE HELD THAT TREASURY'S APPROPRIATIONS ARE NOT AVAILABLE FOR THIS PURPOSE. B-115388, OCTOBER 1, 1976. WITH THIS IN MIND WE TURN TO THE QUESTIONS ASKED.

THE LAW AUTHORIZES THE SECRETARY OF THE TREASURY TO ISSUE TO THE OWNER OR HOLDER OF AN ORIGINAL CHECK OF THE UNITED STATES, A SUBSTITUTE CHECK WHEN HE IS SATISIFIED THAT THE ORIGINAL CHECK IS STOLEN, WHOLLY OR PARTLY DESTROYED OR SO MUTILATED OR DEFACED SO AS TO IMPAIR ITS VALUE TO THE OWNER OR HOLDER THEREOF. THE SUBSTITUTE CHECK IS ISSUED AGAINST FUNDS AVAILABLE FOR PAYMENT OF THE ORIGINAL CHECK, AND THE SUBSTITUTE CHECK MAY NOT BE PAID IF THE ORIGINAL IS PAID. FURTHER IT GOES WITHOUT SAYING THAT A SUBSTITUTE MAY NOT BE ISSUED WHEN THE ORIGINAL HAS ALREADY BEEN PAID SINCE THE RECIPIENT IS ENTITLED TO ONLY ONE PAYMENT. HOWEVER, IF THE ORIGINAL IS PAID UNDER A FORGED ENDORSEMENT, THEN THE TREASURER IS AUTHORIZED BY 31 U.S.C. SEC. 562 TO ISSUE A SETTLEMENT CHECK (RATHER THAN A SUBSTITUTE CHECK) DRAWN UPON THE CHECK FORGERY INSURANCE FUND TO CLAIMANTS (PROVIDED ALL THE OTHER REQUIREMENTS OF 31 U.S.C. SECS. 561 ET SEQ. ARE COMPLIED WITH).

FROM THIS IT SEEMS CLEAR THAT THE CONGRESS CONTEMPLATED THE CASHING OF ONLY ONE, NOT TWO CHECKS. FOR THE TREASURER TO COMPLY WITH THESE LAWS, HE WOULD FIRST BE REQUIRED TO DETERMINE WHETHER THE ORIGINAL CHECK HAD BEEN PAID AT THE TIME THE REQUEST FOR SUBSTITUTE WAS RECEIVED. IF IT HAD NOT BEEN PAID, HE COULD ISSUE A SUBSTITUTE CHECK PROVIDED HE MAKES THE NECESSARY DETERMINATIONS. FURTHERMORE, IN ORDER TO ASSURE THAT ONLY ONE PAYMENT IS MADE REQUIRES THE TREASURER TO STOP PAYMENT ON THE FIRST CHECK. IF, ON THE OTHER HAND, THE TREASURER FINDS THAT THE FIRST CHECK HAD BEEN PAID AT THE TIME THE REQUEST FOR THE SUBSTITUTE IS RECEIVED, THEN HE MUST DETERMINE IF IT WAS PAID ON A FORGED ENDORSEMENT. IF IT WAS PAID ON A FORGED ENDORSEMENT AND HE MAKES THE OTHER DETERMINATIONS REQUIRED BY 31 U.S.C. SEC. 562, THEN HE MAY ISSUE A SETTLEMENT CHECK. IF HE DETERMINES THAT IT HAS BEEN PAID, BUT NOT ON A FORGED ENDORSEMENT, THEN HE MAY NOT ISSUE ANY CHECK. HOWEVER, WHILE THIS PROCEDURE MAY HAVE BEEN PRACTICAL AT THE TIME THESE VARIOUS PROVISIONS WERE ENACTED INTO LAW, THE INCREASE IN THE VOLUME OF TREASURY'S CHECK ISSUING ACTIVITY AND PRESSURES PUT UPON THE TREASURY TO ISSUE MANY REPLACEMENT CHECKS WITHOUT DELAY HAS RESULTED IN ISSUANCE AND PAYMENT OF SUBSTITUTE CHECKS WITHOUT THE REQUIREMENTS OF 31 U.S.C. SECS. 528(A) AND 561 ET SEQ. BEING STRICTLY ADHERED TO. SEE ANSWERS TO QUESTION 6 BELOW. WHILE THESE PAYMENTS GENERALLY ARE NOT CONSIDERED AS BEING MADE PURSUANT TO AN APPROPRIATION, AS INDICATED ABOVE, THEY MUST BE RECORDED FOR ADMINISTRATIVE PURPOSES (INCLUDING COLLECTION). IN 1960 IT WAS AGREED BY THE DEPARTMENT OF THE TREASURY, THE BUDGET BUREAU (NOW OFFICE OF MANAGEMENT AND BUDGET) AND THIS OFFICE THAT WHERE BOTH CHECKS WERE CASHED, TREASURY WOULD CONTINUE TO RECORD THE UNAUTHORIZED PAYMENTS IN AN ACCOUNT RECEIVABLE, AND IF IT COULD NOT BE COLLECTED AND THE TREASURER RELIEVED OF LIABILITY UNDER 31 U.S.C. SEC. 156, THEN TREASURY WOULD SEEK AN APPROPRIATION AGAINST WHICH TO WRITE OFF THIS AMOUNT IN THE ACCOUNT RECEIVABLE. HOWEVER FOR SOME UNEXPLAINED REASON TREASURY HAS YET TO REQUEST THE NECESSARY APPROPRIATION.

