TITLE: B-307693, Mr. Jeffrey Elmore--Request for Relief of Financial Liability, April 12, 2007
BNUMBER: B-307693
DATE: April 12, 2007
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B-307693, Mr. Jeffrey Elmore--Request for Relief of Financial Liability, April 12, 2007

   B-307693

   April 12, 2007

   Ms. Deborah L. Borovitcky
   Director
   Defense Automatic Addressing Systems Center
   Defense Logistics Agency
   5250 Pearson Road, Area C, Building 207
   Wright-Patterson Air Force Base, Ohio 45433-5328

   Subject: Mr. Jeffrey Elmore--Request for Relief of Financial Liability

   Dear Ms. Borovitcky:

   This responds to your letter of March 30, 2006, requesting that we relieve
   Mr. Jeffrey Elmore of pecuniary liability pursuant to 31 U.S.C. sect.
   3528(b) for four improper government purchase card payments totaling
   $402.81. Letter from Deborah L. Borovitcky, Director, Defense Automatic
   Addressing Systems Center, to the Comptroller General of the United
   States, Request for Relief of Financial Liability, Mar. 30, 2006. Because
   Mr. Elmore did not exercise good faith when certifying the four improper
   payments, we decline to grant relief.

   The circumstances underlying your request require us to address two
   broader issues in addition to Mr. Elmore's liability. First, because Mr.
   Elmore was a certifying officer of the Defense Logistics Agency (DLA), an
   agency of the Department of Defense (DOD), we examine whether our
   authority to consider his relief request is circumscribed by 31 U.S.C.
   sect. 3527(b), which applies to all accountable officers of the "armed
   forces." We conclude that GAO has statutory authority to consider
   Mr. Elmore's relief request because he is a certifying officer of a
   defense agency, not a certifying officer of the armed forces.

   Second, we consider the propriety of imposing liability on a certifying
   officer who certifies payment of a purchase card billing statement that
   includes improper purchase card transactions. We conclude that liability
   attaches to a certifying officer's certification of the billing statement
   for payment. Although the amount of the improper payments Mr. Elmore
   certified is not very large, the wider implications of your request are
   significant and go directly to the role of a certifying officer with
   respect to purchase card payments.

   To establish a record when rendering decisions, our practice is to obtain
   the views of the relevant federal agency. GAO, Procedures and Practices
   for Legal Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept.
   2006), available at www.gao.gov/legal.htm. In this regard, we supplemented
   your original submission through e-mail and telephone conversations to
   obtain a clear understanding of the facts underlying the four improper
   purchases Mr. Elmore certified.

   BACKGROUND

   At the time of the payments at issue here, Mr. Elmore was a certifying
   officer for government purchase card payments for the Defense Automatic
   Addressing Systems Center (DAASC) at Wright-Patterson Air Force Base in
   Ohio.[1] DAASC is a component of the Defense Supply Center Columbus
   (DSCC), which in turn is part of DLA. A DSCC audit of the DAASC purchase
   card program found four instances of improper payments made with
   government purchase cards using appropriated funds. DSCC Internal Audit
   Office, Audit Report No. 05-15, DAASC Purchase Card Review, Nov. 17, 2005
   (Report No. 05-15). These payments were for two lunches for DAASC
   employees and defense contractors at a local restaurant, disposable coffee
   cups, and a late fee paid to Park University. Id.  at 2. For all four
   improper payments, DSCC recommended that DAASC hold Mr. Elmore, as the
   certifying officer, responsible to reimburse the government. Id. at 4-6.
   DAASC, responding to the report, said that it would request relief for Mr.
   Elmore. Id.

   DISCUSSION

   GAO's authority to consider relief requests from accountable officials of
   the armed forces is limited by 31 U.S.C. sect. 3527(b). We have not
   considered before whether this limitation applies to requests from
   certifying officers of DOD components other than the armed forces. We also
   have not considered the appropriate role for a certifying officer who
   certifies payment to a credit card bank for uses of a purchase card. We
   address these questions and Mr. Elmore's relief request below.

   GAO's Authority to Consider Relief Request

   GAO is authorized to relieve certifying officers of pecuniary liability
   resulting from improper payments when we find that the obligation was
   incurred in good faith, that no law specifically prohibited the payment,
   and that the United States government received value for the payment.[2]
   31 U.S.C. sect. 3528(b)(1)(B).

