CHAPTER 21. WAIVER OF DEBTS

21.01 WAIVER OF BENEFIT DEBTS

a. General. Title 38 U.S.C. 5302, authorizes the waiver of debts arising as a result of participation in a benefit or home loan program administered by VA. The standards for waiver are defined in 38 CFR 1.965. Debts that can be waived are compensation, pension, and education benefit debts, education loan default debts, workstudy overpayments, home loan debts, and debts created as the result of VA hospitalization, domiciliary care, or treatment of a veteran either furnished in error or on a tentative eligibility basis. NOTE: Debts arising from medical services furnished solely on an emergency or humanitarian basis, per diem charges, or Category C debts cannot be considered for waiver; however, they can be considered for compromise. Waiver authority is delegated by the Secretary to VBA field station Committees on Waivers and Compromises (COWC's).

b. Collection Letters. Form letters in the FL 4400 series and certain computergenerated letters advise debtors of their right to waiver and of the opportunity to request an oral hearing on the issue of waiver before the COWC makes a decision.

c. Amount To Be Considered for Waiver. If a request for waiver is made within the statutory time limit set forth in 38 CFR 1.963 and 1.964, the entire amount of the indebtedness will be considered for waiver even though all or a portion of that indebtedness may have already been recouped prior to the request. This also includes any retroactive payments withheld from an award made for a period outside the overpayment period. However, benefits are not to be withheld until the debtor has been given the opportunity to request, within 30 days of the initial notice of indebtedness, both a waiver and a hearing, as well as certain other administrative remedies, and VA has made an initial decision on such requests. Amounts recouped will be refunded if the waiver is eventually granted.

d. When to Refer Debt for Waiver to COWC. A request for waiver of an indebtedness should be referred to the COWC when the debtor or his/her representative requests waiver, or when in the opinion of the Chief of the Fiscal activity the circumstances warrant such referral.

e. Referral Documentation. Referral to the COWC will be made on the VA Form 41042, Referral of Indebtedness to Committee on Waivers and Compromises, (original copy only). Supporting documents that will assist the COWC in arriving at their decision will be attached to the VA Form 41042, including the debtor's request for waiver. The referral should include some evidence of the debtor's financial circumstances, preferably a complete the VA Form 45655, or a current credit report or verification of employment, when necessary. If the debtor fails to submit financial data within 20 days after receipt of the waiver request, the case will be considered by the COWC on the basis of available financial data at the station.

f. COWC Decision. The COWC will forward the signed decision to the Chief of the Fiscal activity who will notify the debtor or representative, by use of VA FL 4326, of the denial of waiver or granting of a waiver, in part or in full. If the COWC grants a waiver on a debt maintained in CARS, the Chief of the Fiscal activity will notify the DMC of the waiver and provide a copy of the COWC decision. If the COWC grants a waiver on a debt maintained at the field station, the Chief of the Fiscal activity will notify the debtor of the waiver by use of VA FL 4437.

g. Notice of Disagreement. If the debtor files a notice of disagreement with the waiver denial and indicates an intention to appeal, the notice will be referred to the COWC with the decision denying the request for waiver. The accounts receivable record should be annotated with the referred action and diaried for followup with the COWC within 90 to 120 days.

h. Offset of Benefits.

(1) If the debtor is in receipt of benefits and requests waiver within 30 days of the initial notice of indebtedness, collection by offset of benefits will be initiated upon the COWC's initial decision to deny waiver and will continue even if the debtor files a notice of disagreement and there is a subsequent BVA review. If the COWC or BVA overturns the initial COWC decision, a prompt refund of benefits withheld will be made.

(2) If the debtor is not in receipt of benefits, the Chief of the Fiscal activity will insure that collection letters are deferred when a notice of disagreement is received. Collection letters will be resumed only when the Fiscal activity is advised that the BVA has denied the waiver sought under appeal, or that the debtor has withdrawn or has failed to complete the appeal. The initial letter after the appeal is completed should continue the demands for payment.

i. Debts Previously Referred for Enforced Collection. If a debt has been referred for enforced collection and a request for waiver or an appeal of a waiver denial is received timely, the Fiscal activity will immediately notify the appropriate office (GAO, DOJ, or DC) of the receipt of the request.

j. Entitlement Charging

(1) When an education debt is written off because of waiver, entitlement is charged equivalent to the amount written off. To restore the entitlement charged as a result of the waiver, the debt must be paid in full.

(2) Basic loan guaranty entitlement is reduced by the amount of entitlement used to obtain a direct, guaranteed or insured housing loan. If the loan is defaulted and VA incurs a loss, the loss must be paid in full to restore previously used entitlement.

21.02 WAIVER OF ERRONEOUS PAYMENTS TO EMPLOYEES (PAYROLL & OTHER)

a. General. Title 5 U.S.C. Section 5584 authorizes the waiver of erroneous payments of pay or allowances as well as travel, transportation, and relocation expense debts. Such waiver requests will be considered by a COWC in accordance with 4 CFR Parts 1 and 2; 38 CFR 1.963a; and MP4, part I, chapter 8, paragraph 8A.17.

b. Responsibility of the Chief of the Fiscal Activity.

