Washington, D.C.

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

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Kimberly A. Steide, DPA
Principal Deputy Associate Director
Agency Compliance and Evaluation
Merit System Accountability and Compliance

07/02/2025

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Date

The claimant is a current Federal civilian employee of the U.S. Department of the Army (hereafter referred to as “agency” and “Army”), assigned to the 7th Army Training Command (7th ATC), International Military Training Division, in Grafenwoehr, Germany. He requests the U.S. Office of Personnel Management (OPM) reconsider his agency’s denial of living quarters allowance (LQA) for the original purchase price of his personally owned quarters (POQ). We received the claim on June 28, 2024, and the agency administrative report (AAR) on September 19, 2024. For the reasons discussed herein, the claim is denied.

The claimant is assigned to a Logistics Management Specialist, GS-0346-12, position with the 7th Army Training Command (7th ATC), International Military Training Division, in Grafenwoehr, Germany, effective January 1, 2023. Prior to his current appointment, the claimant previously held a position with the 7th ATC, effective November 30, 2006. At this time, the claimant was found ineligible to receive LQA. However, while still employed with the 7th ATC, the claimant and his spouse purchased a home in Grafenwoehr, Germany, on February 24, 2010. The original purchase price of the home amounted to €206,000. In March 2018, the claimant was reassigned to a stateside position with Army at Fort Belvoir, Virginia, then later was employed with the U.S. Department of the Navy, U.S. Marine Corps at Quantico, Virginia. In May 2020, the claimant returned to Europe to occupy a Program Manager, GS-0340-12, position with the European Command, Office of Defense Cooperation in Warsaw, Poland. While stationed in Warsaw, the claimant was found eligible to receive LQA as a U.S. hire under the provisions found in the Department of State Standardized Regulations (DSSR) section 031.11. As mentioned above, the claimant returned to Grafenwoehr, Germany with the 7th ATC in January 2023. At the time, he was eligible to receive LQA for his POQ purchased in February 2010. The claimant applied to receive LQA for POQ, with an intent to receive up to 10 percent of his POQs original purchase price as the annual rate of expense for rent. However, after reviewing the claimant’s financial documents, the agency determined that the LQA should only cover the actual expenses left on the purchase price of the home, which was approximately €63,000 (emphasis added). The agency, therefore, denied the claimant’s request to adjust his LQA payments to reflect the 10 percent of his POQ’s original purchase price, i.e., €206,000.

The DSSR sets forth basic eligibility criteria for the granting of LQA. The DSSR contains the governing regulations for allowances, differentials, and defraying of official residence expenses in foreign areas. Under DSSR section 031.11, LQA may be granted to employees recruited in the United States. It states in part:

Quarters allowances prescribed in Chapter 100 may be granted to employees who were recruited by the employing government agency in the United States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, and the possessions of the United States.

There is no dispute the claimant met section 031.11 of the DSSR at the time of his appointment. Thus, the claimant was eligible for LQA as a U.S. Hire. Therefore, the claimant requested and was granted full LQA (rental and utilities portion) for his POQ under DSSR section 136a, which states:

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. 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.

Although the claimant was eligible to receive LQA for his POQ, the claimant anticipated receiving LQA at an annual rate computed by using the original purchase price of his POQ. It is the claimant’s understanding that the agency should have determined his LQA for POQ annual rate by calculating 10 percent of the original purchase price, i.e., €206,000 as described above in DSSR section 136a, instead of the €63,000. However, the agency states that the claimant’s original purchase price is “immaterial” to the claimant’s current circumstance. Moreover, the agency states that it must consider the requirements outlined in DSSR section 132.5 Costs, which “stipulates that only actual expenses incurred by an employee may be reimbursed by LQA.” Specifically, the regulation 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.

In addition, Army in Europe Regulations (AER) 690-500.592, paragraph 11.e.(6), further 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), as discussed below.

Along with the previously mentioned regulations, the “LQA Allowable Cost” guidance dated May 23, 2016, 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. [italics added]

The agency makes its determination for LQA based on the actual costs remaining at the time of application or reapplication for LQA. The agency will consider any payments against the initial purchase price made prior to application. In the claimant’s case, there was no reapplication for LQA for his home purchased in February 2010. The claimant was determined ineligible to receive LQA as an employee with the 7th ATC at the time of the home’s purchase. The claimant’s request for LQA for POQ came as a result of a reassignment to the 7th ATC in January 2023. The agency states that the two assignments are unrelated and although the claimant was previously ineligible to receive LQA at the time of the home’s purchase, the agency cannot use the original purchase price to make an LQA determination. To do so would require that the agency ignore the payments that were already made against the purchase, which is not permitted in regulation. Therefore, the agency is reducing the LQA allowance to the actual costs the claimant still incurs residing in his POQ and as a Federal civilian employee who is eligible to receive LQA.
Within the scope of DSSR regulations, 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. 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.

Within the scope of the DSSR, an agency may, as done here, issue further implementing instructions for the guidance of its agency with regard to the granting of and accounting for LQA payments. As LQA is a discretionary allowance, agency implementing regulations and/or policies may be more restrictive, but not more permissive, than the DSSR; i.e., they may impose additional limitations on the granting of LQA. Thus, OPM applies agency-developed policies to the extent such guidance agrees with the DSSR. In this case, the agency has not violated its authority in implementing further restrictions concerning the grant of LQA. We find no reason to disturb its decision to deny the claimant’s request based on provisions of paragraph 11.e.(6), of the AER 690-500.592, section 132.5 of the DSSR, and paragraph 1.b.(4)(a) of the “LQA Allowable Cost” guidance dated May 23, 2016.

Furthermore, the Department of Defense Instruction 1400.25 V1250 specifies that overseas allowances are not automatic salary supplements, nor are they entitlements. The statutory and regulatory languages are permissive and give agency heads considerable discretion in determining whether to grant LQA to agency employees. Thus, an agency may withhold LQA payments 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 section 178.105 of title 5, Code of Federal Regulations, 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 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 agency’s decision. Accordingly, the claim for LQA using the original purchase price of the POQ (i.e., €206,000 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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