Citation Nr: 1330762 Decision Date: 09/25/13 Archive Date: 09/30/13 DOCKET NO. 10-09 131 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Milwaukee, Wisconsin THE ISSUE Entitlement to waiver of recovery of an overpayment of additional Department of Veterans Affairs disability compensation for a spouse in the calculated amount of $2,691, to include whether the overpayment was properly created. REPRESENTATION Veteran represented by: Disabled American Veterans ATTORNEY FOR THE BOARD Debbie A. Breitbeil, Counsel INTRODUCTION The Veteran, who is the appellant, served on active duty from June 1967 to February 1970 and from February 1975 to January 1976. This matter is before the Board of Veterans' Appeals (Board) on appeal of a determination in December 2009 of a Committee on Waivers and Compromises of the Milwaukee, Wisconsin Regional Office (RO) Department of Veterans Affairs (VA). FINDINGS OF FACT 1. By letters in July 1998, June 2007, December 2007, and December 2008 (re-sent in March 2009), the RO informed the Veteran that his compensation award included additional benefits for his spouse and that he must notify the RO immediately if there was any change in the number or status of his dependents. 2. In July 2009, the Veteran reported to the RO on a status of dependents form that his first wife had died in July 2007 and that he had married his current wife in June 2009. 3. By letter in September 2009, the RO retroactively reduced the Veteran's compensation award, effective on August 1, 2007, due to the removal of his first wife on the last day of the month in which her death had occurred; the Veteran was informed that an overpayment in his account had been created. 4. By letter in October 2009, the RO awarded the Veteran additional compensation benefits on account of his new wife added to his award, effective July 1, 2009. 5. By letter in October 2009, VA's Debt Management Center notified the Veteran of a $2,691 overpayment in his account. 6. In a December 2009 decision, the RO's Committee on Waivers and Compromises denied the Veteran's claim for a waiver of recovery of the overpayment; the Committee considered the period of the overpayment was from August 1, 2007 through September 2009. 7. For the period of August 2007 through June 2009, the Veteran was paid additional VA disability compensation for a spouse in the amount of $2,391, when he should have been paid $0, resulting in a $2,391 overpayment, because he was not married during that period. 8. Recovery of the overpayment of $2,391 is not against equity and good conscience. CONCLUSION OF LAW The overpayment of additional VA disability compensation for a spouse in the originally calculated amount of $2,691 was not proper, as the overpayment period terminated at the end of June 2009 and not September 2009; the properly created overpayment is in the amount of $2,391, and the Veteran is not entitled to waiver of recovery of that overpayment. 38 U.S.C.A. §§ 5302, 5313 (West 2002); 38 C.F.R. §§ 1.963, 1.965 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veterans Claims Assistance Act of 2000 (VCAA) The VCAA, codified in part at 38 U.S.C.A. §§ 5103, 5103A, and implemented in part at 38 C.F.R § 3.159, amended VA's duties to notify and to assist a claimant in developing information and evidence necessary to substantiate the claim. The VCAA duties to notify and to assist do not apply to the claim of waiver recovery of an overpayment of VA disability compensation. See Barger v. Principi, 16 Vet. App. 132, 138 (2002). In any event, it is noted that the Veteran had notification of the decision of the RO's Committee on Waivers and Compromises, dated in December 2009, setting forth the general requirements of applicable law pertaining to a claim for waiver of recovery of an overpayment, and was advised as to the nature of the evidence necessary to substantiate his claim. In its decision, the RO's Committee on Waivers and Compromises also informed the Veteran of the reasons that his claim was denied and the evidence it had considered in denying the claim. The general advisements were reiterated in the statement of the case issued in February 2010, which also provided the Veteran opportunity to identify or submit any evidence he wished to be considered in connection with his appeal. In short, the Veteran has been notified of the information or evidence necessary to substantiate his claim and the parties responsible for obtaining that evidence. Further, VA has made reasonable efforts to assist the Veteran in obtaining evidence for his claim. For example, VA has requested the Veteran to furnish evidence pertaining to his financial status, and he responded with information dated in October 2009 and December 2009. Additionally, the VA has provided the Veteran with the opportunity for a hearing but he declined a hearing. The Board is unaware of any additional evidence which is available in connection with this appeal. Factual Background A review of the record shows that the