Board of Contract Appeals General Services Administration Washington, D.C. 20405 _______________________ September 15, 1998 _______________________ GSBCA 14514-TRAV In the Matter of DIMITRI & EUGENIA ARENSBURGER Dimitri & Eugenia Arensburger, Silver Spring, MD, Claimants. Mary Elizabeth Hoinkes, General Counsel, United States Arms Control and Disarmament Agency, Washington, DC, appearing for United States Arms Control and Disarmament Agency. NEILL, Board Judge. The Director of the United States Arms Control and Disarmament Agency (ACDA) requests our opinion pursuant to Section 3529 of Title 31 of the United States Code regarding claims for reimbursement of expenses associated with temporary duty (TDY) travel. Two specific questions are posed. They are: (1) Under travel regulations in effect between 1986 and 1990, was a U.S. Government traveler on overseas TDY entitled to the full, flat-rate per diem if, while on frequent and lengthy assignment at the TDY station, the traveler lodged in a home actually purchased for use while on such assignments? (2) Under current regulations, is such a traveler entitled to reimbursement under the lodging component of his or her per diem for expenses incurred. In the event the answer to this second question is in the affirmative, then the agnecy also asks that we indicate specifically what expenses can be paid. For the reasons explained in detail below, we answer the two questions in the affirmative. Background The claimants in this case are Dimitri Arensburger and his wife, Eugenia. They own a residence in Silver Spring, Maryland. Mr. Arensburger was an employee of the Department of State from 1972 until his retirement in 1994. Mrs. Arensburger has been a contract interpreter with the Department s Office of Language Services since 1971. Over the years, the ACDA has frequently employed Mr. and Mrs. Arensburger for interpretation services in conjunction with arms control negotiations in Geneva, Switzerland. Since November 1972, the Arensburgers have been sent to Geneva on numerous occasions to serve as interpreters. Until 1975, the Arensburgers, when on assignment in Geneva, resided in rental units on a short-term basis. In 1975, they began leasing an apartment on an annual basis. In 1977, they became eligible under Swiss law to purchase real estate in Switzerland. In 1978, when it became clear that the agency would continue to send the Arensburgers frequently to Geneva, they purchased a house for use when on assignment there. This inquiry from the ACDA Director is prompted by a disagreement within the agency over whether the Arensburgers could, under travel regulations in effect until December 1990, retain the entire lodging portion of their per diem allowance to cover costs associated with maintaining their home in Geneva when using it while there on TDY. Similarly, there appears to be disagreement within the agency over whether, under the so-called lodgings-plus" system of per diem in effect for travel outside the continental or conterminous United States (OCONUS) since December 1, 1990, the Arensburgers are permitted to apply per diem to defray actual costs associated with maintaining their home in Geneva when they lodge in it while on assignment. This is not the first time that the agency has sought guidance concerning TDY paid to the Arensburgers. When the matter was first raised by the agency's Office of the Inspector General (OIG), the acting general counsel for the agency sought from the General Accounting Office (GAO) a confirmation of the acceptability of the agency's per diem policy for individuals maintaining residences at their TDY posts. GAO declined to address the issue in a hypothetical context and insisted instead that the matter be addressed within the context of an employee's claim. There being no disagreement between agency management and the Arensburgers, the agency concluded that the matter could proceed no further with GAO. The OIG, however, elected to pursue the matter. The agency did not take exception. In August 1995, the OIG, without the participation or involvement of other offices within the agency, made its own submission to GAO. In that submission, it explained that Mr. and Mrs. Arensburger had purchased a residence in Geneva in 1978 and that during the period of 1986-1990, when in Geneva on TDY assignment, they lived in that residence and continued to receive the full, flat rate per diem. The OIG sought a formal opinion on this and related matters.