B-212603 B-212604 B-212652, B-216692, DEC 12, 1984, OFF. OF GEN. COUNSEL

B-212603,B-216692,B-212604,B-212652: Dec 12, 1984

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JEFFCOAT: THIS IS IN RESPONSE TO YOUR LETTER SUBMITTING ADDITIONAL INFORMATION AND REQUESTING RECONSIDERATION OF B-212603 ET AL. BOTH REQUESTS ARE MADE PURSUANT TO 31 U.S.C. THE LOSSES UNDER CONSIDERATION IN THESE CASES OCCURRED WHEN THE PAYCHECKS OF FIVE PAYEES WERE FRAUDULENTLY ENDORSED BY AN UNKNOWN PERSON OR PERSONS AND CASHED BY AN UNIDENTIFIED CASHIER SUPERVISED BY LTC MILLER. THE CHECKS WERE DATED BETWEEN JUNE 30. WERE SUBSEQUENTLY CASHED BETWEEN SEPTEMBER 18. NONE OF THE ORIGINAL PAYEES HAD REPORTED THAT THEIR IDENTIFICATION CARDS WERE MISSING. ARMY INVESTIGATIVE REPORTS IN THE RECORD AS ORIGINALLY SUBMITTED CONCLUDED THAT ADEQUATE CHECK CASHING PROCEDURES WERE IN EFFECT BUT FAILED TO ESTABLISH WHAT STEPS LTC MILLER TOOK TO ENSURE THAT THEY WERE EFFECTIVELY CARRIED OUT. 2.

B-212603 B-212604 B-212652, B-216692, DEC 12, 1984, OFF. OF GEN. COUNSEL

ACCOUNTABLE OFFICERS - RELIEF - ILLEGAL OR ERRONEOUS PAYMENTS - WITHOUT FAULT OR NEGLIGENCE DIGEST: 1. ON RECONSIDERATION, RELIEF GRANTED AN ARMY SUPERVISING FINANCIAL OFFICER FOR ERRONEOUS PAYMENT OF FIVE FORGED CHECKS TOTALING $1780 FROM HIS ACCOUNTS. ADDITIONAL INFORMATION SUBMITTED SUPPORTS CONCLUSION THAT THE OFFICER MAINTAINED AND POLICED AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO AVOID ERRORS. ACCOUNTABLE OFFICERS - RELIEF - ILLEGAL OR ERRONEOUS PAYMENTS - WITHOUT FAULT OR NEGLIGENCE 2. RELIEF GRANTED TO FINANCE AND ACCOUNTING OFFICER FOR LOSS OF $487 RESULTING FROM TWO IMPROPER PAYMENTS SINCE OFFICER MAINTAINED AND POLICED AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO AVOID ERRORS.

MR. CLYDE E. JEFFCOAT: PRINCIPAL DEPUTY COMMANDER UNITED STATES FINANCE AND ACCOUNTING CENTER INDIANAPOLIS, INDIANA 46249

DEAR MR. JEFFCOAT:

THIS IS IN RESPONSE TO YOUR LETTER SUBMITTING ADDITIONAL INFORMATION AND REQUESTING RECONSIDERATION OF B-212603 ET AL., COLONEL (LTC) G.D. MILLER, FINANCE CORPS, SYMBOL 6411, FINANCE AND ACCOUNTING OFFICE, KOREA APO SAN FRANCISCO 96301, FOR IMPROPER PAYMENTS TOTALING $1,780 FROM HIS ACCOUNTS. IN THAT CASE, WE CONSIDERED THREE SEPARATE RELIEF REQUESTS INVOLVING FIVE IMPROPER PAYMENTS. THE ADDITIONAL SUBMISSION RECITES THE REQUIRED AGENCY CONCLUSION THAT LTC MILLER MAINTAINED AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO AVOID ERRORS AND SUFFICIENTLY SUPERVISED HIS SUBORDINATES TO ENSURE ITS EFFECTIVE IMPLEMENTATION. THIS ALSO RESPONDS TO ANOTHER SIMILAR REQUEST FOR RELIEF FOR LTC MILLER, DATED SEPTEMBER 27, 1984, INVOLVING TWO IMPROPER PAYMENTS TOTALLING $487. BOTH REQUESTS ARE MADE PURSUANT TO 31 U.S.C. SEC. 3527(C). FOR THE REASONS GIVEN BELOW, WE GRANT RELIEF IN ALL FOUR INSTANCES.