THUS THE ACCOUNT RECEIVABLE MAINTAINED BY THE TREASURY HAS GROWN TO A POINT WHERE IT NOW REPRESENTS A RATHER LARGE INDEBTEDNESS OUTSTANDING AND OWING THE UNITED STATES. WHILE WE DO NOT TAKE ISSUE WITH TREASURY'S DETERMINATION TO ISSUE SSI CHECKS WITHOUT ASSURING THAT ALL THE REQUIREMENTS OF 31 U.S.C. SEC. 528(A) ARE STRICTLY ADHERED TO (SEE ANSWER TO 6 BELOW), THIS DOES CAUSE A SUBSTANTIAL INCREASE IN THE NUMBER OF DUPLICATE PAYMENTS. CONSEQUENTLY, SOME PRACTICAL MEANS OF COLLECTING ALL DUPLICATE PAYMENTS MUST BE ESTABLISHED.

WE NOTE THAT A NUMBER OF AGENCIES HAVE AGREED TO ACCEPT CHARGE BACKS OF DUPLICATE CHECK PAYMENTS FOR COLLECTION. THEREAFTER, SHOULD AN AGENCY'S COLLECTION ACTION BE TERMINATED UNSUCCESSFULLY SOME AGENCIES HAVE AGREED TO WRITE OFF THE UNCOLLECTIBLES BY CHARGING THEIR OWN APPROPRIATIONS, ELIMINATING THE NEED FOR TREASURY TO SEEK ADDITIONAL APPROPRIATIONS TO ACCOMPLISH THIS. WE ALSO NOTE THAT THE FEDERAL CLAIMS COLLECTION ACT (FCCA), REQUIRES AN AGENCY HEAD TO COLLECT ALL CLAIMS REFERRED TO HIS AGENCY. 31 U.S.C. SEC. 952(A). THUS THE FCCA REQUIRES INTERAGENCY COOPERATION IN CLAIMS COLLECTION. ONE WAY TO ASSURE INTERAGENCY COOPERATION IS BY HAVING THE COLLECTING AGENCY HAVE A STAKE IN THE OUTCOME (THAT IS BY CHARGING THE COLLECTING AGENCY'S APPROPRIATION). IF TREASURY IS UNABLE TO PURSUE VIGOROUS COLLECTION ACTION ON DUPLICATE CHECK PAYMENTS AND AGENCIES ARE NOT COOPERATING IN COLLECTION ACTIONS, THEN AS AN ITERIM SOLUTION UNTIL CONGRESS CAN CONSIDER THIS MATTER, WE WOULD NOT OBJECT TO TREASURY'S DIRECTLY CHARGING BACK DUPLICATE PAYMENTS TO THE APPROPRIATIONS OF THE AGENCY CONCERNED. THE AGENCY CONCERNED COULD THEN PURSUE COLLECTION ACTION AND DEPOSIT ANY RECOVERY TO THE CREDIT OF THE APPROPRIATION CHARGED. IF COLLECTION ACTION IS UNFAVORABLY TERMINATED, THEN THE DEBT SHOULD BE WRITTEN OFF AS PROVIDED IN 4 GAO POLICY AND PROCEDURES MANUAL SEC. 70.6.

1B. TREASURY VIOLATED THE REQUIREMENTS OF 31 U.S.C. SEC. 528(A) WHEN IT PAID BOTH THE ORIGINAL AND SUBSTITUTE CHECK.

