B-75684, MAY 18, 1948, 27 COMP. GEN. 703

B-75684: May 18, 1948

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SO THAT IT SET-OFF IS ACTUALLY ACCOMPLISHED FROM IMMEDIATELY AVAILABLE FUNDS TO THE CREDIT OF THE EMPLOYEE. AS FOLLOWS: YOUR ATTENTION IS INVITED TO CHAPTER R5. THAT ALL OTHER MEANS OF RECOVERY HAVE BEEN EXHAUSTED BY THE ADMINISTRATIVE OFFICE.'. " ALSO HAS A SPACE FOR CERTIFICATION THAT THE DEBT IS PROPERLY DUE THE UNITED STATES. WHICH CERTIFICATION INCLUDES THE PHRASE "AND THAT ALL OTHER MEANS OF RECOVERY HAVE BEEN EXHAUSTED.'. PRACTICALLY ALL FORMER POSTAL EMPLOYEES WERE BONDED WHILE IN THE POSTAL SERVICE. I WOULD APPRECIATE YOUR ADVISING WHETHER OUR INTERPRETATION OF THE LANGUAGE QUOTED IS CORRECT IN THAT IT WOULD BE NECESSARY TO MAKE DEMAND UPON THE SURETY AND. IT IS WELL ESTABLISHED THAT " IT IS LEGAL AND PROPER FOR THE GOVERNMENT.

B-75684, MAY 18, 1948, 27 COMP. GEN. 703

SET-OFF - RETIREMENT FUND CREDITS - BONDED INDEBTEDNESS IN CONNECTION WITH AN INDEBTEDNESS DUE THE GOVERNMENT ARISING FROM A LOSS COVERED BY AN EMPLOYEE'S BOND, THE LOSS SHOULD BE REPORTED TO THE CIVIL SERVICE COMMISSION FOR SET-OFF AGAINST THE AMOUNT TO THE EMPLOYEE'S CREDIT IN THE RETIREMENT AND DISABILITY FUND WITHOUT AWAITING FINAL ADJUDICATION OF THE GOVERNMENT'S CLAIM AGAINST THE SURETY UNDER THE BOND, SO THAT IT SET-OFF IS ACTUALLY ACCOMPLISHED FROM IMMEDIATELY AVAILABLE FUNDS TO THE CREDIT OF THE EMPLOYEE, THE SUBSEQUENT COLLECTION FROM THE SURETY PROPERLY WOULD BE REDUCIBLE IN THE AMOUNT SO RECOVERED.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, MAY 18, 1948:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF APRIL 24, 1948 ( REFERENCE 3), AS FOLLOWS:

YOUR ATTENTION IS INVITED TO CHAPTER R5, PAGE 71, OF THE FEDERAL PERSONNEL MANUAL, EDITION DATED MARCH 8, 1948, WHICH READS AS FOLLOWS:

" ALL AGENCY REQUESTS FOR SET-OFF SHALL BE ON CSC FORM 3037, AND SHALL BE SUBMITTED IN DUPLICATE TO THE CIVIL SERVICE COMMISSION. EACH REPORT MUST INCLUDE A CERTIFICATE BY AN ADMINISTRATIVE OFFICER OF THE AGENCY THAT A VALID INDEBTEDNESS TO THE UNITED STATES EXISTS IN THE EXACT AMOUNT REPORTED, AND THAT ALL OTHER MEANS OF RECOVERY HAVE BEEN EXHAUSTED BY THE ADMINISTRATIVE OFFICE.'

THE FORM 3037, ENTITLED " REQUEST FOR RECOVERY OF DEBT DUE THE UNITED STATES," ALSO HAS A SPACE FOR CERTIFICATION THAT THE DEBT IS PROPERLY DUE THE UNITED STATES, WHICH CERTIFICATION INCLUDES THE PHRASE "AND THAT ALL OTHER MEANS OF RECOVERY HAVE BEEN EXHAUSTED.'

PRACTICALLY ALL FORMER POSTAL EMPLOYEES WERE BONDED WHILE IN THE POSTAL SERVICE. I WOULD APPRECIATE YOUR ADVISING WHETHER OUR INTERPRETATION OF THE LANGUAGE QUOTED IS CORRECT IN THAT IT WOULD BE NECESSARY TO MAKE DEMAND UPON THE SURETY AND, IF NECESSARY, TO BRING SUIT AGAINST THE SURETY AND THE PRINCIPAL BEFORE THE CERTIFICATION REQUIRED ON THE FORM 3037 COULD BE PROPERLY MADE AND CLAIM FOR SET-OFF FILED.

IT IS WELL ESTABLISHED THAT " IT IS LEGAL AND PROPER FOR THE GOVERNMENT, THROUGH ADMINISTRATIVE OFFICES, TO FIRST APPLY ALL AVAILABLE ASSETS IN ITS POSSESSION, INCLUDING BOTH UNPAID SALARY AND AMOUNT IN THE RETIREMENT FUND, BELONGING TO A DEFAULTING OFFICER OR EMPLOYEE, TOWARD LIQUIDATION OF THE INDEBTEDNESS, BEFORE RESORTING TO ITS REMEDY UNDER THE BOND OF THE OFFICER OR EMPLOYEE"--- QUOTING FROM THE SYLLABUS OF 7 COMP. GEN. 305. SEE, ALSO, UNITED STATES V. UNITED STATES FIDELITY AND GUARANTY CO., 35 F.SUPP. 959.

ACCORDINGLY, IN ORDER THAT THE INTERESTS OF THE UNITED STATES MAY BE FULLY PROTECTED, AN INDEBTEDNESS DUE THE GOVERNMENT ARISING FROM A LOSS COVERED BY THE EMPLOYEES' BOND SHOULD BE REPORTED TO THE CIVIL SERVICE COMMISSION FOR SET-OFF AGAINST THE RETIREMENT AND DISABILITY FUND WITHOUT AWAITING FINAL ADJUDICATION OF THE GOVERNMENT'S CLAIM AGAINST THE SURETY. THUS, IF THE AMOUNT TO THE EMPLOYEE'S CREDIT IN THE RETIREMENT FUND IS IMMEDIATELY AVAILABLE FOR SET-OFF, AND IF SET-OFF ACTUALLY IS ACCOMPLISHED BY THE CIVIL SERVICE COMMISSION, SUBSEQUENT COLLECTION FROM THE SURETY UNDER THE BOND PROPERLY WOULD BE REDUCIBLE IN THE AMOUNT SO RECOVERED. OTHER WORDS, THE TWO REMEDIES AVAILABLE TO THE GOVERNMENT IN SUCH CASES SHOULD BE EXERCISED CONCURRENTLY AND THE LIABILITY OF THE SURETY IN ANY EVENT IS THE UNRECOVERED PORTION OF THE GOVERNMENT'S LOSS AT THE TIME OF FINAL SETTLEMENT UNDER THE BOND.