DoD Financial Management Regulation Volume 12, Chapter 7

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DoD Financial Management RegulationVolume 12, Chapter 7CHAPTER 7FINANCIAL LIABILITY FORGOVERNMENT PROPERTY LOST, DAMAGED OR DESTROYED0701OVERVIEW070101.Purpose. This Chapter provides for the implementation of policies andresponsibilities outlined in DoD Directive 7200.11, “Liability for Government Property Lost,Damaged, or Destroyed.” This Chapter prescribes how to:A.Account for loss, damage, or destruction of Government property,determine the amount of financial liability of those found to be responsible for such financiallosses, provide relief from accountability, and establish debts resulting from the assessment offinancial liability.B.Inquire, research, and investigate the causes of the loss, damage, ordestruction of Government property.C.Assess financial liability with respect to lost, damaged, and destroyedGovernment property.D.070102.Initiate DD Form 200, “Financial Liability Investigation of Property Loss.”ResponsibilitiesA.Under Secretary of Defense (Comptroller). The Under Secretary ofDefense (Comptroller) is responsible for financial policies regarding financial liability forgovernment property lost, damaged or destroyed.B.DoD Components. The DoD Components shall ensure that the policiesand procedures of this Chapter are implemented and are responsible for the following:1.responsible for such losses;2.Determining and assessing the amount of financial liability of thoseMitigation or reduction of, or relief from, financial liability inappropriate cases;3.Establishing debts resulting from the assessment of financial liabilityand refer them for appropriate collection action.7-1

DoD Financial Management Regulation0702Volume 12, Chapter 7GENERAL REQUIREMENTS070201.Purpose.This section prescribes general requirements regardingaccounting for lost, damaged, or destroyed Government property.070202.Minimum Requirements. Based on the policies established in DoDDirective 7200.11, the following minimum requirements must be addressed:A.Investigation. Investigate to ascertain the cause of the loss, damage, ordestruction.B.Proximate Cause. Determination of whether the loss, damage, ordestruction was proximately caused by an individual’s negligence or abuse.C.Adjustment. Adjustment of accountable records.D.Administration. Administration of a system to determine whether aresponsible party should be held financially liable for a loss.070203.INITIATION OF INQUIRIESA.General. An inquiry shall be initiated immediately after discovery of theloss, damage, or destruction. This inquiry shall be an informal proceeding designed to determinethe facts and circumstances leading to the loss, damage, or destruction. The approving authorityis responsible for establishing procedures and designating a person to initiate and conduct theinquiry. The person conducting the inquiry shall be responsible for completing blocks 1. through11. of the DD Form 200, as described in section 0706. At a minimum, this inquiry shouldidentify:1.What happened.2.How it happened.3.Where it happened.4.Who was involved.5.When it happened.6.Any evidence of negligence, willful misconduct, or deliberateunauthorized use or disposition of the property.7-2

DoD Financial Management RegulationB.Volume 12, Chapter 7Evidence of Negligence1.When inquiring into the loss, damage, or destruction of governmentproperty, the first consideration is whether there is evidence of negligence. Some questions to beasked are: “Would a reasonably prudent individual have acted in this manner?” “Were thereprocedures governing the use of the property, and were they followed?” “What were thecircumstances that existed when the loss actually occurred?” “Was the individual on the job?”For example, if a dump truck is parked on an incline, a reasonable person would be expected toset the hand brake and leave the vehicle in park. Using blocks under the wheels might or mightnot be required. If the individual failed to set the brake and/or use blocks under the wheels andthe truck rolled down the incline and was damaged, this could be considered evidence ofnegligence. A reasonably prudent person would be expected to take precautions.2.With respect to loss, damage, or destruction of governmentquarters by military personnel, a distinction between simple and gross negligence is needed.Evidence of simple or gross negligence depends on the conduct of the individual. If the individualfailed to exercise precautions or good judgment, then simple negligence applies. If theindividual’s conduct was characterized by a reckless, deliberate, or wanton disregard offoreseeable consequences, then gross negligence applies. Evidence of whether simple or grossnegligence was the proximate cause of the loss or damage is based on the facts and circumstancesand shall be documented during the inquiry process.C.Unrecorded Property. The requirements of this chapter apply whether ornot the Government property is recorded on an accountable record.D.Losses Involving a Shortage of Public Funds. Proceeds of sales ofproperty or services not yet deposited with a DoD disbursing officer are considered accountableproperty and are subject to the policies and procedures in this chapter.E.Exceptions1.Motor vehicle accident investigation reports may be used todocument an inquiry. However, when the documentation clearly indicates that negligence orabuse is involved, or if a claim against the Government is possible, a DD Form 200 shall beprepared.2.Item discrepancies attributed to shippers and transportationdiscrepancies attributed to carriers are processed and reported according to “Reporting of Itemand Packaging Discrepancies,” (Non-FMS) and “Processing Discrepancy Reports Against ForeignMilitary Sales Shipments” (FMS), and “Reporting of Transportation Discrepancies in Shipments.”However, item discrepancy reports should be reviewed and evaluated to determine if thecircumstances of the loss or damage appear to have been caused by negligence of abuse by DoDpersonnel. If so, a DD Form 200 shall be prepared.7-3

