withhold, if otherwise proper, amounts due debtors for application to their debts.

If a debtor is financially unable to remit the full amount of his debt in one payment, he is permitted to make installment payments commensurate with the amount of the debt and his ability to pay. A compromise settlement is encouraged when it becomes clear that a debtor is unable to pay the full amount of his debt within a reasonable time, the cost of collection does not justify the enforced collection of the full amount, there is a real doubt concerning the Government's ability to prove its case in court for the full amount claimed, or for a combination of reasons.

During fiscal year 1971, GAO solicited 16,129 compromises from debtors. There were 299 compromise settlements actually effected during the year, in the aggregate amount of $156,662 in liquidation of debts totaling $369,858. In many cases in which compromises are accepted, collection action against other liable parties continues. Compromise settlements accepted by GAO are final and conclusive on the debtors and on all officials of Government agencies and courts of the United States. The vast majority of compromise settiements are predicated upon the financial hardship of the debtors.

If collection action by the Claims Division is unsuccessful due to the debtor's refusal to answer correspondence or his willful refusal to arrange for settlement of his indebtedness with GAO, the Government's claim is referred to the Department of Justice for suit to enforce collection, provided that the debtor's financial circumstances warrant this action. In such case, a certification by GAO of the parties liable and the amount due the United States is transmitted to the Department of Justice, together with all of the information and documents necessary to support court proceedings, including where appropriate proofs of claim against the estates of decedents and bankrupts, answers to interrogatories, motions for summary judg ments, and other documents used by district attorneys. A total of 2,084 such cases were referred to the Department of Justice during the past year.

Public Law 90-616, approved October 21, 1968 (5 U.S.C. 5584), provides that the Comptroller General or the head of each executive agency may waive a claim of the United States arising out of an erroneous payment of pay occurring on or after July 1, 1960, made to an employee of such executive agency, when collection would be against equity and good conscience and not in the best interest of the United

States. However, any case in which the propriety of granting waiver is doubtful, regardless of the amount involved, is for consideration by the Claims Division, and only the GAO may waive overpayments of pay to an individual aggregating more than $500 or those which are the subject of an exception made by the GAO in the account of any accountable official. Waiver may not be granted in any case after the expiration of 3 years following discovery of the overpayment.

In every case before a request for waiver is granted, it must be established by the application of recognized legal principles that there is no indication of fraud, misrepresentation, fault, or lack of good faith on the part of the employee involved or other person having an interest in obtaining a waiver of the Government's claim.

A person who has been granted a waiver of a claim may be refunded any amounts which he has repaid to the United States for such claim, provided that he applies in writing to the employing agency within 2 years following the date of the waiver. Payment of the refund is made by the employing agency, not by the GAO.

During fiscal year 1971, GAO considered 714 requests for waiver of erroneous payments of pay totaling $562,379. Of these, 453 in the amount of $387,459 were waived in full; 223 requests for waiver, amounting to $137,797, were denied; and the remaining 38 were waived in part-$24,708 being waived and $12,415 being denied.

On March 22, 1971, the GAO, in a letter to the Heads of Departments, Independent Establishments, and Others Concerned, directed attention to Public Law 89-505, approved July 18, 1966 (28 U.S.C. 2415), which imposed limitations on the time within which the Government must institute suit for recovery on various categories of claims of the United States. Each agency was admonished to review its debt claim files and to take timely action to refer cases to GAO and/ or the Department of Justice, in order to prevent the Government from losing its right to sue through default.

Agency Review

and Assistance Branch

In an effort to improve agency effectiveness in claims settlement and debt collection operations, on August 8, 1970, the Comptroller. General established,

within the Claims Division, a new branch known as the Agency Review and Assistance Branch.