FACTS

1. B-212603 ET AL., MARCH 27, 1984.

THE LOSSES UNDER CONSIDERATION IN THESE CASES OCCURRED WHEN THE PAYCHECKS OF FIVE PAYEES WERE FRAUDULENTLY ENDORSED BY AN UNKNOWN PERSON OR PERSONS AND CASHED BY AN UNIDENTIFIED CASHIER SUPERVISED BY LTC MILLER. THE CHECKS WERE DATED BETWEEN JUNE 30, AND AUGUST 15, 1980. THE PAYEES HAD REPORTED NONRECEIPT OF THE ORIGINAL PAYCHECKS AND HAD RECEIVED SUBSTITUTE PAYMENT. THE ORIGINAL PAYCHECKS, WITH FRAUDULENT ENDORSEMENTS, WERE SUBSEQUENTLY CASHED BETWEEN SEPTEMBER 18, AND OCTOBER 21, 1980. THE PROCEDURES IN EFFECT AT THE TIME MAKE IT DIFFICULT FOR US TO DETERMINE WHETHER THE ERRONEOUS PAYMENTS RESULTED FROM THE FAILURE OF ARMY PERSONNEL TO FOLLOW PRESCRIBED CHECK CASHING PROCEDURES OR, INSTEAD, FROM THE USE OF FALSE IDENTIFICATION BY THE FORGER. NONE OF THE ORIGINAL PAYEES HAD REPORTED THAT THEIR IDENTIFICATION CARDS WERE MISSING, WHICH MAKES IT DIFFICULT FOR US TO CONCLUDE THAT THE CASHIER REASONABLY RELIED ON A VALID IDENTIFICATION CARD IN CASHING THE CHECKS. ARMY INVESTIGATIVE REPORTS IN THE RECORD AS ORIGINALLY SUBMITTED CONCLUDED THAT ADEQUATE CHECK CASHING PROCEDURES WERE IN EFFECT BUT FAILED TO ESTABLISH WHAT STEPS LTC MILLER TOOK TO ENSURE THAT THEY WERE EFFECTIVELY CARRIED OUT.

2. SEPTEMBER 27 REQUEST FOR RELIEF

THE FACTS IN THIS CASE ARE QUITE SIMILAR. CHECKS FOR THE JANUARY 15, AND AUGUST 15, 1980, MID-MONTH PAY AND ALLOWANCES ENTITLEMENTS, RESPECTIVELY, OF SCOTT E. JOHNSON AND LONNIE M. ALSTON, IN THE AMOUNTS OF $239 AND $248 WERE CASHED BY UNKNOWN INDIVIDUALS WITH FRAUDULENT ENDORSEMENTS. THE LOSSES WERE DISCOVERED WHEN THE ARMY FINANCE AND ACCOUNTING OFFICE RECEIVED REQUESTS FOR REFUNDS DATED SEPTEMBER 14, AND OCTOBER 17, 1983, FROM THE U.S. TREASURY. /1/ THE ARMY CONCLUDES THAT THE LOSS MUST HAVE RESULTED FROM AN UNIDENTIFIED CASHIER OR CLASS A AGENT EITHER FAILING TO FOLLOW THE ESTABLISHED PROCEDURES FOR CASHING U.S. TREASURY CHECKS, OR FOLLOWING ESTABLISHED PROCEDURES BUT CASHING CHECKS PRESENTED WITH BOGUS IDENTIFICATION THAT APPEARED TO BE VALID. THE ARMY ALSO SUGGESTS THAT AS NEITHER THE IDENTITY OF THE CASHIER OR AGENT NOR THE PARTIES WHO RECEIVED THE PROCEEDS FROM THE FRAUDULENTLY CASHED CHECKS CAN BE IDENTIFIED, COLLECTION ACTION CANNOT BE TAKEN.

LEGAL DISCUSSION

AS AN ACCOUNTABLE OFFICER, LTC MILLER IS PERSONALLY LIABLE FOR DEFICIENCIES IN HIS ACCOUNTS CAUSED BY ILLEGAL, IMPROPER OR INCORRECT PAYMENTS. HOWEVER, OUR OFFICE HAS AUTHORITY UNDER 31 U.S.C. SEC. 3527(C) TO GRANT RELIEF FROM LIABILITY UPON A DETERMINATION THAT THE PAYMENT WAS NOT THE RESULT OF BAD FAITH OR LACK OF DUE CARE BY THE OFFICIAL. SEE, 54 COMP.GEN. 112 (1974).

