B-167790, DEC 26, 1973

B-167790, DEC 26, 1973

UNDER EXISTING LAW AND IN ABSENCE OF ADDITIONAL ANALYSES SUPPORTING NEED FOR LEGISLATION, THIS OFFICE CANNOT CONCUR IN CHANGE OF PROCEDURES PROPOSED BY ADMINISTRATION OF FEDERAL DISASTER ASSISTANCE ADMINISTRATION IN CONNECTION WITH PROJECT APPLICATIONS FOR FEDERAL ASSISTANCE IN AMOUNT UNDER $10,000.

TO MR. SECRETARY:

BY LETTER OF AUGUST 15, 1973, THE ADMINISTRATOR OF THE FEDERAL DISASTER ASSISTANCE ADMINISTRATION (FDAA) REQUESTED OUR CONCURRENCE IN A PROPOSED CHANGE OF PROCEDURE IN CONNECTION WITH PROJECT APPLICATIONS FOR FEDERAL ASSISTANCE IN AMOUNTS UNDER $10,000.

THE LETTER STATES THAT ALL APPLICATIONS FOR FEDERAL ASSISTANCE (PROJECT APPLICATIONS) BY POLITICAL ENTITIES FOR THE REPAIR RESTORATION OF PUBLIC FACILITIES ARE SUPPORTED BY DAMAGE SURVEY REPORTS (DSR'S) FOR EACH ITEM OF ELIGIBLE WORK. THESE DSR'S ARE BASED ON ESTIMATES PERFORMED BY QUALIFIED ENGINEERS OF A FEDERAL AGENCY, AND ARE REVIEWED BY A REPRESENTATIVE OF FDAA PRIOR TO APPROVAL OF A PROJECT APPLICATION. UNDER NORMAL PROCEDURES, AN ADVANCE OF UP TO 75 PERCENT OF THE TOTAL AMOUNT OF AN APPROVED PROJECT MAY BE MADE WITHOUT REGARD TO THE DOLLAR AMOUNT OF THE APPLICATION. WHEN ALL WORK COVERED BY A PROJECT APPLICATION HAS BEEN COMPLETED, A FINAL INSPECTION IS ACCOMPLISHED BY STATE AND FEDERAL ENGINEERS TO VERIFY THAT THE APPROVED WORK HAS BEEN ACCOMPLISHED. FINAL PAYMENT IS THEN MADE, BASED ON THE FINAL INSPECTION AND STATE AND FEDERAL AUDITS. THE LETTER INDICATES THAT THE FDAA'S EXPERIENCE IN FISCAL YEARS 1971 AND 1972 SHOWS THAT THE FINAL PAYMENT, BASED ON INSPECTION AND AUDIT, AVERAGES 17 PERCENT BELOW THE AMOUNTS APPROVED ON THE PROJECT APPLICATION.

THE ADMINISTRATOR OF FDAA STATES THAT A SIGNIFICANT PORTION OF THE ADMINISTRATIVE WORKLOAD AT THE LOCAL, STATE, AND FEDERAL LEVELS INVOLVES APPLICATIONS FOR LESS THAN $10,000. APPLICATIONS UNDER $10,000 CONSTITUTED 52.2 PERCENT OF ALL APPLICATIONS RECEIVED FROM JANUARY 1, 1971, TO DATE, BUT ACCOUNTED FOR ONLY 3.2 PERCENT OF THE TOTAL DOLLARS OBLIGATED FOR ALL APPLICATIONS. IT IS CONTENDED THAT PROCESSING LARGE NUMBERS OF SMALL PROJECTS DURING PEAK WORKLOADS SUCH AS OCCURRED AFTER TROPICAL STORM AGNES DETRACTS FROM THE ATTENTION THAT FDAA'S PROFESSIONAL STAFF CAN GIVE TO LARGER PROJECTS WITH GREATER COMPLEXITY AND HIGHER FEDERAL FUNDING.

