Matter of: Patrick J. Gavigan File: B-248781 Date: September 29, 1992

B-248781: Sep 29, 1992

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Sec. 2774 may not be granted where an enlisted member of the Navy Reserve should have known he was not entitled to retain bonus payments received after he was commissioned as an officer. MILITARY PERSONNEL Pay Overpayments Error detection Debt collection Waiver The Comptroller General is authorized by 10 U.S.C. The portion of a debt arising from a bonus that was proper at the time it was paid is not a debt arising out of an erroneous payment. Even though the portion was subsequently deemed to be unearned. DECISION This action is in response to a request from Patrick Gavigan for reconsideration of our Claims Group's denial of his request for waiver under 10 U.S.C. He was required to maintain his status as an enlisted member to remain eligible for the bonus payments.

Matter of: Patrick J. Gavigan File: B-248781 Date: September 29, 1992

MILITARY PERSONNEL Pay Overpayments Error detection Debt collection Waiver Waiver under 10 U.S.C. Sec. 2774 may not be granted where an enlisted member of the Navy Reserve should have known he was not entitled to retain bonus payments received after he was commissioned as an officer. Member signed a reenlistment contract which states that his bonus entitlement
would end if he became "separated from the selected reserve for any reason
as an enlisted person" prior to the fulfillment of his obligation.
MILITARY PERSONNEL
Pay
Overpayments
Error detection
Debt collection
Waiver
The Comptroller General is authorized by 10 U.S.C. Sec. 2774 to waive a
claim of the United States arising from an erroneous payment of pay and
allowances. The portion of a debt arising from a bonus that was proper at
the time it was paid is not a debt arising out of an erroneous payment,
even though the portion was subsequently deemed to be unearned.
Accordingly the waiver statute does not apply, and waiver may not be
granted.

DECISION

This action is in response to a request from Patrick Gavigan for reconsideration of our Claims Group's denial of his request for waiver under 10 U.S.C. Sec. 2774 of his debt of $920 which he incurred incident to his receipt of a reenlistment bonus under a Selected Reserve incentive program. We agree with our Claims Group's determination that waiver may not be granted.

Mr. Gavigan reenlisted in the U.S. Navy Reserve on November 20, 1982, under the Selected Reserve incentive program. Under this program, Mr. Gavigan received both an initial bonus payment on reenlistment and three subsequent annual bonus payments. Under his reenlistment contract, he was required to maintain his status as an enlisted member to remain eligible for the bonus payments.

On July 31, 1983, Mr. Gavigan was commissioned as an officer in the Naval Reserve. As a result, he lost his enlisted status and became ineligible for further payments under the Selected Reserve incentive bonus program. Moreover, as provided by his contract and under applicable law, he became subject to a statutory provision, also reflected in his contract, requiring that he return, on a pro rata basis, the unearned portion of the initial bonus payment he received at the time of reenlistment. The Navy calculated the unearned portion of the bonus to be $470.

As a result of an administrative error, Mr. Gavigan continued to receive annual bonus payments after his commissioning in 1983. He received payments on January 27, 1984, on February 15, 1985, and finally on March 4, 1986, totalling $450. The Navy eventually discovered the error, and by letter dated April 13, 1988, apparently not received by Mr. Gavigan until October 1988, informed Mr. Gavigan of a total indebtedness to the government of $920 plus any accrued interest.

In November 1988, Mr. Gavigan applied to the Navy for a waiver of his obligation to repay the debt. In January 1989, the Navy denied Mr. Gavigan's request for waiver of the $920 debt, stating that the debt arose out of "payment legal and proper when made . . ." and is therefore "statutorily barred, thus prohibiting waiver consideration." Mr. Gavigan replied to the Navy in February 1989, this time requesting a waiver for $450 only, an amount reflecting the three annual bonus payments which he stated "were not legal and proper when made." The Navy agreed that the three annual payments were erroneous, and therefore could be considered for waiver, but nonetheless denied a waiver, stating that Mr. Gavigan "should have known the payments were erroneous as there is not a bonus program for officers." Mr. Gavigan requested reconsideration of the Navy's denial, and the Navy then forwarded the matter to our Claims Group. By settlement dated August 7, 1989, our Claims Group denied the waiver of the $450 in annual bonus payments on the same basis as the Navy's denial, and also upheld the Navy's determination that the debt arising from the $470 bonus payment was not appropriate for waiver consideration. In March 1992, Mr. Gavigan again requested reconsideration of the denial of his waiver request.

