BNUMBER:  B-271951
DATE:  December 17, 1996
TITLE:  Thomas S. Miller-Aviator Continuation Pay-Waiver Request

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Matter of:Thomas S. Miller-Aviator Continuation Pay-Waiver Request

File:     B-271951

Date:December 17, 1996

DIGEST

An Air Force officer who was scheduled to be separated in August 1994 
was advised by responsible service personnel in late March that his 
annual installment of aviation continuation pay, due in April, would 
be limited to a prorated amount covering his remaining service time 
from April to August.  However, when the payment was made in April, it 
was for the full annual amount, but the day following payment the 
finance office advised the officer that the excess amount was 
erroneous and would be collected from him.  In these circumstances, 
collection is not considered to be against equity and good conscience, 
and waiver of the overpayment under 10 U.S.C.  sec.  2774 is denied.  The 
officer's additional assertion that, under his continuation pay 
agreement, he was entitled to the full annual installment is in effect 
a claim, and the authority to settle such claims has been transferred 
from the General Accounting Office to the Department of Defense where 
he may pursue that matter.

DECISION

This is in response to Thomas S. Miller's request for waiver of the 
claim asserted against him by the Defense Finance and Accounting 
Service (DFAS) for a portion of the aviator continuation pay he 
received while serving on active duty as a captain in the Air Force.  
As explained below, we find that the claim does not qualify for waiver 
under our waiver authority, 10 U.S.C.  sec.  2774.[1]

BACKGROUND

The record shows that in April 1992, Captain Miller entered into an 
aviator continuation pay agreement with the Air Force, pursuant to 37 
U.S.C.  sec.  301b, whereby he agreed to remain on active duty through 
December 21, 1995, in consideration for which he became entitled to 
aviator continuation pay, payable in annual installments.  It appears 
that in early 1994, Captain Miller was nonselected for promotion and 
scheduled to be involuntarily separated from the Air Force on August 
31, 1994.  Captain Miller states that on March 30, 1994, he contacted 
the Air Force office that deals with continuation pay to learn how his 
separation would affect his future payments.  He states he was advised 
that the amount of his upcoming April annual payment would be prorated 
to cover the remaining period of his service, i.e., through August 31.  
He also states that he expressed the belief that under the agreement 
he had signed, he was entitled to the full annual payment for that 
year, not a prorated amount.

On April 13, 1994, personnel at the Finance Office at Ellsworth Air 
Force Base, where Captain Miller was then stationed, advised him that 
it was too late for the Ellsworth office to adjust the payment of his 
annual installment ($6,527.55), which had been paid to his account in 
full on April 11, 1994, by the Finance and Accounting Center in 
Denver, but the amount applicable to the period after his scheduled 
separation in August was an overpayment which would be collected from 
him.  On April 28, 1994, Captain Miller filed a request for waiver of 
the overpayment.  However, Captain Miller was separated from the Air 
Force on August 31, 1994, and the amount of the continuation pay 
installment applicable to the period after that date ($4,152.25) was 
collected from him by the Air Force, and DFAS forwarded his request 
for waiver to our office for consideration.

As noted above, Captain Miller acknowledges that he was told in March 
that he was entitled to only a prorated amount of his annual incentive 
pay installment and that he was advised the day after the full payment 
was made on April 11 that the amount applicable to the period after 
his separation date in August would be collected from him.  However, 
it is his position that under the terms of his continuation pay 
agreement, he was entitled to receive the full annual payment; and, 
therefore, the payment he received was not erroneous, and the 
$4,152.25 collected  should be refunded to him.  Specifically, he 
notes that the agreement provides that the specified amount will be 
paid on each anniversary date and, although entitlement to 
continuation pay is to "stop immediately" in the event of his being 
"separated for any reason," recoupment of a previous payment on a pro 
rata basis is required only if entitlement to such pay stops due to 
one of five specified reasons, none of which apply to his case.

The record shows that Air Force Headquarters, Military Compensation 
Division, takes the position that under applicable regulations 
implementing 37 U.S.C.  sec.  301b for the Air Force, in a situation such 
as Captain Miller's, where it is known that the officer is scheduled 
to be separated before completion of the full period for which an 
annual continuation pay payment is to be made, the payment is to be 
limited to an amount prorated to cover only the remaining period the 
officer is scheduled to serve that year.  Thus, it is the Air Force's 
position in a case such as this where the full annual payment was 
made, to the extent that it exceeds the proper prorated amount, it is 
an erroneous payment to be recovered as such.  That is, apparently it 
is the Air Force's position that in such a case, recoupment is not 
governed by the provisions of the agreement Captain Miller cites which 
apply to recovery of properly paid installments which later become 
subject to recovery because for specified reasons the officer does not 
complete the term for which they were paid.

