08-30 726

Citation Nr: 1008492
Decision Date: 03/08/10 Archive Date: 03/17/10

DOCKET NO. 08-30 726 ) DATE
)
)

On appeal from the
Department of Veterans Affairs Regional Office in Atlanta,
Georgia

THE ISSUE

Whether a debt resulting from the overpayment of compensation
benefits in the original calculated amount of $363 was
properly created.

REPRESENTATION

Appellant represented by: Georgia Department of Veterans
Services

ATTORNEY FOR THE BOARD

Paul S. Rubin, Counsel

INTRODUCTION

The Veteran served on active duty from September 1965 to
September 1985.

This matter comes before the Board of Veterans' Appeals
(Board) on appeal from an October 2006 decision by the
Department of Veterans Affairs (VA) Regional Office (RO) in
Atlanta, Georgia.

FINDINGS OF FACT

1. The Veteran has been charged with an overpayment of VA
compensation of $363, representing the excessive amount he
received in compensation benefits for the time period between
December 1, 2005 and October 31, 2006.

2. The overpayment of $363 was solely the result of VA
administrative error; the Veteran's actions nor his failure
to act did not contribute to the creation of the debt.

CONCLUSION OF LAW

The overpayment of compensation benefits in the amount of
$363 was based solely upon VA administrative error, such that
the debt was not valid and the overpayment was not properly
created. 38 U.S.C.A. §§ 1114 (a), 5112, 5302, 5313 (West
2002 & Supp. 2009); 38 C.F.R. §§ 1.911(c)(1), 1.956, 1.962,
3.500, 3.665 (2009).

REASONS AND BASES FOR FINDINGS AND CONCLUSION

The Duties to Notify and Assist

The Veterans Claims Assistance Act of 2000 (VCAA), codified
at 38 U.S.C.A. §§ 5100, 5102-5103A, 5106, 5107, 5126 (West
2002 & Supp. 2009), imposes obligations on VA in terms of its
duties to notify and assist claimants. But the VCAA is not
applicable to claims for waiver of recovery of overpayment.
Barger v. Principi, 16 Vet. App. 132, 138 (2002). See also
Lueras v. Principi, 18 Vet. App. 435 (2004) (the VCAA does
not apply to a waiver). Thus, any discussion as to VCAA
compliance is not required. In any event, since the Board is
granting the claim, there is no need to discuss in detail
whether there has been compliance with the notice and duty to
assist provisions of the VCAA because even if, for the sake
of argument, there has not been, this is inconsequential and,
therefore, at most harmless error. See 38 C.F.R. § 20.1102.

Governing Law and Regulations for Validity of the Debt

An overpayment is created when VA determines that a
beneficiary or payee has received monetary benefits to which
he or she is not entitled. See 38 U.S.C.A. § 5302; 38 C.F.R.
§ 1.962. An overpayment may arise from virtually any
benefits program administered pursuant to VA law, including
pension, compensation, dependency and indemnity compensation
(DIC), educational assistance benefits and subsistence
allowance, insurance benefits, burial and plot allowances,
clothing allowance, and automobile or other conveyance and
adaptive equipment allowances. 38 C.F.R. § 1.956(a).

"Compensation" means a monthly payment made by VA to a
Veteran because of service-connected disability, or to a
surviving spouse, child, or parent of a Veteran because of
the service-connected death of the Veteran. 38 U.S.C.A. §
101(13) (West 2002); 38 C.F.R. § 3.4 (2009).

A Veteran who is incarcerated in a federal, state, or local
penal institution in excess of 60 days for conviction of a
felony committed after October 7, 1980, and who has a
combined rating of 20 percent or more shall receive the rate
of compensation of 10 percent payable beginning on the 61st
day of incarceration. All or part of the compensation not
paid to the Veteran may be apportioned to the Veteran's
spouse, child, or children on the basis of individual need.
38 U.S.C.A. § 1114 (a), 5313 (West 2002 & Supp. 2009); 38
C.F.R. § 3.665 (2009). In short, these provisions create a
limitation on payment of compensation to persons incarcerated
for conviction of a felony. However, in such instances, VA
must notify the Veteran that his benefits are subject to
reduction due to his incarceration, of the rights of
dependents to an apportionment while the person is
incarcerated, and conditions under which payments to the
person may be resumed upon release from incarceration. 38
C.F.R. § 3.665(a).

The preliminary issue of the validity of a debt is a
threshold determination that must be made prior to a decision
on a request for waiver of the indebtedness. See Schaper v.
Derwinski, 1 Vet. App. 430 (1991). A debtor may dispute the
amount or existence of a debt, which is a right that may be
exercised separately from a request for waiver or at the same
time. See 38 C.F.R. § 1.911(c)(1) (2008); see also
VAOPGCPREC 6-98. The propriety and amount of the overpayment
at issue are matters that are integral to a waiver
determination. See Schaper, 1 Vet. App. at 434.