DoD Financial Management RegulationVolume 12, Chapter 7F.DD Form 200. A DD Form 200 is used to document the facts andcircumstances of the loss. (A DD Form 200 is not required when an individual voluntarily makesrestitution to the government for the full amount of the loss and a controlled item is not involved.)070204.Voluntary Payments. Individuals may voluntarily choose to pay thegovernment for lost, damaged, or destroyed government property any time prior to involuntarycollection from their pay. Individuals offering the payment do so on their own volition. Thegovernment does not seek any advantage or forego any right by accepting a voluntary payment.An individual cannot be coerced or threatened with adverse action if payment is not voluntarilymade. Individuals must be made aware of the effect of making a voluntary payment. That is, itmay not be later withdrawn, avenues for relief will no longer be available, and voluntary paymentdoes not preclude other administrative or disciplinary action contemplated by an individual’scommander. Individuals offering to pay in excess of basic pay for one month by military membersor one twelfth of annual pay by civilian employees must be made aware that their liability may be alesser assessment as a result of an investigation. Voluntary payments may be made in cash or bypayroll deduction.070205.Review. After accountable and/or responsible officers have completedtheir inquiry, the DD Form 200 shall be sent to the appointing authority for review. Theappointing authority shall determine if a financial liability officer or financial liability board isneeded to conduct an investigation. The general criteria for appointing a financial liability officeris in paragraph 070402.A. The criteria for appointing a financial liability officer for inventorylosses is in paragraph 070807. Legal officials and the member’s commander must be consultedbefore statements are taken from anyone if there is a suspected violation of the Uniform Code ofMilitary Justice (10 U.S.C. Chapter 47).070206.Financial Liability Officer Investigations. The appointing authority mayappoint a financial liability officer to determine whether the facts and circumstances support thefindings and recommendations of the individual completing blocks 9. and 10. on the DD Form200. Qualifications, duties, and responsibilities of financial liability officers are discussed insection 0704.070207.Financial Liability Board. The appointing authority may appoint a financialliability board in lieu of an officer. The reasons for appointment of a board include thecomplexity, size, or unique type of loss due to negligence or abuse. The composition, objectives,and functions of the board are discussed in section 0705.070208.Determination of Financial LossA.Computation of Financial Loss. A documented computation of thefinancial loss to the government shall be made when there is evidence to indicate that the loss wasproximately caused by negligence or abuse.7-4

