B-22816, JANUARY 19, 1942, 21 COMP. GEN. 675

B-22816: Jan 19, 1942

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1942: I HAVE YOUR LETTER OF DECEMBER 24. THEREOF PROVIDES THAT THE CONTRACTOR IS TO BE REIMBURSED FOR ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED BY THE CONTRACTING OFFICER. IF PAYMENTS TO EMPLOYEES ARE MADE BY CHECK. WHICH WERE APPROVED BY THE CONSTRUCTING QUARTERMASTER ON SEPTEMBER 26. ARE AS FOLLOWS: 1. SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS THE SECOND PARTY AGREE (SIC) TO CASH THE PAY ROLL CHECKS OF THE FIRST PARTIES WHICH HAVE BEEN ISSUED TO THE WORKMEN ENGAGED UPON THE ABOVE-MENTIONED PROJECT. SECOND PARTY FURTHER AGREES THAT IT WILL COOPERATE WITH ITS MERCHANT CUSTOMERS. THE SECOND PARTY MAY REFUSE TO CASH OR ACCEPT ANY CHECK WHICH IS NOT PRESENTED TO IT BY THE EMPLOYEE IN PERSON AND WHEN THE PERSON PRESENTING SAID CHECK IS.

B-22816, JANUARY 19, 1942, 21 COMP. GEN. 675

CONTRACTS - COST-PLUS - PAY ROLL CHECK-CASHING CHARGES WHERE A COST-PLUS-A-FIXED-FEE CONTRACT PROVIDES FOR REIMBURSEMENT FOR COSTS INCIDENT TO THE CONTRACTOR'S COMPLIANCE WITH ITS OBLIGATION TO FURNISH FREE PAY-ROLL CHECK-CASHING FACILITIES FOR ITS EMPLOYEES, CONTRACTOR MAY BE REIMBURSED FOR THE FIXED CHECK-CASHING CHARGES PAID A LOCAL BANK PURSUANT TO AN AGREEMENT, MADE NECESSARY BY THE INADEQUACY OF LOCAL BANKING FACILITIES FOR THE DIRECT CASHING OF ALL THE CONTRACTOR'S PAY-ROLL CHECKS ON PAY DAYS, WHEREBY THE BANK NOT ONLY CASHED CHECKS FOR EMPLOYEES DIRECTLY WITHOUT CHARGE BUT ALSO CLEARED CHECKS CASHED BY LOCAL MERCHANTS AND OTHER PATRONS PRESENTED TO IT FOR PAYMENT WITHOUT IMPOSING ON SUCH MERCHANTS AND PATRONS THE USUAL CHECK CASHING CHARGE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, JANUARY 19, 1942:

I HAVE YOUR LETTER OF DECEMBER 24, 1941, TRANSMITTING FOR ADVANCE DECISION BUREAU VOUCHER NO. 115, IN THE AMOUNT OF $133.54, COVERING REIMBURSEMENT OF BANK CHARGES FOR CASHING PAY-ROLL CHECKS OF G. L. TARLTON CONTRACTOR, INC., AND MACDONALD CONSTRUCTION CO., A COST-PLUS-A FIXED-FEE CONTRACTOR UNDER CONTRACT NO. W-7032-QM-15, DATED AUGUST 6, 1941.

THE CONTRACT INVOLVED PROVIDES FOR THE CONSTRUCTION OF A MOTOR TRIANGULAR DIVISION CANTONMENT AT NEOSHO, MO., ON A COST-PLUS-A-FIXED FEE BASIS. ARTICLE II, PARAGRAPH 1, THEREOF PROVIDES THAT THE CONTRACTOR IS TO BE REIMBURSED FOR ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED BY THE CONTRACTING OFFICER, INCLUDING, AMONG OTHERS, THE FOLLOWING ITEM:

Q. DISBURSEMENTS INCIDENT TO PAYMENT OF PAY ROLLS, INCLUDING BUT NOT LIMITED TO, THE COST OF DISBURSING CASH, NECESSARY GUARDS, CASHIERS, AND PAYMASTERS. IF PAYMENTS TO EMPLOYEES ARE MADE BY CHECK, FACILITIES FOR CASHING CHECKS MUST BE PROVIDED WITHOUT EXPENSE TO EMPLOYEES, AND THE CONSTRUCTOR SHALL BE REIMBURSED THEREFOR.

