B-220500, SEP 12, 1986, OFFICE OF GENERAL COUNSEL

B-220500, SEP 12, 1986, OFFICE OF GENERAL COUNSEL

DISBURSING OFFICERS - RELIEF - ERRONEOUS PAYMENTS - NOT RESULT OF BAD FAITH OR NEGLIGENCE DIGEST: RELIEF IS GRANTED ARMY DISBURSING OFFICIAL UNDER 31 U.S.C. SEC. 3527(C) FROM LIABILITY FOR THREE IMPROPER PAYMENTS RESULTING FROM PAYEE'S NEGOTIATION OF ORIGINAL AND SUBSTITUTE MILITARY CHECKS. PROPER PROCEDURES WERE FOLLOWED IN THE ISSUANCE OF THE SUBSTITUTE CHECK, THERE WAS NO INDICATION OF BAD FAITH ON THE PART OF THE DISBURSING OFFICIAL AND SUBSEQUENT COLLECTION ATTEMPTS ARE BEING PURSUED. HOWEVER, WE RECOMMEND THAT ARMY DEVELOP GUIDELINES FOR DEALING WITH PAYEES REQUESTING MORE THAN ONE SUBSTITUTE CHECK WITHIN A RELATIVELY SHORT PERIOD OF TIME.

MR. CLYDE E. JEFFCOAT:

PRINCIPAL DEPUTY COMMANDER

U.S. ARMY FINANCE AND ACCOUNTING CENTER

INDIANAPOLIS, INDIANA 46249

THIS RESPONDS TO YOUR REQUESTS OF MARCH 4 AND APRIL 22, 1986, THAT WE RELIEVE CAPTAIN (CPT) W. P. RUGGIA, FINANCE CORPS, DSSN 6410, FINANCE AND ACCOUNTING OFFICE, ROCK ISLAND ARSENAL, ROCK ISLAND, ILLINOIS, UNDER 31 U.S.C. SEC 3527(C) FOR THREE IMPROPER PAYMENTS TOTALLING $558.65, PAYABLE TO MS. VADA L. SHELBY. FOR THE REASONS STATED BELOW, RELIEF IS GRANTED. HOWEVER, WE ARE CONCERNED ABOUT THE LACK OF GUIDELINES FOR DEALING WITH PERSONS REQUESTING MORE THAN ONE SUBSTITUTE AND/OR REPLACEMENT CHECK WITHIN A RELATIVELY SHORT PERIOD OF TIME.

IN THIS CASE THE PAYEE, MS. SHELBY, OVER A PERIOD OF LESS THAN 7 MONTHS, FROM MARCH 1, THROUGH SEPTEMBER 13, 1982, REQUESTED AND RECEIVED FIVE SEPARATE SUBSTITUTE PAYMENTS, TOTALLING $1,027.05. (WE HAVE PREVIOUSLY GRANTED RELIEF TO CPT RUGGIA FOR TWO IMPROPER PAYMENTS MADE TO MS. SHELBY TOTALLING $468.40, B-220500, DECEMBER 16, 1985). IN EACH INSTANCE, THE PAYEE ALLEGED WITHIN THE PROPER TIME FRAME THAT THE ORIGINAL CHECK HAD NOT BEEN RECEIVED AND IN EACH INSTANCE CPT RUGGIA ISSUED THE SUBSTITUTE INSTRUMENT ON THE DAY THE STOP PAYMENT REQUEST WAS MADE. A SUMMARY OF THE EVENTS IS PRESENTED BELOW:

"TABLE OMITTED"

*RELIEF HAS BEEN GRANTED IN THESE CASES. B-220500, DECEMBER 16, 1985.

AS YOU CAN SEE FROM THE CHART, THE DEBIT VOUCHERS FROM TREASURY INDICATING THAT A LOSS HAD OCCURRED DID NOT COME IN UNTIL AFTER MS. SHELBY HAD RESIGNED. FURTHER, THE DEBIT VOUCHERS WERE NOT RECEIVED AT THE SAME TIME OR IN SEQUENCE THAT THE LOSSES OCCURRED. AS A RESULT, CPT RUGGIA FORWARDED THE LOSSES TO USAFAC AT DIFFERENT TIMES.

WE RECEIVED THE RELIEF REQUEST FOR THE CHECKS ISSUED IN JULY AND SEPTEMBER 1982 ON SEPTEMBER 20, 2985. THE SUBMISSION CONTAINED NO INDICATION THAT MS. SHELBY HAD ON THREE OTHER OCCASIONS REQUESTED AND RECEIVED SUBSTITUTE PAYMENTS. HOWEVER, WE DID CONTACT USAFAC ON OCTOBER 2 AND OCTOBER 16, WHEN MS. SHELBY CAME IN FOR WHAT WE ASSUMED WAS THE SECOND TIME. WE WERE INFORMED THAT IN SEPTEMBER WHEN MS. SHELBY APPLIED FOR A SUBSTITUTE CHECK, HER REQUEST HAD TO BE PERSONALLY APPROVED BY CPT RUGGIA. ON THE BASIS OF THIS INFORMATION, WE GRANTED RELIEF.