DoD Financial Management RegulationVolume 12, Chapter 71.When damaged property or items can be repaired economically orrestored in condition to that immediately prior to the loss, the loss to the government shall bebased on the cost of repair or restoration. If the cost to repair or restore the property exceeds thecost to replace the property, the loss to the government shall be as determined in paragraph,070208.A.2, below.2.When property is lost, damaged, or destroyed beyond economicalrepair, and the property is not replaceable, the amount of the loss shall be the fair market value ofthe property immediately before the loss. When a fair market value cannot readily be determined,the amount shall be the acquisition cost or standard price, adjusted for depreciation based on thespecified depreciation period for such item or if such a period has not been specified, based on itsestimated useful life. Depreciation shall be computed using the straight line method ofdepreciation. In no case should property be depreciated below its scrap value. For property thatis damaged beyond economical repair, the scrap or salvage value of the property shall be used toreduce the loss to the government.B.Liability. Financial liability of individuals is based on the actual loss to thegovernment, as computed in paragraph 070208.A, above. When liability is limited by theindividual’s rate of pay (see DoD Directive 7200.11), the amount of the actual loss to thegovernment still is computed. However, in such cases, the financial liability of the individualeither is the actual amount of the loss or the limitation based upon the rate of pay, whichever isless.C.Collective Liability. If more than one individual is found liable financiallyfor the loss, damage, or destruction of government property, the individuals shall be collectivelyliable for the loss to the government, subject to the limitations in DoD Directive 7200.11.Because the government cannot collect more than the total amount of assessed liability, theapproving authority who assessed financial liability will decide how much to collect from eachindividual. Among the factors to be considered in taking collection action from each liableindividual are the degree of each individual’s responsibility for the loss, damage, or destructionand the ability to collect for the loss from the responsible individual.070209.Notification and Examination. When financial liability is recommended, theindividual shall be notified and given the opportunity to examine the findings andrecommendations, obtain representation, make a rebuttal statement, and present any mitigatingfactors that may have contributed to the negligence or abuse. If damage to government housing isinvolved, an individual also shall be given the opportunity to request a waiver of the financialliability, as stated in DoD 4165.63-M, “DoD Housing Management.”0703APPROVING AND APPOINTING AUTHORITY070301.Duties and Responsibilities7-5

DoD Financial Management RegulationVolume 12, Chapter 7A.Approving Authority. DoD Component regulations shall designate whomay be an approving authority. The approving authority’s responsibilities may be delegated;however, the delegations must be in writing. The approving authority also may act as theappointing authority or designate an appointing authority in writing. The approving authorityshall:1.Designate an appointing authority, when needed.2.Disqualify himself or herself when a conflict of interest is possiblebecause the loss relates to property for which he or she is responsible and/or accountable.3.Establish procedures and designate a person to initiate and conductan inquiry immediately after the loss, damage, or destruction is discovered (see paragraph070203.A).4.Ensure that all DD Forms 200 received are accurate and complete.Evaluate each DD Form 200 and either approve recommendations to assess financial liability orrelieve those involved from liability, responsibility or accountability. The approving authorityapproves or disapproves all DD Forms 200, regardless of dollar value, unless otherwise delegatedin writing.5.Ensure that all gains and losses which require a formal investigationare promptly and thoroughly investigated. The system used to process DD Forms 200 must befrequently reviewed to evaluate the accuracy and timeliness of the investigations.6.Ensure that DD Forms 200 are initiated, processed and adjudicatedwithin the time limits that may be established by the DoD Components.7.Require, if delays occur in the initiating or processing of a DDForm 200, a written explanation of the reason for the delay and take appropriate correctiveactions.8.Ensure that persons held financially liable are so notified, informedof their rights (including waiver rights if Government housing is involved), and given theopportunity to inspect and copy the DD Form 200.9.Personally evaluate each DD Form 200 when there is evidence ofnegligence or abuse.10.Determine whether to delegate to the appointing authority theauthority to approve or disapprove a DD Form 200 when there is no evidence of negligence orabuse.7-6

DoD Financial Management RegulationVolume 12, Chapter 711.Ensure, when financial liability is recommended, or whenrecommendations appear to be inconsistent with findings, that a judge advocate or civilianattorney has reviewed the findings and provided an opinion on the adequacy of evidence and itsrelationship to the findings and recommendations. This legal review shall be included as part ofthe record with the DD Form 200 and completed before final action is taken by the approvingauthority.12.Ensure that corrections of any attested entries are properly initialedand documented.13.Overrule, when appropriate, the recommendations of the appointingauthority and the financial liability officer. When this action results in the assessment of financialliability, the individuals not previously recommended for liability shall be advised of their rightsand afforded an opportunity to exercise their rights.14.Formally notify individuals against whom he or she has approvedfinancial liability.B.Appointing Authority. The appointing authority is designated in writing bythe approving authority. The approving authority also may act as appointing authority. Theappointing authority is responsible for the following tasks:1.Appoint a financial liability officer, if needed.2.Appoint a board in lieu of a financial liability officer to conduct theinvestigation, if warranted. Reasons for considering appointment of a board include complexity,size, or unique type of loss due to negligence or abuse. (See section 0705.)3.Provide administrative guidance to the financial liability officer or4.Review DD Forms 200 for accuracy and compliance with thisthe board.Regulation.5.Approve or disapprove the recommendations of the financialliability officer or the board, and forward personal recommendations to the approving authority.6.Approve or disapprove DD Forms 200 when there is no evidenceof negligence or abuse and authorization has been delegated in writing by the approving authority.7-7

