B-237082, B-237088, B-237090, B-237093, B-237096, B-237097, B-237098, B-237101, B-237103, MAY 8, 1990, Office of General Counsel

B-237082, B-237088, B-237090, B-237093, B-237096, B-237097, B-237098, B-237101, B-237103, MAY 8, 1990, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Accountable Officers - Disbursing officers - Relief - Illegal/improper payments - Overpayments DIGEST: Relief is granted Department of the Treasury disbursing official under 31 U.S.C. Sec. 3527 for duplicate check overpayments. The overpayments were not the result of bad faith or lack of reasonable care, an adequate system of procedures and controls was maintained, and diligent collection actions were taken.

Gerald Murphy

Fiscal Assistant Secretary

U.S. Department of the Treasury:

On September 19, 1989 you requested that we relieve James J. Lucas, Regional Director of the Chicago Financial Center, Financial Management Service, Department of the Treasury, under 31 U.S.C. Sec. 3527(c) (1982) from liability for overpayments made out of his accounts in the following cases:

GAO File No. Payee Amount

B-237082 Henry Foster $476.44

B-237088 Inge Chiandussi $356.00

B-237090 Margaret Guthrie $100.00

B-237093 Anthony Sanfilippo $744.00

B-237096 Roger & Blanche Ussery $727.50

B-237097 Xerox Corporation $310.33

B-237098 Novi Transport $125.00

B-237101 Maria Garcia $70.65

B-237103 General Telephone $103.94

We have consolidated these requests because they involve similar or identical facts, namely, the issuance and release of duplicate checks and the subsequent negotiation by the payees of these duplicate checks.

As we stated in our earlier correspondence with you dated October 6 and November 9, 1989, under 31 U.S.C. Sec. 3527(c), we may relieve a disbursing officer from liability for an illegal, improper or incorrect payment when the payment "was not the result of bad faith or lack of reasonable care" and there is evidence that the agency has made diligent collection efforts. 62 Comp.Gen. 476 (1983). Where, as here, the incorrect payments were made by the disbursing officer's subordinates, we generally will find that the disbursing officer acted with reasonable care for purposes of 31 U.S.C. 3527(c) upon a showing that the officer properly supervised his employees. "Proper supervision is demonstrated by evidence that the supervisor maintained an adequate system of procedures and controls, and that appropriate steps were taken to ensure the system's implementation and effectiveness." B-237082 et al., Nov. 9, 1989, citing 62 Comp.Gen. at 480.

In our prior correspondence we suspended the statute of limitations in all nine cases under 31 U.S.C. Sec. 3526(g) (1982) while awaiting further information regarding the system of procedures in effect at the Chicago finance center.

We stated that we could not grant relief based on Treasury's unsubstantiated determination that adequate procedures were in place, but that instead we needed evidence sufficient to determine independently whether those procedures were in place. See B-235037, Sept. 18, 1989.

You have now supplied the additional information we requested in a letter dated January 8, 1990, from Mr. Spencer Sakai, Manager, Financial Operations Branch. With this letter you included a copy of applicable operating procedures from the Division of Disbursement Procedures Manual in effect at the time the overpayments occurred. The letter also stated that "all employees were trained in the proper check issuing procedures and were given a copy of the manual prior to performing their jobs."

Because Mr. Lucas appears to have maintained an adequate system of procedures and controls which his subordinates were aware of, we find that the overpayments were not the result of bad faith or lack of reasonable care by Mr. Lucas. The agency also seems to have made diligent collection efforts by repeatedly attempting to contact the payees and reclaim the erroneous payments. Consequently, relief is granted.

To facilitate our consideration of future requests for relief similar to those under consideration here your requests should include copies of the applicable standard operating procedures or regulations and should address whether such procedures were in effect at the time of the overpayment. Any probative evidence as to whether and how the official implemented and maintained the procedures at the time of overpayment also should be submitted to facilitate our review of the disbursing officer's exercise of reasonable care.

Some of your relief requests were submitted near the end of the three year period within which this Office is authorized to relieve accountable officers. 31 U.S.C. Sec. 3526(c)(1). After this period, the account is settled by operation of law and the accountable officer cannot be held responsible for a loss covered by the settled account. 31 U.S.C. Sec. 3526(c)(2). Consequently, requests for relief should be submitted not more than two years after you receive notice of the loss in the account of the accountable officer. Two years allows enough time for your agency to pursue rigorous collection action; then, if collection fails, there is time for this office to adequately consider a request for relief within the 3-year period.