IT APPEARS FROM THE ENCLOSURES FORWARDED WITH YOUR LETTER THAT ON SEPTEMBER 2 AND 3, 1941, THE CONTRACTOR ENTERED INTO AGREEMENTS FOR THE CASHING OF ITS PAY-ROLL CHECKS WITH SEVEN BANKS, TWO LOCATED IN NEOSHO, MO., ONE LOCATED IN GOODMAN, MO., AND FOUR LOCATED IN JOPLIN, MO., WHICH AGREEMENTS SET FORTH THE ARRANGEMENTS AND CONDITIONS UNDER WHICH PAY-ROLL CHECKS ISSUED TO THE CONTRACTOR'S EMPLOYEES WOULD BE CASHED BY THE BANKS AT PAR AND WITHOUT ANY DEDUCTION FOR THE SERVICE. THE PERTINENT PROVISIONS OF THE AGREEMENTS, WHICH WERE APPROVED BY THE CONSTRUCTING QUARTERMASTER ON SEPTEMBER 26, 1941, ARE AS FOLLOWS:

1. SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS THE SECOND PARTY AGREE (SIC) TO CASH THE PAY ROLL CHECKS OF THE FIRST PARTIES WHICH HAVE BEEN ISSUED TO THE WORKMEN ENGAGED UPON THE ABOVE-MENTIONED PROJECT, WITHOUT FEE OR CHARGE TO THE WORKMAN OR EMPLOYEE WHO MAY PRESENT SAID CHECK OR CHECKS TO SAID BANK IN PERSON.

2. SECOND PARTY FURTHER AGREES THAT IT WILL COOPERATE WITH ITS MERCHANT CUSTOMERS, PATRONS AND CORRESPONDENT BANKS TO THE END THAT SUCH CHECKS MAY ALSO BE QUICKLY CASHED BY SAID PATRONS AND CORRESPONDENT BANKS; BUT THE SECOND PARTY MAY REFUSE TO CASH OR ACCEPT ANY CHECK WHICH IS NOT PRESENTED TO IT BY THE EMPLOYEE IN PERSON AND WHEN THE PERSON PRESENTING SAID CHECK IS, IN THE OPINION OF THE SECOND PARTY, NOT FINANCIALLY RESPONSIBLE. OBLIGATION SHALL EXTEND TO SAID SECOND PARTY TO CASH, RECEIVE, OR CLEAR ANY CHECK WHEN IT MAY, FOR ANY CAUSE HAVE DOUBT OF THE AUTHENTICITY OF ANY SIGNATURE OR ENDORSEMENT, OR OF THE CHARACTER OR RESPONSIBILITY OF THE PERSON PRESENTING THE SAME OR OFFERING IT FOR CLEARANCE.

3. FIRST PARTIES AGREE THAT THEY WILL KEEP THE SECOND PARTY INFORMED IN ADVANCE AS TO ITS PAY ROLL SO THAT THE SECOND PARTY MAY HAVE TIME AND OPPORTUNITY TO ANTICIPATE THE INCREASED BURDEN UPON ITS CASH ON HAND AND FACILITIES FOR HANDLING THE SAME. IT IS UNDERSTOOD, HOWEVER, THAT SUCH INFORMATION MAY ONLY BE APPROXIMATE AND CANNOT BE EXACT OR IN DETAIL; THE PARTIES ONLY CONTEMPLATING A CLOSE COOPERATION IN SUCH MANNER SO THAT NO UNDUE BURDEN MAY BE THROWN UPON THE SECOND PARTY AND THAT IT MAY NOT BE SURPRISED BY AN OVERLOAD OR UNUSUAL AMOUNT OF CHECKS WHICH HAVE NOT BEEN CONTEMPLATED.

4. SECOND PARTY AGREE (SIC) THAT IT WILL MAKE REASONABLE PROVISION FOR THE HANDLING OF SUCH PAY-ROLL CHECKS IN THE KEEPING OF CASH ON HAND AND IN FURNISHING FACILITIES THEREFOR; BUT IF, AND IN THE EVENT THE AMOUNT OR NUMBER OF CHECKS PRESENTED OR RECEIVED IN ANY ONE DAY SHALL BE OF SUCH UNUSUAL NUMBER OR AMOUNT AS TO EXCEED THE CASH ON HAND OR THE FACILITIES OF SAID BANK IN REGARD TO TELLER OR CLERICAL SERVICE THEN SECOND PARTY SHALL HAVE THE RIGHT TO SUSPEND THE CASHING OF SAID CHECKS TEMPORARILY ON SAID ACCOUNT. IT IS THE SENSE OF THIS AGREEMENT THAT SECOND PARTY WILL PREPARE FOR AND PROVIDE REASONABLE FACILITIES AND MONEYS BUT THAT IT SHALL HAVE THE RIGHT TO LIMIT THE CASHING OF SAID CHECKS TO AN AMOUNT AND NUMBER COMMENSURATE WITH ITS SAID CASH AND FACILITIES.

