BNUMBER:  B-271608
DATE:  June 21, 1996
TITLE:  [Letter]

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B-271608

June 21, 1996

David J. Bechtol
Director for Field Support
Defense Finance and Accounting Service
Cleveland Center
1240 East Ninth Street
Cleveland, Ohio  44199-2056

Dear Mr. Bechtol:

This responds to your letter of March 20, 1996, concerning liability 
for $214,883.21 resulting from improper payments that appear to have 
been made between August 1993 and May 1994 at the U.S. Navy Personnel 
Support Activity Detachment (Detachment), Sigonella, Italy.  Your 
letter characterizes the improper payments as (1) seventeen cases of 
dishonored checks, totalling $3,251.45, cashed by former Navy 
personnel, and (2) dishonored Italian lire checks, totalling 
$211,631.76, cashed by foreign nationals.  Former Lt. Paul E. Sessions 
was the disbursing officer accountable for these funds when the 
improper payments were made.  LTJG V.F. Milano is the disbursing 
officer currently responsible for this account; the amount of these 
improper payments is currently recorded as a deficiency in the 
account.

You request that we deny relief from liability to former Lieutenant 
Sessions, grant relief to LTJG Milano, and remove the $214,883.21 
deficiency from the account.  As explained below, we fully agree with 
your characterizations of the loss and of former Lieutenant Sessions' 
actions, and accordingly, deny relief to him.  LTJG Milano is not an 
accountable officer with respect to the improper payments, and relief 
is therefore unnecessary.  Moreover, under these circumstances, the 
Secretary of Defense is authorized under 31 U.S.C.  sec.  3530 to make the 
necessary adjustments to this account to remove the deficiency.

We first address former Lieutenant Sessions' liability.  At the time 
the dishonored checks were cashed by the Detachment's disbursing 
office, Lieutenant Sessions was the disbursing officer authorized to 
make payments from the Detachment's account, and in whose name the 
account was held.  In response to questions raised about disbursing 
management at the Detachment, an Inventory Board was set up by the 
Personnel Support Activity, Europe, to perform a cash count during an 
unannounced audit of all items in the possession of Lieutenant 
Sessions.  The Inventory Board issued a cash verification report 
finding an indefinite number of dishonored checks.[1]  You state in 
your letter that "[a]s a result of [the dishonored checks] and other 
major discrepancies in his accountability, Lieutenant Sessions was 
relieved for cause on June 3, 1994."  On January 12, 1995, he was 
found guilty at a General Court Martial of four specifications of the 
Uniform Code of Military Justice, Article 92, three specifications of 
dereliction of duty, and one specification of an orders violation.

As the account's cognizant disbursing officer at the time the 
dishonored checks were cashed, Lieutenant Sessions is personally 
liable for the dishonored checks as improper payments from his 
account.  B-261312, Feb. 5, 1995; B-161457, Oct. 30, 1969.  This 
Office has authority under 31 U.S.C.  sec.  3527 to relieve a disbursing 
officer from liability for improper payments if we determine that the 
payments were not the result of bad faith or a lack of reasonable 
care.  B-261312, Feb. 2, 1995;     B-246418, Feb. 3, 1992.  In cases 
where a subordinate rather than the disbursing official actually 
disbursed the funds, we have granted relief to the supervisory 
disbursing officer upon a showing that the official properly 
supervised the subordinate, maintained an adequate system of 
procedures and controls to safeguard the funds, and took steps to 
ensure the system's implementation and effectiveness.  B-240654, Feb. 
6, 1991.  The record shows that Lieutenant Sessions was the 
supervisory disbursing officer with regard to the improper payments at 
issue here.