In order for the Board to determine that the overpayment was
not properly created, such that the debt was not valid, it
must be established that the appellant was legally entitled
to the benefits in question or, if the appellant was not
legally entitled, then it must be shown that VA was solely
responsible for the appellant being erroneously paid
benefits. Administrative errors include all administrative
decisions of entitlement, whether based upon mistake of fact,
misunderstanding of controlling regulations or instructions,
or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55
Fed. Reg. 27757 (1990). Sole administrative error connotes
that the appellant neither had knowledge of nor should have
been aware of the erroneous award. Further, neither the
appellant's actions nor his or her failure to act must have
contributed to payment pursuant to the erroneous award. 38
U.S.C.A. § 5112(b) (9), (10) (West 2002 & Supp. 2009); 38
C.F.R. § 3.500(b)(2) (2009); Jordan v. Brown, 10 Vet. App.
171 (1997) (sole administrative error is not present if the
payee knew, or should have known, that the payments were
erroneous). Thus, a finding of sole administrative error
requires not only error on the part of VA, but that the
beneficiary is unaware that the payments are erroneous.

The United States Court of Appeals for Veterans Claims
(Veterans Court) noted that, "[s]tated another way, when an
overpayment has been made by reason of an erroneous award
based solely on administrative error, the reduction of that
award cannot be made retroactive to form an overpayment debt
owed to VA from the recipient of the erroneous award."
Erickson v. West, 13 Vet. App. 495, 499 (2000).
In other words, if a debt is the result solely of
administrative error, the effective date of the reduction of
benefits is the date of the last payment based on this error
and, consequently, there would be no overpayment charged to
the Veteran for an overpayment attributable to administrative
error. 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. § 3.500(b).

Analysis

Effective May 19, 2004, the Veteran was in receipt of 60
percent disability compensation for his service-connected
disabilities. But in an April 5, 2005 statement, the Veteran
advised that the VA should stop his entitlement to
compensation due to his incarceration for a March 30, 2005
conviction of a felony. The VA interpreted the conviction to
mean that his incarceration began on March 30, 2005, such
that a reduction in compensation benefits was made effective
May 30, 2005 (the 61st day of his incarceration). In a July
2005 decision, his spouse was granted apportionment of
benefits effective May 30, 2005. Subsequently, however, in
an August 2008 Report of Contact, the Georgia Men's State
Prison indicated that the Veteran's incarceration actually
began on May 12, 2005, as opposed to March 30, 2005.
Therefore, the reduction of benefits should have been made
effective 61 days later on July 11, 2005, instead of May 30,
2005. The VA concluded in the September 2008 Statement of
the Case (SOC) that withholding for the Veteran's
incarceration began too early.

In any event, the $363 debt on appeal does not arise out of
the amount of compensation benefits withheld due to confusion
regarding his correct incarceration date. Rather, it arises
out of the latter payment of reduced compensation benefits
from December 1, 2005 to October 31, 2006. In this regard,
due to his incarceration, the VA initially paid the Veteran
reduced compensation benefits in the amount of $108 a month
starting on May 30, 2005. But due to a legislative change,
the Veteran's monthly compensation benefits were increased to
$145 a month from December 1, 2005 to October 31, 2006, for a
total of $1,595. However, the VA determined that Veteran's
monthly compensation benefits should only have been increased
to $112 a month from December 1, 2005 to October 31, 2006,
for a total of $1,232. See December 2008 written paid and
due audit. In short, beginning December 1, 2005, the Veteran
was incorrectly paid compensation benefits of $145 a month
instead of $112 a month due to his incarceration. As such,
this left an overpayment amount of $363 ($1,595 minus $1,232)
for the time period between December 1, 2005 to October 31,
2006.

In a November 2006 Debt Management Center (DMC) letter to the
Veteran, he was notified of the amount of this overpayment
($363). The VA noted that it planned to recoup this
overpayment by withholding compensation benefits beginning in
February 2007.

The Veteran has not disagreed with the amount of the
overpayment - $363, which was confirmed by the December 2008
written paid and due audit. However, he has challenged the
validity of the debt, which is a creation issue. He argues
that it is not his fault VA paid him $145 a month instead of
$112 a month from December 1, 2005 to October 31, 2006. He
believes it is not fair that VA informed him of the
overpayment in an October 2006 decision, 10 months after VA
commenced with the improper payments. He also added that
recoupment of the overpayment by VA would add to the
tremendous strain he and his spouse have had to endure
because of his incarceration. In essence, the Veteran is
asserting that the overpayment was the result of sole
administrative error by VA and is therefore invalid. See
October 2008 statement. If it is determined that any or all
of the overpayment at issue was improperly created, award
action should be taken to rectify the error.