   With respect to DOD certifying officers, this authority is limited by 31
   U.S.C. sect. 3527(b). Under section 3527(b), GAO "shall relieve" a
   certifying officer of the "armed forces" of liability for an improper
   payment if DOD finds that the criteria in section 3528(b)(1)(B), listed
   above, are satisfied.[3] DOD's findings in this regard are binding on GAO.
   31 U.S.C. sect. 3527(b)(2). Thus, DOD need not forward to GAO relief
   requests from certifying officers of the armed forces. Cf. B-198451-O.M.
   (making the same determination regarding requests for relief of liability
   arising out of physical losses of funds from disbursing officers of the
   Army, Navy, Air Force, or Marine Corps).

   The statutory limitation in section 3527(b) applies only to certifying
   officers of the "armed forces," not to all DOD certifying officers. The
   term "armed forces" first appeared in the statute as part of the 1982
   recodification of title 31 of the United States Code. Pub. L. No. 97-258,
   sect. 1, 96 Stat. 877, 965 (Sept. 13, 1982). Earlier versions of what is
   now section 3527(b) as enacted applied explicitly to the Navy, Army, Air
   Force, and Marine Corps. See Act of July 11, 1919, ch. 9, 41 Stat. 132
   (Navy); Act of December 13, 1944, ch. 552, 58 Stat. 800 (Army); Pub. L.
   No. 84-365, ch. 803, 69 Stat. 687 (Aug. 11, 1955) (combining the previous
   statutes and expanding their scope to encompass the Army, Navy, Air Force,
   or Marine Corps). After 1955, the statute referred to "Army, Navy, Air
   Force or Marine Corps." E.g., 31 U.S.C. sect. 95a (1976). During
   recodification, the language "Army, Navy, Air Force, or Marine Corps" was
   changed to the current language, "armed forces." The House report
   accompanying Public Law 97-258 explained that "the words `armed forces'
   [were] substituted for `Army, Navy, Air Force, or Marine Corps' for
   consistency with Title 10." H.R. Rep. No. 97-651, at 123 (1982). As
   defined in title 10, the "armed forces" are the Army, Navy, Air Force,
   Marine Corps, and Coast Guard.[4] 10 U.S.C. sect. 101(a)(4). The change in
   language effectuated no change in the scope of the statute's coverage,
   because the recodification of title 31 involved no change to the
   substantive law. Pub. L. No. 97-258, sect. 4(a).

   Thus, because the term "armed forces" as used in section 3527(b) applies
   only to the Army, Navy, Air Force, or Marine Corps, GAO may entertain
   relief requests from certifying officers of other DOD components in the
   same manner as it does requests from certifying officers in other
   agencies. As DLA is not one of the armed forces, we may entertain the
   request that we relieve Mr. Elmore of pecuniary liability.

   Mr. Elmore's Responsibilities as Purchase Card Certifying Officer

   Under 31 U.S.C. sect. 3528, a certifying officer is responsible for the
   existence and correctness of the facts in the payment voucher he signs and
   any accompanying documents, and is personally liable for the amount of any
   illegal, improper, or incorrect payment resulting from any false,
   inaccurate, or misleading certificate made by him, as well as for any
   payment prohibited by law or which did not represent a legal obligation.
   E.g., B-303920, Mar. 21, 2006. The function of certification, as evidenced
   by the potential for personal pecuniary liability, is not perfunctory, but
   involves a high degree of responsibility. 55 Comp. Gen. 297 (1975). A
   critical tool that certifying officers have to carry out this
   responsibility is the power to question, and refuse certification of,
   payments that may be improper. See, e.g., B-303177, Oct. 20, 2004.
   Although DSCC found Mr. Elmore liable for four improper purchase card
   payments by virtue of his position as the certifying officer for these
   payments, DLA regulations setting out the purchase card payment process do
   not expressly articulate an opportunity for the certifying officer to
   scrutinize and refuse to certify questionable payments.

   DLA purchase card regulations are set out in DLA Directive 5025.30, as
   supplemented by DLA Instruction 4105.3, Government Purchase Card Program
   (Oct. 29, 2004). DLA purchase cardholders receive monthly statements of
   account for their cards from the bank servicing the card. Instruction
   4105.3 at para. 4.6.3.2.2.1. The statement of account lists each
   transaction the cardholder made with the card during the previous 30-day
   billing cycle. Id. Within 5 days of receiving the statement of account, a
   cardholder must verify each charge on the statement of account, sign and
   date the statement, and forward the statement to the card's billing
   official. Id. at para. 4.6.3.2.3.

