BNUMBER:  B-266249
DATE:  November 14, 1996
TITLE:  [Letter]

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B-266249

November 14, 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 certifying officer Carol Phillips and Mr. Thomas M. Quinn, her 
supervisor at the
Andover Service Center of the Internal Revenue Service (IRS), for a 
loss arising
from the payment of an erroneous tax refund in the amount of $3,503.  
Due to the
expiration of the applicable statute of limitations, we are returning 
this case to you
without action. 
 
Certifying officers are generally responsible for the existence and 
correctness of the
facts stated in the certificate, voucher, and supporting 
documentation; the
correctness of the computations on the voucher; and the legality of 
the proposed
payment under the appropriation or fund involved.  Moreover, they are 
pecuniarily
liable to the United States, automatically and strictly, for any 
illegal, improper, or
incorrect payment that results from a false or misleading 
certification, or which is
prohibited by law or does not represent a legal obligation under the 
appropriation
or fund so used.  31 U.S.C.  sec.  3528(a).  At the same time, 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).  

Recently, we advised you concerning when and how to refer requests for 
relief of
IRS certifying officers under section 3528(b) for losses arising from 
erroneous tax
refunds.  B-266245, Oct. 24, 1996 (copy enclosed).  In that case, we 
noted that the
Internal Revenue Code and IRS policy require IRS certifying officers 
to initially
assess taxes and certify and pay refunds based upon the 
representations contained
in the taxpayer's return, subject to later adjustment and collection 
of any refunds
found erroneous.  We explained that while IRS certifying officers are 
generally
liable for losses arising from erroneous certifications of tax 
refunds, they are not
liable for losses arising from certifications that were not erroneous 
at the time that
they were made.  The latter category includes refunds that are 
determined in post-
payment audits or adjudications to have been fraudulently obtained or 
otherwise
erroneous.  Id.  In B-266245, we "tolled" the running of the 
applicable statute of
limitations, 31 U.S.C.  sec.  3526(c), to allow your office to ascertain 
some omitted
factual information bearing on whether the certifying officer actually 
was liable for
the loss under section 3528(a), and if so, whether to resubmit the 
request for her
relief under section 3528(b). 

In the present case, your submissions state that this loss occurred 
because a tax
preparer, without the taxpayer's knowledge, submitted a false return 
using the
taxpayer's name and social security number.  Presumably, the fraud was 
not
apparent on the face of the return, and accordingly, the Internal 
Revenue Code and
IRS policy required Ms. Phillips to process the return and certify any 
tax refunds
claimed therein based on the information stated in it.  In that case, 
the refund was
not erroneous at the time Ms. Phillips certified it, and she would be 
neither liable
for, nor in need of relief from, this loss.  However, if the fraud was 
apparent on the
face of the return, then Ms. Phillips's certification was erroneous at 
the time she
made it and she would be automatically liable for the loss.  Her 
eligibility for relief
from that liability would depend, in part, upon whether she acted with 
or without
negligence in certifying the refund.  B-266245, supra.  

Normally, as in B-266245, supra, we would refer this matter to you for 
your
determination on the remaining factual issue of whether her 
certification was
consistent with the Internal Revenue Code and IRS Policy, i.e., was 
the fraud
apparent on the face of the return?  Or, if you determined that the 
refund was not
consistent with the Internal Revenue Code and IRS policy and, thus, 
legally
erroneous at the time she certified it, but you (or Ms. Phillips) 
still believed that she
qualified for relief under section 3528(b), you could resubmit a 
request for her
relief.  In this case, however, it appears from your office's 
submissions that the
applicable statute of limitations, 31 U.S.C.  sec.  3526(c), has already 
run on this case,
and further examination into this matter is unnecessary. 

Under 31 U.S.C.  sec.  3526(c), this Office is required to settle and 
adjust all accounts of
the United States within three years after the date that a 
"substantially complete"
account is available for audit.  E.g., B-258735, Dec. 15, 1994.  See 
also GAO, Policy
and Procedures Manual for Guidance of Federal Agencies (GAO-PPM), tit. 
7,  sec.  8.7
(TS No. 7-43, May 18, 1993).  Where the loss is due to fraud, the 
three-year period
begins when the loss is discovered and reported to appropriate agency 
officials. 
E.g., 70 Comp. Gen. 616, 622 (1991); 7 GAO-PPM  sec.  8.7.  In the absence 
of
appropriate action by this Office within the three-year period, 
account irregularities
are deemed conclusively settled against both the Comptroller General 
and the
executive branch.  31 U.S.C.  sec.  3526(c)(2), (d).  E.g., 70 Comp.Gen. 
420, 423 (1991). 
In order to preserve and protect the government's rights with respect 
to the
three-year period specified in section 3526(c), agencies should 
report, with certain
exceptions not relevant here, all unresolved irregularities to this 
Office within two
years after the date that the relevant account is substantially 
complete and ready
for audit.  7 GAO-PPM  sec.  8.4C.  

Your supplemental submission states that the refund at issue here was 
certified for
payment on March 26, 1990, and was officially found and reported to be 
improper
on March 27, 1991.  Given these facts, the three-year statutory period 
established in
section 3526(c) expired at the end of March, 1994.  Consequently, to 
the extent that
Ms. Phillips may have been legally liable for the loss in this matter, 
her account has
already been settled in her favor, by operation of the law.  
Accordingly, there is no
occasion for us to consider your request for her relief pursuant to 31 
U.S.C.
 sec.  3528(b).  E.g., B-258735, supra.

Finally, Mr. Quinn's relief (for any liability he may have under IRS 
regulations as
Ms. Phillips' supervisor) is not within our jurisdiction.  See 
B-266245, supra.  We are
returning this issue to you for your disposition.

Sincerely yours,

Gary L. Kepplinger
Associate General Counsel

Enclosure

B-266249

November 14, 1996

DIGEST

A request under 31 U.S.C.  sec.  3528 for relief of an Internal Revenue 
Service certifying
officer from pecuniary liability for an erroneous tax refund was 
returned without
action because the statute of limitations established in 31 U.S.C.  sec.  
3526(c) expired
before the matter was submitted to GAO.