B-133862 OM, NOV. 29, 1957

B-133862 OM, NOV. 29, 1957

PRECIS-UNAVAILABLE

THE COMPTROLLER GENERAL:

THE DEPARTMENT OF THE AIR FORCE HAS ISSUED INSTRUCTIONS TO CONSIDER AS A PHYSICAL LOSS OF FUNDS MONEY OBTAINED BY MEANS OF FORGED, FRAUDULENT OR OTHER SPURIOUS DOCUMENTS USED AS DISBURSING DOCUMENTS BY FINANCE PERSONNEL ACTING ALONE OR IN COLLUSION WITH OTHERS.

SECTION 1(A) OF THE ACT OF AUGUST 11, 1955, 69 STAT. 687, STATES THAT WHENEVER ANY DEFICIENCY EXISTS OR OCCURS IN THE OFFICIAL DISBURSING ACCOUNTS OF ANY DISBURSING OFFICER IN CONSEQUENCE OF THE MAKING OF ANY ILLEGAL, IMPROPER OR INCORRECT PAYMENT, AND THE COMPTROLLER GENERAL OR ANY OFFICER OF THE GENERAL ACCOUNTING OFFICE DESIGNATED BY THE COMPTROLLER GENERAL DETERMINES, UPON HIS OWN MOTION OR UPON WRITTEN FINDINGS AND RECOMMENDATIONS MADE BY THE HEAD OF THE DEPARTMENT OR AGENCY CONCERNED OR HIS DESIGNEES FOR THAT PURPOSE, THAT SUCH PAYMENT WAS NOT THE RESULT OF BAD FAITH OR LACK OF DUE CARE ON THE PART OF SUCH DISBURSING OFFICER, THE COMPTROLLER GENERAL OR HIS DESIGNEE IS AUTHORIZED IN HIS DISCRETION TO RELIEVE SUCH DISBURSING OFFICER OF ACCOUNTABILITY AND RESPONSIBILITY, AND ALLOW CREDIT IN HIS OFFICIAL DISBURSING ACCOUNTS. SUCH RELIEF MAY BE DENIED IN ANY CASE IN WHICH THE COMPTROLLER GENERAL OR HIS DESIGNEE DETERMINES THAT THE DEPARTMENT OR AGENCY CONCERNED HAS NOT DILIGENTLY PURSUED COLLECTION ACTION IN ACCORDANCE WITH PROCEDURES PRESCRIBED BY THE COMPTROLLER GENERAL.

SECTION 2(A) OF THE ACT AMENDS THE ACT OF DECEMBER 13, 1944, 58 STAT. 800, AS AMENDED, TO DIRECT THE UNITED STATES GENERAL ACCOUNTING OFFICE TO RELIEVE ANY DISBURSING OFFICER OF THE ARMY, NAVY, AIR FORCE, OR MARINE CORPS OF LIABILITY FOR PHYSICAL LOSS OR DEFICIENCY OF ANY GOVERNMENT FUNDS, VOUCHERS, RECORDS, OR PAPERS IN HIS CHARGE UPON THE DETERMINATION OF THE SECRETARY OF THE DEPARTMENT CONCERNED THAT SUCH LOSS OCCURRED WHILE THE OFFICER WAS IN THE LINE OF HIS DUTY AND THAT SUCH LOSS OR DEFICIENCY OCCURRED WITHOUT FAULT OR NEGLIGENCE ON HIS PART. ANY DETERMINATION MADE BY THE SECRETARY OF THE DEPARTMENT CONCERNED SHALL BE CONCLUSIVE UPON THE GENERAL ACCOUNTING OFFICE. IT FURTHER PROVIDES THAT "NO RELIEF MAY BE GRANTED UNDER THIS ACT WITH RESPECT TO ANY DEFICIENCY IN THE ACCOUNTS OF ANY DISBURSING OFFICER WHICH RESULTS FROM ANY ILLEGAL OR ERRONEOUS PAYMENT."