   Billing officials are the certifying officers for DLA purchase card
   transactions. Id. at 5.1. At the same time a cardholder receives the
   statement of account for the cardholder's purchase card, a billing
   official receives a billing statement from the bank for the same card. Id.
   at para. 4.6.3.2.2.2. The billing statement is the official invoice for
   the card. Id. After reviewing the cardholder's statement of account and
   the billing statement, the billing official certifies payment of the
   billing statement to the Defense Finance and Accounting Service (DFAS),
   which disburses the payment to the bank servicing the card. Id. at  para.
   4.6.3.2.4.

   Billing officials must refuse to certify fraudulent transactions appearing
   on the billing statement. Id. However, billing officials "shall refrain
   from disputing improper, abusive or questionable transactions made by the
   cardholder if the Bank [servicing the purchase card] is entitled to
   payment." Id.

   DLA regulations neither define improper transactions nor describe the
   circumstances under which the bank servicing a purchase card would be
   "entitled to payment." The General Services Administration (GSA) Master
   Contract for purchase cards, which DLA utilizes for its purchase card
   program,[5] provides that if a purchase card "has been used by an
   authorized . . . cardholder to make an unauthorized purchase, the
   Government is liable for the charge." GSA SmartPay Master Contract, clause
   46.1 (Apr. 1, 2002) available at www.gsa.gov/gsasmartpay (last visited
   Mar. 12, 2007). The Master Contract does not define what constitutes an
   unauthorized purchase. Yet, read literally, both the Master Contract and
   DLA regulations suggest that a cardholder can use the card to make a
   purchase that, while not fraudulent, would constitute an improper use of
   appropriated funds and the billing official for the card should not
   question the purchase before certifying the billing statement for payment.

   DLA, however, obviously interprets its regulations and the GSA Master
   Contract as preserving the billing official's duty to scrutinize and
   question apparently improper purchases appearing on billing statements.
   Indeed, DLA determined that Mr. Elmore was liable for improper purchase
   card transactions because as the certifying officer for the card, he did
   not dispute questionable transactions made by the cardholder prior to
   certifying the transactions for payment. See Report No. 05-15.

   We agree with DLA's interpretation. To interpret DLA regulations and the
   GSA Master Contract otherwise would be contrary to the statutory
   responsibilities imposed on certifying officers. Under 31 U.S.C. sect.
   3528, a duly appointed certifying officer is responsible for the legality
   of the payments the certifying officer certifies. To execute this
   statutory responsibility properly, and to avoid possible pecuniary
   liability, a certifying officer must be able to question information
   appearing on the billing statements. We are unwilling to read DLA
   regulations or the GSA Master Contract as overriding this statutory
   responsibility.

   Mr. Elmore's Relief Request

   According to DLA, Mr. Elmore was the certifying officer responsible for
   certifying the four improper purchase card payments identified in Report
   No. 05-15. DSCC found that, as such, he is pecuniarily liable for these
   payments. DSCC Memorandum for DAASC, Review of Purchase Card Account Files
   for Gary M. Perdue,[6]  Jan. 9, 2006. You request relief for these
   improper payments on behalf of Mr. Elmore.

   Our Office may relieve a certifying official from liability for an
   improper payment of public money when we find that the obligation was
   incurred in good faith, that no law specifically prohibited the payment,
   and that the United States government received value for the payment. 31
   U.S.C. sect. 3528(b)(1)(B).

   A finding of good faith under the above standard requires that we find
   that the certifying officer did not have, nor should reasonably have had,
   doubt regarding propriety of payment; whether a certifying officer should
   have been in doubt requires weighing all the surrounding facts and
   circumstances and cannot be resolved by any hard and fast rule. B-303920.
   Because of the reasons discussed below, we believe Mr. Elmore was or
   should have been aware that the four payments for which he is liable were
   improper. Therefore, we are unable to grant relief.[7]

     (1) Lunches at restaurant

   Mr. Elmore certified two payments for lunch for 16 contractors and 7 DAASC
   employees at a local restaurant on August 23 and 24, 2004 (hereinafter
   2004 meetings). Report No. 05-15  at para. 9. The total cost of these two
   meals was $360. Id. DSCC found that appropriated funds were not available
   for such an expense. Id.

   At the time Mr. Elmore certified payment for the lunches, DSCC purchase
   card guidance prohibited using the cards to purchase food. DSCC, DSCC
   Government-Wide Commercial Purchase Card Program, para. F(1)(e)(2), June
   10, 2003, superseded by DSCC, DSCC Purchase Card Program Local Guidance,
   May 15, 2006. Mr. Elmore was thus on notice that payments for lunch at the
   2004 meetings was improper.