9. SECOND PARTY AGREES TO MAKE DAILY LIST (WITH COPIES THEREOF) OF ALL SUCH PAY-ROLL CHECKS WITH AN ADDING MACHINE TAPE RECORD OF THE TOTALS AND DELIVER SAME TO THE PICK-UP AGENT OF FIRST PARTIES. SECOND PARTY SHALL ALSO SEPARATE, CANCEL, AND BUNDLE SAID CHECKS SO THAT THEY MAY BE DELIVERED ON DAILY PICK UP AND THE SECOND PARTY SHALL ALSO FURNISH TO THE FIRST PARTIES, AND TO THE REPRESENTATIVE OF THE CONSTRUCTING QUARTERMASTER, SUFFICIENT ROOM AND FACILITIES TO AUDIT SAID LISTS AND COUNT SAID CHECKS ON SAID DAILY PICK-UP.

10. FIRST PARTIES AGREE THAT THEY WILL FURNISH A DAILY " PICK-UP" SERVICE FOR SAID CHECKS. THAT IS, THE FIRST PARTIES WILL, ONCE EACH WORKING DAY, CALL UPON THE SECOND PARTY, COUNT THE CHECKS WHICH MAY HAVE BEEN RECEIVED BY IT, AUDIT THE LIST, AND DELIVER THEIR CHECK IN THE FULL AMOUNT OF THE TOTAL OF ALL OF SUCH CHECKS, WHICH SHALL HAVE BEEN CASHED AND LISTED BY THE SECOND PARTY SO THAT THE SECOND PARTY SHALL RECEIVE DAILY REIMBURSEMENT FOR THE CASHING OF SAID CHECKS.

11. AS COMPENSATION FOR ITS SERVICE IN THE CASHING OF SAID CHECKS THE FIRST PARTIES AGREE TO PAY THE SECOND PARTY THE SUM OF EIGHT CENTS (8 CENTS) PER CHECK, FOR EACH AND EVERY CHECK WHICH SHALL HAVE BEEN RECEIVED BY IT AND CLEARED, LISTED AND DELIVERED TO THE FIRST PARTIES IN THE PICK- UP. PAYMENT OF SUCH COMPENSATION SHALL BE MADE MONTHLY ON THE 10TH DAY OF EACH MONTH HEREAFTER DURING THE EXISTENCE OF THIS CONTRACT. EACH PAYMENT SHALL INCLUDE ALL CHECKS CLEARED DURING THE PRECEDING CALENDAR MONTH.

THE AGREEMENTS WITH THE FOUR BANKS LOCATED AT JOPLIN, MO., PROVIDE THAT THE CHARGE FOR THE PICK-UP SERVICE IS TO BE 5 CENTS PER CHECK, AND A CHARGE OF 8 CENTS PER CHECK FOR THE PICK-UP SERVICE IS PROVIDED FOR IN THE AGREEMENTS WITH THE TWO BANKS LOCATED AT NEOSHO, MO., AND THE ONE BANK LOCATED AT GOODMAN, MO.

THE REASONS FOR ENTERING INTO SUCH AGREEMENTS ARE STATED BY THE CONTRACTOR IN ITS MEMORANDUM, DATED NOVEMBER 4, 1941, TO THE OFFICE OF THE CONSTRUCTING QUARTERMASTER, AS FOLLOWS:

IN ORDER TO CLARIFY THE VARIOUS FACTORS INVOLVED IN CONNECTION WITH THE CONTRACTS ENTERED INTO BETWEEN THE CONTRACTORS AND THE LOCAL BANKS, WHICH FACTORS HAVE BEEN DISCUSSED ORALLY ON NUMEROUS OCCASIONS WITH THE PROPER REPRESENTATIVES OF THE CONSTRUCTING QUARTERMASTER, WE DESIRE TO RESTATE ALL OF OUR REASONS FOR ENTERING INTO SUCH CONTRACTS IN THIS MEMORANDUM.

WHEN WE ARRIVED AT NEOSHO TO START THE PROJECT, WE REALIZED THAT CERTAIN ARRANGEMENTS WOULD HAVE TO BE MADE IN ORDER TO FULFILL THE REQUIREMENT OF CONTRACT WITH RESPECT TO HAVING EMPLOYEES' PAY-ROLL CHECKS CASHED WITHOUT ANY FEE BEING CHARGED TO SUCH EMPLOYEES. WE REALIZED THAT A PAY ROLL OF THE SIZE AND AMOUNT OF OUR PROSPECTIVE PAY ROLLS WOULD CAUSE AN INCREASE IN THE VOLUME OF BANKING BUSINESS ALL OUT OF PROPORTION TO THE SIZE OF THE TOWN, AND MIGHT SERIOUSLY DISRUPT THE BANKING FACILITIES OF THE VICINITY.