THE ADMINISTRATOR NOW PROPOSES THAT ALL PROJECTS OF LESS THAN $10,000 OF ELIGIBLE WORK UNDER PUBLIC LAW 91-606 BE APPROVED BY THE FEDERAL COORDINATING OFFICER (FCO) FOLLOWING NORMAL PROCEDURES. AFTER APPROVAL BY THE FCO, SUCH PROJECTS WOULD THEN BE ELIGIBLE FOR 100 PERCENT FINAL PAYMENT WITHOUT FURTHER DOCUMENTATION, INSPECTION, OR AUDIT. CERTIFICATION BY THE APPLICANT'S AGENT THAT THE APPROVED WORK HAD BEEN COMPLETED WOULD BE SUBMITTED THROUGH THE STATE COORDINATING OFFICER TO THE FEDERAL COORDINATING OFFICER TO COMPLETE FDAA PROJECT FILES. NO FINAL FEDERAL INSPECTION OR FIELD AUDIT OF THE COMPLETED WORK WOULD BE REQUIRED, BUT MAY BE UNDERTAKEN IN CASES OF ALLEGED FRAUD, OR OCCASIONALLY ON A SAMPLING BASIS.

THE DOCUMENTATION, INSPECTION AND AUDIT PROPOSED TO BE ABANDONED HERE IS, IN EFFECT, RELATED TO THE EXAMINATION OF VOUCHERS REQUIRED TO BE MADE BY OR FOR CERTIFYING OFFICERS PRIOR TO CERTIFICATION OF A VOUCHER. THE ADMINISTRATOR'S LETTER STATES THAT THE FDAA'S EXPERIENCE FOR FISCAL YEARS 1971 AND 1972 INDICATED THAT FINAL PAYMENTS, BASED ON INSPECTIONS AND AUDITS, HAD AVERAGED 17 PERCENT LOWER THAN THE AMOUNTS APPROVED ON THE PROJECT APPLICATIONS. HENCE, UNDER THE PROPOSED PLAN, THE CERTIFYING OFFICERS WOULD BE REQUIRED TO CERTIFY VOUCHERS WITH THE KNOWLEDGE THAT AT LEAST SOME OF THEM CONTAIN PAYMENTS IN EXCESS OF THE AMOUNTS PROPERLY DUE.

SECTION 2 OF THE ACT OF DECEMBER 29, 1941, CH. 641, 55 STAT. 875, 31 U.S.C. 82C, PROVIDES IN PERTINENT PART THAT:

"THE OFFICER OR EMPLOYEE CERTIFYING A VOUCHER SHALL (1) BE HELD RESPONSIBLE FOR THE EXISTENCE AND CORRECTNESS OF THE FACTS RECITED IN THE CERTIFICATE OR OTHERWISE STATED ON THE VOUCHER OR ITS SUPPORTING PAPERS AND FOR THE LEGALITY OF THE PROPOSED PAYMENT UNDER THE APPROPRIATION OR FUND INVOLVED *** AND (3) BE HELD ACCOUNTABLE FOR AND REQUIRED TO MAKE GOOD TO THE UNITED STATES THE AMOUNT OF ANY ILLEGAL, IMPROPER, OR INCORRECT PAYMENT RESULTING FROM ANY FALSE, INACCURATE, OR MISLEADING CERTIFICATE MADE BY HIM, AS WELL AS FOR ANY PAYMENT PROHIBITED BY LAW OR WHICH DID NOT REPRESENT A LEGAL OBLIGATION UNDER THE APPROPRIATION OR FUND INVOLVED***."