WHERE A SUBORDINATE, RATHER THAN THE OFFICER HIMSELF, MAKES THE ERRONEOUS PAYMENT, RELIEF MAY BE GRANTED UPON A SHOWING THAT THE OFFICER PROPERLY SUPERVISED HIS SUBORDINATES BY MAINTAINING AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO AVOID ERRORS AND THAT APPROPRIATE STEPS WERE TAKEN TO ENSURE ITS IMPLEMENTATION AND EFFECTIVENESS. 62 COMP.GEN. 476 (1983). TO GRANT SUCH RELIEF, THIS OFFICE MUST BE PRESENTED WITH SUFFICIENT EVIDENCE TO MAKE AN INDEPENDENT DETERMINATION THAT THE ERRONEOUS PAYMENT WAS NOT CAUSED BY THE BAD FAITH OR LACK OF DUE CARE OF THE OFFICIAL. ID. AT 480. WE CANNOT RELY ON AN AGENCY'S CONCLUSIONS THAT ARE NOT SUPPORTED BY EVIDENCE IN THE RECORD. SEE, B-210648, APRIL 4, 1983.

IN THE SUBMISSION ACCOMPANYING BOTH YOUR REQUESTS FOR RECONSIDERATION OF B-212603 ET AL. MARCH 27, 1984, AND YOUR RELIEF REQUEST OF SEPTEMBER 27, 1984, LTC MILLER STATED THAT ALL CASHIERS UNDER HIS SUPERVISION AT THE TIME OF THE INCIDENTS IN QUESTION WERE OPERATING UNDER INSTRUCTIONS TO CHECK IDENTIFICATION CARDS WHEN CASHING CHECKS. LTC MILLER ALSO STATED THAT HE PERSONALLY OBSERVED THE CASHIERS ON A DAILY BASIS, AS DID HIS CHIEF OF DISBURSING AND SUPERVISORY CASHIER. IN ADDITION, LTC MILLER INDICATED THAT NEW DISBURSING AGENTS WERE REQUIRED TO ATTEND AN ORIENTATION SESSION BEFORE BEING ADVANCED FUNDS AND THAT THIS REQUIREMENT WAS "EMPHATICALLY ENFORCED". IN FACT, LTC MILLER STATED THAT BECAUSE OF THE POTENTIAL FOR FORGERY OF PAYCHECKS, HE HAD IMPLEMENTED A PROCEDURE REQUIRING ANNOTATION OF THE ID CARD NUMBER ON THE CHECK ITSELF. HE NOTED FURTHER, HOWEVER, THAT THE PROCEDURE WAS NOT POPULAR AMONG FINANCE PERSONNEL AND WAS NOT CONTINUOUSLY OBSERVED, THUS NECESSITATING PERIODIC REIMPLEMENTATION "IF IT APPEARED THAT ID CARDS WERE BEING TREATED WITH A CAVALIER ATTITUDE." WHILE LTC MILLER'S CASE WOULD BE STRONGER IF IT WERE CORROBORATED BY A LESS INTERESTED SOURCE, WE RECOGNIZE THAT OTHER EVIDENCE MAY BE VERY DIFFICULT TO RETRIEVE SINCE MORE THAN 4 YEARS HAVE ELAPSED FROM THE TIME OF THE ERRONEOUS PAYMENTS.

ACCORDINGLY, WE THINK THAT LTC MILLER HAS DEMONSTRATED TO OUR SATISFACTION THAT HE WAS EXERCISING DUE CARE IN HIS SUPERVISORY RESPONSIBILITIES WHEN THESE LOSSES OCCURED.

THEREFORE RELIEF IS GRANTED TO LTC MILLER FOR THE LOSSES DESCRIBED IN B-212603 ET AL., MARCH 27, 1984, AND FOR THE TWO IMPROPER PAYMENTS DESCRIBED IN YOUR SEPTEMBER 27, 1984, REQUEST FOR RELIEF.

/1/ THESE REQUESTS ARE ROUTINELY USED BY THE TREASURY TO ALERT A DEPOSITING FACILITY THAT A TREASURY CHECK HAS BEEN FOUND TO HAVE BEEN CASHED WITH A FRAUDULENT ENDORSEMENT. RECEIPT OF THE REQUEST REPRESENTS NOTICE THAT A LOSS HAS OCCURRED.