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The Federal Court of Accounts recently issued Normative Instruction No. 76 of 11/23/2016, published in the official gazette on 12/12/2016, amending Normative Instruction No. 71 of 11/28/2012, which provides for the initiation, organization and submission of Special Accounts Review proceedings before the Federal Court of Accounts.

The Special Accounts Review (“TCE”), as established in article 2 of IN 71/2012, is “a duly formalized administrative proceeding, with its own procedure, to determine liability for damage to the federal public administration, with the investigation of facts, quantification of the damage, identification of those responsible and obtaining the respective reimbursement”.

It is therefore a specific procedure for holding agents liable, whether individuals or legal entities, on whom an obligation to reimburse the public treasury or administrative sanctions have been imposed in an audit carried out by the TCU, resembling in many respects the enforcement phase of a lawsuit, although the obligation itself is not satisfied before the Court of Accounts, but through a lawsuit filed for that purpose.

In addition to the changes made to IN No. 72/2012, on 11/23/2016 the TCU also issued Normative Decision No. 155, regulating some of its provisions, with the aim of detailing documents, providing guidance on administrative measures, establishing priorities and procedures for setting up and processing special accounts review proceedings electronically, and also setting the format for submitting special accounts reviews initiated because the sum of debts owed by the same responsible party has reached the threshold for waiver.

See below the main changes made to the normative instruction and their consequences for managers and others under the Court’s jurisdiction:

• Administrative authorities or internal control bodies are now required to report serious irregularities or illegalities to the TCU, even when they do not result in damage to the public treasury (article 3, sole paragraph). Accordingly, even without any connection to the act itself, authorities may be held liable for their omission or connivance with unlawful acts subject to oversight by the Court of Accounts.

• A period of 180 (one hundred and eighty) days was established for initiating the TCE, counted: (i) in the case of failure to render accounts, from the first day following the deadline; (ii) in the case of insufficient accounts, from the deadline for their analysis; and (iii) in other cases, from the date of the illegitimate/uneconomical event, when known, or from when the administration became aware of it (article 4, §1). This gives greater certainty as to the period the TCU will consider appropriate for taking action, since the rule, before the amendment, stated that the competent authority should “immediately” initiate a special accounts review, without setting a specific deadline.

• Where payment in installments of the debt that would be the subject of the TCE is authorized, the period for initiating it will be suspended until the debt is paid off or until it matures early (if payments are interrupted – article 4, §2). This is a mechanism of procedural economy, since immediate payment of the debt removes the need to initiate a TCE, whose purpose is precisely to enable reimbursement to the public treasury or the conviction of those responsible.

• Regardless of whether the bodies and entities concerned take steps to determine liability, the TCU may initiate a TCE to hold parties liable for the facts determined (article 4, §4) and, if the authorized bodies take no action, the Court may fine the responsible authorities (article 4, §5). Once again, the Court reinforces the need for competent authorities to act to prevent or punish acts contrary to legality.

• The prerequisites for initiating a TCE have been substantially changed; it is now sufficient for there to be factual and legal elements indicating a failure to render accounts or damage or evidence of damage to the public treasury (article 5, caput). Previously, proof of damage and identification of those responsible were essential, so that the TCE served only to quantify the damage and hold the agents involved liable. With this change, there is a strong tendency for the TCE to be used as yet another procedural phase, very similar to the prior audit process itself, doing nothing to speed up proceedings before the Court, which already take an excessively long time.

• When initiating a TCE, it is now mandatory to identify the agents, the unlawful situation, the examination of the adequacy of the information contained in public officials’ opinions regarding the identification and quantification of the damage or evidence of damage, and the causal link between the act investigated and the agent’s conduct (article 5, sole paragraph). This information, as can be inferred from the provision, should make clearer the reasons for initiating this type of proceeding and the parties possibly involved in the act under investigation.

• The thresholds allowing a TCE to be waived were raised from BRL 75,000.00 (seventy-five thousand reais) to BRL 100,000.00 (one hundred thousand reais), which does not mean that the administrative authority should refrain from taking other measures, such as filing a lawsuit to recover the amounts owed to the public treasury (article 6).

• Monetary adjustment and default interest on the amount of the debt are now calculated from the following dates: (i) in the case of failure to render accounts or irregular accounts, from the date the funds were credited or transferred; (ii) in the case of funds invested in the financial market, from the date of payment; and (iii) in other cases, from the date of the event or of the administration becoming aware of it (article 9). The starting date for counting has thus become clearer, replacing the previous starting point — the date the damage occurred — which was not always easy to establish.

• The deadline for submitting the special accounts review to the TCU is now 180 (one hundred and eighty) days from its initiation, rather than from the end of the fiscal year in which it was initiated (article 11), and the TCU may return the proceeding to internal control if it is not properly prepared, in which case it must be resubmitted to the Court within sixty days (article 13).

• The official means of submitting the special accounts review to the TCU is electronic, unless this is duly justified as impossible (article 14), in line with the trend of modernizing the Public Administration through the adoption of digital mechanisms and processes.

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