B-222392, NOV 12, 1986, OFFICE OF GENERAL COUNSEL

B-222392, NOV 12, 1986, OFFICE OF GENERAL COUNSEL

APPROPRIATIONS/FINANCIAL MANAGEMENT - ACCOUNTABLE OFFICERS - DISBURSING OFFICERS - RELIEF - ILLEGAL/IMPROPER PAYMENTS - FORGERIES DIGEST: 1. ARMY FINANCE AND ACCOUNTING OFFICER IS NOT RELIEVED OF LIABILITY FOR IMPROPER PAYMENT MADE BY UNIDENTIFIED SUBORDINATE WHO CASHED A CHECK WITH FORGED ENDORSEMENTS BECAUSE THE RECORD DOES NOT CONTAIN THE EVIDENCE NEEDED TO SHOW THAT THE OFFICER MAINTAINED AND MONITORED A SYSTEM WITH ADEQUATE CONTROLS TO PREVENT LOSSES OF THIS TYPE FROM OCCURRING. APPROPRIATIONS/FINANCIAL MANAGEMENT - ACCOUNTABLE OFFICERS - LIABILITY - STATUTES OF LIMITATION - EFFECTIVE DATES - ILLEGAL/IMPROPER PAYMENTS 2. WHEN AN IMPROPER PAYMENT IS MADE BY AN ACCOUNTABLE OFFICER WHO CASHES A CHECK WITH FORGED ENDORSEMENTS, THE 3-YEAR STATUTE OF LIMITATIONS SET FORTH IN 31 U.S.C. SEC. 3526(C) DOES NOT BEGIN TO RUN UNTIL THE COMMAND HAS RECEIVED A DEBIT VOUCHER FROM THE TREASURY DEPARTMENT OR OTHER INFORMATION EXPLAINING WHY THE PAYMENT WAS IMPROPER.

MR. CLYDE E. JEFFCOAT:

THIS IS IN RESPONSE TO YOUR MARCH 17, 1986 REQUEST THAT WE GRANT RELIEF UNDER 31 U.S.C. SEC. 3527(C) (1982) TO LIEUTENANT COLONEL (LTC) D. B. ARMSTRONG, FINANCE AND ACCOUNTING OFFICER, DSSN 6321, 106TH AREA FINANCE SUPPORT CENTER (AFSC), APO NEW YORK, FOR AN IMPROPER PAYMENT OF $533.06. WE DENY THE REQUESTED RELIEF BECAUSE THE RECORD PRESENTED TO US DOES NOT CONTAIN THE EVIDENCE NEEDED TO SHOW THAT LTC ARMSTRONG MAINTAINED ADEQUATE PROCEDURES TO AVOID THIS LOSS.

THE IMPROPER PAYMENT OCCURRED WHEN A TREASURY CHECK, DATED APRIL 2, 1982, REPRESENTING THE TAX REFUND OF REGINALD AND BOBETTE WOODS, WAS CASHED OVER TWO FRAUDULENT ENDORSEMENTS AT THE FORWARD SUPPORT TEAM IN NELLIGEN, GERMANY, 106TH AFSC. SUBSEQUENTLY, AFTER THE NAMED PAYEES OF THE ORIGINAL CHECK FILED A CLAIM FOR NONRECEIPT, THE TREASURY DEPARTMENT ISSUED THEM A SUBSTITUTE CHECK AND RETURNED THE ORIGINAL CHECK TO THE 106TH AFSC BY DEBIT VOUCHER, DATED FEBRUARY 2, 1984. LTC ARMSTRONG WAS THE FINANCE AND ACCOUNTING OFFICER AT THE 106TH AFSC AT THE TIME THE CHECK WAS IMPROPERLY PAID. BECAUSE ALL OF THE PERSONNEL ASSIGNED TO THE 106TH AFSC AT THE TIME THE CHECK WAS CASHED HAD LEFT DURING THE 2 YEARS BEFORE THE IMPROPER PAYMENT WAS DISCOVERED, THE ARMY WAS UNABLE TO IDENTIFY EITHER THE PERSON OR PERSONS WHO COMMITTED THE FORGERY OR THE CASHIER WHO ACCEPTED THE CHECK.