1C. AS DISCUSSED ABOVE, UNAUTHORIZED, ILLEGAL, IMPROPER, OR ERRONEOUS PAYMENTS NORMALLY CANNOT BE CHARGED AGAINST APPROPRIATIONS. HOWEVER, IN VIEW OF OUR ANSWER TO QUESTION 1A ABOVE AUTHORIZING THE CHARGING OF DUPLICATE PAYMENTS TO AGENCY APPROPRIATIONS UNDER THE CIRCUMSTANCES DESCRIBED THEREIN, WE WILL ADDRESS YOUR QUESTION.

AGENCIES CANNOT RETROACTIVELY CHARGE A GIVEN YEAR'S APPROPRIATION IF THE APPROPRIATION IS FULLY OBLIGATED. THIS WOULD BE IN VIOLATION OF THE ANTI- DEFICIENCY ACT 31 U.S.C. SEC. 665(A) AND MUST BE REPORTED AS SUCH. THE ONLY REMEDY IN SUCH EVENT WOULD BE FOR THE AGENCY TO SEEK A DEFICIENCY APPROPRIATION.

1D. FORGERIES ARE TO BE CHARGED TO THE CHECK FORGERY INSURANCE FUND (SEE ANSWER CONCERNING CHECK FORGERIES BELOW) WHILE DUPLICATE PAYMENT FROM TRUST FUNDS (WHICH CONSTITUTE APPROPRIATIONS AS THAT TERM IS DEFINED BY THIS OFFICE; SEE SAINT LAWRENCE SEAWAY DEVELOPMENT CORPORATION - STATUS OF FUNDS AS "APPROPRIATIONS." B-193573, DECEMBER 19, 1979) SHOULD BE CHARGED TO THE TRUST FUND. B-71585, AUGUST 15, 1956.

2. NO, THE ANTI-DEFICIENCY ACT WAS NOT VIOLATED SINCE THE ISSUANCE OF THE SUBSTITUTE CHECK WAS AUTHORIZED BY LAW WHICH PROVIDED THE FUNDS FOR ITS PAYMENT. HOWEVER, AS INDICATED BY OUR RESPONSES TO QUESTIONS 1A AND 1B, PAYMENT OF BOTH CHECKS WAS PROHIBITED.

3. WE HAVE PREVIOUSLY HELD THAT TREASURY IS RESPONSIBLE FOR ISSUING SUBSTITUTE CHECKS UNDER AUTHORITY OF 31 U.S.C. SEC. 528. B-71585, AUGUST 15, 1956. IN RECOGNITION OF THIS, 31 U.S.C. SEC. 156 WAS ADOPTED, AUTHORIZING THE COMPTROLLER GENERAL TO RELIEVE THE TREASURER (NOW, AS A RESULT OF DELEGATION, THE COMMISSIONER OF GOVERNMENT FINANCIAL OPERATIONS) FROM PERSONAL LIABILITY RESULTING FROM EXECUTING HIS DUTIES UNDER 31 U.S.C. SEC. 528. HOWEVER, WHILE TREASURY'S RESPONSIBILITY FOR ISSUING SUBSTITUTE CHECKS ALSO LODGES WITH IT THE RESPONSIBILITY FOR RECOVERY OF THE FUNDS PAID OUT WHEN THE ORIGINAL IS ALSO PAID, SEE B-71585, AUGUST 15, 1956, QUOTED ABOVE, THIS DOES NOT PRECLUDE TREASURY FROM SEEKING THE ASSISTANCE OF OTHER GOVERNMENT AGENCIES IN RECOVERING THESE PAYMENTS.