ALL MAJOR COMMAND LETTER 1219/57 DATED JULY 24, 1957 (ENCLOSURE NO. 1) AMENDS PARAGRAPH 30945 OF AIR FORCE MANUAL 173-10, RELATIVE TO THE RELIEF OF FINANCE OFFICERS FROM LIABILITY FOR PHYSICAL LOSS OF FUNDS, TO STATE: "TO BE ELIGIBLE FOR RELIEF FROM PECUNIARY LIABILITY, THE FINANCE OFFICER AND ALL OTHER PERSONS CHARGEABLE WITH A LOSS MUST BRING BEFORE THE BOARD SATISFACTORY EVIDENCE SHOWING THAT THE LOSS WAS A PHYSICAL LOSS (SUCH AS LOSS BY FIRE, THEFT, DESTRUCTION, COMBAT ACTION, ETC.) AS DISTINGUISHED FROM AN ILLEGAL OR ERRONEOUS PAYMENT. IN ADDITION, IT MUST BE SHOWN BY SATISFACTORY EVIDENCE THAT THE PHYSICAL LOSS OCCURRED (1) WITHOUT FAULT OR NEGLIGENCE ON THE PART OF THE OFFICER CONCERNED AND (2) IN LINE OF HIS DUTY. (LOSS OF GOVERNMENT FUNDS THROUGH EMBEZZLEMENT BY FINANCE PERSONNEL WILL BE CONSIDERED A PHYSICAL LOSS OF GOVERNMENT FUNDS. MONEY OBTAINED BY MEANS OF FORGED, FRAUDULENT OR OTHER SPURIOUS DOCUMENTS, USED AS DISBURSING DOCUMENTS, BY FINANCE PERSONNEL (ACTING ALONE OR IN COLLUSION WITH OTHERS) WILL BE CONSIDERED A PHYSICAL LOSS OF FUNDS.)"

B-127608 OM DATED MAY 28, 1956, IN PERTINENT PART, STATES THAT THE LEGISLATIVE HISTORY OF THE ACT OF AUGUST 11, 1955 INDICATES THAT THE TERMS "ILLEGAL" AND "IMPROPER" AS USED IN THAT ACT DO NOT IMPLY FRAUDULENT OR WRONGFUL CONDUCT, BUT REFER TO A PAYMENT WHICH THE COMPTROLLER GENERAL FINDS IS NOT IN STRICT TECHNICAL CONFORMITY WITH THE LAW.

HOUSE REPORT NUMBER 996, 84TH CONGRESS, 1ST SESSION, RELATING TO THE CITED ACT (ENCLOSURE NO. 2) UNDER GENERAL STATEMENTS ON PAGE 3 STATES "ILLEGAL" OR "IMPROPER" PAYMENT WITHIN THE SENSE OF THIS LEGISLATION IS ONE WHICH THE COMPTROLLER GENERAL FINDS IS NOT IN STRICT TECHNICAL CONFORMITY WITH THE REQUIREMENTS OF LAW APART FROM ANY QUESTION OF FRAUD OR NEGLIGENCE."

SENATE REPORT NUMBER 1185, 84TH CONGRESS, 1ST SESSION, RELATING TO THE CITED ACT (ENCLOSURE NO. 3) UNDER BACKGROUND ON PAGE 2 STATES "IT SHOULD BE NOTED THAT THE TERMS "ILLEGAL" AND "IMPROPER" AS HERE USED DO NOT IMPLY FRAUDULENT OR WRONGFUL CONDUCT, BUT REFER TO A PAYMENT WHICH THE COMPTROLLER GENERAL FINDS IS NOT IN STRICT TECHNICAL CONFORMITY WITH THE LAW."

THE DETERMINATION MADE BY THE DEPARTMENT OF THE AIR FORCE TO INCLUDE LOSSES OF FUNDS ARISING BECAUSE OF EMBEZZLEMENT OR FRAUDULENT ACTS OF FINANCE PERSONNEL WITHIN THE MEANING OF PHYSICAL LOSS OF FUNDS WAS BASED ON CONCLUSIONS SET FORTH IN THE MEMORANDUM LEGAL OPINION OF THE LEGAL AND ADVISORY BRANCH OF THE FIELD SERVICES DIVISION, AIR FORCE FINANCE CENTER (ENCLOSURE NO. 4) AND THE RECOMMENDATIONS OF THE LETTER DATED JULY 3, 1957 (ENCLOSURE NO. 5) TO THE DIRECTOR OF ACCOUNTING AND FINANCE, HEADQUARTERS, UNITED STATES AIR FORCE.

