BNUMBER:  B-270863
DATE:  June 17, 1996
TITLE:  [Letter]

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B-270863

June 17, 1996

Mr. Joel Taub
Acting Deputy Chief Financial Officer
Department of the Treasury

Dear Mr. Taub:

This is in response to your request of December 11, 1995, that we 
grant relief under 31 U.S.C.  sec.  3527(a), to Ms. Sylvia Wren, former 
Director of the Atlanta Service Center, for the loss of $3,227 in tax 
collections.  The loss occurred as a result of embezzlement by a 
former Internal Revenue Service (IRS) employee.  For the reasons 
stated below, relief is granted.

The record indicates that the loss occurred in May of 1985 and April 
of 1986, when Jimmie R. Gleaton, then a clerk in the Receipt and 
Control Branch, Processing Division, Atlanta Service Center, received 
remittances for payment of taxes from two taxpayers and failed to 
process the funds for proper credit to the taxpayers' accounts.  The 
remittance in May of 1985, was a check for $3,000 and the one in April 
of 1986, was a money order for $613.  Both were made payable to the 
IRS.  Mr. Gleaton altered both making them payable to himself and 
subsequently endorsed them.  The loss was discovered when both 
taxpayers contacted the IRS to report that their check and money order 
had been altered.  The taxpayers' accounts were credited, resulting in 
an irregularity in the account of the Director in the amount of 
$3,613.  

Mr. Gleaton pled guilty to embezzlement in both instances and was 
convicted and sentenced for the first instance on January 15, 1986, 
and again on December 12, 1986, for the second instance.  The court 
ordered restitution of $3,613 and placed Mr. Gleaton on probation for 
four years and five years, respectively, to be served consecutively.  
Mr. Gleaton's probation was revoked for failure to make restitution 
payments and served time in jail as a result.  To date, Mr. Gleaton 
has paid $386.  Collection attempts have been unsuccessful and the IRS 
has determined that the balance, $3,227, is uncollectible.  
   
Losses due to embezzlement by financial personnel are treated as 
physical losses, and relief will be granted if statutory conditions 
are met.  B-244113, Nov. 1, 1991.  Under 31 U.S.C.  sec.  3527(a), we are 
authorized to relieve an accountable officer of liability for a 
physical loss or deficiency of funds if the agency determines, and we 
agree, that the loss occurred: (1) while the officer was acting in the 
discharge of official duties, or because of an act or failure to act 
by a subordinate of the officer; and (2) without fault or negligence 
on the part of the officer.  Your agency has determined, as required 
by 31 U.S.C.  sec.  3527(a), that the accountable officer, Ms. Wren, was 
carrying out her official duties at the time of the loss and the loss 
was not the result of her negligence or fault.

When relief is requested for an accountable officer who is a 
supervisor and the loss is due to the actions of subordinate finance 
personnel, we will review the existence and adequacy of internal 
controls and procedures to determine negligence.           B-215501, 
Nov. 5, 1984.  The record shows that adequate IRS internal controls 
existed and were enforced at the time of the loss.  They included 
monitoring the integrity of clerks by processing "test payments" 
through the system, restricting access to the work area, and 
periodically conducting presentations to all employees regarding the 
consequences of embezzlement.

We agree with your determination that the loss was not the result of 
the fault or negligence of Ms. Wren.  Even the most carefully 
established and effectively supervised system cannot prevent every 
conceivable form of criminal activity.       B-260563, Mar. 31, 1995.  
Accordingly, your request for relief is granted.

Sincerely yours,

Gary Kepplinger
Associate General Counsel
 
B-270863

June 17, 1996

DIGEST  

Former Internal Revenue Service director is relieved from liability 
under 31 U.S.C.
 sec.  3527(a) for loss that resulted from embezzlement by subordinate.  
The director had an adequate system of procedures and controls in 
place that showed the loss was not the result of the director's 
negligence.