   DAASC maintains that Mr. Elmore obtained oral advice from counsel at DSCC
   that purchasing food for attendees at the 2004 meetings was proper. Report
   No. 05-15, Attachment 1, Memorandum for Record, May 6, 2004. DSCC counsel
   denied giving any such approval and stated that counsel had provided a
   legal opinion to DAASC in the past advising that appropriated funds were
   not available to purchase lunch under circumstances similar to the 2004
   meetings. Report No. 05-15 at para. 9.

     (2) Disposable coffee cups

   Another payment, for disposable coffee cups, occurred on July 29, 2004,
   and was for $22.81. Report No. 05-15  at para. 8. Coffee service was
   available to employees and visitors to DAASC facilities. Id. DAASC
   employees used their own coffee cups, while the disposable cups were for
   the use of DAASC visitors. Id. Those who wanted coffee paid a small fee
   for the coffee as they took it, based on an honor system. Id. DSCC
   determined that expenses for disposable coffee cups are properly paid out
   of this voluntary fund, rather than out of appropriated funds. Id.

   A 2002 audit of the DAASC purchase card program had found that Mr. Elmore
   had previously certified improper purchase card payments for coffee cups
   for DAASC visitors in fiscal years 2001 and 2002, in the amounts of $17.00
   and $20.91, respectively. DSCC Internal Review Office, Audit Report No.
   61-02, Review of DAASC Purchase Cardholders and Approving Official, Nov.
   8, 2002 (Report No. 61-02). DSCC held Mr. Elmore pecuniarily liable for
   these payments. Id. On March 2, 2004, DFAS relieved Mr. Elmore of
   liability for the purchase of these coffee cups.[8] Report No. 05-15 at 3.

   Having been granted relief for the 2001 and 2002 purchases, Mr. Elmore
   knew or should have known that he was certifying an improper payment when
   he certified the 2004 payment for coffee cups. Mr. Elmore was aware of the
   results of the 2002 audit, which referenced a Comptroller General
   decision, 47 Comp. Gen. 657 (1968), that prohibits the use of appropriated
   funds to purchase disposable coffee cups. Report No. 61-02, Attachment 4.
   In addition, Mr. Elmore maintains that he sought oral approval from the
   DSCC program coordinator to purchase coffee cups in 2004. DSCC denies
   giving approval for the purchase, and DAASC cannot provide documentation
   of such a conversation. Report No. 05-15 at para. 8b.

   Whatever the reasons for Mr. Elmore's having been granted relief for the
   2001 and 2002 payments, Mr. Elmore was aware that such purchases remained
   an unauthorized use of appropriated funds when he certified the payment
   for disposable coffee cups at issue here. Thus, we cannot find that he
   exercised good faith when he certified the payment of $22.81 for
   disposable coffee cups, and we do not grant relief.

     (3) Late fee

   DSCC also found Mr. Elmore liable for a $20 late fee paid to Park
   University. Report No. 05-15 at para. 12. The purchase cardholder who
   incurred the late fee paid for a course at Park University using the
   purchase card. E-mail from Jeffrey Elmore, DAASC, to Heather E. Alexander,
   Park University Third Party Receivables, Sept. 28, 2005. Before the late
   fee appeared on the cardholder's statement, the cardholder retired, and
   the purchase card was assigned to another DAASC employee. E-mail from
   Deborah Borovitcky, Director, DAASC, to Wesley Dunn, Staff Attorney, GAO,
   Subject: Re: Letter from GAO, Dec. 5, 2006 (December E-mail). The retiring
   employee made a note to her successor cardholder that she suspected a late
   fee might appear on the card account at a later date. Id. A month later,
   the late fee appeared on the monthly statement of account. Id. The new
   cardholder, having read the note regarding the fee left by the original
   cardholder, signed off on the charge as it appeared on the statement of
   account and forwarded the statement of account to Mr. Elmore, who
   certified the late fee for payment. Id. The university subsequently
   learned that it should not have assessed the retired cardholder a late
   fee, and "voided" it from the student's account, but not before the
   government paid the fee based on Mr. Elmore's certification. E-mail from
   Jeffrey Elmore, DAASC, to James Kreimer, DSCC, Subject: Re: Final Draft of
   Audit 05-15, DAASC Purchase Card Review, Oct. 3, 2005; E-mail from Heather
   Alexander, Park University Third Party Receivables, to Jeffrey Elmore,
   DASSC, Subject: Re: $20 Late Fee as Discussed by Park University, Oct. 3,
   2005. The university refused to reimburse DAASC because DAASC paid the
   charge in 2004 and the university claims it cannot revisit a "charge that
   goes back so far." E-mail from Heather Alexander, Park University Third
   Party Receivables, to Jeffrey Elmore, DASSC, Subject: Re: $20 Late Fee as
   Discussed by Park  University, Jan. 9, 2006. DSCC found that late fees are
   a personal responsibility of the student and are not payable from
   appropriated funds. Report No. 05-15 at para. 12.