[foot #] 1 ----------- FOOTNOTE BEGINS --------- [foot #] 1 The OIG submission to GAO sought an opinion not only on the propriety of paying a flat per diem to the Arensburgers while they were lodged at Geneva in a residence owned by them but also on the propriety of certain per diem payments made to Mrs. Arensburger as a contract interpreter. (continued...) ----------- FOOTNOTE ENDS ----------- In a decision rendered on October 2, 1996, the Comptroller General concluded, among other things, that, because the Arensburgers owned the residence in Geneva where they lodged, they were not entitled to the lodging portion of any per diem. The decision addressed only travel between October 1, 1986 and September 30, 1990. Dimitri & Eugenia Arensburger, B-257926.2 (Oct. 2, 1996). The agency contends that this GAO holding is confusing and in conflict with established precedent. It seeks our opinion as to the applicability of the decision to the Arensburgers prior to the introduction of lodgings-plus per diem on a world-wide basis in December 1990. It also seeks our opinion as to the right of the Arensburgers, after the introduction of lodgings-plus per diem, to be compensated for actual costs associated with maintaining their residence in Geneva when used by them while on TDY. The agency advises that the OIG interprets the same GAO decision of October 2, 1996, as precluding any reimbursement under the lodgings portion of per diem for expenses associated with a house owned by the traveler. Discussion The per diem allowance for U.S. Government travelers has its roots in the Subsistence Expense Act passed by Congress in 1926. Subsistence Expense Act of 1926, ch. 457, 44 Stat. 688 (1926). Prior to that time, Government travelers were paid the actual cost of meals and lodging. This method, however, was found to be cumbersome. For it to be viable, approving officials had to know what the expenses should be or else had to be provided receipts supporting a traveler's claim for reimbursement. Even when receipts were provided, the reasonableness of the expenses could still remain in question. The per diem method was intended to serve as an alternative to the actual expense method. Under this method, the Government traveler was given a fixed or flat daily allowance ("per diem") for subsistence expenses without any requirement to account for the use of these funds. Of course, where nothing more than a fixed or flat amount was provided, the potential always existed that this allowance might be more or less than what would actually be required by the traveler for subsistence while on travel. In the years which followed the establishment of the flat-rate per diem, the General Accounting Office issued several reports critical of the flat rate method, pointing out that the Government too often was reimbursing travelers more for their lodging than they had paid. See Jim Sasser, United States Senate, B-198536 (Jan. 19, 1981). ----------- FOOTNOTE BEGINS --------- [foot #] 1 (...continued) Because the agency's inquiry in this case is limited to the first issue only, we will not describe or discuss the related issues of apparent concern to the OIG at that time. ----------- FOOTNOTE ENDS ----------- Perhaps in anticipation of such criticism, a provision was placed in the Standardized Government Travel Regulations (SGTR), called for in section 7 of the Subsistence Expense Act, which specifically reminded agencies of their responsibility to reduce the maximum allowable per diem when aware of particular circumstances which would clearly render the allowable maximum excessive to the traveler s actual needs. The same provision survived in the Federal Travel Regulation (FTR) at the time this inquiry was submitted. It read in pertinent part: It is the responsibility of the head of each agency, or his/her designee, to authorize or approve only those per diem allowances that are justified by the circumstances affecting the travel and are allowable under the specific rules in this part. However, the per diem rates provided for under these rules represent the maximum allowable. To prevent authorization or approval of per diem allowances in excess of amounts required to meet the necessary per diem expenses of official travel, consideration shall be given to factors such as those listed in this paragraph that reduce the necessary expenses of employees (see specific guidelines in 301-7.12 of this part for reducing rates[[foot #] 2]) [.] 41 CFR 301-7.2(b) (1997) (FTR 301-7.2(b)). Another response to the criticism of flat per diem was the eventual introduction of a modified per diem, the lodgings-plus system of computing allowable per diem. Under this system, the traveler was to be given a flat allowance for meals and incidental expenses but was to be reimbursed only for the actual or for an average of the actual costs of daily lodging. As of October 10, 1971, this system became effective for Government employees traveling on official business inside the continental or conterminous United States (CONUS). Further refinements in the use of the lodgings-plus system for travel in CONUS were made in the FTR by GSA, effective July 1, 1986, after passage of the Civilian Travel Expenses Act of 1985, Pub. L. No. 