THE FEDERAL CLAIMS COLLECTION ACT (FCCA) REQUIRES AN AGENCY HEAD TO ATTEMPT COLLECTION OF ALL CLAIMS "ARISING OUT OF THE ACTIVITIES OF, OR REFERRED TO HIS AGENCY." 31 U.S.C. SEC. 952(A). IN HIS LETTER TO SENIOR GROUP DIRECTOR JOHN J. CRONIN, JR., THE TREASURY ASSISTANT GENERAL COUNSEL (ADMINISTRATION, LEGISLATION AND FISCAL OPERATIONS) SAYS THAT WHEN TREASURY MISTAKENLY PAYS A CHECK WHICH IS PRESENTED TO IT LACKING THE ENDORSEMENTS NECESSARY FOR PROPER NEGOTIATION, THE RESULTING CLAIM, BECAUSE THE PAYMENT WAS ERRONEOUS, ARISES FROM TREASURY'S ACTIVITIES WITHIN THE MEANING OF THE FCCA, AND TREASURY IS PRIMARILY RESPONSIBLE FOR COLLECTION. HE IMPLIES THAT TREASURY IS ALSO PRIMARILY RESPONSIBLE WHEN IT PAYS THE ORIGINAL CHECK AND A SETTLEMENT CHECK IS ISSUED UNDER THE CHECK FORGERY INSURANCE STATUTE, 31 U.S.C. SECS. 561 ET SEQ. (DISCUSSED FURTHER BELOW) AND BOTH CHECKS HAVE GENUINE ENDORSEMENTS. SINCE TREASURY IS NOT SUPPOSED TO ISSUE A CHECK UNDER SECTION 561 UNLESS THE ORIGINAL WAS PAID AS A RESULT OF FORGERY. HERE AGAIN ONE MAY SAY THAT TREASURY'S ERROR GAVE RISE TO THE CLAIM.

THE ASSISTANT GENERAL COUNSEL INDICATES THAT TREASURY DISCLAIMS PRIMARY RESPONSIBILITY WHEN IT MAKES PAYMENT ON AN ORIGINAL CHECK WITH A GENUINE ENDORSEMENT BY THE PAYEE AND ON A SUBSTITUTE CHECK ISSUED PURSUANT TO 31 U.S.C. SEC. 528, ALSO WITH A GENUINE ENDORSEMENT. THIS IS APPARENTLY BECAUSE WHEN BOTH CHECKS ARE PRESENTED WITH GENUINE ENDORSEMENT BY HOLDERS IN DUE COURSE, TREASURY "HAS NO ENFORCEABLE RIGHT TO DENY PAYMENT ***." TREASURY FISCAL REQUIREMENTS MANUAL 4 7080.10 (1976).

WE FIND NO REASON TO DIFFER WITH TREASURY, PARTICULARLY SINCE THE QUESTION OF WHEN TREASURY HAS PRIMARY RESPONSIBILITY IS SOMEWHAT ACADEMIC. WHICHEVER AGENCY HAS PRIMARY RESPONSIBILITY, UNDER THE FCCA, THE IMPORTANT THING IS THAT VIGOROUS ACTION BE TAKEN BY SOME AGENCY TO COLLECT CLAIMS IN FAVOR OF THE UNITED STATES. WHERE A CLAIM IS CONNECTED WITH THE ACTIVITIES OF MORE THAN ONE AGENCY, IT DOES NOT SEEM IMPORTANT TO US WHICH AGENCY ASSUMES PRIMARY RESPONSIBILITY FOR COLLECTION AS LONG AS ONE OF THEM DOES AND THE OTHER COOPERATES.

4. UNDER THE PROCEDURE REQUIRED BY THIS OFFICE, FUNDS RECOVERED SHOULD BE DEPOSITED TO THE CREDIT OF THE APPROPRIATIONS CHARGED WITH THE PAYMENTS. 7 GAO SEC. 13.2(2). OBVIOUSLY, IF NO APPROPRIATION HAS BEEN CHARGED WITH THE PAYMENT, THEY SHOULD BE DEPOSITED INTO THE GENERAL FUND OF THE TREASURY AS MISCELLANEOUS RECEIPTS. FURTHERMORE, IF THEY ARE CHARGED TO AN AGENCY'S APPROPRIATION AND LATER DETERMINED TO BE UNRECOVERABLE, WE SEE NO REASON WHY THEY CANNOT BE WRITTEN OFF AS OTHER DEBTS ARE UNDER 4 GAO SEC. 70.6. OTHERWISE, AN APPROPRIATION WOULD BE NECESSARY TO WRITE THEM OFF.

