Skip to main content

B-179659, APR 4, 1975, 54 COMP GEN 827

B-179659 Apr 04, 1975
Jump To:
Skip to Highlights

Highlights

OFFICERS AND EMPLOYEES - TRANSFERS - RELOCATION EXPENSES - FINANCE CHARGES - REASONABLENESS TRANSFERRED EMPLOYEE MAY BE REIMBURSED ONLY FOR THOSE PORTIONS OF A "FINANCE OR SERVICE CHARGE" THAT ARE LISTED AS EXCLUDABLE CHARGES UNDER FEDERAL RESERVE REGULATION Z. DETERMINATION OF REASONABLENESS OF AMOUNT OF INDIVIDUAL ITEMS IS A FACTUAL DETERMINATION TO BE MADE BY THE CERTIFYING OFFICER AFTER EXAMINATION OF ENTIRE RECORD AND AFTER CONSULTATION WITH APPROPRIATE REGIONAL OFFICE OF DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. 1975: THIS MATTER IS BEFORE US BASED UPON A REQUEST FOR AN ADVANCE DECISION SUBMITTED BY AN AUTHORIZED CERTIFYING OFFICER OF THE CHICAGO OPERATIONS OFFICE OF THE ATOMIC ENERGY COMMISSION.

View Decision

B-179659, APR 4, 1975, 54 COMP GEN 827

OFFICERS AND EMPLOYEES - TRANSFERS - RELOCATION EXPENSES - FINANCE CHARGES - REASONABLENESS TRANSFERRED EMPLOYEE MAY BE REIMBURSED ONLY FOR THOSE PORTIONS OF A "FINANCE OR SERVICE CHARGE" THAT ARE LISTED AS EXCLUDABLE CHARGES UNDER FEDERAL RESERVE REGULATION Z. DETERMINATION OF REASONABLENESS OF AMOUNT OF INDIVIDUAL ITEMS IS A FACTUAL DETERMINATION TO BE MADE BY THE CERTIFYING OFFICER AFTER EXAMINATION OF ENTIRE RECORD AND AFTER CONSULTATION WITH APPROPRIATE REGIONAL OFFICE OF DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.

IN THE MATTER OF REAL ESTATE EXPENSES - FINANCE CHARGES, APRIL 4, 1975:

THIS MATTER IS BEFORE US BASED UPON A REQUEST FOR AN ADVANCE DECISION SUBMITTED BY AN AUTHORIZED CERTIFYING OFFICER OF THE CHICAGO OPERATIONS OFFICE OF THE ATOMIC ENERGY COMMISSION.

UNDER THE AUTHORITY OF TRAVEL AUTHORIZATION NO. CHG-371-72 DATED NOVEMBER 4, 1971, MR. ROBERT A. ZICH WAS TRANSFERRED FROM GERMANTOWN, MARYLAND, TO ARGONNE, ILLINOIS. ON FEBRUARY 5, 1972, THE SETTLEMENT FOR MR. ZICH'S NEW HOME WAS HELD. INCLUDED ON THE SETTLEMENT STATEMENT WAS A CHARGE AGAINST MR. ZICH IN THE AMOUNT OF $490, LABELED "LA GRANGE FEDERAL SAVINGS & LOAN ASSOCIATION SERVICE CHARGE." NO FURTHER EXPLANATION OR BREAKDOWN OF THIS AMOUNT IS GIVEN ON THE SETTLEMENT STATEMENT. BY LETTER OF JANUARY 24, 1974, MR. ZICH REQUESTED THAT THE BANK PROVIDE AN ITEMIZATION OF THE CHARGES INCLUDED IN THE $490 SERVICE CHARGE. THE BANK, OVER THE SIGNATURE OF HOWARD M. LIPSEY, LOAN OFFICER, PROVIDED THE FOLLOWING BREAKDOWN:

APPRAISAL FEE $70

CREDIT REPORT/INVESTIGATION30

PREPARATION OF LEGAL DOCUMENTS 150

PROCESSING OF LOAN 150

CLOSING OF LOAN 90

$490

NEXT TO MR. LIPSEY'S SIGNATURE THE WORDS "ESTIMATE ONLY" (UNDERLINED TWICE) WERE WRITTEN.

THIS MATTER WAS FORWARDED FOR OUR CONSIDERATION BASED UPON THE FOLLOWING PARAGRAPH WHICH APPEARED IN OUR LETTER B-179659, MAY 1, 1974, WHICH WAS SENT TO THE CERTIFYING OFFICER WHO SUBMITTED THE CASE AT HAND:

IF YOU SHOULD GET A CLAIM IN THE FUTURE WHICH INCLUDES NO BETTER EVIDENCE THAT THE CHARGES WERE BONA FIDE AND REASONABLE IN AMOUNT THAN HAS BEEN SUBMITTED HERE IN CONNECTION WITH THE ZIRIN CASE, WE SUGGEST THAT YOU SUBMIT IT TO THE COMPTROLLER GENERAL FOR DETERMINATION.