WE CALLED UPON THE VARIOUS BANKERS AT NEOSHO AND REPRESENTATIVES OF THE BANKS OF JOPLIN, AND DISCUSSED WITH THEM THE QUESTION OF CASHING PAY-ROLL CHECKS. IMMEDIATELY UPON OUR BROACHING THE SUBJECT, WE WERE TOLD BY THE VARIOUS BANKERS THAT THEY HAD SENT REPRESENTATIVES INTO THE ROLLA DISTRICT TO DETERMINE WHAT EFFECT THE PAY-ROLL ACTIVITY IN CONNECTION WITH THE CONSTRUCTION AT FT. LEONARD WOOD HAD MEANT TO THE BANKERS IN THAT VICINITY. IN THIS CONNECTION, WE MIGHT POINT OUT THAT THE CONTRACTORS AT FT. LEONARD WOOD HAD ENTERED INTO AGREEMENTS WITH MOST OF THE BANKERS IN THAT VICINITY TO CASH PAYROLL CHECKS FOR THEIR EMPLOYEES FOR A FEE OF EIGHT CENTS (8 CENTS) PER CHECK.

THE NEOSHO AND JOPLIN BANKERS HAD ALSO CONTACTED THE BANKERS IN OTHER PARTS OF THE COUNTRY SITUATED NEAR THE SITE OF CONSTRUCTION PROJECTS, AND THEY RECEIVED REPLIES FROM THEM AS TO THEIR EXPERIENCES WITH THIS TYPE OF BANKING BUSINESS. THE RESULT OF THE VISITS TO BANKERS IN THE ROLLA AREA AND CORRESPONDENCE WITH OTHER BANKERS HAD CONVINCED THE NEOSHO AND JOPLIN BANKERS THAT THIS BUSINESS WAS NOT GREATLY TO BE DESIRED AND WAS NOT VERY PROFITABLE FROM THE BANKS' STANDPOINT. HOWEVER, THEY FELT THAT A FEE OF TEN CENTS (10 CENTS) PER CHECK WOULD BE A FAIR REIMBURSEMENT FOR THE SERVICE. IN THIS CONNECTION, WE WISH TO POINT OUT THAT THE NEOSHO BANKS HAVE ALWAYS CHARGED TEN CENTS (10 CENTS) PER CHECK FOR CASHING A CHECK DRAWN ON AN OUT-OF-TOWN BANK, ALSO THAT THE NEOSHO BANKS WERE NOT LARGE ENOUGH TO CARRY OUR ACCOUNT AND HAVE OUR CHECKS DRAWN ON THEM. WE WISH ALSO TO MENTION THAT THE JOPLIN BANKS HAVE A CLEARING HOUSE AGREEMENT WHICH PROVIDES A CHARGE OF THREE CENTS (3 CENTS) PER CHECK FOR ALL CHECKS DEBITED AGAINST A CUSTOMER'S ACCOUNT.

AFTER MUCH DISCUSSION AND MANY CONFERENCES BETWEEN THE CONTRACTORS AND THE BANKERS, AN AGREEMENT WAS FINALLY REACHED THAT THE CONTRACTORS WOULD PAY THE TWO BANKS AT NEOSHO AND THE ONE BANK AT GOODMAN--- A TOWN LYING IMMEDIATELY SOUTH OF THE RESERVATION--- EIGHT CENTS (8 CENTS) PER CHECK FOR ALL CHECKS PICKED UP FROM THEM, AND WOULD PAY THE BANKS AT JOPLIN FIVE CENTS (5 CENTS) PER CHECK. THE METHOD OF PICK-UP AND REASON THEREFOR WILL BE EXPLAINED LATER IN THIS MEMORANDUM.

THE CONTRACTS ENTERED INTO WERE SUBMITTED TO THE ZONE CONSTRUCTING QUARTERMASTER BY THE CONSTRUCTING QUARTERMASTER, AND WERE APPROVED BY ZONE BY MEANS OF A TRANSMITTAL LETTER AND APPROVED BY THE CONSTRUCTING QUARTERMASTER BY HIS SIGNATURE ON THE DOCUMENTS.

WE WILL HEREINAFTER SET FORTH AN EXPLANATION FOR INCLUDING THE VARIOUS ARTICLES CONTAINED IN THE CONTRACTUAL AGREEMENTS.

ARTICLE 1: THIS ARTICLE OF THE CONTRACT WAS INCLUDED FOR THE BENEFIT OF THE CONTRACTORS. NOT KNOWING WHAT THE FLOW OF OUR CHECKS WOULD RESULT IN, WE WANTED TO BE SURE NO BANK COULD REFUSE TO CASH A WORKMAN'S CHECK DUE TO THE FACT THAT THE EXPENSE TO SUCH BANK CASHING THIS CHECK WOULD PROVE TO BE MORE THAN THE AGREED-UPON FEE, OR DUE TO THE FACT THAT THE BANKS' FACILITIES MIGHT HAVE BEEN SO EXTENDED AS TO INTERFERE WITH ITS NORMAL BUSINESS.