One of the primary functions of the Branch is to review agency regulations, procedures, and actual operations relating to the adjudication of payment and debt claims and to the collection of debts due the United States. Also, in accordance with 4 CFR 92.7, the Branch reviews the record of agency actions and operations under 5 U.S.C. 5584, relating to waivers of claims of the United States arising out of erroneous payments of pay made to civilian employees. After reviews are completed, reports concerning GAO findings and recommendations are submitted to the heads of agencies or, in appropriate cases, to the Congress. Each agency has primary responsibility for the payment of obligations incurred during the course of its operations. This authority, however, is limited by applicable statutes, statutory regulations, and availability of appropriations. Also, under the Federal Claims Collection Act of 1966, the head of an agency has primary responsibility for the collection of debts due the United States arising during the course of operations of his agency. The new Branch is making every effort to render assistance to the executive branch of the Government by helping to establish or improve agency procedures and operations, especially in connection with their operations under the General Accounting Office Policy and Procedures Manual for Guidance of Federal Agencies, the provisions of the Federal Claims Collection Act of 1966, and the regulations which were issued jointly by the Comptroller General and the Attorney General of the United States to implement

the act.

During fiscal year 1971, GAO reported to the Congress on the progress and problems in implementing the Federal Claims Collection Act of 1966. The report was based on a review of the claims collection activities of seven agencies and on data obtained from questionnaires executed by 15 agencies. This act was the first general statutory authority to give Federal agencies broad administrative power to compromise and terminate collection action on claims. The Joint Standards of the Comptroller General and the Attorney General require agencies to (1) issue internal regulations or instructions for claim collection, (2) collect, compromise, or terminate collection action on claims, and (3) report those claims which cannot be settled by the agency to the GAO for further collection action. GAO found that some agencies did not issue internal

regulations and that some of the regulations issued did not provide for the collection procedures required by the act and the standards. Collection actions taken by administrative agencies frequently were not

documented.

GAO also found that backlogs developed because of the lack of implementing agency instructions or regulations and uncertainty regarding the proper procedures to be followed. In attempting to dispose of these backlogs, collection action, on a large number of claims, was improperly terminated during the first 12 or 18 months after the legislation became effective.

GAO cannot state precisely how many claims are presently outstanding in the Government or how much money is involved. Statistics furnished by only a few agencies, however, indicate that hundreds of millions of dollars are involved.

GAO will continue to make periodic reviews in the various departments and agencies to determine agency compliance with the GAO Manual and the Federal Claims Collection Act. GAO will provide assistance and guidance to insure greater uniformity and efficiency in administrative claims collection operations. (See Appendix, Section I, Item 230.)

Review of Payment and Debt Claims Operations and Regulations

Department of State

During fiscal year 1971, GAO reviewed the regulations of the Department of State as well as its actual operations in connection with both payment and debt claims. In a report to the Secretary of State, GAO noted that with minor exceptions payment claims were being handled in conformity with the GAO Manual. GAO did find several areas in the Department's debt collection procedures and practices which it felt should be changed, including guidelines issued to implement the Federal Claims Collection Act. GAO also found that collection action was not taken in a timely manner against debtors, or in the case of deceased debtors, against their estates. At the time GAO issued its report to the Secretary, the Department had already adopted many of the changes in its operating procedures which were suggested at the time of the review. (See Appendix, Section I, Item 231.)

Veterans Administration

GAO previously reviewed regulations and claims operations at the Veterans Administration (VA) Central Office, Washington, D.C., and at the Veterans Administration Center in Philadelphia. At the time of its report to the Administrator, GAO recommended changes in the regulations insofar as they were in conflict with the GAO Manual and the Joint Standards. VA did revise its regulations and called attention in its all-station publications to the areas which GAO had brought to its attention.

Reviews made during fiscal year 1971 in the Regional Offices in Denver, Colo., and Newark, N.J., revealed collection deficiencies similar to those found in the Philadelphia Center. Most of them occurred, however, before the regulations were revised. (See Appendix, Section I, Item 232.)