5. WE DO NOT AGREE WITH THE TREASURY ASSISTANT GENERAL COUNSEL'S POSITION THAT TREASURY CANNOT STOP PAYMENT ON A CHECK WHEN IT IS BOTH THE DRAWER AND DRAWEE OF THE CHECK. HIS ARGUMENT CAN BE SUMMARIZED AS FOLLOWS:

GENERALLY, UNDER THE UNIFORM COMMERCIAL CODE (U.C.C.), WHICH GOVERNS CHECKING TRANSACTIONS IN ALL STATES, AND COURT DECISIONS, CHECKS DRAWN BY BANKS UPON THEMSELVES (CASHIERS' CHECKS) ARE CONSIDERED ACCEPTED BY THE BANK UPON ISSUNACE. CONSEQUENTLY, THE BANK MAY NOT STOP PAYMENT. E.G., NATIONAL NEWARK AND ESSEX BANK V. GIORDANO, 268 A. 2D 327 (N. J. SUPER., 1970). FURTHER, A BANK WHICH PLACES A STOP PAYMENT ORDER AGAINST A CASHIER'S CHECK HAS BEEN HELD LIABLE FOR DAMAGES RESULTING FROM DISHONOR OF THE CHECK. WERTZ V. RICHARDSON HEIGHTS BANK AND TRUST, 495 S. W. 2D 572 (TEX., 1973). THE TREASURY ASSISTANT GENERAL COUNSEL THINKS THAT THE TREASURY COULD BE CONSIDERED A BANK FOR PURPOSES OF THE U.C.C. AND THEREFORE SUBJECT TO THE ABOVE REQUIREMENTS.

A "BANK" IS DEFINED BY U.C.C. SEC. 1-201(4) TO BE "ANY PERSON ENGAGED IN THE BUSINESS OF BANKING." "PERSON" IS DEFINED TO INCLUDE GOVERNMENT OR GOVERNMENTAL AGENCY. U.C.C. SEC. 1-201 (28) OR (30). THE BUSINESS OF BANKING CAN BE DESCRIBED AS INCLUDING ISSUING NEGOTIABLE NOTES, DISCOUNTING NOTES AND RECEIVING DEPOSITS, AUTEN V. U. S. NATIONAL BANK OF NEW YORK, 174 U. S. 125, 141 (1898); MARVIN V. KENTUCKY TITLE TRUST CO., 291 S. W. 17, 18 (KEN. C. A., 1927), AND A PERSON IS CONDUCTING THE BUSINESS OF BANKING ALTHOUGH ONLY ONE OF THESE FUNCTIONS IS CARRIED ON, MCCLAREN V. STATE, 124 N. W. 667 (WIS., 1910); OULTON V. SAVINGS INSTITUTION, 84 U. S. (17 WALLACE) 109, 118 (1872); UNITED STATES V. PAPWORTH, 156 F. SUPP. 842 (N. D. TEX., 1957).

THEREFORE, SINCE TREASURY ISSUES NOTES PAYABLE ON DEMAND, SELLS LONG AND SHORT TERM SECURITIES, RECEIVES DEPOSITS AND LOANS MONEY TO FEDERAL AGENCIES AND DEPARTMENTS, TREASURY COULD BE CONSIDERED A BANK, AND HENCE SUBJECT TO THE U.C.C. RULE AGAINST BANKS STOPPING PAYMENT, WERE IT DECIDED THAT THE U.C.C. APPLIES TO THE CHECKS ISSUED BY THE GOVERNMENT. IN THIS REGARD, WE HAVE HELD THAT THE PROVISIONS OF THE U.C.C. SHOULD BE FOLLOWED BY THE GOVERNMENT, IN THE INTEREST OF UNIFORMITY, TO THE MAXIMUM PRACTICABLE EXTENT WHEN NOT INCONSISTENT WITH THE LAW, COURT DECISIONS, OR FEDERAL INTEREST. 51 COMP.GEN. 668 (1972).

WHILE IT IS POSSIBLE THAT THE TREASURY WOULD BE CONSIDERED A "BANK" IN CONDUCTING SOME OF ITS ACTIVITIES, THIS WOULD SEEM HIGHLY UNLIKELY WHEN PERFORMING ITS CHECK ISSUANCE FUNCTION. WHEN ISSUING CHECKS, TREASURY IS ACTING NOT AS A BANK, BUT INSTEAD AS THE PAYING AGENT OF THE UNITED STATES GOVERNMENT IN GENERAL, AND OF THE PARTICULAR AGENCY PURSUANT TO WHOSE CERTIFICATION (AUTHORIZATION) TREASURY ISSUES THE CHECK. THE INTEREST BEING SERVED IS NOT THAT OF THE TREASURY IN ANY BANKING CAPACITY, BUT INSTEAD, THE PUBLIC INTEREST THAT IS SERVED THROUGH THE NORMAL CONDUCT OF GOVERNMENTAL ACTIVITY. TO ACCEPT TREASURY'S ARGUMENT WOULD PRECLUDE THE GOVERNMENT FROM EVER STOPPING PAYMENT ON A CHECK NO MATTER HOW INEQUITABLE OR UNJUSTIFIABLE THE PAYMENT MAY BE.

