B-239154, Nov 30, 1990, Office of General Counsel

B-239154, Nov 30, 1990, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Cashiers - Relief - Illegal/improper payments - Fraud DIGEST: U.S. Army Finance and Accounting Officer and subordinate cashier are relieved under 31 U.S.C Sec. 3527(c) for an improper payment made by cashing a fraudulently endorsed check. The officer's standard operating procedures for cashing personal checks were adequate and appear to have been followed by the cashier. The loss was the result of criminal activity beyond the control of either the officer or subordinate cashier.

Colonel Garry D. Foster

Finance Corps Chief of Staff:

This letter is in response to your request that we relieve Major R. C. Veilleux, Finance Corps, Disbursing Station Symbol Number (DSSN) 8460, Finance and Accounting Officer, 11th Finance Support Unit, APO New York, and his cashier Louise T. Hanley, under 31 U.S.C Sec. 3527(c) (1988) from liability for an improper payment in the amount of $740.00. For the reasons stated below, relief is granted.

According to your submission, the improper payment occurred on October 9, 1987 when Ms. Hanley cashed a fraudulently drawn and endorsed personal check in the amount of $740.00 for an individual purporting to be Private James L. Soto. The real Private Soto's bank returned the check unpaid and the Army deducted the amount of the returned check from his pay. Private Soto then reported that he had not negotiated the check. A subsequent investigation by the Army's Criminal Investigation Division (CID) implicated Specialist Fred L. Pocius as responsible for stealing and negotiating Private Soto's check. While working in the ID Card Section, Specialist Pocius apparently obtained an identification card which he subsequently used to fraudulently negotiate the check. Private Soto was later reimbursed for the amount deducted from his pay after the Army determined that collection action should be taken against Specialist Pocius. Consequently, the amount of the improper payment is still charged against DSSN 8460.

Because the loss was incurred during Major Veilleux's tenure both he and the person who actually made the improper payment are liable as disbursing officials for the amount of the improper payment. Under 31 U.S.C Sec. 3527(c) (1988), this Office has the authority to relieve a disbursing official from liability when an improper 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 such as Major Veilleux is shown by evidence that the official implemented and maintained adequate procedures and controls to avoid errors and safeguard public funds. The good faith and reasonable care of a person such as Ms. Hanley who actually made the payment can be shown by evidence that the individual complied with established procedures and that nothing occurred which should have made that person suspicious of the fraud. B-227209, Aug. 5, 1987.

The supporting documents establish that Major Veilleux maintained adequate standard operating procedures to safeguard the funds for which he was responsible. These procedures require that when cashing personal checks each cashier request an identification card for proper identification and verification with the data on the face or reverse of the personal check. According to the CID investigation, Ms. Hanley determined that she had cashed the check in question and stated that she always verifies the social security number, photograph, expiration date and signature on the ID card of the person cashing a check, as required by the standard operating procedures. Ms. Hanley stated that whoever cashed Private Soto's check had an identification card with information that corresponded to the information listed either on the face or reverse of the check. Thus, as Ms. Hanley's statements suggest, and as corroborated by the CID investigation mentioned earlier, the improper payment appears to have been the result of skillfully executed criminal activity beyond the control of either the cashier or the finance officer. See B-230118, Mar. 1, 1988.

In considering whether to grant relief under 31 U.S.C Sec. 3527(c), we have stated that this Office will deny relief to officers who delay more than three months in referring the matter for collection after their office becomes aware of the deficiency. B-233870, May 30, 1989. However, in this case we will grant relief even though the matter was not referred to collection until well after the three month deadline. Final disposition had to await the CID investigation and a subsequent legal determination that collection action should proceed against Specialist Pocius. Thus, the delay was beyond the control of Major Veilleux. However, the Army should now diligently pursue collection action. For the above reasons, relief is granted to Major Veilleux and Louise T. Hanley.