99-234, 99 Stat. 1756 (1986). At the time GSA issued these amendments to the FTR, it also committed to conduct a thorough review of the per diem reimbursement system for OCONUS travel with an eye to ----------- FOOTNOTE BEGINS --------- [foot #] 2 Section 301-7.12 states in part: An agency may, in individual cases or situations, authorize a reduced per diem rate under certain circumstances, such as when lodgings and/or meals are obtained by the employee at a reduced cost or furnished to the employee at no cost or a nominal cost by the Government; or when for some other reason the per diem costs to be incurred by the employee can be determined in advance. ----------- FOOTNOTE ENDS ----------- establishing eventually a worldwide lodgings-plus per diem computation system. As a result of this review, GSA concluded that a worldwide lodgings-plus system would, in fact, simplify reimbursement procedures and ease the administration of official travel. Effective December 1, 1990, therefore, the FTR was amended to implement such a system. 55 Fed. Reg. 41525 (1990). This change in the FTR undoubtedly accounts for the fact that the Director of the ACDA has presented two principal questions rather than one for our consideration. The overriding concern is, of course, whether the Arensburgers can apply a part of their per diem to the actual costs associated with maintaining their residence in Geneva when they are there on TDY. Because their use of the house extends back to the period prior to the regulation change in December 1990, we are asked to address the issue raised both in terms of the regulation in effect prior to that time and after that time. We turn first to the question of whether, prior to the introduction of lodgings-plus for travel outside CONUS, the Arensburgers were entitled to retain their entire flat per diem. This issue is not a new one. Prior to the introduction of lodgings-plus in October 1971 for CONUS travel, the Comptroller General, who previous to this Board considered claims such as this, addressed the same question with regard to an individual using his or her own residence while on TDY in CONUS. Where the residence was the same as that from which the traveler commuted to his or her regular permanent duty station, the Comptroller General consistently held that the traveler was not entitled to per diem since the TDY did not generate any costs beyond those which normally would have been incurred even if travel had not been undertaken. E.g., 31 Comp. Gen. 264 (1952); 21 Comp. Gen. 697 (1942). The same issue was also examined by the United States Court of Claims, which reached a similar result. Bornhoft v. United States, 137 Ct. Cl. 134 (1956). When a traveler made use of a second residence, however, this being located at or near the TDY site, the Comptroller General recognized that, in some circumstances, there might be additional expenses justifying a per diem allowance. In these situations, it was the custom of the Comptroller General to defer to the agency, pointing out that, under the SGTR, the agency was not obliged to pay the maximum authorized per diem but rather could reduce or deny the per diem if particular circumstances clearly rendered the allowable maximum excessive to a traveler s actual needs. E.g., Comp. Gen. Dec. B-174428 (Apr. 17, 1972); Comp. Gen. Dec. B-152216 (Aug. 20, 1963); Comp. Gen. Dec. B-127828 (May 22, 1956); 35 Comp. Gen. 554 (1956). With regard to the question presented here concerning retention of the per diem provided to the Arensburgers prior to the introduction of lodgings-plus per diem for OCONUS travel, we find the approach used by the Comptroller General for similar cases occurring prior to the introduction of lodgings-plus in CONUS travel to be a reasonable one and follow it here. This is a matter best left to agency discretion. Has the agency abused its discretion or acted irresponsibly in this matter? We think not. The agency informs us that its practice prior to the introduction of lodgings-plus per diem in OCONUS travel was to provide per diem without reduction if the employee incurred more than non-trivial expenses for food and lodging. The agency further explains that this was deemed to be an acceptable alternative to reviewing and assessing the reasonableness of receipted expenditures. We find the agency's position to be a reasonable one. Nothing in the record suggests that any of the subsistence expenses of the Arensburgers while on TDY were non-existent or trivial. Even with regard to their lodging, we do not understand the concern to be that there were no actual costs associated with lodging in their own residence, but rather that application of per diem to defray these costs is improper. Admittedly, it would be questionable if the residence was purchased without TDY in mind and for purposes unrelated to the TDY assignment