ARTICLE 2: THIS ARTICLE WAS INSERTED BECAUSE THE CONTRACTORS KNEW THAT THE BANK FACILITIES WERE INADEQUATE TO HANDLE A LARGE NUMBER OF INDIVIDUALS CASHING CHECKS, AND KNEW THAT THE MERCHANTS WOULD HAVE TO COOPERATE IN THE CASHING OF SUCH CHECKS. THE CONTRACTORS DID NOT WANT THE MERCHANTS TO HAVE ANY OCCASION TO CHARGE THE CONTRACTORS' EMPLOYEES FOR THIS SERVICE. AT THE PRESENT TIME, THE BANKS OF NEOSHO AND GOODMAN ARE RUNNING EXTRA SERVICE FOR THEIR MERCHANTS BY STAYING OPEN ON SATURDAY NIGHTS SO THAT MERCHANTS WHO CASH CHECKS MAY IN TURN BRING THESE CHECKS TO THE BANK, RECEIVE CASH FOR THEM, AND BE IN A POSITION TO CASH MORE CHECKS AT THEIR STORES OR BUSINESS ESTABLISHMENTS.

ARTICLE 3 WAS INSERTED AT THE REQUEST OF THE BANKERS, AND THE CONTRACTORS HAVE FULFILLED THEIR OBLIGATIONS UNDER THIS ARTICLE.

ARTICLE 4 WAS INSERTED FOR THE MUTUAL BENEFIT OF BOTH PARTIES. UP TO THE PRESENT TIME NO BANK HAS SUSPENDED THE CASHING OF CHECKS, AND IN VIEW OF THE FACT THAT OUR PAY ROLL SATURDAY, NOVEMBER 1, CONSISTED OF MORE THAN 11,000 CHECKS AMOUNTING TO APPROXIMATELY $500,000, WE FEEL THAT THERE WILL NEVER BE ANY OCCASION FOR THE BANKS TO REFUSE TO CASH CHECKS OR LIMIT THE CASHING OF CHECKS.

ARTICLES 5, 6, 7, AND 8 DO NOT REQUIRE ANY EXPLANATION.

ARTICLES 9 AND 10 CONCERN THE DAILY " PICK-UP.' THE REASON FOR THIS DAILY PICK-UP IS TWO-FOLD: FIRST, IT IS THE PRACTICE OF THE BANKS TO PHOTOGRAPH ALL CHECKS WHICH CLEAR THROUGH THEM. THEY WOULD NOT AGREE,BECAUSE OF THEIR LIMITED EQUIPMENT, TO PHOTOGRAPH ALL OF THE PAY ROLL CHECKS WHICH MIGHT CLEAR. CONSEQUENTLY, WE AGREED THAT WE WOULD EACH DAY SEND OUR REPRESENTATIVE TO THE BANK TO PICK-UP ALL SUCH CHECKS AND WOULD GIVE THE BANK OUR GENERAL ACCOUNT CHECK FOR THE TOTAL AMOUNT OF DOLLARS REPRESENTED BY THE VARIOUS PAY-ROLL CHECKS. THE SECOND REASON, AND FROM THE CONTRACTORS' STANDPOINT THE MOST IMPORTANT REASON, WAS THAT THIS DAILY PICK-UP WOULD ENABLE US TO EACH DAY RECONCILE ALL PAY-ROLL CHECKS, THROUGH OUR IMMEDIATE INSPECTION OF ALL CHECKS WHICH COME THROUGH THE BANKS, WE WOULD DISCOVER THE FORGERIES WITHIN A DAY AND WOULD BE ABLE TO TAKE PROPER PRECAUTIONS TO ELIMINATE THEM. IN THIS CONNECTION, WE CALL TO YOUR ATTENTION THE SITUATION WHICH DEVELOPED DURING THE CONSTRUCTION OF FT. LEONARD WOOD. COUNTERFEITERS VERY CLEVERLY REPRODUCED THE CONSTRUCTION COMPANY'S PAY ROLL CHECK INCLUDING THE MECHANIZED SIGNATURE, AND IN THE COURSE OF ONE DAY, PASSED APPROXIMATELY 30 COUNTERFEIT CHECKS. THIS WAS DISCOVERED IMMEDIATELY THROUGH THE BANK PICK-UP THERE, AND BY IMMEDIATELY POSTING POLICE OFFICERS AT ALL BANKS IN THE AREA THE ATTEMPTED WHOLESALE FLOODING OF COUNTERFEIT CHECKS WAS STOPPED. HAD IT NOT BEEN FOR THE DAILY INSPECTION OF CHECKS WHICH CLEARED, IT IS REASONABLE TO SUPPOSE THAT THE COUNTERFEITERS MIGHT HAVE CASHED HUNDREDS OF FORGED CHECKS BEFORE THEY WERE DISCOVERED. AS STATED HEREINBEFORE, CONTRACTS WITH THE TWO BANKS AT NEOSHO AND THE ONE BANK AT GOODMAN PROVIDE FOR THE PAYMENT OF EIGHT CENTS (8 CENTS) PER PAY ROLL CHECK PICKED UP, AND THE CONTRACTS WITH THE FOUR BANKS AT JOPLIN PROVIDE FOR THE PAYMENT OF FIVE CENTS (5 CENTS) FOR EACH PAY-ROLL CHECK PICKED UP. IN JUSTIFICATION OF THIS CHARGE, THE TWO BANKS AT NEOSHO AND THE BANK AT GOODMAN SUBMITTED TO US AND WE FORWARDED TO THE CONSTRUCTING QUARTERMASTER, STATEMENTS IN WHICH THEY LISTED THE APPROXIMATE ADDITIONAL EXPENSE TO THEM EACH MONTH IN ORDER TO PROVIDE THE SERVICE CONTEMPLATED.