Office of Education

GAO has undertaken a review of the indebtedness to the Government arising incident to the Federal loan insurance portion of the Guaranteed Student Loan Program which is administered by the Office of Education, Department of Health, Education, and Welfare. On January 5, 1971, GAO informed the Secretary of the Department that, in view of the magnitude of the Federal Loan Insurance Program and the significant indebtedness to the Government resulting from the operations of such program, it was incumbent that

adequate resources be allotted to establish and maintain an effective collection operation within the Office of Education. At the end of fiscal year 1971, GAO was preparing a report to the Congress on all significant matters disclosed by its review of the loan program.

Defense Supply Agency

Following reviews of regulations and claims operations at the Defense Supply Agency (DSA) Headquarters and at four of its field activities in Philadelphia, GAO reported to the Director of that agency that instructions contained in the DSA Accounting and Finance Manual were generally adequate and in conformity with the GAO Manual and the Federal Claims Collection Act. GAO noted, however, several instances in which the instructions needed to be corrected or clarified.

GAO noted at one of the field activities that appeals for reconsideration or adjustment of a claim were not always forwarded to GAO after an administrative denial. The GAO Manual provides that reclaims of items previously denied by the administrative agency must be forwarded to the Claims Division, GAO, unless it is determined administratively that the action taken in denying the claim was clearly in error and properly can be corrected by the agency. DSA officials took prompt action to insure the correct processing of payment claims administratively denied. (See Appendix, Section I, Item 233.)

CHAPTER NINE

LEGAL SERVICES

The Office of the General Counsel is headed by Paul G. Dembling, General Counsel. Assisting Mr. Dembling in directing the work of this office are the Deputy General Counsel, Milton J. Socolar, and Associate General Counsels F. Henry Barclay, Jr., John T. Burns, and Stephen P. Haycock. The entire staff comprises some 208 attorneys and support service personnel. An organization chart of the office is presented on page 130.

The legal work of the General Accounting Office stems from article 1, section 9, clause 7, of the Constitution of the United States which provides that:

"No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law;

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The design of this provision, as explained by Alexander Hamilton, was "to secure these important ends— that the purpose, the limit, and the fund of every expenditure should be ascertained by a previous law." Thus, under the Constitution, control over the public purse was placed in the hands of the Congress.

The Comptroller General of the United States is responsible on behalf of the Congress for determining, with certain exceptions, the legal propriety of executive branch expenditures. A major function of the Office of the General Counsel is to provide legal advice

to and on behalf of the Comptroller General concerning any public expenditure upon which he may be called to rule.

In addition to matters covering the legality of Government payments, the Office of the General Counsel prepares reports to the Congress on proposed legislation, often working in close collaboration with committee staff members, and reviews all GAO audit reports to assure that legal implications have been appropriately considered.

It is difficult, in a brief report, to convey adequately the broad extent to which legal assistance is furnished in the form of formal decisions, comments on proposed legislation, office opinions to operating divisions, audit report reviews, and informal advice furnished daily by the staff. To appreciate fully the range of the legal activities of the Office, it is necessary to reflect upon the growing complexity of the legislative approaches being taken to deal with the social, political, economic, and military needs faced as a nation and to recognize that the General Accounting Office is responsible for determining the legality of a major portion of all Government expenditures.

The legal work is handled under the following subject categories:

Civilian Personnel

Contracts

General Government Matters Military Personnel

Transportation

Within these broad areas, the work includes over 400 decisions a month involving all fields of law and requires expertise in statutory construction procedure, evidence, and contract interpretation. While it is not possible to review all of the major legal efforts of each category, the following descriptions provide an insight into the nature and extent of the assistance rendered.

Civilian Personnel

The civilian personnel structure of the Federal Government is founded upon a complex array of statutes, regulations, and instructions designed to assure equitable treatment for all employees. Rights and authorities are spelled out to cover such matters as entitlements to pay, including severance, overtime, holiday, Sunday,