ANALYSIS AND CONCLUSION

Under the applicable statutory, 37 U.S.C.  sec.  301b, supra, the 
continuation pay in question is payable to aviation officers who 
execute a written agreement to remain on active duty in an aviation 
service for at least 1 year, upon acceptance of the agreement by the 
Secretary concerned (in this case the Secretary of the Air Force) ( sec.  
301b(a)); the term of the agreement and the amount payable may be 
prorated ( sec.  301b(d)); the total amount payable pursuant to the 
agreement becomes fixed and may be paid in either a lump sum or in 
installments ( sec.  301b(e)); and if an officer who has received such pay 
fails to complete the period of active duty specified in the 
agreement, the Secretary concerned may require the officer to repay, 
on a pro rata basis and to the extent the Secretary determines 
conditions and circumstances warrant, all sums paid under these 
provisions ( sec.  301b(g)).  The Secretaries concerned are to prescribe 
regulations, subject to the approval of the Secretary of Defense, to 
carry out these provisions ( sec.  301b(h)).  Therefore, an officer's 
entitlement to such payments is subject to these statutory provisions, 
the service's implementing regulations, and the provisions of the 
applicable agreement. 

Our waiver authority applicable to military pay and allowances, 10 
U.S.C.  sec.  2774, applies to a claim against a service member "arising 
out of an erroneous payment" the collection of which would be against 
equity and good conscience and not in the best interests of the United 
States.[2]  We have long held that an amount correctly and legally 
paid to a member in the form of a bonus as an incentive for him to 
remain on active duty may not be later considered an "erroneous 
payment" within the meaning of the waiver statute where the member 
becomes legally obligated to refund all or part of the amount received 
because he does not complete the active duty commitment for which the 
payment was made.  See e.g., Spc. Wayne Susumu Enomoto, B-180028, July 
9, 1974; Eugene M. Edynak, M.D., B-200113, February 13, 1981; and 
James W. Parker, B-259696, January 25, 1995.  

In accordance with these decisions, if the installment of Captain 
Miller's continuation pay in question had been correctly and legally 
made and its partial recoupment was based on his subsequent failure to 
complete the term of service for which it was paid, his debt would not 
be considered to have arisen out of an "erroneous payment" and it 
would not be subject to consideration for waiver under 10 U.S.C.  sec.  
2774.  As noted above, however, it is the Air Force's position that 
under their regulations, the installment payment should have been 
limited to the prorated amount, and thus to the extent it exceeded 
that amount, it was an erroneous payment subject to recovery.  On that 
basis, the debt in question is considered as arising out of an 
erroneous payment and is subject to consideration for waiver under 10 
U.S.C.  sec.  2774.  See Enomoto, supra.

As the language of the waiver statute indicates, whether to grant 
waiver is not to be decided simply as a matter of right whenever an 
individual innocently receives compensation to which he or she is not 
entitled, but is to be decided on principles of equity and fairness 
under the circumstances present in each case.  Accordingly, we have 
held that where an agency's prompt notification of an overpayment to 
an employee precludes the employee from relying on the accuracy of the 
payment to his or her detriment, waiver is not appropriate since 
collection would not be against equity and good conscience despite the 
fact that the employee was without fault in the matter.  See Richard 
C. Clough, 68 Comp. Gen. 326 (1989), and decisions cited therein.[3]

In Captain Miller's case, he was notified before the payment was made 
that he was entitled to only a prorated amount of the continuation 
pay, and the day after the overpayment was made, he was advised by the 
base finance office that an erroneous amount had been paid and the 
excess would be collected from him.  In these circumstances, we do not 
find collection to be against equity and good conscience.  
Accordingly, we deny Captain Miller's request for waiver of the 
$4,152.25 in excess continuation pay he received.

Concerning Captain Miller's argument that under the provisions of his 
continuation pay agreement he was entitled to the full annual 
installment he received, that is in effect an assertion of a claim for 
continuation pay, and such claims are no longer within our 
jurisdiction to settle.  Effective June 30, 1996, our authority to 
settle claims for military pay and allowances was transferred to the 
Department of Defense, Office of Hearings and Appeals, Claims 
Division, which may be addressed at Post Office Box 3656, Arlington, 
Virginia 22203.[4]  Accordingly, if he wishes to pursue his claim on 
that basis, he may file it with the Office of Hearings and Appeals at 
the address above.

/s/Seymour Efros
for Robert P. Murphy
General Counsel 

1. The legal issues decided in this case also will be applied in 
several other pending cases involving similar requests for waiver of 
repayment of aviation continuation pay previously filed with our 
former Claims Group by other members.

2. The statute also provides that we may not waive a claim if we find 
an indication of fraud, misrepresentation, fault, or lack of good 
faith on the part of the member.  10 U.S.C.  sec.  2774(b).  We find no 
such indication on the part of Captain Miller in this case.

3. These decisions concerned requests for waiver by civilian employees 
under 5 U.S.C.  sec.  5584; however, the same standards apply to waiver 
requests under 10 U.S.C.  sec.  2774.  See 4 C.F.R. Part 91 (1996).

4. Pub. L. No. 104-53,  sec.  211, 109 Stat. 535 (1995), transferred our 
authority under 31 U.S.C.  sec.  3702 to settle such claims to the Office 
of Management and Budget which delegated this function to the 
Department of Defense.  In addition, our waiver authority under 10 
U.S.C.  sec.  2774, will be transferred to the Office of Management and 
Budget effective December 18, 1996, pursuant to Pub. L. No. 104-316,  sec.  
105, 110 Stat. 3826 (1996).