B-30398, DECEMBER 5, 1942, 22 COMP. GEN. 509

B-30398, DECEMBER 5, 1942, 22 COMP. GEN. 509

EXCHANGE LOSSES IN OBTAINING FOREIGN MONEY FOR PAYMENT OF OFFICERS' AND EMPLOYEES' SALARIES, ETC. LOSSES BY EXCHANGE SUSTAINED IN THE NEGOTIATION OF DRAFTS IN FOREIGN COUNTRIES TO SECURE FOREIGN MONEY WITH WHICH TO PAY OFFICERS AND EMPLOYEES THEIR SALARY AND OTHER ITEMS, WHICH ARE FIXED AND PRIMARILY PAYABLE IN UNITED STATES DOLLARS, ARE NOT CHARGEABLE TO GOVERNMENT FUNDS. WHERE, IN ACCORDANCE WITH REQUIREMENTS OF THE FOREIGN SERVICE REGULATIONS OF THE DEPARTMENT OF STATE, A GOVERNMENT DISBURSING OFFICER DRAWS A DRAFT "AT FIVE DAYS SIGHT," INSTEAD OF "AT SIGHT," FOR THE PURPOSE OF SECURING FOREIGN MONEY WITH WHICH TO PAY THE SALARY AND OTHER ITEMS DUE OFFICERS AND EMPLOYEES WHICH ARE FIXED AND PRIMARILY PAYABLE IN UNITED STATES DOLLARS, THE BANK'S CHARGE FOR NEGOTIATION OF DRAFTS DRAWN "AT FIVE DAYS SIGHT," AND NOT THE LOWER CHARGE FOR NEGOTIATION OF "AT SIGHT" DRAFTS, IS THE CHARGE WHICH MUST BE BORNE BY THE OFFICER OR EMPLOYEE FOR WHOSE BENEFIT THE DRAFT IS DRAWN.

COMPTROLLER GENERAL WARREN TO THE AMERICAN CONSUL GENERAL, GLASGOW, SCOTLAND, DECEMBER 5, 1942:

BY LETTER OF MAY 7, 1942, THE SECRETARY OF STATE FORWARDED HERE FOR MY CONSIDERATION YOUR LETTER OF MARCH 30, 1942, REF. 125.5, HHW/LJW, AS FOLLOWS:

I REFER TO NOTICE OF EXCEPTION FROM THE GENERAL ACCOUNTING OFFICE, DATED DECEMBER 22, 1941, WHICH HAS REFERENCE TO FORM 332 IN MY ACCOUNTS FOR THE MONTH OF OCTOBER 1940, SUBMITTED FROM THE AMERICAN CONSULATE AT KINGSTON, JAMAICA. THIS NOTICE OF EXCEPTION, SENT TO THE CONSULATE AT KINGSTON, JAMAICA, WAS RECEIVED THERE AFTER MY DEPARTURE ON TRANSFER. HENCE THE DELAY IN REPLY.

THE LETTER FROM THE COMPTROLLER GENERAL TO THE SECRETARY OF STATE, DATED JUNE 18, 1940, GIVES MANY CITATIONS TO ESTABLISH THAT SALARIES PAID ABROAD IN FOREIGN CURRENCY SHOULD BE PAID AT THE BANK'S BUYING RATE OF EXCHANGE. IT IS NOT NECESSARY TO QUOTE THESE CITATIONS; THEY ARE SUMMARIZED AT THE END OF THE LETTER AS FOLLOWS:

"IN VIEW OF THE FOREGOING I AM UNABLE TO ACCEDE TO THE CONTINUANCE OF THE USE OF THE SELLING RATE FOR THE CONVERSION OF THE PAYMENTS IN QUESTION, AND, IN THIS CONNECTION, THE OFFICERS SHOULD BE INSTRUCTED TO FORWARD EVIDENCE OF THE DAILY BUYING RATES FOR NEW YORK SIGHT DRAFTS IN ADDITION TO THE SELLING RATES AS NOW REQUIRED.'

FOR THE PURPOSES OF THIS REPLY, THE ABOVE DECISION THAT BUYING RATES FOR SIGHT DRAFTS AND NOT SELLING RATES MUST BE USED IN PAYMENT OF SALARIES IS ACCEPTED. BUT THE EXCEPTION UNDER REPLY DOES NOT FOLLOW THIS DECISION. IT ALLOWS A SUM LESS THAN THAT WHICH THIS DECISION ASSERTS TO BE THE CORRECT ONE.