Veteran had been in receipt of VA disability compensation benefits since his award of April 1993. In September 1997, he filed VA Form 21-686C, Declaration of Status of Dependents, indicating that he had married in April 1996. He reiterated that information on another form submitted in May 1998. By letter in July 1998, the RO informed the Veteran that his compensation award included additional benefits for his spouse, effective in October 1997; the RO also informed him that he must notify the RO immediately if there was any change in the number or status of his dependents, or else his failure to quickly tell VA of a dependency change will result in an overpayment which must be repaid. By letters in June 2007, December 2007, and December 2008 (which was re-sent in March 2009 on account of being undeliverable), the RO reiterated to the Veteran that his compensation award included additional benefits for his spouse and reminded him that he must report any change in the status of his dependents. The June 2007 letter stated that such failure to timely report a change would result in an overpayment that must be repaid. The December 2008 letter provided "death" as an example of a change in his marital status. Enclosed with the June 2007 and December 2008 letters was VA Form 21-8764, which notified the Veteran that he must promptly advise VA of any change in the status of his dependents. In July 2009, the Veteran filed VA Form 21-686C, Declaration of Status of Dependents, indicating that his first wife had died in July 2007 and that he had married his current wife in June 2009. By letter in September 2009, the RO informed the Veteran that it was retroactively reducing his compensation award, effective on August 1, 2007, due to the removal of his first wife on the last day of the month in which her death had occurred. The RO explained that its action resulted in the creation of an overpayment in his account. The RO also sought additional information concerning his current wife before it could add her to his award. By letter in October 2009, the RO informed the Veteran that it had added his current wife to his compensation award and that he would receive additional benefits on her account, effective July 1, 2009. The RO also reminded him that an overpayment in his account of $2,693 had been created, which had to be recouped. Subsequently, by letter in October 2009, VA's Debt Management Center informed the Veteran of an overpayment of $2,691 in disability compensation benefits; he was told that his benefits would be withheld starting in January 2010 until his overpayment was recouped. In October 2009, the Veteran submitted a request for a waiver of recovery of the overpayment of disability compensation. In conjunction with his waiver request, he filed a VA Form 5655, Financial Status Report, which indicated total gross monthly income of $2,823 from VA compensation for him and his wife and total monthly expenses of $2,954 (to include $138 for payments on installment contracts and other debts, and $200 in expenses for the care and feeding of grandchildren while his children went to work). He reported assets of only $1,000 for a car. In a November 2009 statement, the Veteran emphasized that he could not afford to have his entire VA monthly payment withheld because he had no other income and it would constitute extreme financial hardship for him and his family. He asserted that he did not try to defraud the government and was unaware of the debt as it was being created. He also explained that he and his wife kept their grandchildren several times during the week so that their children could go to work, and that this arrangement required extra money. He also noted various doctor bills every month and the need to borrow money to buy furniture and maintain an old car. In a decision in December 2009, the RO's Committee on Waivers and Compromises denied the Veteran's claim for a waiver of recovery of an overpayment of disability compensation in the total amount of $2,691, on the basis that recovery would not be against equity and good conscience. The Committee stated that the overpayment was created as a result of a retroactive reduction of disability compensation, for the period of August 1, 2007 through September 2009, on the basis that he failed to report a change in dependency status. In December 2009, the Veteran submitted a notice of disagreement with the decision to deny his waiver request. Attached to his statement was another VA Form 5655, Financial Status Report, which indicated total gross monthly income of $2,823 from VA compensation for him and his wife and total monthly expenses of $2,965 (to include $695 for payments on installment contracts and other debts). He reported assets of only $650 for a car. Analysis An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. 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 compensation. 