TITLE: B-305919, Department of Defense Accountable Officials--Local Nationals Abroad, March 27, 2006
BNUMBER: B-305919
DATE: March 27, 2006
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B-305919, Department of Defense Accountable Officials--Local Nationals Abroad, March 27, 2006

   Decision

   Matter of: Department of Defense Accountable Officials--Local Nationals
   Abroad

   File: B-305919

   Date:  March 27, 2006

   DIGEST

   The Department of Defense may use appropriated funds to employ foreign
   local nationals as Departmental Accountable Officials under 10 U.S.C.
   sect. 2773a even though foreign local nationals may not be subject to
   pecuniary liability under United States law. The Department of Defense
   should formulate a written policy addressing the consideration and
   circumstances under which local nationals may serve as Departmental
   Accountable Officials.

   DECISION

   A certifying officer at the headquarters of U.S. Army Materiel Command
   Europe has requested an advance decision under 31 U.S.C. sect. 3529
   regarding the propriety of using appropriated funds to employ foreign
   local nationals as Departmental Accountable Officials[1] under 10 U.S.C.
   sect. 2773a. E-mail from Jerome J. Markiewicz to U.S. Government
   Accountability Office Redbook Queries, June 6, 2005 (Markiewicz e-mail).
   The certifying officer's inquiry stems from the fact that under treaties
   and other agreements between the United States and foreign governments,
   foreign local nationals employed by the United States abroad may not be
   subject to United States law that might otherwise pertain to their
   employment. One such law is 10 U.S.C. sect. 2773a, which authorizes the
   Secretary of Defense to designate civilian employees of the Department of
   Defense (DOD) as Departmental Accountable Officials. Employees so
   designated are liable for fiscal irregularities in the same manner as
   certifying and disbursing officers. 10 U.S.C. sect. 2773a(c)(2).

   In light of the possibility that foreign local nationals' employment
   abroad might not be subject to section 2773a and the accountability it
   imposes, the certifying officer asks whether DOD may use appropriated
   funds to employ foreign local nationals as Departmental Accountable
   Officials. We conclude that even though foreign local nationals serving as
   Departmental Accountable Officials may not be subject to the
   accountability normally coupled with such positions, DOD may use
   appropriated funds to employ foreign local nationals as Departmental
   Accountable Officials abroad. We caution, however, that DOD should craft a
   written policy detailing the circumstances, if any, under which local
   nationals should be placed in positions of accountability.

   BACKGROUND

   An accountable officer is any government officer or employee who by reason
   of his or her employment is responsible for government funds. B-304233,
   Aug. 8, 2005. Accountable officers are strictly liable for fiscal
   irregularities associated with the funds for which they are responsible.
   62 Comp. Gen. 476, 479-80 (1983). The ranks of accountable officers
   include certifying officers, disbursing officers, collecting

   officers, and other employees having custody of government funds.[2]

   In 2002, Congress authorized the Secretary of Defense to create another
   accountable position by adding section 2773a to title 10 of the United
   States Code.[3] Bob Stump National Defense Authorization Act for Fiscal
   Year 2003, Pub. L. No. 107-314, div. A, title X, sect. 1005(a), 116 Stat.
   2458, 2631 (Dec. 2, 2002). Under section 2773a, the Secretary of Defense
   may designate those civilian employees of DOD as Departmental Accountable
   Officials who provide to DOD certifying officers "information, data, or
   services that are directly relied upon by the certifying official in the
   certification of vouchers for payment." 10 U.S.C. sect. 2773a(b)(1). DOD's
   Financial Management Regulation (FMR) lists functions that are to be
   performed by Departmental Accountable Officials. Department of Defense
   Financial Management Regulation 7000.14-R, vol. 5, ch. 33, Departmental
   Accountable Officials, Certifying Officers and Review Officials (April
   2005). These include execution of purchase card programs, authorization of
   travel orders, and preparation of contract modifications. Id. The FMR
   notes that the list of functions is not exhaustive. Id.

   The Secretary of Defense may not designate as Departmental Accountable
   Officials individuals who are otherwise accountable, such as certifying or
   disbursing officers. 10 U.S.C. sect. 2773a(b)(2). Departmental Accountable
   Officials are pecuniarily liable for illegal, improper, or incorrect
   payments resulting from their fault or negligence. 10 U.S.C. sect.
   2773a(c). The FMR directs that individuals designated as Departmental
   Accountable Officials sign DOD Form 577, which acknowledges their personal
   pecuniary liability to the United States. DOD-FMR 7000.14-R. Such
   liability is joint and several with the certifying or disbursing officer
   who makes a payment based on the Departmental Accountable Official's
   erroneous information, 10 U.S.C. sect. 2773a(c)(3), and is the same as
   that incurred by certifying and disbursing officers government-wide under
   subtitle III of title 31 of the United States Code. Thus, even though
   Departmental Accountable Officials under section 2773a do not handle
   government funds or certify their payment, they share personal liability
   with certifying or disbursing officers of DOD for improper payments if
   their negligence or fault is a contributing factor.

