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The Army Finance and Accounting Center offered an officer a monetary settlement following records correction proceedings, but the member disagreed with the proposed settlement and declined to accept it. Since the proposed settlement produced irreconcilable differences, the matter was forwarded to GAO. The member retired from active Army service in 1974, attended a university for a year, and was engaged in full-time employment. Apparently dissatisfied with the circumstances which led to his military retirement, the member applied for relief. The correction board amended the member's records to show that his retirement in 1974 was null and void, and that he had been promoted from the grade of major to that of lieutenant colonel effective December 1973. As a result of the correction in his records, the officer returned to active service in March 1977 and has remained on active duty since then. If an Army officer is separated from active service but is later retroactively restored to active duty, he becomes entitled to credit for active duty military backpay covering the period of his nullified separation from the service. However, he is not entitled to credit for uniform allowances authorized for officers newly entering on active duty in connection with his actual return to Army service. Likewise, the Veterans Administration (VA) should recompute the VA education assistance benefits he received during the interim period at reduced inservice rates. The Federal and State tax consequences of military records correction proceedings are matters primarily for consideration by the concerned revenue authorities. In addition, the member's interim civilian earnings must be deducted from the net amount of military backpay found to be due to him in the settlement of his military pay accounts incident to the records correction proceedings. Interest does not accrue on military backpay due to a service member because of a correction of his records. Erroneous overpayments made to the member which were discovered in an audit of his pay records should be included as a debit to be set off against the credits for military backpay, and it should not be collected through deduction from the member's current pay and allowances. After reviewing the record, GAO concluded that the settlement offered to the member had been correctly prepared. The settlement certificate was returned to the Army for final processing.

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