Washington, DC

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

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


05/23/2019

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Date

The claimant was a Federal civilian employee of the Department of the Air Force (AF) at Ramstein Air Base (AB), Germany, during the claim period.  He requests that the amount of living quarters allowance (LQA) that he was granted for his personally owned quarters (POQ) be re-determined to include renovation costs or by using the appraised value instead of the purchase price of the property.  Alternatively, if his request is not granted, he asks that the original LQA amount granted in 2009 be “reinstated, with any debt relieved and garnished wages returned to [him].”  The U.S. Office of Personnel Management (OPM) received the claim request on July 31, 2018, the agency administrative report (AAR) on August 23, 2018, and the claimant’s comments on the AAR on August 31, 2018.  For the reasons discussed herein, the claim is denied.

The claimant was appointed to a Supervisory Program Analyst, YC-0343-02, position with AF in Germany, effective April 27, 2009.  In July 2009, the claimant was granted LQA in the amount of $29,412.00 per year for POQ he purchased in 1999 while overseas on active duty.  In October 2016, the claimant’s agency notified him that he had been erroneously overpaid.  The amount of LQA for POQ was then reduced to $17,034.00 per year based on the original purchase price of the property, resulting in retroactive deductions of the LQA amounts and garnishment of payments.  The claimant subsequently returned to the United States upon his reassignment to another Federal civilian position, Foreign Affairs Specialist, GS-0130-13 with Headquarters AF in Virginia, effective December 11, 2016. 

The basis of the claimant’s request is twofold.  First, he believes since “LQA is an allowance intended to cover ‘the annual costs of suitable, adequate, living quarters…’” and renovations were necessary to make his property “habitable,” the cost of those renovations should be considered in his LQA calculation.  Second, in his view, the inclusion of renovation costs would “have been moot if the appraised value had been used” to calculate the amount of LQA for POQ.  Specifically, he states:

….The DoD has issued further implementing regulations through its requirements for DoD civilian employment overseas, Department of Defense Regulations (DoD) 1400.25-M, in which Subchapter 1250.5.1.14, [sic] Personally Owned Quarters (POQ) reads, “The annual rent payable for Personally Owned Quarters is based on the purchase price or appraised value of the property (emphasis mine), converted to U.S. dollars at the exchange rate in effect at the time of purchase.”  This clearly allows the appraised value of the property to be used to determine LQA and the regulation is silent on when the appraisal must be conducted.  Their determination arbitrarily stated they must apply to policy in the same way for all employees, which contradicts the latitude provided in DOD 1400.25-M.  The statute and regulation allow for latitude in unique situations and my situation is clearly unique.

However, in its AAR the agency explains:

Even though the predecessor of the current DoDI 1400.25-V1250, i.e. Subchapter 1250 to DoD 1400.25-M, that was in effect in 2009 allowed the calculation of LQA on the basis of the appraised value of a property it has to be held that this option was in fact unlawful because it was outside the scope of the preceding DSSR 136 a. (which in 2009 was not different than the currently published version).  Consequently, the rule that LQA for POQ shall be calculated on the basis of the purchase price only was and remains binding.  In addition, the relevant section 136 a. lists specific additional cost elements that may be considered in the calculation of LQA for POQ.  Costs for renovations are not mentioned.  Hence there is no legal basis for adding these or any differential amount derived from an increased market value due to a refurbishment of the property.

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Furthermore, deviating from the above principles would infringe upon this agency’s obligation to apply the regulations on overseas allowances consistently and equitably for all employees.

In the claimant’s response to the AAR, he states that, “A full reading of the DSSR informs the intent of the LQA allowance to cover substantially all expenses for suitable and adequate housing,” and that when he purchased his home, “it in no way was suitable an[d] adequate to live in with mold and structural damage requiring significant work to make it habitable (which is discussed in DSSR paragraph 137).” [1]  In addition, he states:

A full reading of the DSSR would include section 013 which states “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.”  This renders invalid the 86 FSS point about the DOD regulation using the appraised value as being unlawful.

The Department of State Standardized Regulations (DSSR) contains the governing regulations for allowances, differentials, and defraying of official residence expenses in foreign areas. Section 131.1 of the DSSR defines LQA as "a quarters allowance granted to an employee for the annual cost of suitable, adequate, living quarters for the employee and his/her family.”  DSSR section 131.3, Scope, states LQA rates are intended to "cover substantially all of the average employee's costs for rent, heat, light, fuel, gas, electricity, water, taxes levied by the local government and required by law…” 

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. 

DoDI 1400.25-M, Subchapter 1250, Overseas Allowances and Differentials, dated December 1996, reissued June 26, 2006, cited by the claimant and in effect at the time he applied for LQA for POQ, states:

SC1250.5.1.12. Personally Owned Quarters (POQ).  The annual rent for POQ is based on the purchase price or appraised value of the property, converted to U.S. dollars at the exchange in effect at the time of purchase. 

The clear language of DSSR Section 136(a) establishes that an amount up to 10 percent of the original purchase price of the house shall be considered the annual rate of expenses for rent.  The purchase price of a house is commonly accepted to be the price stated and paid on the purchase contract as a legal document.  Although the claimant states renovations were necessary to make the house habitable and references DSSR section 137, that section applies to rental property, not to POQs, and is therefore irrelevant to this matter.  There is no provision in section 136(a) that allows the cost of renovations to be included as part of the original purchase price.  See OPM File Numbers 05-0028, September 5, 2006; 12-0034, February 4, 2014; and 13-0056, August 21, 2014.

Under DSSR section 013, the head of an agency may issue further implementing instructions for the guidance of the agency with regard to the granting of and accounting for these payments.  Thus, Department of Defense Instruction 1400.25, Volume 1250, implements the provisions of the DSSR, but may not exceed their scope; i.e., extend benefits that are not otherwise permitted by the DSSR.  Thus, OPM applies agency-developed policies to the extent such guidance is in agreement with the DSSR, when such implementing instructions do not exceed the scope or meaning of the DSSR.  Although DoDI 1400.25-M, Subchapter 1250, that was in effect at the time the claimant applied for his current position allowed for the calculation of LQA based on the appraised value of a property, the DSSR does not allow for the appraised value of a property to be used in calculating LQA.  Therefore, we find no basis for disturbing the agency decision. 

The use of the permissive term “may” in section 013 as opposed to the mandatory terms “will” or “shall” indicate that LQA is a discretionary allowance on the part of the agency.  The agency’s position is that it has consistently applied the purchase price of the property to compute LQA for POQ for all eligible employees in accordance with applicable regulation.  OPM will accept the facts asserted by the agency, absent clear and convincing evidence to the contrary.  5 CFR 178.105.  The claim to re-determine LQA for POQ to include renovation costs or by using the appraised value instead of the purchase price of the property is therefore denied.

Concerning the claimant’s alternative request that the original LQA amount of $29,702.00 per year be reinstated and that he be relieved of all debt, we note that payments of money from the Federal Treasury are limited to those specifically authorized by statute.  Since OPM has no legal basis to act on the claimant’s request, this claim is also denied.    

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).  Thus, 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).  Since an agency decision made in accordance with established regulations and under its discretionary authority as is evident in the present case cannot be considered arbitrary, capricious, or unreasonable, the claim is accordingly 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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