It is clear from the evidence of record that the Veteran was
not legally entitled to the benefits in question of $145 a
month. That is, effective December 1, 2005, due to periodic
legislative changes, the Veteran was instead entitled to
benefits of $112 a month, which is the 10 percent rate of
compensation payable for incarcerated Veterans under 38
U.S.C.A. § 1114(a) (West 2002 & Supp. 2006). See also 38
C.F.R. § 3.665(a), (d) (2006). In view of this statute and
regulation, the Veteran was not legally entitled to receive
compensation benefits of $145 a month from December 1, 2005
to October 31, 2006. Yet, the VA still awarded the Veteran
this improper amount during this time period. Since the
Veteran had no legal entitlement to compensation benefits of
$145 a month from December 1, 2005 to October 31, 2006, then
in order to substantiate the Veteran's claim that the
overpayment was not properly created, it must be demonstrated
that VA was solely responsible for the Veteran being
erroneously paid such benefits.

Upon review of the evidence of record, the Board finds that
the overpayment was created solely as a result of VA
administrative error and it cannot, therefore, be held to
have been properly created. As early as July 2006, the VA
sent the Veteran a letter advising that his rate of
compensation should be $112 a month from December 1, 2005.
Yet, the VA continued to make erroneous payments of $145 a
month. In fact, in the September 2008 SOC, the VA noted that
the award of $145 a month was the result of an incorrect
"manual change" by a VA employee. As such, this
overpayment was the result of VA administrative error. In
order for the overpayment to be considered the result of sole
administrative error, and for the Veteran to consequently not
be liable for the debt, the Veteran must not have known, or
should have known, that the payments were erroneous. In this
regard, the Veteran was informed by VA of the overpayment in
an October 2006 decision, 10 months after the VA began to
make the improper payments. The Veteran is not responsible
for keeping up to date with VA's various periodic legislative
changes pertaining to payment amounts. The Veteran clearly
was unaware that the payments of $145 a month were erroneous.
In fact, he did not receive any formal notice of the
overpayment from the VA until October 2006, subsequent to all
payments being made.

The evidence of record does not demonstrate that the Veteran
had knowledge that he was receiving benefits to which he was
not entitled or that he otherwise acted or failed to act in
such a way as to perpetuate the error. Accordingly, the
Board finds that the overpayment was solely the result of VA
administrative error, and that the debt in the amount of $363
therefore was not properly created and cannot legally be
charged to the Veteran. Erickson v. West, 13 Vet. App. 495
(2000) (holding that when an overpayment has been made by
reason of an erroneous award based solely on administrative
error, the reduction of that award cannot be made retroactive
to form an overpayment debt owed to VA from the recipient of
the erroneous award).

In view of the finding that the overpayment resulted solely
as a result of VA administrative error, the Board finds that
the RO's decision to attempt to recover the $363 was improper
and that the debt is not a valid debt to VA. 38 U.S.C.A.
§ 5112(b) (9), (10) (West 2002 & Supp. 2009); 38 C.F.R. §
3.500(b)(2) (2009); Jordan v. Brown, 10 Vet. App. 171 (1997).

The Board acknowledges that in a November 2006 DMC letter to
the Veteran, the VA noted that it planned to recoup the $363
overpayment by withholding benefits beginning in February
2007. If that is the case, it is feasible that some of the
overpayment debt may have already been recovered by VA.
However, in accordance with Franklin v. Brown, 5 Vet. App.
190, 193 (1993), the Board will consider waiver of the entire
overpayment. Since the Board has determined that the
overpayment was not properly created and that the debt was
not valid, any amount already recouped by VA will be returned
to the claimant. See Franklin, supra.

On a final note, the Board sees that in the September 2008
SOC, the RO briefly addressed the separate issue of the
validity of the debt for compensation benefits improperly
withheld from May 30, 2005 to July 11, 2005 due to confusion
regarding the Veteran's actual incarceration date. This
issue was referred for possible readjudication to reflect the
correct date of incarceration, and apportionment of benefits
to the Veteran's spouse. However, in a January 2009
administrative decision, the RO determined that from May 30,
2005 to July 11, 2005, the overpayment of apportionment
benefits of $1,105.63 to the Veteran's spouse was due to VA
administrative error in the miscalculation of the Veteran's
incarceration date. Therefore, the apportionment award of
the Veteran's spouse was not reduced for the time period from
May 30, 2005 to July 11, 2005. The RO also noted that the
Veteran's compensation benefits had been favorably changed to
reflect withholdings beginning his 61st day of incarceration
- July 11, 2005. In summary, these particular validity
issues related to the Veteran's incarceration date have
already been resolved in the Veteran and his spouse's favor.
They are not before the Board at this time.

ORDER

The overpayment in compensation benefits of $363 was not
properly created and is not a valid debt, such that the
Veteran's recovery of that sum is granted.

____________________________________________
A. BRYANT
Veterans Law Judge, Board of Veterans' Appeals

Department of Veterans Affairs