People who rip off Uncle Sam pay the `conscience fund'

``My conscience hurts,'' wrote an ex-government worker who had absconded with some room dividers. His handwritten letter to the United States Treasury Department went on, ``I am extremely sorry for this rotten act. Enclosed is a $50 bill to cover the cost.''

``It was a brand new $50 bill,'' remembers Andy Montgomery, who works for the Financial Management Service, a branch of the Treasury that runs the little-known account called the ``conscience fund.''

The fund was officially authorized in 1950, but it has existed in an uncodified form since the days of President James Madison's administration in 1811. At that time, an anonymous citizen mailed the Treasury $5 along with a note saying he was sorry for defrauding the government. Since then, more than $55 million has gone into the Treasury's general account.

Whether these donors would ever be prosecuted if identified is open to question. Mr. Montgomery says his department is not in the business of prosecution. Furthermore, he believes most of today's donors do not deliberately set out to defraud the government. ``A person who takes an ashtray or makes a telephone call or something, they do it at the time and then regret it later,'' he says.

Montgomery keeps copies of the many handwritten letters that accompany the conscience fund donations. (He's never received a typewritten note.) Fund money is termed a donation because it is unsolicited by the government. In fact, as far as the government knows, the donor is still innocent.

Montgomery says that while he receives an occasional check or money order, most of the donations are cash. Sometimes donors pay in installments. One man has been sending $35 to the fund for the past two years because he said he can't afford a lump-sum reimbursement. He does not say why he sends money.

Since the fund was started, the single largest contribution is said to be $139,000. Last year $10,000 was donated to the fund by a lawyer on behalf of a client who had underpaid taxes.

Usually the donations are much smaller - between 22 cents for postage to a couple of hundred dollars, to cover duty fees, long-distance phone calls, or the taking of items, such as binoculars.

Montgomery says he receives more donations around holidays, Christmas or Easter, as well as around income tax time.

Internal Revenue Service spokesman Wilson Fadely says his department has no policy to investigate or to identify those who donate to the conscience fund. But Mr. Fadely says it is possible a donor could be prosecuted, just as a tax evader who files an amended return could be prosecuted.