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Policy, Data, Oversight Pay & Leave

Washington, DC

U.S. Office of Personnel Management
Compensation Claim Decision
Under section 3702 of title 31, United States Code

Headquarters, U.S. Africa Command
Department of the Army
Stuttgart, Germany
Living quarters allowance for personally owned quarters

Damon B. Ford
Compensation and Leave Claims
Program Manager
Agency Compliance and Evaluation
Merit System Accountability and Compliance



The claimant is a Federal civilian employee of the Department of the Army (DA), in Stuttgart, Germany.  He requests the U.S. Office of Personnel Management (OPM) review his agency’s decision regarding the amount of living quarters allowance (LQA) he was granted for personally owned quarters (POQ).  We received the claim request on March 23, 2018, and the agency administrative report (AAR) on November 29, 2018.  For the reasons discussed herein, the claim is denied.

The claimant purchased a home in Germany in February 2009.  After restoring the home, he moved in December 2010.  Thereafter, he applied and was found eligible for LQA under the provisions of the Department of State Standardized Regulations (DSSR) section 031.11, as an employee recruited in the United States.  He received LQA for the POQ from December 2010 until October 2012, when he returned to the United States to a DA position in Fort Campbell, KY.  While living and working in the United States and not receiving a LQA, the claimant continued making payments towards the purchase of the quarters.  In May 2017, he was reassigned to a position in Stuttgart, Germany and he re-occupied the quarters.  Thereafter, he requested the agency recommence his LQA for POQ for the remainder of the 10-year period prescribed in the DSSR, taking a purchase date of February 17, 2009, and a price of €261,500.00 into account.  However, upon the claimant’s reapplication for LQA, the agency determined a different purchase date and price for the POQ.  The agency further determined it would only authorize actual costs remaining against the purchase of the quarters, i.e., €74,552.37, pursuant to the provisions of DSSR sections 132.5 and 136 and paragraph 1.b.(4)(a) and (b) of its “LQA Allowable Costs” guidance dated May 23, 2016.  The claimant challenges the agency’s findings and believes the agency’s decision is in direct conflict with the provisions of DSSR section 136. 

In its AAR to OPM, the agency explained its decision as follows:

Based on the notary/purchase contract available and provided by the agency as Encl 2, the contract was concluded on January 29, 2009.  This is the date that is considered the date of the purchase not, as Mr. Hales suggested in item 16a of the DSSR130 worksheet, February 17, 2009.  The agreed purchase price shown in the contract was €249,000.00, to be payable by March 5, 2009, and not according to Mr. Hales, €261,500.00.  This higher amount is actually the amount of the loan that Mr. Hales took out from the bank, as he discussed in the email attachment to exhibit 6, which is corroborated by his loan documents from the bank, dated February 17, 2009...

The agency further states:

The agency notes that Mr. Hale’s bank statement showing that he would still owe an amount of €74,552.37 would not only include interest payments due but is an amount against the loan he took out in February 2009 which was higher than the actual purchase price of the quarters.  The amount shows that Mr. Hales made continuous payments against the loan whilst he was assigned stateside, and as of May 2017 re-occupies the quarters; we consider this a re-application for LQA for those quarters applying [LQA Allowable Costs” guidance, dated May 23, 2016, paragraph 1.b.(4)(a) and (b)] provisions.  What is more since it is nearly impossible to arrive at an amount of LQA that may be paid  for quarters that have not been acquired as a result of the current assignment of an employee in the overseas area but some time before, either in connection with a previous Federal civilian assignment or independent of one, the agency does not consider itself in violation of DSSR §136 relating to POQ in connection with DSSR § 132.5 where actual costs of the quarters may only be paid under the LQA, despite the circumstances here that the amount provided by Mr. Hales as actual remaining costs is in all probability against the total loan taken out and not against the actual purchase price of the quarters. 

The DSSR contains the governing regulations for allowances, differentials, and defraying of official residence expenses in foreign areas.  Section 013 of the DSSR, addressing the authority delegated to the heads of agencies, states in part:

When authorized by law, the head of an agency may defray official residence expenses for, and grant post differential, difficult to staff incentive differential, danger pay allowance, quarters, cost-of-living, representation allowances, compensatory time off at certain posts and advances of pay to an employee of his/her agency and require an accounting thereof, subject to the provisions of these regulations and the availability of funds.  Within the scope of these regulations, the head of an agency may issue such further implementing regulations as he/she may deem necessary for the guidance of his/her agency with regard to the granting of and accounting for these payments. [Italics added.]

Thus, Department of Defense Instruction (DODI) 1400.25, Volume 1250, dated February 23, 2012, and “LQA Allowable Costs” guidance dated May 23, 2016, used in connection with the provisions of the Army in Europe Regulation (AER) 690-500.592, dated November 18, 2005, and in effect during the period in question, may impose additional requirements to further restrict LQA eligibility, but may not exceed the scope of the DSSR; i.e., allow for the granting of LQA in cases not otherwise permitted under the DSSR. 