FURTHERMORE, IT WAS PROVIDED IN TITLE III OF THE SIXTH SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1942, APPROVED APRIL 28, 1942, CH. 247, 56 STAT. 244, 31 U.S.C. 82F, THAT "THE RESPONSIBILITY AND ACCOUNTABILITY OF CERTIFYING OFFICERS UNDER THE ACT OF DECEMBER 29, 1941 (PUBLIC LAW 389), SHALL BE DEEMED TO INCLUDE THE CORRECTNESS OF THE COMPUTATIONS OF CERTIFIED VOUCHERS ***." THESE ACTS DO NOT, OF COURSE, SPECIFICALLY STATE THAT A CERTIFYING OFFICER MUST EXAMINE DOCUMENTS AND AUDIT EVERY VOUCHER PRESENTED TO HIM FOR CERTIFICATION. NEVERTHELESS, THE HISTORY OF THE ACT OF DECEMBER 29, 1941, CLEARLY INDICATES THAT THE PURPOSE OF THAT ACT WAS TO PLACE THE RESPONSIBILITY FOR THE PROPRIETY AND CORRECTNESS OF GOVERNMENT PAYMENTS UPON THE PERSON IN THE BEST POSITION TO KNOW THE PERTINENT FACTS, THAT IS, THE CERTIFYING OFFICER. OBVIOUSLY, THE ONLY WAY TO KNOW SUCH FACTS IS TO EXAMINE THE VOUCHER AND ITS SUPPORTING PAPERS SO AS TO INSURE, INSOFAR AS POSSIBLE, THAT THE PAYMENT INVOLVED IS PROPER. THE INCLUSION OF RELIEF PROVISIONS IN THE ACT OF DECEMBER 29, 1941, INDICATES THE RECOGNITION ON THE PART OF THE CONGRESS THAT EVEN WITH EXAMINATION OF ALL VOUCHERS AND SUPPORTING PAPERS SOME ERRORS WOULD BE MADE - AND IT IS A KNOWN FACT THAT UNDER THE PRESENT SYSTEM ERRORS ARE MADE - BUT IT IS ALSO CLEAR THAT THE CONGRESS INTENDED THAT A CERTIFYING OFFICER WOULD CERTIFY A VOUCHER ONLY AFTER HE HAD DETERMINED TO THE BEST OF HIS KNOWLEDGE AND BELIEF THAT THE PAYMENT TO BE MADE THEREIN WAS CORRECT AND PROPER AND THAT, IN THE ABSENCE OF FRAUD ON THE PART OF THE CERTIFYING OFFICER, HE WOULD NOT KNOWINGLY CERTIFY ERRONEOUS OR IMPROPER PAYMENTS. WE BELIEVE THAT ANY PLAN WHICH CONTEMPLATES THE CERTIFICATION OF VOUCHERS WITH THE KNOWLEDGE THAT SOME OF THEM - EVEN THOUGH THE PARTICULAR ONES ARE NOT KNOWN - CONTAIN ERRONEOUS OR IMPROPER PAYMENTS VIOLATES THE SPIRIT AND INTENT, IF NOT THE LETTER, OF THE ACTS ESTABLISHING THE RESPONSIBILITY OF CERTIFYING OFFICERS.

THERE IS ALSO FOR CONSIDERATION THE FACT THAT UNDER THE CITED LAWS THE CERTIFYING OFFICER MUST "BE HELD ACCOUNTABLE FOR AND REQUIRED TO MAKE GOOD TO THE UNITED STATES THE AMOUNT OF ANY ILLEGAL, IMPROPER, OR INCORRECT PAYMENT RESULTING FROM ANY FALSE, INACCURATE, OR MISLEADING CERTIFICATE MADE BY HIM, AS WELL AS FOR ANY PAYMENT PROHIBITED BY LAW OR WHICH DID NOT REPRESENT A LEGAL OBLIGATION UNDER THE APPROPRIATION OR FUND INVOLVED." THIS ACCOUNTABILITY AND LIABILITY ATTACHES REGARDLESS OF WHETHER THE CERTIFICATION OF THE IMPROPER PAYMENT IS MADE INADVERTENTLY UNDER THE PRESENT SYSTEM OR KNOWINGLY UNDER THE PROPOSED SYSTEM. IF THE PROPOSED SYSTEM WERE ADOPTED, WE WOULD HAVE NO ALTERNATIVE UNDER EXISTING LAW BUT TO HOLD THE CERTIFYING OFFICERS LIABLE FOR ANY AND ALL ERRONEOUS PAYMENTS DUE TO THEIR CERTIFICATIONS, REGARDLESS OF THE FACT THAT THE VOUCHER PAYMENT WAS NOT PROPERLY DOCUMENTED BECAUSE OF AN ADMINISTRATIVELY APPROVED PLAN. FURTHERMORE, THE RELIEF PROVISIONS OF THE ACT OF DECEMBER 29, 1941, WOULD NOT AUTHORIZE OUR OFFICE TO GRANT RELIEF TO A CERTIFYING OFFICER SOLELY ON THE BASIS THAT THE ERRONEOUS PAYMENT WAS MADE ON A VOUCHER WHICH, UNDER AN ADMINISTRATIVELY APPROVED PLAN, WAS NOT PROPERLY DOCUMENTED. THE LAW AUTHORIZES OUR OFFICE TO GRANT RELIEF, IN OUR DISCRETION, ONLY WHEN WE FIND:

"*** (1) THAT THE CERTIFICATION WAS BASED ON OFFICIAL RECORDS AND THAT SUCH CERTIFYING OFFICER OR EMPLOYEE DID NOT KNOW, AND BY REASONABLE DILIGENCE AND INQUIRY COULD NOT HAVE ASCERTAINED, THE ACTUAL FACTS, OR (2) THAT THE OBLIGATION WAS INCURRED IN GOOD FAITH, THAT THE PAYMENT WAS NOT CONTRARY TO ANY STATUTORY PROVISION SPECIFICALLY PROHIBITING PAYMENTS OF THE CHARACTER INVOLVED, AND THAT THE UNITED STATES HAS RECEIVED VALUE FOR SUCH PAYMENT ***."

THESE GROUNDS FOR RELIEF WOULD NOT BE IN ANY WAY ALTERED BY ADOPTION OF THE PROPOSED PLAN, BUT WOULD OF NECESSITY BE FOR APPLICATION EXACTLY AS THEY ARE NOW APPLIED UNDER THE PRESENT SYSTEM OF VOUCHER EXAMINATION AND DOCUMENTATION.

HENCE, UNDER EXISTING LAW WE CANNOT CONCUR WITH THE USE OF THE PROCEDURE PROPOSED IN THE ADMINISTRATOR'S LETTER. CF. 43 COMP. GEN. 36 (1963). AGREE THAT TOP MANAGEMENT SHOULD FROM TIME TO TIME EVALUATE THE AUDIT ACTIVITIES IN ORDER TO DETERMINE WHETHER THEY ARE MEETING CURRENT NEEDS SATISFACTORILY, WITH MINIMUM INTERFERENCE WITH OPERATING ACTIVITIES, WITHOUT DUPLICATION OF EFFORT, AND AT A REASONABLE COST AND THAT LEGISLATIVE ACTION MAY BE WARRANTED. FDAA OFFICIALS TOLD US, HOWEVER, THAT THERE HAD BEEN NO ANALYSES TO DETERMINE (1) THE EXTENT TO WHICH INSPECTIONS AND AUDITS HAD PREVENTED OVERPAYMENTS ON PROJECTS UNDER $10,000, OR ON PROJECTS OF ANY OTHER DOLLAR AMOUNT; (2) THE COSTS OF THE FEDERAL INSPECTIONS AND AUDITS; AND (3) THE EFFECTIVENESS OF THE STATES' SYSTEMS OF INTERNAL CONTROL, INCLUDING INSPECTIONS AND AUDITS. IF THESE ADDITIONAL ANALYSES SUPPORT THE NEED FOR THE LEGISLATION, WE WOULD NOT BE OPPOSED TO FAVORABLE CONGRESSIONAL CONSIDERATION THEREOF PROVIDED THAT APPROPRIATE PROCEDURES THEREUNDER WOULD BE ESTABLISHED.