(1) Application for waiver is processed by the Chief of the Fiscal activity of the station where the employee is currently employed and must be received within 3 years immediately following the date on which the debt was discovered. Requests for waiver by former VA employees are processed by VA station where the person was last employed. The Chief of the Fiscal activity may initiate waiver when the facts and circumstances warrant waiver consideration.

(2) A report of investigation on all debts (see exception in para d below) that are considered for waiver is to be prepared for the signature of the station director by the Chief of the Fiscal activity where the person is employed and sent to the COWC of jurisdiction as part of the waiver referral package. Reports prepared by VACO Finance Center will be signed by the Associate Deputy Assistant Secretary for Financial Operations (047F). If all or part of the debt was paid to the employee by another VA station, the necessary information will be obtained from that station to permit full development of the facts. The report will include:

(a) A statement of the aggregate (gross) amount of the debt.

(b) A citation of inclusive dates of each pay period in which erroneous payment was made and the amount of the debt applicable to each pay period.

(c) The appropriation or fund from which erroneous payment was made, and, if more than one appropriation or fund is involved, the amount applicable to each.

(d) A detailed statement describing the circumstances under which the erroneous payment was made or the travel debt occurred.

(e) The date the debt was discovered at the facility and the date of the initial demand letter to the employee.

(f) A statement as to whether or not the erroneous payment is the subject of an exception made by the Comptroller General of the United States.

(g) A statement as to whether there is any indication of fraud, misrepresentation, fault, or lack of good faith on the part of the employee or any other person having an interest in obtaining a waiver of the debt.

(h) Any other factual information, such as personnel action forms, earnings and leave statements, indoctrination or other instructions indicating knowledge on the part of the employee concerning the possibility of having received an erroneous payment of pay and allowances. As a minimum, include copies of SF 50B, Notification of Personnel Action, appropriate VA Forms 45632, Earnings and Leave Statement, and any other forms or documents which establish or have a bearing on the employee's pay entitlement.

(i) A statement regarding what corrective action has been or will be taken to prevent similar erroneous payments in the future.

(j) A recommendation with respect to waiver of the debt.

(k) A statement from the employee with respect to any knowledge of the erroneous payment he/she may have had at the time of its occurrence and any corrective action taken if an error was suspected.

(3) A full report of investigation will not be prepared for cases involving amounts of $25 or less where there is no indication in the record of fraud, misrepresentation, fault, or lack of good faith on the part of the employee or any other person having an interest in obtaining a waiver of the debt. A statement to this effect will be sent with the waiver referral package to the COWC.

(4) The field station COWC has complete authority to either grant or deny waiver for debts not in excess of $1500, exclusive of interest, administrative costs, penalties, and other charges. The COWC can only deny waiver on debts in excess of $1500, since GAO has exclusive authority to grant waivers for debts in excess of this amount. The COWC may, however, recommend waiver of those debts that exceed $1500 when denial is not appropriate. The recommendation, along with the waiver request, the report of investigation, and all other pertinent information, will be forwarded by the Chief of the Fiscal activity responsible for collecting the debt to either the Payroll Policy Division (047G3) if the waiver request involves an erroneous payment of pay or allowances, or to the Debt Management Policy Division (047G7) if the request involves travel, transportation, or relocation expenses. The requests will then be submitted to GAO by VACO (047).

(5) Notifications relating to decisions rendered by the COWC will be sent by the Chief of the Fiscal activity responsible for collecting the debt. If the COWC denies the request for waiver, the Chief of the Fiscal activity must advise the employee of the right to appeal the denial to GAO, regardless of the amount of the debt. The employee must be advised that such an appeal should be submitted to the Chief of the Fiscal activity. Upon receipt of an appeal, the Chief of the Fiscal activity will incorporate it with the COWC decision, report of investigation, and other pertinent information, and submit the package to either VACO (047G3) or (047G7), as appropriate, for referral to GAO. Decisions rendered by the GAO on requests for waiver or appeals will be sent by VACO (047) to the Chief of the Fiscal activity who submitted the waiver request.

(6) An application for refund of amount waived where the debt has been repaid in whole or in part must be made to VA no later than 2 years following the date of the waiver decision. The refund will be made by the station where the employee is currently employed. Refunds to former VA employees will be made by the separating station. The refund shall be charged to the appropriation from which the erroneous payment was made. The COWC of jurisdiction shall be notified of the date and amount of refund. The Payroll Policy Division (047G3) shall be notified of refunds made as a result of GAO waiver action.

(7) Erroneous payment of travel, relocation expenses, or pay or allowances debts will not be referred for litigation until a debtor has exhausted their appeal rights, unless the time remaining for suit within the applicable statute of limitations does not permit such waiver consideration prior to referral.