In this regard, the Navy found that Lieutenant Sessions "did not 
exercise due care" as evidenced by his failure to follow prescribed 
procedures.  Lieutenant Sessions failed to make timely deposit of the 
seventeen checks cashed by former Navy personnel, totalling $3,251.45, 
as required by volume 4, paragraph 04030403 of the Navy Comptroller 
Manual (Manual); he violated paragraphs 04030410.1 and 04190100 of the 
Manual by his failure to record the debit vouchers in the cashbook 
immediately upon receipt; and, he failed to pursue the established 
collection procedures outlined in paragraph 04031001.  The Italian 
lire checks, totalling $211,631.76, were cashed by foreign nationals 
in direct violation of the check cashing procedures established in 
volume 5, paragraph 040103 of DOD's Financial Management Regulation.  
The cash verification report noted that Lieutenant Sessions 
"admittedly states that he was well aware of the contentious practice 
of cashing Italian lire checks."

We have no basis to question the Department's findings concerning 
Lieutenant Sessions' lack of good faith and failure to exercise 
reasonable care.  In cases such as this, where the Department has 
fully investigated the facts surrounding the improper payments and the 
resulting loss of federal funds and court-martialed the disbursing 
officer for his actions, we do not perform an independent 
investigation of the facts, but defer to the findings of the agency as 
represented in the record submitted to us.[2]  Relief from liability, 
therefore, is denied Lieutenant Sessions.

The record indicates that Gianni Ferrante, an Italian agent cashier, 
cashed many,    if not all, of the checks of foreign nationals that 
were subsequently dishonored.    As such, he is jointly and severally 
liable for those improper payments.  B-248532, Oct. 26, 1992.  There 
is no basis in the record from which we can determine whether relief 
is available to him.  You should consider whether relief is 
appropriate, and if not, take collection action against him.[3]

With respect to LTJG Milano's liability for this loss, we note that he 
was not the accountable officer for this account when the loss 
occurred.  LTJG Milano did not assume responsibility for the account 
until Lieutenant Sessions was released from his duties.  He, 
therefore, is not liable for the loss, and it is unnecessary to grant 
him relief.  See 62 Comp. Gen. 476 (1983).

You also request that we remove the deficiency in the amount of 
$214,883.21 from the account.  Under 31 U.S.C.  sec.  3530, government 
agencies are authorized to charge current operating appropriations 
with amounts necessary to restore deficiencies in accounts resulting 
from the fault or negligence of accountable officers when the head of 
the agency determines that the loss cannot be recovered from the 
accountable officer or any other party liable for the loss.  See GAO, 
Policy and Procedures Manual for Guidance of Federal Agencies, tit. 7,  sec.  
8.14D (1993).  The Department has determined that the loss cannot be 
collected from former Lieutenant Sessions.  The Department should also 
determine whether any collection action can be taken against Mr. 
Ferrante.  The Department can then make the necessary adjustments to 
the account without further involvement by our Office.  We stress that 
under the provisions of 31 U.S.C.  sec.  3530(b), the determination that 
amounts remain uncollectible and are subsequently adjusted does not 
affect the personal financial liability of the disbursing officers for 
the loss, should collection action become feasible in the future.  
B-235405, Mar. 19, 1990. 

Sincerely yours,

Gary L. Kepplinger
Associate General Counsel
B-271608

June 21, 1996

DIGEST

1.  Where a military department fully investigates the facts 
surrounding an improper payment and court-martials the disbursing 
officer for the actions related to the improper payments, we have no 
basis to question the department's findings concerning the officer's 
good faith and exercise of reasonable care.

2.   Under 31 U.S.C.  sec.  3530, government agencies are authorized to 
charge current operating appropriations with amounts necessary to 
restore deficiencies in accounts resulting from the fault or 
negligence of accountable officers when the head of the agency 
determines that the loss cannot be recovered from the accountable 
officer or any other party liable for the loss.

1. The Naval Criminal Investigative Service and the Guardia Finanza 
are conducting an investigation into these dishonored checks.

2. Cf. B-211660, Dec. 15, 1983.  (The record submitted by the agency 
was conclusory; it did not include any explanation for the conclusion.  
Although we denied relief, we indicated a willingness to reconsider 
the matter upon the agency's presentation of supporting evidence.)

3. In this regard, the record indicates that Mr. Ferrante was 
dismissed in August, 1994, and is facing charges in an Italian court 
for illegally cashing checks.