   Agencies of the federal government are generally authorized to hire
   nationals of foreign countries to staff their operations in those
   countries. 22 U.S.C. sect. 3968(b). DOD entrusts local national labor at
   its facilities overseas with various duties, including budgetary and
   accounting functions. Markiewicz e-mail. Many of these duties are of such
   a nature that the Secretary of Defense could properly designate those who
   fulfill them as Departmental Accountable Officials under section 2773a and
   the FMR. Id. See DOD-FMR 7000.14-R. As discussed above, Departmental
   Accountable Officials are personally liable under section 2773a for
   improper payments resulting from their fault or negligence.

   ANALYSIS

   The policy underlying the concept of pecuniary liability for accountable
   officers is almost as old as our republic. As the Supreme Court stated in
   1845, those responsible for the public purse must be strictly liable for
   losses occurring on their watch, and "[a]ny relaxation of this condition
   would open a door to frauds, which might be practised [sic] with impunity.
   . . . [W]hat losses might not be anticipated by the public?" United States
   v. Prescott, 44 U.S. (3 How.) 578, 588-89 (1845) (a depositary of public
   money is pecuniarily liable for funds stolen from his possession through
   no fault or negligence of his own). DOD imposes pecuniary liability on
   Departmental Accountable Officials so that they share responsibility for
   erroneous payments with certifying officers, who may make such payments
   based on the Departmental Accountable Officials' negligent furnishing of
   information. DOD-FMR 7000.14-R.

   Employing local nationals as Departmental Accountable Officials under
   section 2773a involves these policy matters. While United States citizens'
   employment overseas is subject to United States law, local nationals'
   employment often is not. See Department of Defense Manual 1400.25-M, para.
   SC1231.4.1.1 (December 1996). The law that applies to United States
   employment of local nationals abroad is determined by agreements
   negotiated between the Department of State and the government of the
   nation hosting the United States operation. See Manual 1400.25-M, para.
   SC1231.3.1. Such agreements often provide that the employment of local
   nationals is subject to the law of the host country, rather than United
   States law. For example, by international agreement with Germany,[4]
   United States employment of German nationals is governed by German law, as
   opposed to United States law. Supplementary Agreement to the NATO Status
   of Forces Agreement with Respect to Forces Stationed in the Federal
   Republic of Germany, art. 56, July 1, 1963, 14 U.S.T. 531. See United
   States Army Europe, Reg. 690-60, Employment of Local National Personnel in
   Germany, para. 8 (Sept. 29, 1987) ("[Local National] employment in
   [Germany] is governed by [German] labor law. . . ). Thus, whether a German
   national employed by the United States as a Departmental Accountable
   Official is subject to the accountability imposed by section 2773a is
   itself a matter to be determined by German law.

   A United States citizen designated a Departmental Accountable Official
   could act in such a manner as to incur pecuniary liability under section
   2773a, yet because of the Status of Forces Agreement and German law, a
   German local national in the same position acting in an identical manner
   may not be held accountable. For instance, section 2773a permits the
   Secretary of Defense to impose pecuniary liability for acts of simple
   negligence, while German law, in fact, may impose a higher standard of
   culpability.[5] Memorandum from Michael J. Litak, Military and Civil Law
   division, to

   Ralf Schoenstein, Civil Personnel Directorate, G1, HQ, USAREUR and 7^th
   Army 5, para. 10a (Aug. 27, 2005) (Schoenstein Memo). Thus, while a local
   national Departmental Accountable Official might act in a manner that
   would subject a United States citizen in the same position to pecuniary
   liability, the local national might be legally unaccountable. Id.

   The possibility that DOD may not be able to enforce accountability against
   a local national employed by the United States as a Departmental
   Accountable Official although a United States citizen in identical
   circumstances would be pecuniarily liable is troubling. However, we are
   unaware of any legal authority prohibiting DOD from hiring local nationals
   to serve as Departmental Accountable Officials under section 2773a.
   Whether or not to hire local nationals for such positions is a policy
   matter to be decided by DOD.

   According to section 2773a, the Secretary of Defense may designate "any
   civilian employee of the Department of Defense" a Departmental Accountable
   Official. The FMR defines "employee" as a "current or retired civilian[]
   paid from appropriated funds." DOD-FMR 7000.14-R, Definition 58 (May
   2005). Local national employees are not members of the United States
   military; they are civilians.[6] In addition, most, if not all, local
   nationals working in positions that could be designated Departmental
   Accountable Officials are paid with appropriated funds. See Mike Litak,
   U.S. and Them: Citizenship Issues in Department of Defense Civilian
   Employment Overseas, Army Law., June 2005, at 1, 5-8 (2005). As stated
   above, we are aware of no specific authority barring such employment. Thus
   DOD, consistent with section 2773a and DOD policy, may properly employ
   local nationals as Departmental Accountable Officials.