YOUR SECOND RELIEF REQUEST ON BEHALF OF CPT RUGGIA PERTAINING TO MS. SHELBY WAS DATED MARCH 4, 1984, AND INVOLVED THE AUGUST 1982 CHECK. INCLUDED IN YOUR SUBMISSION WAS A MILITARY POLICE REPORT INVESTIGATING THREE SUBSTITUTE PAYMENTS, THE AUGUST CHECK AND THE TWO CHECKS ISSUED IN MARCH 1982. ON MARCH 19, 1986, WE CONTACTED USAFAC TO FIND OUT THE STATUS OF THE LOSSES RESULTING FROM THE MARCH CHECKS. WE WERE TOLD THAT THESE CASES WERE BEING PROCESSED FOR RELIEF AND THAT WE WOULD RECEIVE THEM AS SOON AS POSSIBLE. YOUR THIRD RELIEF REQUEST ON BEHALF OF CPT RUGGIA INVOLVING MS. SHELBY WAS DATED APRIL 22, 1986.

AFTER RECEIVING YOUR THIRD REQUEST, WE AGAIN REQUESTED INFORMATION ON WHAT STEPS WERE TAKEN BY CPT RUGGIA, IN VIEW OF THE FACT THAT MS. SHELBY HAD REPEATEDLY CLAIMED NON-RECEIPT OF HER ORIGINAL PAYCHECKS AND THAT SHE HAD REQUESTED AND RECEIVED FIVE SUBSTITUTE INSTRUMENTS. WE WERE INFORMED THAT SEPTEMBER CPT RUGGIA PERSONALLY INTERVIEWED MS. SHELBY AND COUNSELED HER TO HAVE HER PAYCHECKS SENT DIRECTLY TO EITHER A BANK OF POST OFFICE BOX.

AS YOU ARE AWARE, THIS OFFICE HAS AUTHORITY UNDER 31 U.S.C. SEC. 3527(C) TO RELIEVE A DISBURSING OFFICER FROM LIABILITY WHEN THE RECORD INDICATES THAT THE DISBURSING OFFICER ACTED WITHIN THE BOUNDS OF DUE CARE AS ESTABLISHED BY APPLICABLE REGULATIONS, THAT THERE IS NO EVIDENCE OF BAD FAITH ON THE PART OF THE DISBURSING OFFICER AND THAT A DILIGENT EFFORT WAS MADE TO COLLECT THE OVERPAYMENT. 62 COMP.GEN. 91 (1982).

IF WE APPLY THIS STANDARD INDIVIDUALLY TO THE OVERPAYMENTS MADE TO MS. SHELBY THE STANDARD WOULD BE MET IN EACH INSTANCE. IT IS ONLY WHEN THE OVERPAYMENTS ARE VIEWED COLLECTIVELY THAT IT BECOMES UNCLEAR WHETHER CPT RUGGIA EXERCISED DUE CARE IN ISSUING FIVE SEPARATE SUBSTITUTE PAYMENTS TO THE SAME PAYEE WITHIN A PERIOD OF LESS THAN 7 MONTHS.

CPT RUGGIA ISSUED THE SUBSTITUTE CHECKS ON THE BASIS OF MS. SHELBY'S ALLEGATIONS THAT SHE HAD NOT RECEIVED HER ORIGINAL PAYCHECKS AND HER REQUEST FOR STOP PAYMENT. FOLLOWING STANDARD PROCEDURES, CPT RUGGIA ISSUED THE SUBSTITUTE CHECKS TO MS. SHELBY ON THE DAYS SHE MADE THE REQUESTS FOR STOP PAYMENTS. WHILE WE DO NOT QUESTION THIS PROCEDURE FOR THE FIRST OR EVEN SECOND REQUEST, WHEN MS. SHELBY CAME IN FOR THE THIRD TIME, WE BELIEVE CPT RUGGIA SHOULD HAVE DELAYED ISSUING THE SUBSTITUTE PAYMENT WHILE HE ATTEMPTED TO VERIFY FROM THE DEPARTMENT OF TREASURY THE STATUS OF THE PREVIOUSLY ISSUED INSTRUMENTS. IN ADDITION, WE THINK THAT CPT RUGGIA SHOULD HAVE COUNSELED MS. SHELBY AT THAT TIME TO HAVE HER PAY DEPOSITED DIRECTLY IN A FINANCIAL INSTITUTION WHERE ITS RECEIPT COULD BE VERIFIED. OBVIOUSLY, CPT RUGGIA WAS AWARE OF THE PROBLEM WHEN HE DID COUNSEL MS. SHELBY AFTER THE FIFTH OCCASION.

