B-241019, Aug 19, 1991, 91-2 CPD ***, Office of General Counsel

B-241019: Aug 19, 1991

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APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Certifying officers - Relief - Illegal/improper payments - Overpayments DIGEST: Requests for GAO to relieve supervisory accountable officers must contain the evidence necessary for GAO to independently determine whether the standards for relief have been met. The standards to grant relief are whether the officer maintained a system of controls to prevent the loss and took steps to ensure that the controls were implemented. GAO cannot grant relief based upon an agency's unsubstantiated determination that these standards were met. Your request is based on our authority to relieve disbursing officials under 31 U.S.C. Both invoices were paid on May 25.

B-241019, Aug 19, 1991, 91-2 CPD ***, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Certifying officers - Relief - Illegal/improper payments - Overpayments DIGEST: Requests for GAO to relieve supervisory accountable officers must contain the evidence necessary for GAO to independently determine whether the standards for relief have been met. For supervisory accountable officers, the standards to grant relief are whether the officer maintained a system of controls to prevent the loss and took steps to ensure that the controls were implemented. GAO cannot grant relief based upon an agency's unsubstantiated determination that these standards were met.

Colonel Garry D. Foster:

Finance Corps Chief of Staff

Department of the Army

Colonel Foster:

This responds to your August 27, 1990, request that we relieve Lieutenant Colonel T.F. Sharp (Finance and Accounting Officer, Fort Riley, Kansas) from liability for a $3,080.00 improper payment made out of his account. Your request is based on our authority to relieve disbursing officials under 31 U.S.C. Sec. 3527(c) (1988). We deny your request for relief because the record presented to us does not contain sufficient evidence for us to conclude that Colonel Sharp maintained and enforced an adequate system of procedures and controls to avoid the type of error which resulted in the improper payment at issue.

BACKGROUND

The improper payment resulted from issuing two payments to ETEK (Electronics in Medicine, Inc.) for one month's services. The Accounts Payable Section received invoice 1024 from ETEK on March 27, 1989, for maintenance services for April 1989 under contract DAKF 19-88-C-0104. May 2, an unknown clerk prepared a voucher for invoice 1024 to pay ETEK $3,080.00. Also on May 2, the Accounts Payable Section received invoice 1024A, designated a "revised invoice," from ETEK for April 1989 services. Around May 17, Ms. Maria Rhodes, voucher examiner, prepared a voucher to pay ETEK for invoice 1024A. Both invoices were paid on May 25.

The contract was for maintenance services for the period October 10, 1988 through September 30, 1993. Because the contract was for recurring services, regulations authorized payments based on the vendor invoice and the contract for the second through eleventh payments. Supporting documents such as a receiving report or a certificate of performance only were required for the first and last payments. Army Regulation 37-107, para. 5-3.

The Army Regulations and the Standard Operating Procedures (SOP) for the Accounts Payable Section dated January 11, 1988, require that a bills register card be prepared for each purchase order and filed in the contract folder. The bills register card is used to record information about the related supporting documents necessary to complete a payment voucher. It provides space for recording data from the procurement document, the invoice, the receiving/acceptance report, and payment information from the voucher and check. The bills register card provides a means of preventing duplicate payments. See Army Regulation 37-107, paras. 2-12c and 5-3d.

When Ms. Rhodes prepared a voucher to pay invoice 1024A, the bills register card was not in the contract file, and she prepared a temporary bills register card to record the payment. Both vouchers were certified for payment by Mrs. Lambert, Chief of the Accounts Payable Section.

The overpayment was discovered by the Army's Quality Assurance Branch which reported to Mrs. Lambert that two checks with the same date and same amount were issued on contract DAKF 1988-C-0104. After locating and auditing the contract, Mrs. Lambert agreed that a duplicate payment had been made for the month of April 1989. The $3,080.00 overpayment has not been recovered from the payee.

In your request for relief for Colonel Sharp, you state that "the unknown clerk, Ms. Rhodes and Mrs. Lambert acted in compliance with their procedures. Ms. Rhodes, not subject to pecuniary liability for the duplicate payment under 31 U.S.C. Sec. 3527(c), followed written procedures in preparing the voucher for payment." You also state that the improper payment was not the result of bad faith or lack of reasonable care on the part of Colonel Sharp.

DISCUSSION

As the disbursing officer responsible for the account, Colonel Sharp is personally liable for deficiencies caused by an improper payment made by his subordinates. This Office is authorized to grant relief from liability under 31 U.S.C. Sec. 3527(c) upon a determination that the improper payment was not the result of bad faith or lack of reasonable care by the official and that diligent collection efforts were made. cases where a subordinate of the official actually disbursed the funds, we have granted relief upon a showing that the finance officer properly supervised his subordinates. Proper supervision is demonstrated by evidence that the supervisor maintained an adequate system of procedures and controls to avoid errors and took steps to ensure the implementation and effectiveness of the system. 62 Comp.Gen. 476, 480 (1983); B-234815, Oct. 3, 1989.

We typically base our independent determination about proper supervision on evidence such as the applicable SOPs or regulations and statements explaining the procedures and their implementation by the supervisory and subordinate officials involved. B-234962, Sept. 28, 1989; B-228946, Jan. 15, 1988. When a submission requesting that we grant relief does not contain the evidence needed for this Office to independently determine whether adequate procedures were in place, we cannot grant relief based merely on the agency's unsubstantiated determination. B-222392, Nov. 12, 1986.

The record before us does not contain evidence demonstrating that Colonel Sharp maintained an adequate system of procedures and controls. Army Regulation 37-107, paras. 2-12 and 5-3 clearly emphasize the importance of stringent controls to avoid duplicate payments on recurring payments contracts and specifically note the significance of the bills register card. Paragraph 7a(3)(b) of the SOPs maintained by Colonel Sharp does require that a bills register card be prepared for each purchase order and filed in the contract folder. However, the SOPs do not address the alternative controls that agency officials may rely on, or the actions they should take, when the bills register card is missing. In light of the importance the Army Regulations place on bills register cards to avoid duplicate payments on recurring payment contracts, the record does not demonstrate that the SOPs maintained by Colonel Sharp were adequate to protect against duplicate payments. See B-227436, July 2, 1987. The record contains no evidence of additional policies and procedures imposed by Colonel Sharp designed to prevent duplicate payments on recurring payments contracts.

Further, even if the system of procedures and controls was adequate, the record does not address whether Colonel Sharp took steps to ensure that the procedures were implemented effectively. For example, you assert that all officials involved "complied with their applicable procedures," but you do not explain the absence of the bills register card from the contract file. In addition, you do not explain how the unknown clerk and Ms. Rhodes complied with applicable procedures. Specifically, you do not discuss Ms. Rhodes' treatment of the invoice that was clearly marked "revised," her placement of a substitute bills register card in the contract file, or her failure to bring the absence of the bills registered card to the attention of her supervisor.

Since the record before us does not contain evidence adequate for us to conclude that Colonel Sharp maintained and enforced procedures and controls to avoid this type of loss, we deny the request for relief. such evidence is furnished to us, we would be willing reconsider this decision.