B-226708.3, Dec 12, 1988
B-226708.3: Dec 12, 1988
GAO cannont take exception to any illegal payments that may have been made to certain entities created by the Federal Home Loan Bank Board. There are no transactions by a Bank Board accountable officer to which GAOP could take exception. They are not in fact federal employees since they were not formally appointed in the civil service. You ask what recourse is available to the General Accounting Office under current law for the recovery of any federal appropriated funds which may have been misused in the operation of these three entities. The result of a GAO exceptin in the settlement of an accountable officer's accounts is to render that individual personally liable for the improper payments.
B-226708.3, Dec 12, 1988
APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Relief - GAO authority DIGEST: 1. GAO cannont take exception to any illegal payments that may have been made to certain entities created by the Federal Home Loan Bank Board. Since the Bank Board provides no direct financial support to these entities, there are no transactions by a Bank Board accountable officer to which GAOP could take exception. While the Federal Savings and Loan Insurance corporation (FSLIC) does provide financial support for one of the entities, GAO lacks authority to take exception to the financial transactions of FSLIC. CIVILIAN PERSONNEL - Compensation - Civilian service - Determination 2. While GAO has concluded that employees of certain entities created by the Federal Home Loan Bank Board should be regarded as Federal employees, they are not in fact federal employees since they were not formally appointed in the civil service. See 5 U.S.C. Sec. 2105(a) and court cases cited.
The Honorable David Pryor, Chairman Subcommittee on Federal Services, Post Office, and Civil Service Committee on Governmental Affairs United States Senate
This responds, in part, to your letter of September 9, 1988, concerning the effect of our recent opinion on the legal status of certain Federal Home Loan Bank System entities, B-226708, September 6, 1988. We concluded in our September 6 opinion that employees of the Office of Regulatory Policy, Oversight and Supervision (ORPOS) (now know as the Office of Regulatory Activities) and the Office of Finance should be regarded as employees of the Federal Home Loan Bank Board, and, thus, federal employees. We also concluded that employees of the Federal Asset Disposition Association (FADA) should be regarded as federal employees. You ask what recourse is available to the General Accounting Office under current law for the recovery of any federal appropriated funds which may have been misused in the operation of these three entities.
To the extent that payments to ORPOS, the Office of Finance or FADA may be regarded as illegal, GAO's only potential recourse would be to take exception to the accounts of any accountable officers who improperly certified or disbursed the payments in question. The result of a GAO exceptin in the settlement of an accountable officer's accounts is to render that individual personally liable for the improper payments. See, generally, 31 U.S.C. Secs. 3526 and 3528 (1982). See also 55 Comp.Gen. 297 (1975), discussing the responsibilities and liabilities of accountable officers. In the case of the three Bank System entities, however, this recourse is not available. No Bank Board funds have been paid to ORPOS, the Office of Finance, or FADA; as a consequence, there are no transactions by a Bank Board accountable officer to which we could take exception. Funds for ORPOS and the Office of Finance are provided directly from assessments against the Federal Home Loan Banks and never pass through the Bank Board. See 12 C.F.R. Sec. 522.90(b)(2) and (c) (ORPOS) and 12 C.F.R. Sec. 522.82 (Office of Finance).
Funding for FADA has been provided by the Federal Savings and Loan Insurance Corporation (FSLIC). FSLIC is a wholly owned government corporation which is subject to GAO audit in accordance with the Government Corporation Control Act. See 31 U.S.C. Sec. 9101(3)(E), 9105 and 9106. The Act provides that our reports to Congress shall include each financial transaction or undertaking of a government corporation which the Comptroller General believes to be unlawful. 31 U.S.C. Sec. 9106(a)(5). We have interpreted this provision as precluding us from taking exception to such transactions. See B-146820, June 2, 1967.
In addition, section 402(c)(5) of the National Housing Act, as amended, 12 U.S.C. Sec. 1725(c)(5), provides in part that FSLIC--
"... shall determine its necessary expenditures under this Act and the manner in which the same shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds. ..."
We have likewise construed language of this nature as precluding GAO from taking exception to the transactions of the entities involved. See B-209585, January 26, 1983 (Tennessee Valley Authority); B-200103, Mar. 5, 1981 (Commodity Credit Corporation).
In sum, there is no enforcement action that GAO could take to recover any illegal payments to ORPOS, the Office of Finance or FADA.
You should also be aware that, in any event, enforcement action by us could not lead to recovery from employees of the three entities of compensation they have received in excess of federal salary schedules. While we believe the Bank Board acted improperly in establishing ORPOS, the Office of Finance and FADA as entities outside the application of title 5, the fact remains that their employees are not actually federal employees. Three distinct criteria must be met in order for an individual to have the legal status of federal employee. The employee must be: (1) appointed in the civil service by a federal official; (2) engaged in the performance of federal function; and (3) subject to the supervision of another federal employee. See 5 U.S.C. Sec. 2105(a). The courts have consistently held that all three of these criteria must be satisfied in order to establish a federal employment relationship. See, e.g., Watts v. Office of Personnel Management, 814 F.2d 1576 (Fed. Cir.), cert. denied, 108 S. Ct. 258 (1987); Horner v. Acosta, 803 F.2d 687 (Fed. Cir. 1986); Costner v. United States, 665 F.2d 1016 (Ct. Cl. 1981), and decisions cited.
As indicated in our September 6 opinion, we believe that the employees of ORPOS, the Office of Finance, and FADA are engaged in the performance of federal functions and are subject to the supervision of federal employees. As such, these employees meet the second and third criteria of 5 U.S.C. Sec. 2105(a). However, they have never been appointed in the civil service by a federal official as required by the first criterion.
The absence of an appointment in the civil service precludes an individual from having federal employee status even when that individual's service in a status other than that of a federal employee is unauthorized. Thus, rejecting a "totality of the circumstances" approach to determining whether an individual was a federal employee, the court in Costner v. United States, supra, stated that:
"An abundance of federal function and supervision will not make up for the lack of an appointment."
665 F.2d at 1020.
A civil service appointment, in turn, requires a mutual intent on the part of the appointing authority and appointee to effect federal employee status. Watts v. Office of Personnel Management, supra, 814 F.2d at 1580:
"The essential prerequisites to an appointment are an authorized appointing officer who takes an action that reveals his awareness that he is making an appointment in the United States civil service, and action by the appointee denoting acceptance."
Clearly no such appointments exist with respect to the employees of ORPOS, the Office of Finance, and FADA. The officials of these entities did not intend to appoint the individuals concerned as federal employees nor did the individuals intend or purport to be federal employees. Accordingly, the employees of the three entities cannot be held liable for receiving compensation in excess of federal employee salary schedules.
We have enclosed copies of the Comptroller General opinions cited herein.
Unless you publicly announce its contents earlier, we plan no further distribution of this report until 7 days after its issuance.