BNUMBER:  B-266245
DATE:  October 24, 1996
TITLE:  [Letter]

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B-266245

October 24, 1996

Mr. Edwin A. Verburg
Deputy Chief Financial Officer
Department of the Treasury

Dear Mr. Verburg:

This responds to your letter of September 15, 1995, requesting relief 
from liability for Ms. Dianna Palmer and Mr. Bob Hughes of the 
Brookhaven Service Center of the Internal Revenue Service (IRS) for an 
improper payment in the amount of $5,137.  As explained below, we are 
unable to grant relief to Ms. Palmer without additional information 
from you.  Therefore, we are tolling the running of the statute of 
limitations in this matter to allow you adequate time to submit the 
necessary information.  31 U.S.C.  sec.  3526(g).  The matter of Mr. 
Hughes's relief is not within our jurisdiction, and we are returning 
that issue for your disposition.

According to your letter, the loss here occurred as a result of the 
issuance of an erroneous tax refund check.  You identify Dianna Palmer 
as the cognizant certifying officer.  This Office is authorized to 
relieve a certifying officer from liability when we find that (1) the 
certification was based on official records and the certifying officer 
did not know, and by reasonable diligence and inquiry could not have 
discovered, the correct information; or (2) in the context of payments 
under contracts, the contractual obligation was incurred in good 
faith, no law specifically prohibited the payment, and the United 
States received value for the payment.  31 U.S.C.  sec.  3528(b).  In a 
situation such as this, involving an erroneous tax refund, our 
consideration would most likely focus on section 3528(b)(1) rather 
than (b)(2).  As you can see, such consideration is necessarily 
fact-based.  Your September 15 submission to us did not include a 
statement of the facts that resulted in the erroneous refund.  In 
order for us to make the determination required by section 3528(b)(1), 
we will also need to examine copies of the records that Ms. Palmer 
referred to in certifying this refund.  It appears from the record you 
submitted that the refund at issue here was found to be erroneous on 
November 29, 1993.  Consequently, the statute of limitations for 
granting relief to Ms. Palmer expires on November 29, 1996.  In order 
to allow you adequate time to compile and submit the necessary 
information and documentation, we are tolling the running of the 
statute of limitation pursuant to 31 U.S.C.  sec.  3526(g).  

You also identify Bob Hughes, Director of the Brookhaven Center, as an 
accountable officer having pecuniary liability for this erroneous 
refund.  In informal conversations, your staff explained that IRS 
administrative rules hold Mr. Hughes liable for losses such as this 
solely by virtue of his position and duties as Service Center Director 
and supervisor of the responsible certifying officer.  While the law 
does not normally impose pecuniary liability upon an employee solely 
because he or she supervises certifying officers, e.g., B-214286, July 
20, 1984, agencies have the authority to administratively impose 
pecuniary liability for the loss of government property or funds upon 
employees who are not otherwise financially accountable.  E.g., 
B-236142.2, Feb. 23, 1990.  At the same time, however, the authority 
to relieve those employees from such administrative liability rests 
with the agency that created it, not with GAO.  E.g., B-191036, July 
7, 1978.  For this reason, we are returning to you the matter of Mr. 
Hughes's liability, and we defer to your conclusions as to his request 
for relief.

If you have any questions about this matter, please call me or Mr. 
Neill Martin-Rolsky of my staff at 202-512-5644.

Sincerely yours,

Gary L. Kepplinger
Associate General Counsel

B-266245

October 24, 1996

DIGESTS

1.  In response to a request under 31 U.S.C.  sec.  3528 for relief for 
certain Internal Revenue Service (IRS) accountable officers for some 
erroneous tax refunds, GAO tolled the running of the statute of 
limitations in order to allow IRS to submit information explaining the 
facts and circumstances under which those erroneous refunds were made.  
Not all erroneous refunds give rise to accountable officer liability.

2.  GAO returned without action a request for relief under 31 U.S.C.  sec.  
3528 for an Internal Revenue Service (IRS) service center director who 
supervised some certifying officers charged with losses arising from 
erroneous tax refunds.  Supervisors of certifying officers are not 
automatically accountable under the law for losses incurred by their 
subordinates, unless the supervisors were accountable officers in 
their own right with respect to the losses in question.  To the extent 
that IRS regulations administratively impose liability upon the 
supervisor under these circumstances, only IRS may grant the 
supervisor relief from that liability.