Section 136(a) of the DSSR addressing LQA for POQ, states: 

When quarters occupied by an employee are owned by the employee or the spouse, or both, or by the employee or the domestic partner, or both, an amount up to 10 percent of original purchase price (converted to U.S. dollars at original exchange rate) of such quarters shall be considered the annual rate of his/her estimated expenses for rent.  Only the expenses for heat, light, fuel, (including gas and electricity), water, garbage and trash disposal and in rare cases land rent, may be added to determine the amount of the employee's quarters allowance in accordance with Section 134.  The amount of the rental portion of the allowance (up to 10 percent of purchase price) is limited to a period not to exceed ten years at which time the employee will be entitled only to above utility expenses, garbage and trash disposal, plus land rent. 

Supplementing DSSR section 136(a), DoDI 1400.25, Volume 1250, dated February 23, 2012, states in relevant part under Enclosure 2, paragraph 2.l.:

The annual rent payable for personally-owned quarters (POQ) is based on the purchase price or appraised value of the property, converted to U.S. dollars at the exchange rate in effect at the time of purchase.

Section 132.5 of the DSSR addressing LQA cost requirements, states:

Employees shall submit written estimates of costs, or actual costs if they are known, to the head of agency on Section 960 LQA Annual/Interim Expenditures Worksheet attached to the SF-1190, Foreign Allowances Application, Grant, and Report, whenever an LQA grant commences.  Thereafter, each employee shall show the actual annual expenses of rent and utilities, supported by receipts or other satisfactory evidence, whenever requested by the officer designated to grant allowances, the Department of State, or other responsible authority.  (See also Sections 077.2 and 134.16.) (emphasis added)

“Living Quarters Allowance (LQA) Allowable Costs” guidance dated May 23, 2016, implemented in connection with AER 690-500.592, states in relevant part under paragraph 1.b.(4):

(a) Any prior payments for POQ made by the employee (e.g., during military service, contractor employment, as private individual, etc.) that reduce the original purchase price, reduce the actual cost used for LQA calculation.  Failure to provide this information will result in LQA denial.  The actual cost will be prorated as the rental portion of POQ LQA and may continue for up to the DSSR 10-year period. 

(b) Effect of continued payments.  Any payments on POQ made after LQA has commenced, but while the employee is not drawing LQA (e.g., mortgage payments between overseas tours of duty) that reduce the original price, reduce the actual costs payable on that POQ upon reapplication for LQA.  The reduced actual cost will be prorated as the rental portion of POQ LQA and may continue for up to the DSSR 10-year period. DSSR section 136(a) establishes that an amount up to 10 percent of the “original purchase price” is considered the annual rate of expenses for rent. 

The term “original purchase price” as it is used in DSSR section 136(a) is considered to mean the actual price of the POQ when it was purchased.  The purchase price of a house is commonly accepted to be the price stated on the purchase contract as a legal document.  The record reveals that the claimant signed a notary/purchase contract for the POQ on January 29, 2009, and the stated cost of the house on that contract is €249,000.00.  Given these facts, the agency’s determination that January 29, 2009, represents the purchase date for the POQ and €249,000.00 represents the original purchase price is not unreasonable.  When the agency’s factual determination is reasonable, we will not substitute our judgment for that of the agency.  See e.g., Jimmie D. Brewer, B-205452, March 15, 1982.     

As it relates to the LQA grant amount, the agency is required to determine the amount allowable for LQA for POQ based on individual circumstances to provide for the “actual costs” and “actual annual expenses,” as provided for in DSSR section 132.5, and the agency may properly exercise its discretion in determining the LQA grant for POQ.  Therefore, under DA’s further implementing guidance dated May 23, 2016, prior payments received for POQ made by the employee that reduce the original purchase price serve to reduce the actual cost used for LQA calculation.  The claimant admits he continued making payments towards the POQ while in his assignment stateside.  For this reason, OPM agrees with the agency’s decision to offset the original purchase price of the POQ against payments made and re-determine actual costs payable on the POQ.  The agency guidance at paragraph 1.b.(4)(a) and (b) does not exceed the scope of the DSSR and is in accordance with the “actual costs” requirements in DSSR section 132.5.  Thus, we find no reason to disturb the agency’s decision to establish the claimant’s LQA for POQ based on €74,552.37, the remaining amount owed on his loan, as the allowable amount to provide for actual costs for the quarters. 

The statutory and regulatory languages are permissive and give agency heads considerable discretion in determining whether to grant LQAs to agency employees.  Wesley L. Goecker, 58 Comp. Gen. 738 (1979).  Under statutes that vest a degree of discretion to administrative agencies, our review is generally confined to deciding whether an agency’s action must be viewed as arbitrary, capricious, or so at variance with the established facts as to render its conclusion unreasonable.  Therefore, an agency may withhold LQA payments from an employee when it finds that the circumstances justify such action, and the agency’s action will not be questioned unless it is determined that the agency’s action was arbitrary, capricious, or unreasonable.  Under 5 CFR 178.105, the burden is upon the claimant to establish the liability of the United States and the claimant’s right to payment.  Joseph P. Carrigan, 60 Comp. Gen. 243, 247 (1981); Wesley L. Goecker, 58 Comp. Gen. 738 (1979).  Here, the claimant has failed to meet that burden.  Since an agency decision made in accordance with established regulations and within its discretionary authority, as is evident in the present case, cannot be considered arbitrary, capricious, or unreasonable, there is no basis upon which to reverse the decision.  Accordingly, the claim is denied.

This settlement is final.  No further administrative review is available within OPM.  Nothing in this settlement limits the claimant’s right to bring an action in an appropriate United States court.

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