38 C.F.R. § 1.965(a). An additional monthly amount of VA disability compensation benefits may be payable for a spouse where a veteran is entitled to compensation based on disability evaluated as 30 percent or more disabling. 38 C.F.R. § 3.4(b)(2). The 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). If the debt were the result solely of administrative error, the effective date of the reduction of benefits would be the date of the last payment based on this error, and consequently there would be no overpayment charged to the veteran for the portion of the overpayment attributable to administrative error. 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. §§ 3.500(b)(2), 21.7635(q)(2); see Erickson v. West, 13 Vet. App. 495, 499 (2000). The file indicates that after the Veteran notified VA in July 2009 that his wife had died in July 2007, thereby terminating the dependency allowance he was receiving for her, the RO retroactively removed her from his compensation award, effective August 1, 2007, in accordance with 38 C.F.R. § 3.500(g). The RO also indicated in an October 2009 letter to the Veteran that it was adding his current wife to his award effective July 1, 2009, in accordance with 38 C.F.R. § 3.401(b). Thus, the period of the overpayment, or that period during which the Veteran was paid additional dependency benefits to which he was not legally entitled, was August 1, 2007 through June 2009 (23 months). VA calculated the amount of the overpayment as $2,691. However, in the December 2009 decision of the Committee on Waivers, it was noted that the debt of $2,691 was created for the period of August 1, 2007 through September 2009, due to an unreported change in dependency status. Presumably, the ending date of the overpayment period was chosen as it was the month in which VA took action to retroactively remove the first spouse from the award. This is in error and in conflict with the October 2009 action to add the Veteran's current wife to his award effective July 1, 2009. Consequently, the overpayment amount was not proper and must be re-calculated prior to determining whether recovery of the proper overpayment amount may be waived. Despite the absence of an audit conducted in this case to demonstrate how the debt amount was calculated, the record shows in various award letters sent to the Veteran in 2007, 2008, and 2009 and on computer-generated reports of the Veteran's compensation awards in the file, that for the overpayment period he was paid the following monthly amounts: $781 effective August 1, 2007; $799 effective December 1, 2007; $2,669 effective September 1, 2008; and $2,823 effective December 1, 2008. The monthly compensation benefits he was due for the same period are the following: $712 effective August 1, 2007; $728 effective December 1, 2007; $2,527 effective September 1, 2008; and $2,673 effective December 1, 2008. In other words, the Veteran was overpaid the following amounts: $69 for the 4-month period from August 1, 2007 through November 2007 (or $276 total); $71 for the 9-month period from December 1, 2007 through August 2008 (or $639 total); $142 for the 3-month period from September 1, 2008 through November 2008 (or $426 total); and $150 for the 7-month period from December 1, 2008 through June 2009 (or $1,050 total). The aggregate amount from each of the periods is $2,391, which constitutes the properly created debt for which the waiver request will be considered. Pursuant to 38 U.S.C.A. § 5302(c) and 38 C.F.R. § 1.965(b), a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of an overpayment. The RO's Committee on Waivers concluded in December 2009 and confirmed in February 2010 that the facts in this case do not show the mandatory bars to waiver in the Veteran's case, and the Board agrees. The Veteran has stated that he was unaware of the debt as it was being created and did not defraud the government. The Board finds his statements to be credible. There is no evidence that the Veteran intended to deceive VA or seek unfair advantage. The RO's Committee on Waivers then denied the Veteran's claim for waiver on the basis that recovery of the overpayment would not be against equity and good conscience. 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.963(a). The standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the Government's rights. The decision reached should not be unduly favorable or adverse to either side. The phrase "equity and good conscience" means arriving at a fair decision between the obligor and the government. In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: 1. Fault of the debtor. Whether the actions of the debtor contributed to the creation of the debt. 2. Balancing of faults. Weighing of the fault of the debtor against that of the VA. 3. Undue hardship. Whether collection would deprive the debtor or family of basic necessities. 4. Defeat the purpose. Whether withholding of benefits or recovery would nullify the objective for which benefits were intended. 5. Unjust enrichment. Whether failure to make restitution would result in unfair gain to the debtor. 