CONSEQUENTLY, THE ANSWER TO YOUR FIFTH QUESTION IS NO.

ON THE OTHER HAND, THE POSSIBILITY THAT PAYMENT WOULD BE STOPPED ON SUPPLEMENTAL SECURITY INCOME CHECKS OR OTHER CHECKS PAYABLE TO PEOPLE WHOSE ECONOMIC STATUS MAKES IT UNLIKELY THAT THEY WOULD HAVE CHECKING OR SAVINGS ACCOUNTS COULD MAKE IT MORE DIFFICULT FOR THEM TO CASH THEIR CHECKS. (AS DISCUSSED BELOW IN ANSWER TO QUESTION 6, WE HAVE RECOGNIZED THE IMPORTANCE OF PROMPT PAYMENT TO THESE PEOPLE.) FOR A PAYEE WHO HAS AN ACCOUNT WITH A FINANCIAL INSTITUTION, THE INSTITUTION WILL CASH HIS CHECK OR ACCEPT IT FOR DEPOSIT BECAUSE, IF IT IS DISHONORED, THE INSTITUTION IS PROTECTED BY ITS ABILITY TO CHARGE HIS ACCOUNT. HOWEVER, BANKS WHERE THE PAYEE HAS NO ACCOUNT OR STORES CASHING THESE CHECKS COULD DO LITTLE TO PROTECT THEMSELVES AGAINST LOSSES AS A RESULT OF PAYMENT BEING STOPPED AND WOULD THEREFORE BE RELUCTANT TO ACCEPT THEM. REQUIRING IDENTIFICATION WOULD NOT NECESSARILY HELP SINCE PAYMENT COULD BE STOPPED ON CHECKS PROPERLY ENDORSED BY THE NAMED PAYEE (WHERE THE PAYEE MADE A FRAUDULENT CLAIM FOR A REPLACEMENT CHECK). THE ONLY ALTERNATIVE THEN WOULD BE FOR RECIPIENTS OF THOSE CHECKS TO PAY A FEE FOR CASHING THEM.

STOPPAGES WOULD PROVE INEFFECTIVE AGAINST THE MAJORITY OF PERSONS PRESENTING THE CHECKS FOR PAYMENT WHO ARE PRESUMABLY HOLDERS IN DUE COURSE. SEE STATE V. EASTON, 422 P. 2D 7 (WASH, 1966). CONSEQUENTLY, IT IS UNCLEAR HOW USEFUL OR COST EFFECTIVE SUCH A PRACTICE WOULD BE IF THE NET RESULT WAS MERELY TO INVOLVE THE GOVERNMENT IN LITIGATION BROUGHT BY LARGE NUMBERS OF HOLDERS IN DUE COURSE.

6. 31 U.S.C. SEC. 528(A) REQUIRES THAT BEFORE A SUBSTITUTE CHECK IS ISSUED, THE SECRETARY OF THE TREASURY MUST BE SATISFIED THAT THE ORIGINAL IS LOST, STOLEN, WHOLLY OR PARTLY DESTROYED, OR IS SO MUTILATED OR DEFACED AS TO IMPAIR ITS VALUE TO ITS OWNER OR HOLDER. IT ALSO PROHIBITS THE PAYMENT OF THE SUBSTITUTE CHECK IF THE ORIGINAL CHECK SHALL FIRST HAVE BEEN PAID. ALSO, AS INDICATED ABOVE, TREASURY CANNOT ISSUE A SUBSTITUTE CHECK WHERE THE ORIGINAL CHECK HAS BEEN PAID. HOWEVER, THE EXTENT OF THE SEARCH TREASURY MUST DO TO SATISFY ITSELF THAT THE SUBSTITUTE CHECK SHOULD BE ISSUED DEPENDS UPON THE TIME AVAILABLE. THUS, WHERE THE CIRCUMSTANCES NECESSITATE TREASURY'S PROMPT ISSUANCE OF THE SUBSTITUTE, IT MUST WEIGH THIS AGAINST POSSIBLE PROBLEMS CAUSED BY PAYMENT OF THE SUBSTITUTE CHECK WHEN THE ORIGINAL MIGHT ALREADY HAVE BEEN PAID OR MIGHT NOT BE LOST, STOLEN, DESTROYED, OR MUTILATED.

