Financial liability investigations for property loss (FLIPL) often occur during changes of command. When officers are about to take command, they are thrown into the confusing world of supply and the change of hand receipt process. In a perfect world, all runs smoothly; the outgoing hand receipt holder is present, all hand-receipted property is immaculate, and all sub-hand receipt holders are available.
This is rarely the case. When property is missing, it is the responsibility of staff judge advocates (SJAs) to brief financial liability officers (FLOs) on FLIPL law. This article provides SJAs the background requirements for briefing a FLO, what should be included as evidence in the FLO's investigation, and the underlying property principles SJAs need to know.
LEGAL BASICS
FLOs look for four elements in a FLIPL: responsibility, negligence, proximate cause, and loss. Negligence, arguably the most important, must be present before a hand receipt holder can be liable for property loss. FLOs submit the completed FLIPL to the JAG office, which performs a legal review to confirm or refute findings of all four elements. Hand receipt holders, FLOs, and JAGs can benefit from understanding what types of evidence supports the four elements of a FLIPL.
Most of the evidence compiled should either support or refute a finding of negligence, which takes two forms: simple and gross. Simple negligence is briefly defined as the absence of due care, and gross negligence is an extreme departure from due care. The combination of the command supply discipline program (CSDP) and the use of the Global Combat Support System-Army (GCSS-Army) can help to reduce both types of negligence.
SUPPLY BASICS
Before a FLIPL investigation begins, SJAs provide FLOs with a legal briefing. Responsibility and its differing types and applications must be presented in the briefing. The SJA also briefs the FLOs on the different types of property and how to identify the property on a hand receipt. SJAs should remember to brief FLOs on required inventories and how these inventories appear on component hand receipts.
The FLO should include evidence of who is responsible in the FLIPL process. These documents can take the form of relevant primary and sub-hand receipts. The primary hand receipt holder is usually the company commander. Sub-hand receipt holders are responsible for a portion of the commander's hand receipt. This responsibility is further delegable from sub-hand receipt holders to the end users.
Property often has components, which require component hand receipts for accountability. Copies of these hand receipts are available from the unit's supply section, property book office (PBO), or the primary, sub, and end-user hand receipt holders. FLOs should ask for hand receipts from the unit's supply section before reaching out to other parties.
Only property that is the subject of the FLIPL needs to have the respective serial number, national stock number (NSN), or other identifying number highlighted on a hand receipt. The FLO then properly marks all hand receipts as exhibits and includes them with the findings. The FLO must also include copies of all available counseling statements involving property accountability for personnel responsible for lost, missing, or damaged property.
TYPES OF RESPONSIBILITY
Both FLOs and SJAs need to understand the definitions of several different aspects of Army property, beginning with the types of responsibility. There are five types of responsibility used to determine who is responsible for the loss, destruction, or damage to government property: command, supervisory, direct, custodial, and personal.
1. Command responsibility obligates unit commanders to ensure the property in their command is properly used, cared for, and kept safe. Commanders cannot delegate command responsibility.
2. Supervisory responsibility obligates supervisors to ensure that property issued to subordinates is properly used and cared for. Supervisory responsibility arises through an assignment to a supervisory position and is not contingent on signed receipts or responsibility statements.
3. Direct responsibility obligates a person to ensure property they signed for is properly used, cared for, and kept safe.
4. Custodial responsibility obligates a person to ensure property in storage and awaiting issue or turn-in is cared for and kept safe. Custodial responsibility often results from a supply assignment.
5. Personal responsibility obligates a person to exercise reasonable actions to properly care for and keep safe property issued or acquired for a person's exclusive use. Personal responsibility always accompanies the physical possession of property.
These five types of responsibility explain who is responsible for what property on a hand receipt.
TYPES OF PROPERTY
In order to read a hand receipt, the FLO and SJA need to understand different types of property labeling. Accounting requirements codes (ARCs) label the type of property on a hand receipt and determine if there is liability attached to missing property.
Nonexpendable property includes all non-consumable major end items. Nonexpendable property has an ARC of "N."
Durable property is usually not on a commander's primary hand receipt and is often a component of an end item. Durable property may be part of a sets, kits and outfits (SKO) listing or a part of the NSN system. An example of durable property is hand tools. Durable property has an ARC of "D."
Expendable property loses its identity through its use. Expendable property requires accountability only if it is authorized by a modified table of organization and equipment or table of distribution and allowances. All other expendable property generally is considered as consumed in use. An example of consumed in use expendable property is masking tape. Conversely, all munitions require accountability on property book records. Expendable property has an ARC of "X."