THERE ARE NO ARMY REGULATIONS REQUIRING THAT A FINANCE OFFICER DELAY ISSUING A SUBSTITUTE CHECK TO A PAYEE WHO HAD, IN THE PAST CLAIMED NON RECEIPT, NOR ARE THERE REGULATIONS OR GUIDELINES REQUIRING A FINANCE OFFICER TO VERIFY THE STATUS OF PREVIOUSLY ISSUED CHECKS. THE ARMY'S POLICY IS TO ISSUE SUBSTITUTE CHECKS WITHIN 3 DAYS AFTER THE DATE OF THE ORIGINAL CHECK, WHEN THERE IS NO INDICATION OF FRAUD ON THE PART OF THE PAYEE. THE PURPOSE OF THIS POLICY IS TO AVOID THE CREATION OF HARDSHIP TO INDIVIDUALS WHERE PAYMENTS ARE DENIED. 63 COMP.GEN. 337 (1984). UNDER THESE CIRCUMSTANCES, AND IN VIEW OF THE FACT THAT WE HAD PREVIOUSLY GRANTED RELIEF TO CPT RUGGIA FOR THE THIRD AND FIFTH PAYMENTS, WE WILL GRANT RELIEF HERE.

NEVERTHELESS, WE THINK THAT THE ARMY SHOULD DEVELOP GUIDELINES FOR HANDLING MULTIPLE REQUESTS BY THE SAME PAYEE FOR SUBSTITUTE PAYMENTS. THE CONTENT OF SUCH GUIDANCE WOULD, OF COURSE BE UP TO THE ARMY TO DETERMINE. HOWEVER, WE SUGGEST THAT AFTER THE SECOND REQUEST FOR STOP PAYMENT WITHIN A 6-MONTH PERIOD, THE PAYEE SHOULD BE COUNSELED TO HAVE CHECKS SENT DIRECTLY TO A FINANCIAL INSTITUTION. THIS WAY, THE ARMY CAN ASCERTAIN IF THE ORIGINAL CHECKS ARE BEING RECEIVED.

IN ADDITION, WE WOULD RECOMMEND THAT AFTER A SUBSTITUTE CHECK HAS BEEN ISSUED ON TWO PREVIOUS OCCASIONS, STEPS BE TAKEN IMMEDIATELY TO VERIFY THE STATUS OF THE PRIOR ISSUED CHECKS BEFORE ISSUING ANOTHER ONE. UNDERSTAND THAT ABOUT 30 DAYS AFTER A STOP PAYMENT REQUEST IS MADE, A FINANCE OFFICER CAN CALL THE DEPARTMENT OF THE TREASURY'S DIVISION OF CHECK CLAIMS AND FIND OUT IF THE CHECK HAS BEEN NEGOTIATED. INFORMATION FROM TREASURY THAT BOTH ORIGINAL AND SUBSTITUTE CHECKS HAVE BEEN CASHED ON EITHER OF THE TWO PREVIOUS OCCASIONS WOULD PROVIDE A BASIS FOR REFUSING TO ISSUE FUTURE SUBSTITUTE CHECKS. IT ALSO WOULD ALLOW COLLECTION OF THE OVERPAYMENTS WHILE THE EMPLOYEE IS STILL EMPLOYED.

IF THE STOP PAYMENT REQUEST IS FOR THE PAYEE'S FINAL PAY CHECK, WE WOULD ALSO RECOMMEND THAT THE FINANCE OFFICER VERIFY THE STATUS OF ANY PREVIOUSLY ISSUED SUBSTITUTE PAYMENT BEFORE ISSUING THE SUBSTITUTE CHECK.

FINALLY, WE WOULD FIND IT HELPFUL IF, IN THE FUTURE, YOUR RELIEF REQUEST INCLUDES INFORMATION ON WHETHER THE PAYEE HAS AT ANY TIME RECEIVED A SUBSTITUTE CHECK AND IF SO WHAT THE STATUS OF THE CHECKS ARE. THIS INFORMATION SHOULD BE AVAILABLE SINCE UNDER ARMY REGULATIONS, RECORDS OF SUBSTITUTE CHECKS ISSUED MUST BE RETAINED BY THE FINANCE AND ACCOUNTING OFFICER FOR A PERIOD OF 3 YEARS. AR-37-103, PARA. 4-165.