IN THIS REGARD, IN GAO'S REPORT TO THE HONORABLE ELIZABETH HOLTZMAN, "REPLACING LOST OR STOLEN GOVERNMENT CHECKS: EXPEDITED SERVICE VERSUS COSTS AND RISKS," GGD 77-65, JULY 19, 1977, WE POINTED OUT THE RISKS INVOLVED IN ISSUING SUBSTITUTE SUPPLEMENTAL SECURITY INCOME (SSI) CHECKS BEFORE DETERMINING WHETHER THE ORIGINAL HAS BEEN PAID. WE ALSO POINTED OUT THAT RECIPIENTS OF SSI CHECKS ARE DEPENDENT UPON THE CHECKS FOR THEIR LIVING EXPENSES AND THUS FACE SEVERE HARDSHIP IF THEY DO NOT RECEIVE THEIR CHECKS IN TIMELY FASHION. BECAUSE OF THIS, TREASURY AND THE SOCIAL SECURITY ADMINISTRATION (SSA) ESTABLISHED A GOAL OF REPLACING A LOST OR STOLEN SSI CHECK WITHIN 10 DAYS. THE REPORT STATES (PP. 6-7):

"TO RECEIVE THE EXPEDITED SERVICE AN SSI BENEFICIARY MUST FILE A CLAIM IN THE SAME MONTH THAT THE ORIGINAL CHECK WAS ISSUED. TREASURY DOES NOT VERIFY THE STATUS OF THE ORIGINAL CHECK. THEREFORE, SAFEGUARDS BUILT INTO THE SYSTEM TO PREVENT DOUBLE PAYMENT ARE BYPASSED. DETERMINING THAT A PAYEE DID NOT CASH AN ORIGINAL CHECK IS A TIME-CONSUMING PROCESS. SO, BECAUSE THE LAW DOES NOT PERMIT PAYMENT OF A REPLACEMENT CHECK IF THE ORIGINAL HAS BEEN CASHED TREASURY PRESUMES THAT THE ORIGINAL CHECK IS OUTSTANDING, IF LESS THAN A MONTH HAS PASSED FROM THE DATE OF ISSUANCE TO THE DATE OF THE CLAIM. THE CLAIM IS RECEIVED A MONTH OR MORE AFTER THE DATE OF THE CHECK, THE CLAIM FOLLOWS THE REGULAR CHECK CLAIMS PROCESS.

"UNDER THESE PROCESSING PROCEDURES, TREASURY DOES NOT VERIFY THE STATUS OF THE ORIGINAL CHECK BEFORE ISSUING A REPLACEMENT AND, IN MANY CASES, IT TURNS OUT THAT BOTH THE ORIGINAL AND THE REPLACEMENT CHECKS ARE CASHED BY THE PAYEE. IN THESE CASES, SSA HAS AGREED TO ABSORB THE COST OF THE DUPLICATE PAYMENTS AND ASSUME RESPONSIBILITIES FOR COLLECTION FROM THE BENEFICIARY. FROM AUGUST 1974 TO AUGUST 1976, 34,056 CHECKS FOR $5,340,664 - ABOUT 1,400 PER MONTH AT $155 EACH - WERE CHARGED BACK TO SSA BECAUSE THE PAYEE CASHED BOTH THE ORIGINAL AND THE REPLACEMENT."

AFTER WEIGHING THE EQUITIES, TREASURY APPARENTLY HAS DECIDED TO INSURE THAT INNOCENT CLAIMANTS RECEIVE TIMELY PAYMENTS RATHER THAN THAT THE ORIGINAL CHECK HAS NOT BEEN PAID. SEE "REPLACING MISSING SUPPLEMENTAL SECURITY INCOME CHECKS - RECIPIENTS WAITING LONGER THAN NECESSARY," HRD 78 -28, AUGUST 22, 1978, CRITICIZING TREASURY'S DELAY IN REPLACING CHECKS UNDER THIS ACCELERATED PROCEDURE. SINCE THESE PAYMENTS ARE RECURRING IN NATURE, IF A MISTAKE IS MADE, THE GOVERNMENT HAS THE RIGHT TO SETOFF LATER PAYMENTS AGAINST THE OVERPAYMENT. HOWEVER, IF AN INNOCENT CLAIMANT IS DENIED TIMELY PAYMENT, THE HARDSHIP MAY BE SEVERE.