IDENTIFYING PROPERTY
There are three primary ways to identify property on a hand receipt: by NSN, national item identification number (NIIN), and line item number (LIN). The FLO needs to understand these coding systems in order to identify missing property.
NSNs are 13-digit numbers for materiel and are listed in technical manuals (TM) and often on property data plates. NSN nomenclature contains the basic noun that describes the property and identifies the make, model, size, and related information to distinguish NSN item types with the same generic nomenclature. A NIIN is the last nine digits of an NSN.
A LIN is a six-character alphanumeric identification code for generic nomenclature and pertains to the listing line on which the generic nomenclature appears in bulletins and Army equipment authorization documents. LINs treat all NSN items possessing the functional capability expressed by the generic nomenclature collectively. For example, one LIN may cover all mechanics' tool kits, another heavy equipment transports, and a third M4 rifles. PBOs use LINs to identify equipment commanders will inventory during a cyclic inventory.
INVENTORY REQUIREMENTS
Commanders must conduct inventories for changes of command, changes of hand receipt holder, cyclic accountability, sensitive-item accountability, and when units conduct field exercises or deploy. Not conducting required inventories increases the likelihood of a finding of negligence due to poor accountability.
Change of command inventories occur when the incoming commander inventories all of the property on the primary hand receipt. During this process, the commander inventories every major end item on the primary hand receipt. All items on component hand receipts, including basic issue items (BII) and components of the end item (COEI), also are inventoried.
Change of hand receipt holder inventories often occur at the platoon and squad levels. The incoming platoon leader or noncommissioned officer (NCO) inventories all property signed down to them from the commander. The incoming sub-hand receipt holder is responsible for ensuring 100 percent accountability of all items, including BII and COEI.
Cyclic inventories occur on a monthly basis when elected by the command in place of the annual 100 percent inventory. Ten percent of the total property on the primary hand receipt is inventoried each month (except for two months). This type of inventory should trigger the update of component hand receipts.
Sensitive-item inventories are conducted every month by an NCO or officer. These inventories account for all equipment deemed sensitive on the hand receipt, which is normally everything contained in an arms room to include communications equipment.
Field exercise inventories should take place within 15 days of the end of an exercise. These inventories should also occur before and after deployments. This inventory should trigger component hand receipt updates.
SUB-HAND RECEIPT HOLDER COUNSELING
Counseling sub-hand receipt holders in writing reduces the possibility of sub-hand receipt holder negligence. Before sub-hand receipt holders sign for property, the commander needs to provide them with a written counseling. The expectations of the commander should be clear and provide guidance about CSDP, inventory procedures and basic supply accountability. This written counseling statement serves as a training aid by passing along best practices to junior leaders.
In addition to counseling sub-hand receipt holders, the unit commander should not sign primary hand receipts until all sub-hand receipt holders have signed their hand receipts. This ensures that all property is assigned and reduces the threats of liability and negligence.
INVENTORY BEST PRACTICES
The FLO briefing should include a background on how unit commanders conduct a proper inventory and the tools involved. Inventory-related documents include inventory schedules and component listings from relevant updated publications.
The FLO must include evidence that an inventory occurred properly or improperly. The FLO should obtain a copy of the change of command inventory schedule. The FLO must also obtain a copy of the relevant component listings for any lost, missing, or damaged equipment. However, the most important evidence the FLO must obtain is anything developed by the hand receipt holders during the inventory process. These documents include all relevant administrative adjustment reports and any photographic evidence.
INVENTORY SCHEDULES. Inventories are determined by an inventory schedule. Having an inventory schedule that is approved by the S-4 demonstrates the unit supply section's competence. At the company level, the executive officer and supply sergeant develop this schedule for primary hand receipts. As the unit's supply officer and NCO, they should know the property better than an incoming commander.
Inventory schedules must cover inventories of all property on every hand receipt and any property not currently on a hand receipt. The commander is usually responsible for at least two primary hand receipts: the unit property book and installation property book property. There may also be central issue facility, department of public works, or training and support center hand receipts.
UPDATED PUBLICATIONS. The supply section should have the most recent TMs and supply catalog publications on hand during the inventory. To find the most recent publications, the supply section looks at the primary hand receipt, obtains the relevant NSN, NIIN, or LIN for the property, and looks them up in GCSS-Army.
INVENTORY RECORDS. Recording every step in the inventory is an essential factor to reduce the possibility of negligence. The paper trail should start on day one of the inventory. Current and future hand receipt holders should bring a tape measure, digital camera, pen, and paper. Using a digital camera creates a photographic record of property, identifies features and serial numbers, and creates evidence that can help defeat a claim of negligence, provided the date-time stamp option is on.