THE INTENT OF THAT PARAGRAPH WAS TO SUGGEST THAT WHEN THE EVIDENCE WAS SO SKETCHY AS TO RAISE DOUBTS THAT THE CHARGES IN QUESTION WERE PERMISSIBLE UNDER THE APPLICABLE REGULATIONS, THE CERTIFYING OFFICER MIGHT WISH TO ASK FOR A RULING FROM THIS OFFICE. WE DID NOT INTEND TO SUGGEST THAT WE, RATHER THAN THE CERTIFYING OFFICER, WOULD MAKE DETERMINATIONS AS TO THE REASONABLENESS OF EACH REIMBURSABLE CHARGE. THEREFORE, WE WILL ATTEMPT TO SET FORTH SUFFICIENT GUIDELINES FOR THE USE OF THE CERTIFYING OFFICER, SO THAT IT WILL NOT BE NECESSARY TO SUBMIT EACH CLAIM OF THIS TYPE FOR OUR CONSIDERATION.

AT THE TIME MR. ZICH PURCHASED HIS HOME, THE REIMBURSEMENT OF REAL ESTATE EXPENSES WAS GOVERNED BY THE PROVISIONS OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56 (1971), SPECIFICALLY SECTION 4.2D WHICH PROVIDED, IN PERTINENT PART, THAT:

*** NOTWITHSTANDING THE ABOVE, NO FEE, COST, CHARGE, OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, AND REGULATION Z ISSUED PURSUANT BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

REGULATION Z, WHICH IS SUBSTANTIALLY THE SAME AS THE ABOVE-CITED PROVISIONS OF THE TRUTH IN LENDING ACT (15 U.S.C. 1601 NOTE), IS PUBLISHED AS 12 C.F.R. PART 226 (1972), AND PROVIDES, IN PERTINENT PART, THAT:

SEC. 226.4 DETERMINATION OF FINANCE CHARGE.

(A) GENERAL RULE. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT OF THE FINANCE CHARGE IN CONNECTION WITH ANY TRANSACTION SHALL BE DETERMINED AS THE SUM OF ALL CHARGES, PAYABLE DIRECTLY OR INDIRECTLY BY THE CUSTOMER, AND IMPOSED DIRECTLY OR INDIRECTLY BY THE CREDITOR AS AN INCIDENT TO OR AS A CONDITION OF THE EXTENSION OF CREDIT, WHETHER PAID OR PAYABLE BY THE CUSTOMER, THE SELLER, OR ANY OTHER PERSON ON BEHALF OF THE CUSTOMER TO THE CREDITOR OR TO A THIRD PARTY, INCLUDING ANY OF THE FOLLOWING TYPES OF CHARGES:

(1) INTEREST, TIME PRICE DIFFERENTIAL, AND ANY AMOUNT PAYABLE UNDER A DISCOUNT OR OTHER SYSTEM OF ADDITIONAL CHARGES.

(2) SERVICE, TRANSACTION, ACTIVITY, OR CARRYING CHARGE.

(3) LOAN FEE, POINTS, FINDER'S FEE, OR SIMILAR CHARGE.

(4) FEE FOR AN APPRAISAL, INVESTIGATION, OR CREDIT REPORT.

(E) EXCLUDABLE CHARGES, REAL PROPERTY TRANSACTIONS. THE FOLLOWING CHARGES IN CONNECTION WITH ANY REAL PROPERTY TRANSACTION, PROVIDED THEY ARE BONA FIDE, REASONABLE IN AMOUNT, AND NOT FOR THE PURPOSE OF CIRCUMVENTION OR EVASION OF THIS PART, SHALL NOT BE INCLUDED IN THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, ABSTRACT OF TITLE, TITLE INSURANCE, OR SIMILAR PURPOSES AND FOR REQUIRED RELATED PROPERTY SURVEYS.

(2) FEES FOR PREPARATION OF DEEDS, SETTLEMENT STATEMENTS, OR OTHER DOCUMENTS.

(3) AMOUNTS REQUIRED TO BE PLACED OR PAID INTO AN ESCROW OR TRUSTEE ACCOUNT FOR FUTURE PAYMENTS OF TAXES, INSURANCE, AND WATER, SEWER, AND LAND RENTS.

(4) FEES FOR NOTARIZING DEEDS AND OTHER DOCUMENTS.