BUREAU VOUCHER NO. 155, SUPRA, COVERS REIMBURSEMENT TO THE CONTRACTOR OF THE SUM OF $133.54, REPRESENTING AMOUNTS PAID TO FOUR OF THE BANKS UNDER THE ABOVE-MENTIONED AGREEMENTS AS COMPENSATION FOR THE PICK-UP OF PAY-ROLL CHECKS DURING THE MONTH OF SEPTEMBER 1941. WITH RESPECT THERETO, IT APPEARS THAT A DIFFERENCE OF OPINION HAS ARISEN BETWEEN THE FINANCE OFFICE AND THE OFFICE OF THE QUARTERMASTER GENERAL AS TO THE GOVERNMENT'S LIABILITY TO REIMBURSE THE CONTRACTOR FOR THE OBLIGATIONS INCURRED BY IT TO THE BANKS UNDER THE ABOVE-MENTIONED AGREEMENTS. IT APPEARS THAT BOTH THE FINANCE OFFICE AND THE OFFICE OF THE QUARTERMASTER GENERAL AGREE THAT, UNDER THE TERMS OF THE COST-PLUS A-FIXED-FEE CONTRACT INVOLVED, THE CONTRACTOR IS ENTITLED TO REIMBURSEMENT OF FEES WHICH ARE PAID TO BANKS FOR THE CASHING OF CHECKS WHICH ARE PRESENTED TO THEM DIRECTLY BY EMPLOYEES OF THE CONTRACTOR. HOWEVER, AS APPEARS FROM THE TERMS OF THE AGREEMENTS WITH THE BANKS, SUPRA, THE COMPENSATION PROVIDED THEREUNDER IS BASED ON THE NUMBER OF CHECKS WHICH ARE RECEIVED BY THE BANKS, CLEARED THROUGH EACH, LISTED, AND DELIVERED TO THE CONTRACTOR IN THE PICK-UP EACH DAY, AND NOT ON THE NUMBER OF CHECKS WHICH ACTUALLY MAY BE CASHED DIRECTLY BY ANY PARTICULAR BANK FOR THE CONTRACTOR'S EMPLOYEES. THE FINANCE OFFICER, KANSAS CITY, MO., OBJECTS TO REIMBURSING THE CONTRACTOR FOR AMOUNTS PAID TO THE BANKS AS CHARGES FOR THE CASHING AND CLEARANCE OF ITS CHECKS WHICH ARE PRESENTED TO THE BANKS BY PERSONS OTHER THAN THE CONTRACTOR'S EMPLOYEES. ON THE OTHER HAND, THE OFFICE OF THE QUARTERMASTER GENERAL HAS APPROVED PAYMENT OF THE FULL AMOUNT OF THE VOUCHER ON THE GROUND THAT THE AGREEMENTS BETWEEN THE CONTRACTOR AND THE BANKS ARE FOR THE PURPOSE OF PROVIDING FACILITIES FOR THE CASHING OF PAY- ROLL CHECKS WITHOUT COST TO THE EMPLOYEES, AND THAT PAYMENT IS NOT BEING MADE FOR THE PROCESSING OR CLEARANCE OF CHECKS THROUGH THE CONTRACTOR'S ACCOUNT GENERALLY, BUT FOR THE FURNISHING OF A CHECK CASHING FACILITY AS REQUIRED BY ARTICLE II, PARAGRAPH 1 Q, OF THE CONTRACT, SUPRA.

