[B-150512]

Certifying Officers Liability-Voucher, Etc., Examination— Sampling, Etc., Plans

A proposed statistical sampling plan for internal examination of vouchers prior to certification, which plan contemplates the certification of some vouchers containing erroneous or improper payments by the certifying officer who, under section 2 of the act of December 29, 1941, 31 U.S.C. 82c, is made responsible for the propriety and correctness of the payments, and who would be liable for all erroneous payments regardless of whether the erroneous payment was made on a voucher examined under the proposed plan or on one that was not, is a plan which violates the spirit and intent of the acts establishing the responsibility of certifying officers and, therefore, may not be adopted.

To the Secretary of Agriculture, July 9, 1963:

Your letter of December 19, 1962, requested our consideration and approval of a proposal to adopt recognized statistical sampling methods in the examination of vouchers in your Department under your internal audit procedures prior to certification for payment.

Your letter states that on the basis of an exhaustive review of voucher examination practices in the Washington, D.C., fiscal offices of your Department agencies, you have developed a statistical sampling plan using recognized mathematical formulas and probability theories. The plan was tested in a pilot operation on travel vouchers in one office during July and August of 1962. The plan did not use an arbitrarily selected fixed percentage in selecting the number of vouchers to be examined. The total number of vouchers examined and the specific vouchers selected varied with the overall quality of the vouchers submitted for certification. You state that the sample was selected randomly by a valid scientific sampling process by which the number of youchers selected for examination fluctuated with the degree of errors observed, thus permitting a pre-established acceptable error tolerance to be maintained in the vouchers processed for payment.

The letter of December 19, 1962, indicates that the pilot sampling plan was based on assurance that regardless of the number of errors or suspendable items on the total number of vouchers received for processing not more than 7.5 percent of the total vouchers certified for payment would contain questionable items. To maintain this assurance, the sampling method provided for automatic adjustments, by predetermined quantities, in the number of vouchers examined. The specific vouchers selected for examination were determined by use of a table of random numbers, thus assuring that each voucher presented for certification had an equal opportunity of being examined.

You state that analysis of data obtained during the pilot operation confirmed that the statistical sampling plan achieved the objectives contemplated. The desired outgoing quality level was maintained with a reduction in voucher examination cost from $195 to $72 for

each one hundred travel vouchers processed for payment. You indicate that the study shows that use of statistical sampling procedures in your Department would reduce the cost of voucher examination by at least $400,000 to $500,000 annually without losing the intangible benefits and deterrent advantages of examining every voucher. Hence, you propose to issue instructions providing that recognized statistical sampling methods shall be adopted in examining vouchers throughout the Department of Agriculture.

Your letter states that minor modification of the basic statistical sampling plan may be required in various voucher examining offices. Selection of the sampling method will be based on careful review of each voucher examining operation to assure that the desired outgoing quality level for the particular types of vouchers involved is maintained. The proposed instructions will require that prompt corrective action be taken whenever a pattern of errors is disclosed in the types of vouchers or in vouchers submitted by certain payees. It is stated that any plan developed under your proposal will be subjected to periodic review and testing to assure its continuing effectiveness in operation. Department regulations will prescribe the specifications and review requirements that statistical sampling plans must meet before they will be approved by the Secretary's office. Such regulations will define the circumstances under which reviews would be made and prescribe the method and frequency of such reviews. The statistical sampling plans, the specifications and the review standards will be developed in writing and will be available to the General Accounting Office staff.

You believe that adoption of the proposed methods is not specifically prohibited by any law or regulation. However, since such adoption would constitute a radical change from present practices, you desire our approval of the proposal before issuing Department-wide regulations prescribing such methods.

We have examined the statistical sampling plan used in your test operation and the results achieved thereby. The plan used appears to be reasonably sound and the results of the test show that a cost saving may be achieved by such a plan through reduction of the number of employees required to examine a given number of vouchers. However, before it may be said that any such plan will save the Government money, it must be supported by a detailed demonstrated savings after taking into consideration all direct costs of the certifying officer's review, the cost representing erroneous payments included in the vouchers certified for payment thereunder, and additional internal auditing costs incurred as a result of adoption of such a plan. We note that the estimated $400,000 to $500,000 Department-wide savings mentioned in your letter is not supported in this manner.

We believe that there may be an overall savings to the Government under an adequate and carefully operated statistical sampling plan. However, we do not believe that such a plan may be adopted under existing statutes. Any statistical sampling plan includes an "allowable error rate"; that is, such a plan contemplates the certification of a certain number of erroneous payments. Under such a plan, the certifying officer certifies vouchers with the knowledge that some of them, although he does not know which ones, contain erroneous or improper payments.

Section 2 of the act of December 29, 1941, Ch. 641, 55 Stat. 875, 31 U.S.C. 82c, provides in pertinent part that:

The officer or employee certifying a voucher shall (1) be held responsible for the existence and correctness of the facts recited in the certificate or otherwise stated on the voucher or its supporting papers and for the legality of the proposed payment under the appropriation or fund involved *** and (3) be held accountable for and required to make good to the United States 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 under the appropriation or fund involved * *