THE FOREIGN SERVICE REGULATIONS ( CHAPTER V-54 3 (D) ( PRESCRIBE THAT DRAFTS SHALL BE DRAWN AT FIVE DAY SIGHT. THIS IS AN ADMINISTRATIVE PROVISION, NOT FOR THE BENEFIT OF THE FOREIGN SERVICE OFFICER. IF A FOREIGN SERVICE OFFICER IS COMPELLED TO DRAW AT FIVE DAYS SIGHT AND TO ACCEPT PAY AT THE RATE FOR FIVE DAY SIGHT DRAFTS, HE RECEIVES A SUM LESS THAN THE EQUIVALENT OF HIS SALARY AS FIXED BY LAW.

AS THE FOREIGN SERVICE REGULATIONS NOW PRESCRIBE THAT DRAFTS BE DRAWN AT FIVE DAYS SIGHT, SO ALSO MIGHT THEY PRESCRIBE THAT DRAFTS BE AT FIFTEEN OR THIRTY OR AT NINETY DAYS. THEREBY A VERY MATERIAL PART OF THE LEGAL SALARY OF A FOREIGN SERVICE OFFICER MAY BE TAKEN FROM HIM TO THE PROFIT OF THE BANKER IF THE OFFICER BE OBLIGED TO ACCEPT PAYMENT AT THE RATE OBTAINABLE FOR A TIME DRAFT.

THE COMPTROLLER GENERAL HAS DIRECTED THAT "THE BUYING RATE" OBTAIN WHEN SALARIES ARE PAID FROM FUNDS RECEIVED BY CASHING DRAFTS FROM FEES. THIS BUYING RATE CAN BE NONE OTHER THAN THE BUYING RATE FOR SIGHT DRAFTS. IF, THEREFORE, AS IS FREQUENTLY THE CASE, A SALARY BE PAID IN PART FROM FUNDS OBTAINED FROM A DRAFT CASHED OUT OF FEES AND IN PART FROM A DRAFT COMMERCIALLY CASHED, THE RESULT IS TWO DIFFERENT LEGAL EQUIVALENTS FOR A GIVEN AMOUNT OF DOLLARS AT ONE AND THE SAME INSTANT--- OBVIOUSLY AN IMPOSSIBILITY. IN CONNECTION WITH THIS MATTER, THE WORDING OF THE COMPTROLLER GENERAL'S LETTER IS OF PARTICULAR SIGNIFICANCE. HE STATES---

"THE BUYING RATE OBTAINS WHETHER THE DRAFT TO PURCHASE THE FOREIGN MONEY BE CASHED COMMERCIALLY OR FROM FEE COLLECTIONS," NOT "THE BUYING RATES" AS HE WOULD IF TWO SEPARATE RATES FOR PAYMENT OF SALARIES WERE ENVISAGED.

MY CONTENTION IS THAT THE WORDS "BUYING RATE" AS USED BY THE COMPTROLLER GENERAL IN HIS LETTER OF JUNE 18, 1940 (ENCLOSURE TO DIPLOMATIC SERIAL NO. 3265 OF AUGUST 7, 1940) MEAN BUYING RATE FOR SIGHT DRAFTS; OTHERWISE THEIR MEANINGS ARE INFINITE (SINCE A DRAFT IF NOT AT SIGHT MAY BE FOR ANY PERIOD FROM ONE DAY UP); FURTHER THAT THE COST ENTAILED BY ANY ADMINISTRATIVE PROVISION IN CONNECTION WITH THE PAYMENT OF SALARIES WHICH IS FOR THE PURPOSES AND BENEFIT OF THE UNITED STATES GOVERNMENT OR A BRANCH THEREOF AND NOT FOR THE BENEFIT OF THE FOREIGN SERVICE OFFICER IS A CHARGE TO BE BORNE BY THE GOVERNMENT AND THAT IT CANNOT EITHER DIRECTLY OR INCIDENTALLY REDUCE A SALARY FIXED BY LAW.

IN AS MUCH AS THE AMOUNT INVOLVED IS GREATLY BEYOND THAT SHOWN ON THE PAYROLL IN QUESTION, A RECONSIDERATION OF THE NOTICE OF EXCEPTION IS REQUESTED.

FOREIGN SERVICE FORM 332, DISBURSING FUNDS-CASH RECORD AND SCHEDULE, SUBMITTED WITH YOUR OCTOBER, 1940, ACCOUNT, EVIDENCES A CHARGE OF $1.28 TO THE APPROPRIATION CONTINGENT EXPENSES, FOREIGN SERVICE, 1941, FOR LOSS BY EXCHANGE ON DISBURSEMENTS. EXCEPTION TO SUCH CHARGE WAS TAKEN IN THE AUDIT FOR THE REASON THAT BANK CHARGES OR OTHER INCIDENTAL CHARGES INCURRED IN THE PURCHASE OF FOREIGN CURRENCY TO MEET THE PAYMENTS OF SALARIES AND ALLOWANCES WHICH ARE PROPERLY PAYABLE IN UNITED STATES DOLLARS ARE NOT CHARGEABLE TO GOVERNMENT FUNDS.