   Nevertheless, we suggest that DOD consider the wisdom of hiring local
   nationals as Departmental Accountable Officials in countries where by
   agreement local law applies to the employment, and local law may not
   subject the local national to the same accountability as other DOD
   employees.[7] B-188715, Jan. 31, 1978 (concluding that when local national
   employees in accountable positions, not subject to United States law,
   cannot be held liable under law of host nation, United States should
   "reconsider its policy of appointing to accountable officer positions . .
   . citizens" of the host nation). Section 2773a is available only to DOD
   and was meant to give DOD power to subject to fiscal accountability those
   employees whose exercise of discretion and judgment in the performance of
   their duties DOD certifying officers rely on when certifying payment
   vouchers. See H.R. Rep. No. 107-436, at 340. It is somewhat anomalous that
   DOD would choose to hire potentially unaccountable individuals as
   Departmental Accountable Officials.

   To clarify these responsibilities, DOD should draft a policy addressing
   the practice of employing local nationals as Departmental Accountable
   Officials. Such a policy should offer clear guidance regarding the
   advisability of hiring local nationals as Departmental Accountable
   Officials. The policy should include consideration of the law of the host
   nation before appointing a local national as a Departmental Accountable
   Official.

   In making these suggestions, we remain cognizant that local national
   employees are important to DOD installations overseas and that they have
   occupied accountable positions for many years. Schoenstein Memo at 5,
   para. 11. We are also aware of the possibility that under section 2773a,
   individuals, including local nationals, could perform functions that the
   FMR identifies as functions of Departmental Accountable Officials, yet not
   be designated as Departmental Accountable Officials. We are confident that
   any policy put forth by DOD would adequately address these circumstances
   while minimizing the number of Departmental Accountable Officials

   who may not be held accountable.

   CONCLUSION

   While employing local nationals as Departmental Accountable Officials
   under section 2773a may undermine the policies behind placing pecuniary
   liability on Departmental Accountable Officials, we are aware of no legal
   authority prohibiting the practice. We recommend that DOD craft a policy
   regarding employment of local
   nationals as Departmental Accountable Officials, to address the
   consideration and circumstances under which foreign local nationals may
   serve as Departmental

   Accountable Officials.

   Anthony H. Gamboa

   General Counsel

   ------------------------

   [1] This decision uses the term "Departmental Accountable Officials" to
   mean those employees designated as such under 10 U.S.C. sect. 2773a, and
   uses the term "accountable officers" to mean government employees who are
   otherwise responsible for government funds under Title 31 of the United
   States Code, such as disbursing and certifying officers.

   [2] For further discussion of the role of accountable officers, see U.S.
   Government Accountability Office, Principles of Federal Appropriations
   Law, vol. 2, 3rd ed., ch. 9, GAO-06-382SP (Washington, D.C.: February
   2006).

   [3] In 2000, we concluded that a DOD regulation authorizing agency
   certifying officials to designate DOD employees as "accountable officials"
   was impermissible, as only Congress, by statute, may impose pecuniary
   liability. B-280764, May 4, 2000. Subsequent to our decision, Congress
   enacted section 2773a. The House Committee on Armed Services reported that
   section 2773a would allow DOD "to enforce responsibilities . . . [in]
   areas where personnel are required to review and submit data that the
   Department [of Defense] will rely on to make payments." H.R. Rep.
   No. 107-436, at 340 (2002).

   [4] The request for decision here does not ask that we focus our analysis
   on Germany or any one country. Nevertheless, because of the myriad
   agreements between the United States and foreign governments regarding
   United States employment of local nationals, we use one country's
   agreement with the United States--the Federal Republic of Germany--as an
   illustration.

   [5] Liability under German law is restricted when the work being performed
   is "damage-prone," defined as "work . . . that includes a very high
   probability of an occasional oversight, even by an employee who generally
   uses required care." United States Army Europe, Reg. 690-62, U.S. Forces
   Claims Against Local National Employees in Germany, para. 5b (Oct. 30,
   1984).

   [6] Department of Defense Manual 1400.25-M, Subchapter 1231 addresses
   employment of local nationals in general. It does not discuss the hiring
   of local nationals as Departmental Accountable Officials. Because
   Departmental Accountable Officials exercise judgment and discretion in
   providing information upon which certifying officers rely, we assume for
   purposes of this decision that local nationals in Departmental Accountable
   Official positions are direct rather than indirect hires of the United
   States, and are therefore employees of the United States. See Manual
   1400.25-M, paras.1231.4.2.1-1231.4.2.2.4. See also Schoenstein Memo at 4,
   para. 5c ("It is well established that [local national] employees in
   Germany are legally the employees of the U.S. Government").

   [7] The State Department follows a similar policy in its hiring of foreign
   local nationals overseas. Department of State Foreign Affairs Handbook,
   vol. 4, H-113.2, FSN Direct Hire Employees (June 21, 2005). Before hiring
   a local national as a disbursing officer (an accountable officer position
   under Title 31 of the United States Code), the State Department considers
   "[t]he recourses available to the United States in the event the [local
   national] misappropriates funds and the extent that host country laws
   and/or the courts aid in the prosecution of their citizens and the
   recovery of the misappropriated funds." Id.