WE FIND NOTHING THAT WOULD LEAD US TO CONCLUDE THAT TREASURY HAS ABUSED ITS DISCRETION IN THIS MATTER. WHILE THIS PROCEDURE MAY NOT STRICTLY MEET THE REQUIREMENT THAT THE SECRETARY SATISFY HIMSELF THAT THE ORIGINAL WAS LOST, STOLEN, MUTILATED, DESTROYED, OR NOT PAID, WE DO NOT VIEW THE TREASURY-SSA ARRANGEMENT AS SUBJECT TO CRITICISM, SINCE THE PURPOSE WAS TO PREVENT PERSONS WHO HAD NOT RECEIVED THEIR CHECKS FROM SUFFERING SEVERE HARDSHIP. YOUR SIXTH QUESTION IS ANSWERED ACCORDINGLY.

FINALLY, NONE OF THESE ANSWERS REQUIRES AMENDMENT OF THE GAO MANUAL.

- CHECK FORGERY -

IN 1941, THE CONGRESS ESTABLISHED THE CHECK FORGERY INSURANCE FUND IN THE AMOUNT OF $50,000 (ADDITIONAL SUMS WERE AUTHORIZED TO BE APPROPRIATED AS NECESSARY), AND DIRECTED THE TREASURER "TO DRAW ON THE FUND" TO PAY PEOPLE WHO HAD BEEN ISSUED CHECKS BY THE GOVERNMENT, BUT WHOSE CHECKS HAD BEEN LOST, STOLEN, NEGOTIATED, AND PAID OVER THE PAYEE'S FORGED ENDORSEMENT. 31 U.S.C. SEC. 561 ET SEQ. THE PURPOSE OF ENACTING THIS PROVISION WAS STATED AS FOLLOWS:

"THE PURPOSE OF THIS PROPOSED LEGISLATION IS TO RELIEVE THE INEQUITABLE CONDITION ARISING WHEN THE PAYEE OR A SPECIAL ENDORSEE OF A CHECK DRAWN ON THE TREASURER OF THE UNITED STATES, WHICH HAS BEEN IMPROPERLY NEGOTIATED THROUGH NO FAULT OF THE PAYEE OR SPECIAL ENDORSEE AND PAID UPON A FORGERY OF HIS ENDORSEMENT, IS DEPRIVED OF THE AMOUNT DUE HIM UNTIL SUCH INDETERMINATE FUTURE TIME AS RECOVERY HAS BEEN EFFECTED FROM THE FORGER OR THE BANK OR OTHER PARTY CASHING THE CHECK BY SETTING UP A SMALL REVOLVING FUND (TO BE COMPOSED OF $50,000) OUT OF WHICH PAYMENT MAY BE MADE IN ADVANCE OF RECLAMATION.

"THIS BILL IN NO WAY AFFECTS THE DUTY OF THE TREASURER OF THE UNITED STATES TO RECLAIM, NOR THE LIABILITY OF THE PARTIES WHO RECEIVED THE PAYMENT ON THE ORIGINAL CHECK. WHEN RECOVERIES ARE MADE FROM THE FORGER OR SUBSEQUENT TRANSFEREES OF THE ORIGINAL CHECK, THE AMOUNT THEREOF IS DEPOSITED BACK TO THE CREDIT OF THE FUND OUT OF WHICH THE ADVANCE HAS BEEN MADE." H. R. REP. NO. 1113, 77TH CONG., 1ST SESS., REPRINTED IN 1941 U.S.C. CONG. AND AD. NEWS 901.

THUS, IT APPEARS THAT THE CONGRESS INTENDED THAT THE PAYMENTS IN CHECK FORGERY CASES BE MADE FROM THE FUND AND THAT ANY AMOUNT RECOVERED THROUGH RECLAMATION PROCEEDINGS BE DEPOSITED TO THE CREDIT OF THE FUND. 31 U.S.C. SEC. 563. WHILE THE CONGRESS HAS INCREASED THE AMOUNT OF THE FUND FROM $50,000 TO $2 MILLION, WE ARE UNAWARE OF ANY AUTHORITY FOR TREASURY TO ISSUE SETTLEMENT CHECKS IN EXCESS OF AMOUNTS AVAILABLE IN THE FUND. THUS, IF THE FUND IS INADEQUATE, TREASURY SHOULD SEEK ADDITIONAL APPROPRIATIONS.