DoD Financial Management RegulationVolume 12, Chapter 77.Approve or disapprove DD Forms 200 when the gain or loss ofinventory items is less than 100,000 and authorization has been delegated in writing by theapproving authority.070302.Summary. The appointing and approving authorities must act on the DDForm 200 once an individual has been properly notified and given the opportunity to respond tothe findings. Failure of involved individuals to respond to recommendations of financial liability isnot a sufficient reason to delay the approval process if the individuals were given a reasonableopportunity to reply, as discussed in paragraph 070404.B.10.0704FINANCIAL LIABILITY OFFICER QUALIFICATION AND RESPONSIBILITIES070401.Purpose. This section contains policies regarding the qualifications, duties,and responsibilities of individuals appointed to conduct an investigation and determineresponsibility for lost, damaged or destroyed property listed on DD Forms 200. This section isconcerned with criteria to determine whether a financial liability officer is required to beappointed, who may be appointed as a financial liability officer, and the duties and responsibilitiesof that individual. A financial liability officer’s findings and recommendations are administrative,not judicial; therefore, the reports are purely advisory; the opinions do not constitute finaldeterminations or legal judgments; and the recommendations are not binding upon appointing andapproving authorities.070402.CriteriaA.Appointment of Financial Liability Officer. The appointing authorityshould appoint a financial liability officer to conduct a formal investigation when:1.Recommended by an accountable officer.2.Directed by higher authority.3.Deemed appropriate by the appointing authority (e.g., repetitivelosses, evidence of negligence or abuse or large dollar losses).B.Financial Liability Officer Duty. Unless operational requirements clearlydictate otherwise, a financial liability officer shall perform this function as a primary duty until theinvestigation has been completed.070403.Financial Liability Officer QualificationsA.Selection Criteria. A financial liability officer is selected based on training,experience, competence, and ability to conduct independent and objective investigations.7-8

DoD Financial Management RegulationVolume 12, Chapter 7B.Persons Eligible. The financial liability officer shall be a commissionedofficer; warrant officer; enlisted member in the grade of E-7, E-8, or E-9; or a civilian employeeGS-07, or above. The financial liability officer shall normally be senior to the individuals directlyinvolved in the discrepancy.C.Use of Reserve Component Personnel. Reserve Component commissionedofficers, warrant officers, and noncommissioned officers in grades E-7, E-8, or E-9 not on activeduty may serve as financial liability officers during Reserve training sessions.D.Relationship to Property. Any person who is accountable or responsiblefor, or in any way directly interested in, the property being investigated shall not be appointed as afinancial liability SPONSIBILITIESANDGeneral1.The primary purpose of the DD Form 200 is to determineresponsibility for lost, damaged or destroyed property. To determine such responsibility, the factscontributing to the loss, damage or destruction must be developed by investigation.a.The investigation may establish the fact that some otherindividual is at fault. The financial liability officer shall not limit the investigation to verifyingstatements of interested parties. Rather, the financial liability officer shall perform an investigationas thoroughly as is needed, in his or her opinion, to ensure that all facts are fully developed, theinterests of the government are fully served, and the rights of the involved individuals are fullyprotected.b.An investigation is requi

DoD Financial Management Regulation Volume 12, Chapter 7 7-2 0702 GENERAL REQUIREMENTS 070201. Purpose. This section prescribes general requirements regarding accounting for lost, damaged, or destroyed Government property. 070202. Minimum Requirements. Based on the policies established in DoD

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