BNUMBER:  B-271312
DATE:  January 17, 1997
TITLE:  [Letter]

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B-271312
  
January 17, 1997

Mr. John S. Nabil
Director
Defense Finance and Accounting Service
Denver Center
6760 E. Irvington Place
Denver, CO  80279

Dear  Mr. Nabil:

This responds to your request of January 29, 1996 for relief of 
Captain Harvey B. Rice, Defense Accounting Officer (DAO), McGuire Air 
Force Base, New Jersey, under 31 U.S.C.  sec.  3527(c), for an improper 
payment of $15,117.81 payable to Spensieri Enterprises, Ltd. For the 
reasons below, we grant relief.

The loss resulted when the payee, Spensieri, negotiated both the 
original and a replacement, or recertified check.  On January 31, 
1994, the McGuire Air Force Base Defense Accounting Office issued  a 
check to Spensieri for $15,117.81 as finial payment under a 
construction contract.  Almost six week later, on March 10, Spensieri 
notified the accounting office that it had not received the check, and 
submitted Air Force Form 326, "Statement of Claimant Requesting 
Stoppage of Payment and Request for Substitute of U.S. Treasury 
Check".   On that same day, Captain Rice, using Standard Form 1184, 
"Unavailable Check Cancellation," notified Treasury to cancel the 
check.  After receiving confirmation from Treasury, dated March 29, 
that the check had been cancelled and that his account had been 
credited for the amount of the check, Captain Rice on May 2 issued a 
replacement check to Spensieri, which Spensieri cashed.

Over seven months later, on December 19, Treasury advised Captain Rice 
that Spensieri had cashed the original check on August 9.  Treasury 
also informed Captain Rice that it had reversed its March 29 action 
crediting his account with the amount of the original check.  
Consequently, Captain Rice's account has been charged for 2 checks, 
each in the amount of $15,117.81, and now carries a deficiency of 
$15,117.81.

The Department of Defense's (DOD) Financial Management Regulation 
authorizes disbursing officers to issue replacement checks, or 
recertified checks, when a payee alleges that it has not received an 
original check.  DOD Financial Management Regulation, vol 5, DOD 
7000.14-R, sec. 080405 (Dec. 1993).[1]  The regulation notes that "the 
authority to issue recertified checks rests solely with the DO 
[disbursing officer]" and that "as is the case with all other checks 
and disbursements, the DO will be held personally and pecuniarily 
liable for all illegal, incorrect, or improper disbursements of public 
funds by recertified check."  DOD 7000.14-R, sec. 080404.  In a 
situation such as this, where a payee negotiates both the original and 
a replacement check, as improper payment results where the second of 
the two checks is cashed.  66 Comp. Gen. 192, 194 (1987).  This Office 
may relieve a disbursing officer for a deficiency in his account 
resulting from an illegal, improper or incorrect payment, and credit 
the account for the deficiency, upon finding that the payment was not 
the result of bad faith or lack or reasonable care by the disbursing 
officer, and that the agency acted diligently in trying to collect the 
overpayment.  31 U.S.C.  sec.  3527(c).  See 66 Comp. Gen. at 194.

It appears from your submission that Captain Rice acted with 
reasonable care in this matter, and there is no evidence to suggest 
bad faith on his part.  The record establishes that Captain Rice 
complied with DOD's regulation governing the insurance of replacement 
checks, chapter 08 of volume 5 of DOD's Financial Management 
Regulation.  Captain Rice obtained from Spensieri a written affidavit, 
in the form of Air Force Form 326, asserting nonreceipt of the 
original check.  Captain Rice, using Treasury's SF 1184, notified 
Treasury of the assertion and asked Treasury to cancel the check.  
Captain Rice did not issue the replacement check until Treasury 
confirmed that the original remained outstanding and acknowledged its 
cancellation.  Further, the report of an investigation of the 
deficiency by the Defense Finance and Accounting Service concluded 
that there were no internal breakdowns in McGuires' Defense Accounting 
Office with respect to this matter, and that Captain Rice had in place 
an adequate system of procedures and controls.

The record also establishes that the Air Force has aggressively 
pursued collection of the overpayment from Spensieri in compliance 
with the Federal Claims Collection Standards, 4 C.F.R.  sec.  101-105.  
The Air Force attempted to contact Spensieri three times demanding 
payment of the amount overpaid, but has learned that Spensieri has 
declared bankruptcy and is no longer in business.

Accordingly, we grant relief.

Sincerely yours,

Gary Kepplinger
Associate General Counsel

B-271312

January 17, 1997

                                                        DIGEST 

Relief from liability is granted Air Force disbursing official 
pursuant to 31 U.S.C.  sec.  3527(c) for improper payment resulting from 
payee's negotiation of both original and recertified checks.  Proper 
procedures were followed in the issuance of the recertified check, 
there was no indication of bad faith on the part of the disbursing 
official, and collection actions were initiated in a timely and 
adequate manner.          

1. The Secretary of the Treasury, acting under 31 U.S.C.  sec.   3331(f), 
has delegated to DOD his section 3331 authority to issue replacement 
DOD checks.  DOD 7000.14-R, sec. 080405(A).