THE CONCLUSION OF THE OPINION IS THAT A LOSS ARISING BECAUSE OF AN UNLAWFUL ACT IS NOT AN ILLEGAL OR IMPROPER PAYMENT, FOR IF NO OBLIGATION OF THE UNITED STATES EXISTS TO EXTINGUISH, A PAYMENT CANNOT BE MADE.

RELIEF WAS REQUESTED BY LETTER DATED AUGUST 28, 1957 FROM THE OFFICE OF THE SECRETARY OF THE DEPARTMENT OF THE AIR FORCE (ENCLOSURE NO. 6), WHICH ADVISED THAT A LOSS OF FUNDS IN THE AMOUNT OF $12,325.52 WAS REPORTED IN THE SEPTEMBER 1954 THROUGH NOVEMBER 1955 ACCOUNTS OF GORDON L. COVERT, SYMBOLS A225-645 AND C225-645. IT WAS REPORTED THAT IT HAD BEEN DETERMINED THAT THE LOSS WAS A PHYSICAL LOSS OF FUNDS, INCURRED IN THE LINE OF DUTY AND WITHOUT FAULT OR NEGLIGENCE ON THE PART OF THE DISBURSING OFFICER.

A COPY OF THE LETTER DATED JUNE 12, 1957 FROM THE OFFICE OF THE COMMANDER, HEADQUARTERS, AIR FORCE FINANCE CENTER TO THE OFFICE OF THE SECRETARY OF THE AIR FORCE (ENCLOSURE NO. 7) SHOWS THAT $8,890 OF THE LOSS OCCURRED WHEN THE DULY APPOINTED CASHIER, AN ENLISTED MAN, OF THE DISBURSING OFFICE UNLAWFULLY OBTAINED THAT SUM BY USE OF 30 FRAUDULENT DOCUMENTS DURING THE PERIOD OCTOBER 1, 1954 THROUGH JUNE 28, 1955. THE CASHIER'S GENERAL MODE OF OPERATION WAS TO MAKE PAYMENTS TO AIRMEN ENTITLED TO CASUAL PAY AND ADVANCE PAY IN THE CORRECT AMOUNTS DUE THEM, WITH PROPER ENTRIES MADE ON THEIR MILITARY PAY RECORDS AND THEN LATER TO INCREASE THESE AMOUNTS ON NME FORM 117, MILITARY PAYROLL MONEY LIST AND CERTIFICATION SHEET, TO SHOW PAYMENTS IN HIGHER AMOUNTS AND POCKETING THE DIFFERENCE. ADDITIONAL LOSSES OF $638 AND $847 OCCURRED IN OCTOBER 1955 WHEN OTHER PERSONS, ACTING IN COLLUSION WITH THE SAME CASHIER, UNLAWFULLY OBTAINED THOSE AMOUNTS BY THE USE OF FALSE DOCUMENTS. LOSS OF $1,738 RESULTED FROM EMBEZZLEMENT ACCOMPLISHED BY SIMILAR MANIPULATIONS BY PERSONS UNKNOWN.

THE LETTER FURTHER EXPRESSES THE OPINION THAT THE LOSS OF $1,738 WAS A PHYSICAL LOSS OF FUNDS RATHER THAN AN ILLEGAL OR ERRONEOUS PAYMENT WITHIN THE MEANING OF SECTION 1, PUBLIC LAW 365, 84TH CONGRESS.