On review, we conclude that the amount of $470, representing the pro rata portion of the initial reenlistment bonus payment for which service as an enlisted member was not performed, may not be considered for waiver under 10 U.S.C. Sec. 2774. The statute authorizes waiver of claims of the United States arising only out of erroneous payments of pay and allowances. Payments which are valid when made are not erroneous payments for the purposes of waiver under section 2774. This is the case even though a member may become indebted as a result of circumstances occurring later. Andrew J. Jossis, B-236270, Jan. 26, 1990.

At the time of the payment of the initial reenlistment bonus payment, Mr. Gavigan was legally and validly entitled to the payment. Section 308b of title 37 provides that an enlisted member of a reserve component who has less than 10 years of military service who reenlists for a 3- or 6-year period in a designated military skill or unit may be paid a bonus. The statute provides for an initial payment, which must be refunded on a pro rata basis if the member fails to satisfactorily complete his period of enlistment. At the time of reenlistment, Mr. Gavigan had completed 7 years and 9 months of federal military service. Since it does not qualify as an erroneous payment, the $470 is not subject to waiver under 10 U.S.C. Sec. 2774.

However, the remaining $450, representing three annual bonus payments, arose from erroneous payments, and may thus be considered for waiver. We agree with the Claims Group determination that waiver must be denied. Section 2774 of title 10, United States Code, provides that the Comptroller General or the Secretary concerned may not exercise his authority under this section to waive any claim if in his opinion there exists any indication of fault, fraud, misrepresentation or lack of good faith on the part of the member. Fault, as used in section 2774, is considered to exist if in light of all the facts it is determined that the member should have known that an error existed and taken action to have it corrected.

In the present case, Mr. Gavigan's reenlistment contract spells out the requirements and restrictions of the reenlistment bonus. Included is the requirement that to maintain his eligibility for reenlistment bonus payments, he had to maintain his enlisted status:

"4. In the event that my entitlement to the bonus is terminated for any reason prior to the fulfillment of my contract and obligation, I will not be eligible to receive any additional bonus payments. Termination of bonus entitlement and refund of a pro rata amount of the incentive will be required for failure to maintain satisfactory participation as a member of the drilling reserve: separation from the selective reserve for any reason as an enlisted person . . . ." (Emphasis added.)

Mr. Gavigan signed the document just below a concluding section that states: "I have read and understand each of the statements above contained in my enlistment contract signed by me . . . ." Under these circumstances, we conclude we must hold Mr. Gavigan to knowledge of the provisions of his contract.

Even though administrative error caused the erroneous annual payments, it is our view that Mr. Gavigan should at a minimum have questioned his entitlement to the bonus payments made to him after he had separated from the enlisted reserve and accepted a commission as an officer. We find that he was not without fault as defined in light of the statute. We therefore conclude we may not waive his indebtedness. Accordingly, we uphold the Claims Group's denial of waiver.

The Honorable Wally Herger Member, United States House of Representatives 55 Independence Circle Suite 104 Chico, California 95926

Dear Mr. Herger:

This is in response to your letter of April 14, 1990 regarding your constituent Patrick Gavigan. Mr. Gavigan, formerly a member of the Navy, requests waiver of a debt incurred when he continued to receive and accept re-enlistment bonus payments after he became ineligible for them. He lost his eligibility for the bonus payments in June 1983 when he was separated from the enlisted ranks and commissioned as a Naval officer.

Enclosed is our decision, Patrick J. Gavigan, B-248781, dated today, in which we uphold the denial of waiver by the Navy and our Claims Group. While we regret that we are unable to provide you with a more favorable response, we trust this serves the purpose of your inquiry.

Date: To: Director, Claims Group/GGD - Sharon Green From: General Counsel - James F. Hinchman

Subject: Patrick J. Gavigan (B-248781)

Returned herewith is your file Z-2900917 and our decision, Patrick J. Gavigan, dated today, in which we upheld the denial of waiver.

The Honorable Wally Herger Member, United States House of Representatives 55 Independence Circle Suite 104 Chico, California 95926

Captain D.W. Smith, USN Acting Deputy Director Defense Finance and Accounting Service Cleveland Center 1240 East Ninth Street Cleveland, Ohio 44199-2055

Mr. Mitchell, OGC

Ms. Barnes, OGC

Ms. Maguire, OGC

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