THE QUESTION OF REIMBURSING COST-PLUS-A-FIXED-FEE CONTRACTORS FOR CHARGES MADE BY BANKS FOR THE CASHING OF CHECKS OF THE CONTRACTORS' EMPLOYEES HAS BEEN CONSIDERED BY ME IN PREVIOUS DECISIONS TO YOU AND, WITH RESPECT TO THE MATTER, IT WAS HELD IN MY DECISION OF JUNE 30, 1941, B-15851, 20 COMP. GEN. 928, QUOTING FROM THE SYLLABUS, AS FOLLOWS:

REASONABLE AMOUNTS PAID TO BANKS AS "ACTIVITY CHARGES" IN CONNECTION WITH CASHING PAY-ROLL CHECKS OF EMPLOYEES OF WAR DEPARTMENT COST-PLUS A-FIXED- FEE CONTRACTORS, WHO ARE REQUIRED BY " CONSTRUCTION DIVISION LETTER NO. 75" TO PROVIDE FACILITIES FOR CASHING SUCH CHECKS WITHOUT COST TO THE EMPLOYEES, MAY BE REIMBURSED UNDER CONTRACTS PROVIDING FOR REIMBURSEMENT OF SUCH ACTUAL EXPENDITURES AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER, INCLUDING " ALL * * * SERVICES * * * NECESSARY FOR EITHER TEMPORARY OR PERMANENT USE FOR THE BENEFIT OF THE WORK.'

ALSO, SEE B-15851, MAY 9, 1941, B-16272, AUGUST 4, 1941, AND MAY 9, 1941. HOWEVER, THE RECORDS IN SAID CASES DO NOT SHOW THAT THE PRECISE QUESTION HERE INVOLVED WAS PRESENT THEREIN. IN OTHER WORDS, IT DOES NOT APPEAR CLEARLY FROM THE FACTS IN SAID CASES WHETHER THE CHARGE MADE BY THE BANKS COVERED CHECKS OF THE CONTRACTORS WHICH WERE PRESENTED FOR PAYMENT BY OTHERS AS WELL AS THOSE CHECKS WHICH WERE PRESENTED DIRECTLY BY EMPLOYEES OF THE CONTRACTORS.

ORDINARILY, IT WOULD BE DOUBTFUL IF THERE IS ANY OBLIGATION ON THE GOVERNMENT UNDER THE TERMS OF CONTRACT NO. W-7032-QM-15, SUPRA, OR THE VARIOUS FORMS OF COST-PLUS-A-FIXED-FEE CONTRACTS APPROVED BY YOUR DEPARTMENT, TO REIMBURSE COST-PLUS-A-FIXED-FEE CONTRACTORS FOR AMOUNTS PAID TO BANKS FOR SERVICES PERFORMED IN THE CLEARANCE OF CHECKS THROUGH THE ACCOUNTS OF THE CONTRACTORS. AS IS POINTED OUT BY THE FINANCE OFFICER, KANSAS CITY, MO., IN HIS MEMORANDUMS DATED OCTOBER 2 AND NOVEMBER 18, 1941, TO THE CHIEF OF FINANCE, THE PRIMARY PURPOSE OF ARTICLE II, PARAGRAPH 1 Q, OF THE PRIME CONTRACT, AND OF CONSTRUCTION DIVISION LETTER NO. 75, IS TO REQUIRE THE CONTRACTOR TO PROVIDE A FACILITY FOR THE CASHING OF PAY-ROLL CHECKS WITHOUT ANY EXPENSE TO ITS EMPLOYEES, AND THAT WHEN AN EMPLOYEE HAS CASHED HIS CHECK ELSEWHERE THAN AT THE FACILITY PROVIDED FOR BY THE CONTRACTOR, THE SUBSEQUENT CLEARANCE OF THE CHECK THROUGH THE ACCOUNT OF THE CONTRACTOR IN THE ORDINARY COURSE OF BUSINESS WOULD APPEAR TO BE OF NO CONCERN TO THE GOVERNMENT, AND THAT ANY CHARGE FOR SUCH SERVICE WOULD APPEAR TO BE AN ITEM IN THE NATURE OF AN OVERHEAD EXPENSE, THE PAYMENT OF WHICH IS NOT SPECIFICALLY PROVIDED FOR IN COST-PLUS-A-FIXED -FEE CONTRACTS. SEE B 15851, MAY 9, 1941, SUPRA.