All BII and COEI should be laid out according to its TM, supply catalog, or respective item listing. In the event there are similar end items, all component layouts occur simultaneously. Only inventories for items that can be physically touched occur; relying on the word of another person is not a legal defense to negligence.
The purpose of the pen and paper is to record notes about property. The serial number, date of inventory, and any issues must be recorded. This information is used to correct deficiencies through administrative adjustment reports that list the issues and deficiencies identified with property during an inventory.
GCSS-ARMY PROCEDURES
The FLO briefing must include information about property ordering, the receipt and distribution process, and a background on GCSS-Army.
The FLIPL packet must include copies of all relevant GCSS-Army and Department of the Army Form 2062s, Hand Receipt/Annex Numbers, and component hand receipts, regardless of whether or not they are correct and updated, with all relevant shortage annexes. These documents are available from primary and sub-hand receipt holders or through the unit supply section. All paperwork regarding the ordering, receipt, and distribution of property from GCSS-Army must also be included. Once property arrives, these hand receipts should be updated.
HAND RECEIPTS AND COMPONENT LISTINGS. A user accepts responsibility for an end item and its components by signing a component hand receipt. Filling in both GCSS-Army component listings and Department of the Army form 2062s occur at the time of inventory for all property with components. In order to avoid repeating the entire process, the Soldier who is going to receive the property from the commander should be present.
The reconciliation of inventoried property occurs at the end of each inventory day by the supply section, which uses a shortage annex created to capture all discrepancies. Once the inventory is complete, the supply section orders any missing equipment.
ORDERING PROPERTY. The documents created by the GCSS-Army ordering process can demonstrate a commander's compliance with the CSDP and subsequently help him to avoid being negligent.
Every primary, and many sub-hand receipts, have their own force element (FE) and storage location (SLOC) in GCSS-Army. Using the FE and SLOC, the supply section can order property for a specific component hand receipt and end item, ensuring that when the property arrives it goes to the right place.
Shortages must have orders against them as soon as possible. Putting property on order reduces the possibility of hand receipt holder negligence because GCSS-Army captures all reservation and purchase order information. Putting shortages on order and printing the proof provides the hand receipt holder with evidence of their compliance with CSDP.
UPDATING HAND RECEIPTS FOR RECEIVED PROPERTY. Upon receiving ordered materiel, the supply section posts a goods receipt. The hand receipt holder with the end item containing the shortage goes to the supply section to obtain the respective property. The supply section must maintain good receipts and proof that the sub-hand receipt or end user received the property. These documents show property coming into the unit and its respective assignment.
Updating component hand receipt listings occurs after assigning the property to the respective FE and SLOC. Updating component hand receipts upon receipt and issue of property shows the accountability of that property as a component of a major end item. Ordering all shortages and inventorying every major end item when the shortage arrives should ensure that nothing is missing at the next change of command.
The commander and supply section should maintain copies of all property-related actions in both their offices and residences and keep this documentation for at least two years after a change of hand receipt holder inventory.
THE FLO BRIEF CHECKLIST
Understanding supply procedures, the CSDP, and the inventory process makes the legal review easy. The presence of some of the aforementioned supply documents will significantly aid the SJA in determining if the FLO's findings are legally sufficient. The briefing from the SJA to the FLO covers the following:
Legal:
• Types of hand receipt holder responsibility.
• Types of negligence.
• What proximate cause is and how to find it.
• Loss.
Supply:
• An explanation of the types of property.
• How to identify property.
• The different types of hand receipts.
• When inventories are required and their outcomes.
• Property-related counseling statements.
• Inventory schedules and where to find them.
• Updated publications and where to find them.
• Inventory best practices.
• Component listings and updating.
• How property is ordered.
• The receipt and issue of property at the unit level.
• How and why the property books are updated.
For more information about property accountability, the unit S-4, G-4, and PBO can provide assistance. Army Regulation 735-5, Policies and Procedures for Property Accountability; Army Regulation 710-2, Supply Policy Below the National Level; and Department of the Army Pamphlet 710-2-1, Using Unit Supply System (Manual Procedures), are also good resources. The FLO's resource is Department of the Army Pamphlet 735-5, Property Accountability Procedures and Financial Liability Officer's Guide.
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Evan M. FitzGerald was a Quartermaster Officer and a platoon leader, support operations officer, and executive officer, assigned to the Regimental Support Squadron, 11th Armored Cavalry Regiment at Fort Irwin. He is now a practicing attorney and holds a J.D. from the University of Massachusetts School of Law, and an LL.M. in Transnational Law from Temple University.
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