THE RECORDS BEFORE ME DISCLOSE THAT DRAFT NO. 67, DATED OCTOBER 31, 1940, DRAWN ON THE SECRETARY OF STATE, IN THE AMOUNT OF $715, WAS SOLD TO THE ROYAL BANK OF CANADA, KINGSTON, JAMAICA, FOR POUNDS STERLING 176 8-8 (THE RATE OF EXCHANGE BEING $4.0525 TO ONE POUND), WHICH, WHEN ADDED TO POUNDS STERLING 16-0-3--- THE AMOUNT OF FOREIGN CURRENCY BROUGHT FORWARD FROM THE SEPTEMBER, 1940, ACCOUNT AT THE SAME RATE OF EXCHANGE--- EQUALS POUNDS STERLING 192-8-11, THE AMOUNT OF FOREIGN CURRENCY AVAILABLE FOR EXPENDITURES DURING THE PERIOD INVOLVED. IT IS FURTHER DISCLOSED THAT FROM SAID AMOUNT THERE WAS EXPENDED THE SUM OF POUNDS STERLING 4-8-7, ACCOUNTED FOR AT THE COST RATE OF $4.0525 (BUYING RATE FOR FIVE DAYS' SIGHT DRAFT) OR $17.95, FOR INCIDENTAL OFFICE EXPENSES AND, AFTER DEDUCTING THAT AMOUNT TOGETHER WITH THE AMOUNT OF POUNDS STERLING 18-9-3, THE ADMITTED BALANCE ON HAND AT THE CLOSE OF THE ACCOUNTING PERIOD, OR A TOTAL OF POUNDS STERLING 22-17-10, FROM POUNDS STERLING 192-8-11, THERE REMAINED THE SUM OF POUNDS STERLING 169-11-1, CONVERTED AT THE RATE OF $4.0525 TO ONE POUND OR $687.12, AVAILABLE FOR THE PAYMENT OF SALARIES AND ALLOWANCES ON VOUCHER NO. 10 (IN PART), AND FOR REIMBURSEMENT OF PER DIEM AND OTHER EXPENSES INCURRED BY CHARLES A. ROBERTSON, FOREIGN SERVICE CLERK, IN GOING FROM NEW YORK TO KINGSTON, JAMAICA, OCTOBER 5 TO 15, 1940, ON VOUCHER NO. 11 ($49.11), WHICH WAS DISBURSED AT THE RATE OF $4.045 TO ONE POUND, THE BANK'S BUYING RATE ON SIGHT DRAFTS FOR THE PERIOD INVOLVED, AS EVIDENCED BY THE EXCHANGE QUOTATIONS FURNISHED BY THE ROYAL BANK OF CANADA, KINGSTON, JAMAICA, OR THE UNITED STATES DOLLAR EQUIVALENT OF $685.84, THEREBY INCURRING A LOSS BY EXCHANGE OF $1.28.

IT WAS STATED IN DECISION OF AUGUST 3, 1939, A-81857, 19 COMP. GEN. 144, THAT LOSS BY EXCHANGE INCURRED BY A DISBURSING OFFICER IN THE NEGOTIATION OF A DRAFT OR CHECK TO SECURE FOREIGN CURRENCY NECESSARY TO MAKE DISBURSEMENTS PAYABLE IN FOREIGN CURRENCY IS CHARGEABLE TO THE APPROPRIATION PROVIDED FOR THAT PURPOSE, VIZ., CONTINGENT EXPENSES, FOREIGN SERVICE, BUT THAT IS NOT THE CASE HERE.

IN 3 COMP. GEN. 571 IT WAS HELD, IN EFFECT, THAT THE OBLIGATION OF THE UNITED STATES WITH RESPECT TO THE PAYMENT OF SALARIES AND OTHER ITEMS WHICH ARE FIXED AND PAYABLE IN UNITED STATES DOLLARS IS PRIMARILY FOR PAYMENT IN DOLLARS; AND THAT, WHEN NOT SO PAID, THERE IS PAYABLE IN FOREIGN CURRENCY ONLY SUCH SUM AS WILL, AT THE COMMERCIAL RATE OF EXCHANGE, ON THE DAY OF PAYMENT, EQUAL THE NUMBER OF DOLLARS DUE.