THE TIME PERIOD INVOLVED HERE RAISES THE ISSUE OF THE 3-YEAR STATUTE OF LIMITATIONS SET FORTH IN 31 U.S.C. SEC. 3526(C) (1982). OUR OFFICE HAS CONSISTENTLY HELD THAT ONCE THE 3-YEAR STATUTORY PERIOD HAD EXPIRED, THE ACCOUNT IN QUESTION MUST BE CONSIDERED SETTLED AND THE ACCOUNTABLE OFFICER IMMUNE FROM LIABILITY FOR ANY ERRONEOUS PAYMENT. 62 COMP.GEN. 476, 480 (1983); B-217741, OCTOBER 15, 1985. IN THIS CASE, THE CHECK WITH THE FORGED ENDORSEMENTS WAS DATED APRIL 2, 1982, AND APPARENTLY WAS CASHED SHORTLY THEREAFTER. /1/ HOWEVER, THE 3-YEAR STATUTORY PERIOD DOES NOT BEGIN TO RUN UNTIL THE DEPARTMENT INVOLVED IS IN RECEIPT OF SUBSTANTIALLY COMPLETE ACCOUNTS. 62 COMP.GEN. 498, 502 (1983); B-205587, JUNE 1, 1982. THE ACCOUNTS HERE WERE NOT SUBSTANTIALLY COMPLETE UNTIL AFTER THE 106TH AFSC HAD RECEIVED TREASURY'S DEBIT VOUCHER, DATED FEBRUARY 2, 1984, CONTAINING THE FORGED CHECK AND THEREBY FIRST LEARNED OF THE FORGERY. THUS, SINCE THE 3-YEAR PERIOD HAS NOT YET EXPIRED, WE MUST CONSIDER THIS REQUEST FOR RELIEF ON ITS MERITS, NOTWITHSTANDING THE TURNOVER IN PERSONNEL SINCE THE FORGED CHECK WAS ISSUED.

GENERALLY, A DISBURSING OFFICIAL WHO IS OFFICIALLY RESPONSIBLE FOR AN ACCOUNT IS LIABLE FOR HIS SUBORDINATE'S IMPROPER PAYMENTS OUT OF THAT ACCOUNT. 62 COMP.GEN. 476, 480 (1983). UNDER 31 U.S.C. SEC. 3527(C) (1982), THIS OFFICE HAS THE AUTHORITY TO RELIEVE A DISBURSING OFFICIAL FROM LIABILITY FOR AN IMPROPER PAYMENT WHEN WE DETERMINE THAT THE "PAYMENT WAS NOT THE RESULT OF BAD FAITH OR LACK OF REASONABLE CARE BY THE OFFICIAL." THE GOOD FAITH AND REASONABLE CARE OF A SUPERVISORY DISBURSING OFFICIAL IS SHOWN BY EVIDENCE THAT THE SUPERVISOR MAINTAINED AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS TO AVOID ERRORS AND TOOK STEPS TO ENSURE THE SYSTEM'S IMPLEMENTATION AND EFFECTIVENESS. 62 COMP.GEN. 476, 480 (1983); B-219124, JULY 15, 1985. HOWEVER, WHEN A SUBMISSION RECOMMENDING THAT WE GRANT RELIEF DOES NOT CONTAIN THE EVIDENCE NECESSARY FOR THIS OFFICE TO INDEPENDENTLY DETERMINE WHETHER ADEQUATE PROCEDURES WERE IN PLACE, WE CANNOT GRANT RELIEF BASED MERELY ON THE AGENCY'S UNSUBSTANTIATED DETERMINATIONS. SEE B-213824, JULY 2, 1984; B-210648, APRIL 4, 1983.