of the Arensburgers. The agency advises us, however, that this was not the case. We cannot fault, therefore, the agency's decision not to reduce the flat per diem paid to the Arensburgers prior to the introduction of lodgings-plus per diem in OCONUS travel. It is clear from the decision of October 2, 1996, that GAO incorrectly concluded from the OIG submission that the Arensburgers purchased their residence in Geneva prior to assignment there and for reasons unrelated to their being sent there on Government business. Given this mistaken assumption, the conclusion reached is correct but, of course, inapplicable to the actual facts of this case. This same decision has also created some confusion by citing to precedents involving CONUS travel after the introduction of lodgings-plus when the issue presented involved OCONUS travel prior to the introduction of lodging-plus. Bearing in mind that the application of those precedents is by way of analogy and that the decision is premised on the misunderstanding of a fundamental fact in the case, we do not view it as being in substantive conflict with the various GAO precedents discussed herein and which we have elected to follow in this case. We conclude that they support payment of a flat per diem to the Arensburgers prior to the introduction of lodgings-plus per diem in OCONUS travel in December 1990 since the agency reasonably concluded that there was no cause to reduce the maximum allowable per diem. We turn now to the question of whether, after the introduction of lodgings-plus for OCONUS travel, the Arensburgers are entitled to reimbursement for some lodging costs. Following the introduction of lodgings-plus for CONUS travel, the Comptroller General was asked if a traveler making use of a second residence was entitled to receive a full per diem. Not surprisingly, his reply this time was that this was no longer a matter of agency discretion since, with the recent change in regulation, the lodging allowance was henceforth based on actual lodging costs. Furthermore, the Comptroller General insisted that the actual costs in question be occasioned by the claimant's travel and not simply the result of a prior purchase of the second residence for reasons altogether unrelated to its use during TDY. Otherwise, the costs incurred, even during TDY, would simply not be occasioned by the individual's travel and, therefore, would not be reimbursable. Sanford O. Silver, 56 Comp. Gen. 223 (1977); accord Lt. Robert G. Stentz, USN, B-196968 (July 1, 1980); James H. Quiggle, B-192435 (June 7, 1979); Robert E. Larrabee, 57 Comp. Gen. 147 (1977); Fred Frishman, B-186643 (Oct. 28, 1976); Dr. Curtis W. Tarr, B-181294 (Mar. 16, 1976). The agency, citing decisions of the Comptroller General permitting recovery of certain actual costs of maintaining a residence purchased or rented for use during TDY, contends that the Arensburgers are entitled to recover these costs as part of their per diem. Since this case was submitted, the Board has in fact adopted this line of GAO precedents. Donald C. Smaltz, GSBCA 14328, 97-2 BCA 29,311. In Smaltz we concluded that a claimant may recover as part of his or her per diem a proration of actual interest, tax, utility, and maintenance costs associated with the residence at or near the TDY site. We have, however, noted that the total per diem awarded must not exceed the applicable maximum and that the monthly costs should be divided by the number of days in the month and not by the number of days the claimant actually occupied the residence. Finally, as the Comptroller General did before us, we continue to insist that the residence in question must have been purchased for use while on TDY and not for reasons unrelated to the individual's travel. In conclusion, in answer to the agency's request, it is our opinion that, under travel regulations in effect between 1986 and 1990, U.S. Government travelers such as the Arensburgers, when on overseas TDY, were entitled to the full, flat-rate per diem if the agency sending them on assignment is of the opinion that they are entitled to the maximum allowable per diem and has not reduced the same for good cause. Furthermore, it is our opinion that, under current regulations, travelers such as the Arensburgers, who have purchased a residence at their TDY site for lodging while on assignment there, are entitled, under the lodging component of their per diem, to reimbursement of a proration of their monthly costs of interest, utilities, property taxes, and maintenance applicable to the period of their stay. This opinion is of course based on two qualifications, namely, that the Arensburgers and others finding themselves in a position similar to theirs have been authorized per diem and that those individuals are, in fact, eligible to receive it. _____________________ EDWIN B. NEILL Board Judge