   As discussed above, DLA has a detailed payment process for its purchase
   card program. Before forwarding the statement of account to the billing
   official, cardholders are to verify each charge listed on the statement
   and attach all supporting documentation such as invoices. Instruction
   4105.3 at para. 4.6.3.2.3. If the cardholder does not have documentation
   for a transaction, he or she must attach to the statement of account a
   memorandum for the record describing the charge in detail and explaining
   why supporting documentation is not provided. Id. at para. 4.6.3.2.3.2.
   When the late fee appeared on the statement of account, the cardholder
   verified the charge based on the note left by the predecessor cardholder
   stating that a late fee was to be applied to the account. December E-mail.
   We have no evidence that the cardholder attempted to verify the charge
   further, or attached the requisite memorandum for the record to the
   statement of account before forwarding it to Mr. Elmore.

   Mr. Elmore, as the billing official, was responsible for reviewing the
   cardholder's statement of account prior to certifying the billing
   statement for payment. Instruction 4105.3 at para. 4.6.3.2.4. Upon
   receiving a statement of account showing a charge for a late fee with no
   supporting documentation to explain the reason for the fee, Mr. Elmore
   should have inquired further as to the nature of the fee before certifying
   it for payment. The existence of a late fee implies fault on the part of
   the cardholder; this alone should have put Mr. Elmore on notice that
   paying the fee might be improper. But it is the failure to properly
   exercise his duties as the billing official by questioning a payment
   having no supporting documentation which leads us to conclude that Mr.
   Elmore did not exercise good faith. We therefore decline to relieve Mr.
   Elmore of liability for this payment.

   CONCLUSION

   Because Mr. Elmore was a certifying officer of a defense agency and not
   one of the armed forces, GAO has statutory authority to consider his
   request for relief of liability resulting from his certification for
   payment of four improper purchase card transactions. Mr. Elmore had a
   responsibility to scrutinize and question potential improper payments
   before certifying a billing statement for payment to the bank servicing
   the purchase card. He did not exercise good faith when certifying the four
   transactions for payment. Therefore, after consideration of the full
   record with regard to the four payments at issue here, we decline to grant
   relief.

   Sincerely yours,

   Gary L. Kepplinger
   General Counsel

   cc: Jeffrey Elmore

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

   [1] Mr. Elmore ceased performing this function in June 2006. E-mail from
   Deborah Borovitcky, Director, DAASC, to Wesley Dunn, Staff Attorney, GAO,
   Subject: Re:  Letter from GAO,  Dec. 4, 2006.

   [2] An additional standard of relief is available where the certification
   was based on official records, but that is not the case here. 31 U.S.C.
   sect. 3528(b)(1)(A).

   [3] We have previously addressed our authority to consider requests from
   military disbursing officers for relief of pecuniary liability resulting
   from the physical loss of funds. B-198451-O.M., Feb. 5, 1981. Our
   discussion here does not pertain to disbursing officers or physical
   losses.

   [4] Although the Coast Guard was not named in previous statutes, its
   inclusion as a component of the "armed forces" as defined in title 10 does
   not alter our analysis. The Coast Guard may operate as either an entity of
   DOD or the Department of Homeland Security. While in DOD, the Coast Guard
   is a subsidiary component of the Navy. 10 U.S.C. sect. 5061; see also 14
   U.S.C. sect. 1 (providing that except when operating as a service of the
   Navy, the Coast Guard is a service in the Department of Homeland
   Security).

   [5] All DOD entities except the Navy use the GSA Master Contract for
   purchase cards. GSA SmartPay Contract Guides, available at
   http://apps.fss.gsa.gov/services/gsa-smartpay/fm/taskorders/purchase/dod.cfm
   (last visited Mar. 26, 2007).

   [6] Mr. Perdue evidently was the cardholder for the purchase card account
   to which the improper payments were charged, and Mr. Elmore was the
   certifying officer for Mr. Perdue's account.

   [7] Because we find that Mr. Elmore did not certify the payments in good
   faith, we need not address whether the payments were specifically
   prohibited by law or whether the government received value for the
   payments.

   [8] DAASC officials could not explain to us the reasons DFAS relieved Mr.
   Elmore of liability or the authority DFAS purported to exercise.