PARAGRAPH 30945 OF AIR FORCE MANUAL 173-10, AS AMENDED, WILL IN EFFECT PRECLUDE THIS OFFICE FROM MAKING A DETERMINATION UNDER SECTION 1 OF THE ACT AS TO WHETHER ILLEGAL, IMPROPER OR INCORRECT PAYMENTS ARE THE RESULT OF BAD FAITH OR LACK OF DUE CARE ON THE PART OF THE DISBURSING OFFICER WHEN DEFICIENCIES ARE CAUSED BY THE FRAUDULENT ACTS OF OTHERS AND WILL ALLOW THE SECRETARY OF THE DEPARTMENT TO MAKE THE DETERMINATION THAT THE LOSS OCCURRED WHILE THE OFFICER WAS IN LINE OF HIS DUTY AND THAT SUCH LOSS OR DEFICIENCY OCCURRED WITHOUT FAULT OR NEGLIGENCE ON HIS PART AS PROVIDED IN SECTION 2(A) OF THE ACT.

THE QUESTION ARISES AS TO WHETHER LOSSES DUE TO EMBEZZLEMENT OR FRAUDULENT ACTS OF FINANCE PERSONNEL, ACTING ALONE OR IN COLLUSION WITH OTHERS, ARE ACTUAL PHYSICAL LOSSES OR DEFICIENCIES FALLING WITHIN THE SCOPE OF SECTION 2(A) OF THE CITED ACT OR ARE ERRONEOUS, ILLEGAL OR IMPROPER PAYMENTS UNDER SECTION 1 OF THE ACT.

INSTRUCTIONS AS TO WHETHER THE AIR FORCE REGULATIONS CONSTITUTE PROPER APPLICATION OF THE PROVISIONS OF PUBLIC LAW 365, 84TH CONGRESS, ARE REQUESTED. IF THE DETERMINATION IS IN THE NEGATIVE, IT IS RECOMMENDED THAT THE SECRETARY OF THE AIR FORCE BE ADVISED ACCORDINGLY.

(INDORSEMENT)

DIRECTOR, DEFENSE ACCOUNTING AND AUDITING DIVISION

RETURNED. THE AIR FORCE REGULATIONS DO NOT APPEAR INCONSISTENT WITH VIEWS HERETOFORE EXPRESSED BY OUR OFFICE RELATING TO PHYSICAL LOSSES OR DEFICIENCIES ARISING THROUGH FRAUDULENT ACTIONS BY SUBORDINATES OF ACCOUNTING OFFICERS. SEE B-101375 OM, APRIL 16, 1951; B-88578 (B 90528), AUGUST 21, 1951. ALSO, SINCE THE REGULATIONS CONCERN FRAUDULENT ACTIONS BY SUBORDINATES OF DISBURSING OFFICERS, THEY ARE NOT IN CONFLICT WITH OUR DECISIONS HOLDING THAT LOSSES RESULTING FROM CASHING OF FORGED CHECKS OR ILLEGAL PAYMENTS ON FRAUDULENT VOUCHERS PRESENTED BY OTHER THAN SUBORDINATES DO NOT INVOLVE A PHYSICAL LOSS OR DEFICIENCY. SEE B-76903, JULY 13, 1948; B-75978, JUNE 1, 1948; 2 COMP.GEN. 277. THEREFORE, LOSSES DUE TO EMBEZZLEMENT OR FRAUDULENT ACTS OF FINANCE PERSONNEL, ACTING ALONE OR IN COLLUSION WITH OTHERS, PROPERLY MAY BE VIEWED AS PHYSICAL LOSSES FOR WHICH RELIEF MAY BE GRANTED UNDER SECTION 2(A) OF THE ACT OF AUGUST 11, 1955, 69 STAT. B 145095, 687, AND THEREFORE THE SUBJECT AIR FORCE REGULATIONS NEED NOT BE QUESTIONED. HOWEVER, IF THERE SHOULD COME TO YOUR ATTENTION A SITUATION WHEN A DETERMINATION TO RELIEVE HAS BEEN MADE UNDER SECTION 2(A) OF THE ACT AND DOUBT EXISTS AS TO WHETHER THE FACTS ESTABLISH A PHYSICAL LOSS OR AN ILLEGAL, IMPROPER OR INCORRECT VOUCHER PAYMENT, FOR WHICH RELIEF WOULD NOT BE GRANTED BY OUR OFFICE IF CONSIDERED UNDER SECTION 1, THE MATTER MAY BE SUBMITTED HERE FOR CONSIDERATION.