HOWEVER, THE FURNISHING BY THE CONTRACTOR OF FACILITIES FOR THE CASHING OF PAY-ROLL CHECKS ISSUED TO ITS EMPLOYEES, WITHOUT CHARGE TO THE LATTER, IS NOT NECESSARILY LIMITED TO MAKING ARRANGEMENTS FOR THE CASHING OF SAID CHECKS BY BANKS ONLY. ANY OTHER SIMILAR ARRANGEMENTS WHICH THE CONTRACTOR MAY FIND IT NECESSARY TO MAKE FOR THE CASHING, WITHOUT CHARGE, OF CHECKS ISSUED TO ITS EMPLOYEES IN ORDER TO SATISFY ITS OBLIGATION UNDER ARTICLE II, PARAGRAPH Q, OF THE CONTRACT, WOULD BE PROPER, AND ANY EXPENSE THUS INCURRED WOULD BE AN ITEM PROPER FOR REIMBURSEMENT IF SUCH WAS FOUND TO BE NECESSARY AND REASONABLE BY THE CONTRACTING OFFICER. WITH RESPECT THERETO, IT APPEARS FROM THE MEMORANDUM OF THE CONTRACTOR, OF NOVEMBER 4, 1941, SUPRA, THAT IN THE INSTANT CASE THE FACILITIES OF THE TWO BANKS LOCATED IN NEOSHO, MO., AT THE SITE OF THE WORK, WERE NOT LARGE ENOUGH TO HANDLE THE CONTRACTOR'S ACCOUNT SO THAT CHECKS COULD BE DRAWN ON SAID BANKS. ALSO, IT APPEARS THAT THE FACILITIES OF THE BANKS WERE NOT ADEQUATE TO ACCOMMODATE THE LARGE NUMBERS OF INDIVIDUALS WHO WOULD BE CASHING CHECKS ON THE CONTRACTOR'S PAY DAYS. ACCORDINGLY, IT BECAME NECESSARY FOR THE CONTRACTOR NOT ONLY TO MAKE ARRANGEMENTS WITH OTHER BANKS IN THE VICINITY FOR THE CASHING, WITHOUT CHARGE, OF CHECKS ISSUED TO ITS EMPLOYEES; BUT ALSO, DUE TO THE LIMITED FACILITIES OF THE LOCAL BANKS, THE CONTRACTOR FOUND IT NECESSARY TO ARRANGE FOR THE COOPERATION OF THE MERCHANTS IN THE VICINITY IN THE MATTER, TO THE END THAT THE EMPLOYEES WOULD BE ABLE TO HAVE THEIR CHECKS CASHED BY THE MERCHANTS WITHOUT CHARGE AND THAT THE MERCHANTS IN TURN WOULD NOT HAVE TO PAY A CHECK CASHING CHARGE AT THE LOCAL BANKS. THEREFORE, THE AGREEMENTS WITH THE BANKS NOT ONLY PROVIDED THAT THE BANKS WOULD CASH CHECKS PRESENTED BY THE CONTRACTOR'S EMPLOYEES WITHOUT CHARGE, BUT ALSO THAT THE BANKS WOULD ACCEPT AND CASH WITHOUT CHARGE ANY OF THE CONTRACTOR'S PAY-ROLL CHECKS WHICH WERE PRESENTED BY LOCAL MERCHANTS OR OTHER PATRONS OF THE BANKS.

HENCE, UNDER THE CIRCUMSTANCES, IT DOES NOT APPEAR THAT THE FEE WHICH IS TO BE PAID TO THE BANKS UNDER THE AGREEMENTS ENTERED INTO WITH THE CONTRACTOR ARE IN THE NATURE OF CHARGES FOR THE CLEARANCE OF CHECKS, IN THE ORDINARY COURSE OF BUSINESS, THROUGH THE CONTRACTOR'S ACCOUNT. RATHER, IT APPEARS THAT SUCH CHARGE IS IN PAYMENT FOR A SPECIAL SERVICE RENDERED TO THE CONTRACTOR WHEREBY ALL CHECKS WHICH ARE ISSUED TO ITS EMPLOYEES ARE CASHED WITHOUT CHARGE BY THE BANKS, WHETHER PRESENTED BY THE EMPLOYEES IN PERSON, OR BY OTHERS. ALSO, AS A PART OF SUCH SERVICE, THE CHECKS WHICH ARE RECEIVED BY THE BANKS ARE COLLECTED AND TURNED OVER TO AN AGENT OF THE CONTRACTOR EACH DAY, WHO IN TURN ISSUES A GENERAL CHECK TO THE BANKS FOR THE TOTAL AMOUNT OF THE CHECKS THUS RECEIVED. IT APPEARS FURTHER THAT SUCH SERVICE IS A PART OF THE NECESSARY ARRANGEMENTS WHICH THE CONTRACTOR WAS REQUIRED TO MAKE DUE TO THE CONDITIONS WHICH EXISTED AT THE PROJECT SITE, IN ORDER TO INSURE THAT ALL EMPLOYEES MIGHT HAVE THEIR CHECKS CASHED WITHOUT CHARGE, AS IS REQUIRED BY ARTICLE II, PARAGRAPH Q, OF THE CONTRACT. THE CONTRACTING OFFICER HAS DETERMINED THAT THE FEE PROVIDED FOR IN THE VARIOUS AGREEMENTS WITH THE BANK IS JUST AND REASONABLE, AND SINCE THE FEE IS TO BE PAID ONLY TO THE BANK WHICH DELIVERS THE CHECKS TO THE CONTRACTOR, REGARDLESS AS TO WHAT BANK ORIGINALLY CASHES THE CHECKS, THERE WILL BE NO DUPLICATE PAYMENT FOR THE CASHING OF ANY CHECK.

ACCORDINGLY, YOU ARE ADVISED THAT PAYMENT ON THE VOUCHER, WHICH IS RETURNED WITH THE SUPPORTING PAPERS, IS AUTHORIZED, IF OTHERWISE CORRECT.