(5) APPRAISAL FEES.

(6) CREDIT REPORTS.

IN DETERMINING THE REASONABLENESS OF ANY CHARGE INVOLVED IN THE REIMBURSEMENT OF REAL ESTATE EXPENSES, IT IS IMPORTANT TO NOTE THAT OMB CIRCULAR NO. A-56, SECTION 4.2D, ALSO SETS THE STANDARD FOR SUCH A DETERMINATION WHEN IT PROVIDES THAT EXPENSES ARE REIMBURSABLE, "*** TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE ***." SECTION 4.3C PROVIDES THAT WHEN DETERMINING THE REASONABLENESS OF A CHARGE, AND THE CUSTOM IN THE AREA, THE LOCAL OFFICES OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) SHOULD BE CONSULTED SINCE THEY MAINTAIN AND CAN FURNISH CURRENT SCHEDULE OF CLOSING COSTS APPLICABLE TO THE AREA. WITH REGARD TO THE USE OF THE SCHEDULES, THE SAME SECTION PROVIDES THAT:

*** FOR THE PURPOSE OF DETERMINING WHETHER EXPENSES CLAIMED ARE REASONABLE AND MAY BE APPROVED FOR REIMBURSEMENT, THESE CLOSING COSTS SHOULD BE USED AS GUIDELINES AND NOT AS RIGID LIMITATIONS ***.

APPLYING ALL OF THE ABOVE TO MR. ZICH'S CLAIM, IT IS CLEAR THAT THERE MAY BE NO REIMBURSEMENT OF THE CHARGES FOR "PROCESSING OF LOAN" AND "CLOSING OF LOAN." THESE TWO CHARGES FALL WITHIN THE DEFINITION OF A SERVICE CHARGE UNDER REGULATION Z, AND ARE NOT WITHIN ANY OF THE EXCLUDABLE ITEMS. SEE B-176775, OCTOBER 25, 1972, AND B-181037, JULY 16, 1974.

THE OTHER THREE CHARGES, THE APPRAISAL FEE, CREDIT REPORT/INVESTIGATION, AND THE PREPARATION OF LEGAL DOCUMENTS ARE EXCLUDABLE FROM THE FINANCE CHARGE AND ARE REIMBURSABLE IF BONA FIDE AND REASONABLE. SEE B-176481, AUGUST 11, 1972. HOWEVER, THE RECORD IS NOT SUFFICIENT ON THE ISSUE OF REASONABLENESS TO ALLOW US TO RENDER A DEFINITIVE DECISION. THE ITEMIZATION WAS OBTAINED APPROXIMATELY 2 YEARS AFTER THE SETTLEMENT TOOK PLACE, AND THE BANK OFFICIAL PROVIDING THE BREAKDOWN SPECIFICALLY STATED THAT THE AMOUNTS SET FORTH WERE ESTIMATES. INCLUDED IN THE RECORD IS A COPY OF A HUD SCHEDULE OF CLOSING COSTS, BUT IT IS DATED JULY 16, 1973, WHICH WAS APPROXIMATELY 17 MONTHS AFTER THE SETTLEMENT. THEREFORE A SCHEDULE OF THE CLOSING COSTS FOR THE TIME OF MR. ZICH'S CLOSING MUST BE OBTAINED. WE ALSO NOTE THAT $150 IS ALLOCATED TO "PREPARATION OF LEGAL DOCUMENTS," WITH NO STATEMENT AS TO WHAT DOCUMENTS WERE PREPARED, MAKING IT IMPOSSIBLE TO DETERMINE WHETHER THE FEE CHARGED WAS IN LINE WITH THE PREVAILING CHARGES IN THE AREA FOR COMPARABLE WORK. ALL OF THESE ISSUES MUST BE RESOLVED BEFORE THE VOUCHER MAY BE CERTIFIED FOR PAYMENT. IT IS THE DUTY OF THE CERTIFYING OFFICER TO RESOLVE THE ISSUE OF REASONABLENESS AFTER CONSULTING WITH THE APPROPRIATE OFFICE OF HUD, CONSIDERING THE CUSTOMARY CHARGES IN THE AREA FOR SIMILAR SERVICES, AND EXAMINING THE ENTIRE RECORD ALONG WITH APPROPRIATE REGULATIONS AND CASES.

THEREFORE, AFTER A DETERMINATION HAS BEEN MADE BY THE CERTIFYING OFFICER REGARDING THE REASONABLENESS OF THE CHARGES, THE VOUCHER MAY BE PAID IN ACCORDANCE WITH THIS DECISION AND THE DETERMINATION OF THE CERTIFYING OFFICER.

GAO Contacts

Office of Public Affairs