SINCE OFFICERS AND EMPLOYEES WHO ARE ENTITLED TO PAYMENT IN UNITED STATES DOLLARS MAY, WHEN PAID IN A FOREIGN CURRENCY BY A GOVERNMENT DISBURSING OFFICER, BE PAID ONLY THE AMOUNT OF SUCH CURRENCY ACTUALLY PROCURABLE FOR THE DOLLARS AT THE TIME AND PLACE OF PAYMENT, THE RATE OF EXCHANGE APPLICABLE NECESSARILY MUST BE THE BANKS' BUYING RATE. SEE 19 COMP. GEN. 993--- THE DECISION OF JUNE 18, 1940, TO WHICH YOU REFER- - AND DECISIONS CITED THEREIN. HOWEVER, IT WAS HELD, ALSO, IN SAID DECISION THAT SALARIES GENERALLY ARE PAID AT THE PLACE OF EMPLOYMENT, HERE OR ABROAD, IN THE FORM OF CASH, CHECK, OR DRAFT; THAT PAYMENT BY DRAFT IS NOT SIGNIFICANTLY DIFFERENT FROM PAYMENT BY ORDINARY CHECK AND THAT SUCH PAYMENT IS REGARDED AS EQUIVALENT TO A PAYMENT IN MONEY; THAT THE EXECUTIVE ORDER OF AUGUST 29, 1933, NO. 6262, NOW SECTION V-54 OF THE FOREIGN SERVICE REGULATIONS, CHAPTER 5, RECOGNIZES THIS PRINCIPLE BY AUTHORIZING THE SECRETARY OF STATE TO PAY SALARIES BY SEPARATE DRAFTS TO THE ORDER OF THE INDIVIDUAL EMPLOYEES; THAT NO SPECIAL AUTHORIZATION TO DRAW SUCH DRAFTS WOULD SEEM ESSENTIAL AND THAT SINCE DRAFTS TO EFFECTUATE DOLLAR PAYMENTS ARE AUTHORIZED IN LAW, ARE IN FACT AVAILABLE, AND ARE SO BEING USED THERE CAN BE NO GENERAL PREMISE THAT DOLLARS ARE NOT AVAILABLE ON WHICH TO JUSTIFY PAYMENT OF BANKERS' CHARGES FOR THE SALE OF EXCHANGE WHEN PAYMENTS ARE MADE IN FOREIGN MONEY. 19 COMP. GEN. 144 AND ID. 652.

ACCORDINGLY, SINCE THE PAYMENT IN FOREIGN MONEY OF DOLLAR OBLIGATIONS GENERALLY IS CONSIDERED TO BE FOR THE EMPLOYEE'S BENEFIT, IT MUST BE CONCLUDED THAT LOSSES SUSTAINED IN THE NEGOTIATION OF DRAFTS TO SECURE FOREIGN MONEY WITH WHICH TO MAKE SUCH PAYMENTS ARE NOT PROPERLY CHARGEABLE TO GOVERNMENT FUNDS.

YOU COMPLAIN THAT THE FOREIGN SERVICE REGULATIONS, V-54, PARAGRAPH 3 (D), REQUIRES SUCH DRAFTS TO BE DRAWN "AT FIVE DAYS SIGHT" WHICH RESULTS IN A LOWER RATE, THAT IS, GREATER LOSS TO THE EMPLOYEE, THAN IF THE DRAFTS WERE DRAWN "AT SIGHT.' THAT IS A MATTER PRIMARILY FOR ADMINISTRATIVE CONSIDERATION, AND IT MAY BE PRESUMED THAT THERE ARE COMPELLING REASONS FOR THE REGULATION REQUIRING DRAFTS TO BE DRAWN IN THAT FORM. CERTAINLY AN EMPLOYEE, WHO TAKES ADVANTAGE OF THE OPPORTUNITY TO RECEIVE HIS COMPENSATION IN FOREIGN CURRENCY RATHER THAN IN UNITED STATES DOLLARS, IS NOT IN A POSITION, AS A MATTER OF LAW, TO COMPLAIN OF THE SMALL ADDITIONAL EXCHANGE COST INVOLVED IN THE USE OF SUCH DRAFTS. HOWEVER THAT MAY BE, THE ITEM IN QUESTION REPRESENTS A PERSONAL EXPENSE AND THE DISALLOWANCE OF CREDIT THEREFOR IN YOUR OFFICIAL ACCOUNTS WAS CORRECT AND, UPON REVIEW, MUST BE AND IS SUSTAINED.