B-241201 August 23, 1991

B-241201: Aug 23, 1991

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Relief is denied. The facts are as follows. The Commission was left without a payroll bank account against which salary checks could be drawn and. You maintain that it "was essential to the continued operation of the Panama Canal that the Commission not only arrange a bank account against which [salary] checks could be drawn but to arrange to cash those checks expeditiously for each and every employee.". The Commission also decided that it was necessary to cash retirement checks for the thousands of retirees from U.S. agencies living in Panama. "Not to do so would have caused resentment against the U.S. Government and would likely have been seen as a lack of commitment by the U.S. to its past and present employees.

B-241201 August 23, 1991

Mr. Fernando Manfredo, Jr. Acting Administrator Panama Canal Commission Office of the Administrator APO Miami, Florida 34011-5000

Dear Mr. Manfredo:

This responds to your request of September 10, 1990, that we relieve four accountable officers of the Panama Canal Commission (Commission) for losses in their accounts that occurred during the 1988 Panama banking crisis. Carlos Payne, Assistant Treasurer, had a loss of $9,119.82; Claudette M. Morrell, Teller, had a loss of $1,133.31; Julio C. Gary, Contract Teller, had a loss of $1,120.01; and David G. Clark, Teller, had a loss of $946.24. For the reasons stated below, relief is denied.

BACKGROUND

Based on your submission, the facts are as follows. On March 3, 1988, Panama's Banking Commission ordered the immediate closure of all banks in Panama, including the local branches of the two U.S. based banks used by the Commission to conduct its financial business. This action left the Commission facing a serious financial crisis. Among other things, the Commission was left without a payroll bank account against which salary checks could be drawn and, more importantly, without a source of cash. You maintain that it "was essential to the continued operation of the Panama Canal that the Commission not only arrange a bank account against which [salary] checks could be drawn but to arrange to cash those checks expeditiously for each and every employee." During the crisis, the Commission also decided that it was necessary to cash retirement checks for the thousands of retirees from U.S. agencies living in Panama. "Not to do so would have caused resentment against the U.S. Government and would likely have been seen as a lack of commitment by the U.S. to its past and present employees. It was determined as U.S. Government policy that such a perception would have seriously hampered Commission operations, perhaps even U.S. foreign relations, and undermined confidence in the U.S. Government." To meet these increased demands during the crisis, the Commission worked out an arrangement with the U.S. Army and the Treasury Department to obtain the needed cash and for use of the military's banking facility which had not been closed.

The banks in Panama were closed for approximately nine weeks. Banks reopened for deposits and interbank check clearing on April 18, 1988, expanded banking services on April 26, 1988, and on May 9, 1988, allowed limited withdrawals from customer accounts. Nonetheless, you contend that "employees remained understandably reluctant to deposit their payroll checks into accounts in banks which permitted withdrawal of only a portion of the deposit and might be subject to further closure." For this reason, employees continued to cash their payroll checks at the Commission.

The closure of the banks in Panama and the Commission's decision to offer replacement banking services thus resulted in a dramatic increase in the volume of cash handled by the Commission. Before the banking crisis, the Commission needed $2.5 - 3 million per month to meet its payroll and daily operational needs. Between March 1988 and December 1988, the Commission's Treasurer's office cashed between $8.4 - 12.76 million in checks per month.

A financial audit of the Commission's accounts at this time revealed unexplained shortages in four accountable officers' accounts; the Assistant Treasurer, two tellers, and a contract teller all had significant shortages. Substantially all of the shortages occurred between May 24, 1988 and August 26, 1988, after the date local banks had reopened and permitted limited withdrawal of funds.

Discussion

An accountable officer is held to a high standard of care with respect to funds with which the officer is charged and is automatically liable at the moment a physical loss occurs. 54 Comp.Gen. 112 (1974); B-241478, Apr. 5, 1991. However, under 31 U.S.C. Sec. 3527(a), this Office is authorized to relieve an accountable officer of liability for a physical loss of government funds if we concur in the determination of the head of the agency that: (a) the loss occurred while the officer was carrying out his official duties and (b) the loss was not the result of fault or negligence on the part of the officer.

We concur with your determination that the losses occurred while the accountable officers were carrying out their official duties. The more difficult issue in this case is whether the losses were the result of the accountable officers' negligence. When a loss of funds occurs, an accountable officer is presumed negligent. To grant relief, this presumption must be rebutted with convincing evidence that the loss was not caused by the accountable officer's negligence or lack of reasonable care. B-241478, Apr. 5, 1991. Indeed, the mere absence of evidence implicating the accountable officer in the loss is not sufficient to rebut the presumption of negligence. B-209569, Apr. 13, 1983.

You maintain that the four accountable officers were without fault or negligence and offer two possible explanations for the shortages in the accounts. You indicate, first, that the losses were the result of the increased workload in the Treasurer's office during the Panamanian banking crisis. As stated in your September 10 letter, "the crisis and its aftermath necessitated handling 5-10 times the amount of cash which the Treasurer's office was actually equipped to handle." We have long recognized, however, that an unusually heavy workload is not a basis upon which to grant relief to an accountable officer for an unexplained loss. See, e.g., 48 Comp.Gen. 566 (1969); B-189085, Jan. 3, 1979.

You also contend that the decision by Commission officials to cash all payroll and retirement checks necessitated the Commission's bypassing certain internal controls. For example, to accommodate the increased workload, cash was not always stored in locked safes. In this regard, the Treasurer's office has a steel walk-in-vault which contains safes for storing cash assigned to individual tellers. The vault also contains a walk-in cage where the Assistant Treasurer's safes are located. The Treasurer and the Assistant Treasurer both had keys to the walk-in cage. There apparently was not room in the safes during the crisis for all of the items which normally would have been secured there. Items which could not be accommodated in the safes were therefore stored in the walk-in cage. Prior to the banking crisis, all cash other than bags of coins were stored in safes inside one cage; during the period when large amounts of cash were maintained in the Treasurer's office, both bags of coins and stacks of bills in open trays were stored in the walk-in cage. After the worst of the crisis was over, the Treasurer's office returned to its regular practice of storing only bags of coins outside a safe except for those funds brought in on paydays.

Other internal controls were also bypassed. For example, supervisory verifications were not made or were made informally without resolving differences between physical counts and accountability records. Moreover, daily deposits were not made intact) checks were deposited but cash was retained at The Treasurer's office.

You maintain that "any apparent laxity in security and accountability . . . was not within the control of the accountable officers but rather was solely attributable to the necessary actions of the agency at higher levels." You argue that "the accountable officers in each case could not and did not have direct control over funds and cash at all times," and that because more than one person had keys to the cage, "total access to the cash could not be controlled by [any one] accountable officer."

We do not question the policy decision of the Commission in response to the banking crisis. However, the record submitted to us does not provide the evidence required to rebut the presumption of negligence that attaches upon a loss of funds. For example, while you argue that the accountable officers did not have direct control over the funds in their accounts, the record states that cash was "secured in safes within the cash cage by the accountable officer since June 1, 1991." The record also notes that substantially all of the shortages occurred after June 1, 1991. In addition, there is no evidence presented to indicate that more than one person had access to any one safe. When we have in the past granted relief because more than one person had access to funds, the record made clear that more than one person could, in fact, have been responsible for the loss. See e.g., B-227714, Oct. 20, 1987.

For these reasons, we deny relief to the four accountable officers in this case. Nonetheless, if you can provide information to show that any funds were lost during the period when funds were not secured in individually assigned safes, or any other pertinent information, we will reconsider your request for relief.

Sincerely yours,

Gary L. Kepplinger Associate General Counsel