Washington, DC
U.S. Office of Personnel Management
Compensation Claim Decision
Under section 3702 of title 31, United States Code
Department of the Army
Wiesbaden, Germany
Kimberly A. Steide, DPA
Principal Deputy Associate Director
Agency Compliance and Evaluation
Merit System Accountability and Compliance
02/26/2025
Date
The claimant is a Federal civilian employee of the U.S. Army Installation Management Command, Department of the Army (DA), in Wiesbaden, Germany. He requests the U.S. Office of Personnel Management (OPM) reconsider the agency’s denial of the rental portion of living quarters allowance (LQA) for his personally owned quarters (POQ). We received the claim on May 8, 2024, and the agency administrative report (AAR) on August 9, 2024. For reasons discussed herein, the claim is denied.
The claimant separated from active-duty military service in Heidelberg, Germany, in November 2007, and continued to reside in Germany. On November 26, 2007, he was appointed to a Construction Control Representative, GS-0809-11, Federal civilian position with the Army Corps of Engineers in Wiesbaden, Germany. He was determined eligible for LQA under the provisions of the Department of State Standardized Regulations (DSSR) section 031.12, as an employee recruited outside the United States. In December 2007, the claimant entered into a purchase contract to buy an apartment in Germany and began receiving LQA for POQ from February 2008 until February 2013, when he was called to active duty under military reserve orders. Except for June 2017 to September 2017, the claimant remained activated with the military until the end of September 2023, when he returned to his previous civilian position. Effective October 22, 2023, he transferred to his current General Engineer, GS-0801-13, position at which time he reapplied for LQA for POQ. However, the agency found the claimant ineligible for the rental portion of the allowance because he did not meet the requirements in paragraph 11.e.(6) of the Army in Europe Regulation (AER) 690-500.592. In its decision dated April 18, 2024, the agency explains its denial as follows:
…. The CHRA [Civilian Human Resources Agency] Overseas Benefits Branch did not re-start the LQA for your POQ under the provisions of the DSSR § 136 for the remainder of the 10 years authorized under said provision. CHRA’s concerns with your request was consistent with the provision found in the AER 690-500.592, paragraph 11.e.(6) which prescribes that LQA for a POQ is limited to the actual costs of the original purchase price. Upon request, you did provide your actual expenses remaining against the purchase of the quarters; however, the documents also show that you refinanced the loan between the time you purchased the quarters in late 2007, and your request to re-start the allowance in October 2023. The AER 690-500.592 notes that “the purchase price will not subsequently be increased or extended (for example, due to refinancing….) …The agency did authorize the utilities portion of the allowance, retroactive to your date of return to a civilian position.
In its AAR to OPM the agency further explains:
Upon re-application for LQA for his POQ in October 2023, based on the original purchase price in December 2007, would it not be for the provisions found in the AER 690-500.592, paragraph 11e(6), the agency would not only have re-commenced the DSSR-prescribed timeframe for the remainder the 10-year period for the LQA, but also paid the $268,488.88, the difference between the original purchase of $559,316.00 and the LQA already received for about five years. This difference does not take into account the difference in the exchange rate between December 2007 (€1.00 = $1.434) and October 22, 2023, which was $1.059 to €1.00, resulting in a Euro amount of €253,529.86. However, because of the requirement imposed by the agency to demonstrate actual costs remaining for POQs and not taking re-financing into consideration of the costs remaining, which is direct result of the re-financing action here, the agency is not able to authorize the full amount of LQA. In the end, the agency would pay more in LQA in US-Dollars for a POQ than the DSSR intended.
The claimant disagrees with the agency determination to deny the rental portion of the allowance. He believes the LQA for his POQ should be “grandfathered” by application of the rules in the 2005 version of AER 690-500.592 because he purchased the POQ in December 2007, and not by those in the 2018 version of AER 690-500.592, currently in effect, which he considers having “ambiguous refinancing rules.” Thus, he effectively seeks the rental portion of the allowance to restart where it left off in September 2017 for the remainder of the original purchase price, for the rest of the DSSR prescribed 10-year period.
The DSSR contains the governing regulations for allowances, differentials, and defraying of official residence expenses in foreign areas. Under DSSR section 013, the head of an agency may issue further implementing instructions for the guidance of the agency regarding the granting of and accounting for these payments. Thus, agency implementing guidance such as the Department of Defense Instruction (DoDI) 1400.25-V1250, dated February 23, 2012, and the AER 692-500.592, dated September 6, 2018, 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 in pertinent part:
When quarters occupied by an employee are owned by the employee or the spouse, 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.
Section 132.5 of the DSSR provides for LQA cost requirements. It 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.)
Relative to DSSR section 132.5, AER 690-500.592 paragraph 11.e.(6) states:
POQ is limited to actual cost based on the employee’s original purchase price. (OPM decision 12-0037, 22 April 2013). The purchase price will not subsequently be increased or extended (for example, due to refinancing, exchange rate fluctuations, additional mortgage situations). The DSSR 10-year period for POQ is cumulative and will not exceed the actual cost remaining at the time of application or reapplication for LQA (including any payments against the initial purchase price made prior to application) …
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 agency, however, 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. Agency implementing guidance in the AER 692-500.592 paragraph 11.e.(6) prescribes that LQA for POQ is limited to actual cost based on the employee’s “original purchase price” and “[t]he purchase price will not subsequently be increased or extended (for example, due to refinancing, exchange rate fluctuations, additional mortgage situations).”
The claimant signed a notary/purchase contract for the POQ on December 20, 2007, and the purchase price of the apartment on that contract is €390,000.00. However, the original loan contract was only for a 7-year period, so in January 2015, the claimant refinanced the balance (€295,165.30) of his original loan extending it for a duration of 17 years and 6 months, ending on June 30, 2032. Therefore, the claimant did not meet the additional LQA requirements imposed by the agency in its AER 690-500.592, paragraph 11.e.(6) because he refinanced the loan and so the agency is unable to account for the actual costs remaining on the POQ based on its original purchase price of (i.e., €390,000.00). The guidance in the AER 692-500.592 paragraph 11.e.(6) does not exceed the scope of the DSSR and is in direct accordance with the “actual costs” requirements in section 132.5. Thus, we find no reason to disturb the agency’s decision to deny the rental portion of the LQA for the POQ. Accordingly, the rental portion of the allowance is denied.
Furthermore, the agency states that the claimant’s request for the LQA for his POQ to be “grandfathered” under the 2005 version of the AER 690-500.592 since he purchased the POQ in December 2007 is misguided and inconsistent with its fiduciary responsibility, and responds as follows:
The agency is not suggesting that OHA [Overseas Housing Allowance] is the same as LQA; what the agency is suggestion is that employees such as [the claimant] who have already received an allowance, under either statue, to be used to defray expense for the very same quarters is problematic. In other words, [the claimant] not only takes issue with what he considered an obscure re-financing clause in the regulation, but by extension also with the agency’s policy that his military housing allowance he received for his current quarters essentially since February 2013 until September 2023, apart from a short interruption of three months in mid-2017, when he received LQA, should not be considered upon re-application of LQA for his POQ; however in doing so [the claimant] seems to fail to acknowledge that he seeks to be paid twice for the same reason, should the agency follow his request to be “grandfathered.”
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. See also OPM File Number 17-0015 dated February 20, 2018.
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 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). In this case, the claimant has failed to do so. 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.