TYPICALLY, IN ORDER FOR US TO DETERMINE WHETHER AN ADEQUATE SYSTEM OF PROCEDURES AND CONTROLS WAS IN PLACE WHEN THE LOSS OCCURRED, OUR OFFICE CONSIDERS VARIOUS TYPES OF EVIDENCE, INCLUDING THE APPLICABLE STANDARD OPERATING PROCEDURES GOVERNING CHECK CASHING, AND THE STATEMENTS OF THE CASHIER (WHO IS UNKNOWN IN THIS CASE) AND THE SUPERVISORY DISBURSING OFFICIAL EXPLAINING THOSE PROCEDURES AND THE MANNER IN WHICH THEY WERE IMPLEMENTED. SEE B-216726, JANUARY 9, 1985; B-212603 ET AL., DECEMBER 12, 1984; B-212588, AUGUST 14, 1984; AND B-213874, SEPTEMBER 6, 1984. NO SUCH EVIDENCE WAS FURNISHED TO US IN THIS CASE. /2/ WE DO NOT KNOW WHETHER LTC ARMSTRONG REQUIRED THE CASHIERS IN THE 106TH AFSC TO VERIFY SIGNATURES AND THE IDENTITY OF PAYEES BY CHECKING THE IDENTIFICATION CARDS OF PERSONS PRESENTING CHECKS FOR PAYMENT. WITHOUT SUCH CONTROLS IN EFFECT, IT IS VERY DIFFICULT FOR CASHIERS TO DETECT FRAUDULENT ENDORSEMENTS AND THE PRESENTATION OF CHECKS BY IMPOSTERS. SEE, B-221416, MARCH 26, 1986. ASSUME THAT THE IDENTIFICATION CARDS PRESENTED BY THE FORGERS WERE THOSE OF ARMY PERSONNEL OR THE CASHIER WOULD NOT HAVE BEEN WILLING TO CASH THEIR CHECKS, BUT WERE THE PROPER PAYEES ALSO ARMY PERSONNEL? IN THE CASE OF AN INCOME TAX REFUND, IT WOULD SEEN LOGICAL TO ASCERTAIN WHETHER THE NAMED PAYEES WERE IN FACT ARMY PERSONNEL BY TELEPHONING THEIR UNIT TO CHECK.

MOREOVER, WE ARE PUZZLED WHY THE IDENTITY OF THE CASHIER WHO PAID THE FORGERS IS UNKNOWN-- WHETHER OR NOT HE HAS LEFT THE SERVICE-- UNLESS, OF COURSE, A VERY IMPORTANT SAFEGUARD WHICH APPEARS TO BE PART OF THE STANDARD OPERATING PROCEDURES WAS IGNORED. WE ARE REFERRING TO THE REQUIREMENT TO MAINTAIN A CASHIER DAILY ACTIVITY REPORT. FROM THE SAMPLE DA FORM 1924, THERE IS SPACE FOR THE CASHIER'S NAME ON THE TOP. WAS THIS FORM EXAMINED TO DETERMINE THE CASHIER'S IDENTITY? WE DO NOT HAVE THIS INFORMATION.

BASED ON THE ABSENCE OF ADEQUATE EVIDENCE, WE ARE UNABLE TO DETERMINE THAT LTC ARMSTRONG MAINTAINED AND MONITORED A SYSTEM WITH ADEQUATE CONTROLS TO PREVENT LOSSES OF THIS TYPE FROM OCCURRING. ACCORDINGLY, WE MUST DENY RELIEF. HOWEVER, IF SUCH EVIDENCE IS FURNISHED TO US SUPPORTING THE RECOMMENDATION THAT WE GRANT RELIEF, WE WOULD BE WILLING TO RECONSIDER THIS DECISION.

/2/ ALTHOUGH WE WERE FURNISHED WHAT APPEARS TO BE A PARTIAL COPY OF THE STANDARD OPERATING PROCEDURES IN EFFECT WHEN THE LOSS OCCURRED, THE MATERIAL PROVIDED TO US DID NO COVER CHECK CASHING PROCEDURES.

/1/ WE WERE NOT FURNISHED WITH ANY INFORMATION AS TO THE SPECIFIC DATE ON WHICH THE CHECK WAS CASHED.