Furthermore, it was provided in Title III of the Sixth Supplemental National Defense Appropriation Act, 1942, approved April 28, 1942, Ch. 247, 56 Stat. 244, 31 U.S.C. 82f, that "The responsibility and accountability of certifying officers under the act of December 29, 1941 (Public Law 389), shall be deemed to include the correctness of the computations of certified vouchers ***." These acts do not, of course, specifically state that a certifying officer must examine every voucher presented to him for certification. Nevertheless, the history of the act of December 29, 1941, clearly indicates that the purpose of that act was to place the responsibility for the propriety and correctness of Government payments upon the person in the best position to know the pertinent facts, that is, the certifying officer. Obviously, the only way to know such facts is to examine the voucher and its supporting papers. The inclusion of relief provisions in the act of December 29, 1941, indicates that recognition on the part of the Congress that even with examination of all vouchers some errors would be madeand it is a known fact that under the present system errors are made— but it is also clear that the Congress intended that a certifying officer would certify a voucher only after he had determined to the best of his knowledge and belief that the payment to be made therein was correct and proper and that, in the absence of fraud on the part of the certifying officer, he would not knowingly certify erroneous or improper payments. We believe that any plan of examining vouchers prior to certification which contemplates the certification of vouchers with the knowledge that some of them-even though the particular ones are not known-contain erroneous or improper payments violates

the spirit and intent, if not the letter, of the acts establishing the responsibility of certifying officers.

There is also for consideration the fact that under the cited laws the certifying officer must "be held accountable for and required to make good to the United States 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 under the appropriation or fund involved." This accountability and liability attaches regardless of whether the certification of the improper payment is made inadvertently under the present system or knowingly under a statistical sampling system. If the proposed system were adopted, we would have no alternative under existing law but to hold the certifying officers liable for any and all erroneous payments due to their certifications, regardless of whether such erroneous payment was made on a voucher which was examined under the system or on one that was not. Furthermore, the relief provisions of the act of December 29, 1941, would not authorize our Office to grant relief to a certifying officer solely on the basis that the erroneous payment was made on a voucher which, under a statistical sampling plan, he did not examine. The law authorizes our Office to grant relief, in our discretion, only when we find

(1) that the certification was based on official records and that such certifying officer or employee did not know, and by reasonable diligence and inquiry could not have ascertained, the actual facts, or (2) that the obligation was incurred in good faith, that the payment was not contrary to any statutory provision specifically prohibiting payments of the character involved, and that the United States has received value of such payment *

These grounds for relief would not be in any way altered by adoption of a statistical sampling plan, but would of necessity be for application exactly as they are now applied under the present system of voucher examination.

For the reasons stated, we cannot, under existing law, sanction the use of a statistical sampling plan for the examination of vouchers prior to and as preparation for certification.

[B-150970]

Pay-Retired-Waiver for Veterans Benefits-Termination Disability compensation payments which had been elected by the guardian of a hospitalized mentally incompetent retired Coast Guard member upon the execution of a waiver of the member's retired pay but which were being withheld under the limitation in 38 U.S.C. 3203(b) (2) at the time of the death of the member before release from the hospital are regarded as finally terminated from the date of the cessation of payments since death precluded payment; therefore, the retired pay waiver executed under 38 U.S.C. 3105 is ineffective from the time the disability compensation payments were withheld and retired pay may be paid as provided in 10 U.S.C. 2771.

To C. C. Gordon, United States Coast Guard, July 10, 1963: Reference is made to your letter of February 27, 1963, which was forwarded by the Commandant, U.S. Coast Guard, on that date, wherein you request a determination as to whether payment of retired pay in the case of William G. Burgess (101-476) FN, U.S. Coast Guard, retired, for the period December 1, 1959, through February 28, 1963, may be paid to his guardian, Ethel M. McGunigle. You state that Mr. Burgess retired on July 1, 1934, for permanent physical disability and has been confined in St. Elizabeths Hospital, Washington, D.C., since that time; that Mrs. McGunigle was appointed guardian of her brother on June 18, 1948; that while retired pay checks were mailed to her through November 30, 1951, Mr. Burgess' retired pay was discontinued in its entirety in favor of Veterans Administration compensation payments effective December 1, 1951; and that he has not been paid any money from the U.S. Coast Guard from December 1, 1951, through February 28, 1963. It is assumed that payment of retired pay was discontinued as a result of a waiver of such pay by his guardian under 38 U.S.C. 26c (1946 Ed.).

It is further stated that the Veterans Administration has notified Mrs. McGunigle and the U.S. Coast Guard that payments of compensation for Mr. Burgess were discontinued after November 30, 1959, due to the fact that his estate was in excess of $1,500 and that further compensation payments may not be made until his estate is reduced to $500. Such action apparently was taken under 38 U.S.C. 3203 (b) (2).

The act of May 27, 1944, Ch. 209, 58 Stat. 230 (38 U.S.C. 26c (1946) Ed.) now codified in 38 U.S.C. 3105), provided in material part that any person receiving pay pursuant to any provision of law relating to the retirement of persons in the regular military or naval service, and who would be eligible to receive pension or compensation under laws administered by the Veterans Administration if he were not. receiving such retired pay, shall be entitled to receive such pension or compensation upon filing with the department by which such retired pay is paid of a "waiver of so much of his retired pay and allowances as is equal in amount to such pension or compensation." Since the amount of retired pay which is subject to waiver is limited to an amount which is equal to the compensation to which he is entitled from the Veterans Administration, it appears that if that agency terminates the compensation payable on behalf of a mentally incompetent member the waiver of his retired pay becomes ineffective. See 28 Comp. Gen. 484. However, for such result to follow, termination of the compensation payments must be complete and unconditional, as distinguished from a temporary or contingent withholding for payment at a later time. 38 U.S.C. 3203(b)(2) provides for a lump-sum payment to the veteran of the compensation withheld under