6. Changing position to one's detriment. Whether reliance on VA benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. 38 C.F.R. § 1.965(a). According to the determination by the Committee on Waivers, the overpayment in this case was created as a result of a retroactive removal of the Veteran's first spouse from his disability compensation award, effective August 1, 2007, as she had died in July 2007. Based on a review of the entire record and having considered the contentions of the Veteran, the Board concludes that the Veteran was solely at fault in the creation of the overpayment. The RO notified him on several occasions (in July 1998, June 2007, December 2007, and in March 2009) that his disability compensation award included additional benefits for his spouse and that he is obligated to notify the RO promptly if there was any change in the status of his dependent, or else an overpayment would need to be repaid. There is no evidence that prior to July 2009 the Veteran notified VA of his first wife's death. His delay in reporting a dependency change led to the creation of the overpayment in this case. There is no indication of any fault on the part of the VA in the creation of the overpayment, because prompt action was taken by the RO to reduce benefits upon learning of the Veteran's dependency change (first wife's death and marriage to current wife). It is clear that the Veteran's actions, or lack of action, caused the overpayment without any fault on the part of the VA. In addition, the Board must also consider whether recovery of the debt would result in financial hardship to the Veteran. It is not entirely clear from the record whether the overpayment has been recouped. Financial status reports dated in October 2009 and December 2009 appear to reflect similar information. The reports show that his monthly expenses exceeded his income by $131 to $142. Moreover, the October 2009 reports show that his monthly expenses included monthly payments on installment contracts and other debts of $138, while the December 2009 report shows $695 for such expenses. When the amounts due monthly to his creditors are not considered, the Veteran's net monthly income actually exceed his monthly income. It is also noted that the October 2009 report indicates expenses of $200 for the care of grandchildren while his children go to work, but there is no indication that the Veteran is receiving any remuneration from his children to help defray such daycare expenses while they go to work. The Board also notes that the Veteran's only asset is an old car (1998/1996 year), and evidently he had no cash in the bank or on hand. Based on the income and expense information of record, it is concluded that the record does not tend to support a claim that recovery of the debt endangered or would endanger the Veteran's ability to provide for his basic necessities. Although he has reported essentially no assets with which to repay the VA debt, when the amount due monthly to his creditors are not considered, the Veteran's monthly net income exceeds his monthly expenses. As the VA debt is a valid debt to the government, there is no reason that the Veteran should not accord the government the same consideration that he accords his private creditors. Furthermore, it appears that there are adults within his family (his children) from whom it would be reasonable to expect a contribution to the household income to defray the expenses of caring for the grandchildren several times a week (as the Veteran noted in a November 2009 statement). In addition, the record reveals no other factors which would make recovery of the overpayment inequitable, as discussed further below. Another factor to be considered is whether the recovery of the overpayment would defeat the purpose for which the benefits were intended. The Veteran was entitled to additional disability compensation for his first wife (a dependency allowance), but upon her death his entitlement ended. Withholding of benefits to recover the debt is not shown to defeat the purpose of the dependency allowance, because the Veteran was not entitled to such benefits during the period that he had no spouse. The Board also finds that failure to have made restitution would result in unfair gain to the Veteran because he received monetary benefits to which he had no entitlement. Additional VA benefits for a spouse were paid out over the period of August 2007 through June 2009, when in fact he was no longer married, which is clearly prohibited by law. The Board must consider whether reliance on benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The Veteran has not contended, nor does the evidence show, that he had relinquished a valuable right or incurred a legal obligation in reliance on his additional VA benefits to which he had no legal entitlement. In sum, the Board concludes that the facts of this case, when weighed against the various elements to be considered, demonstrate that recovery of the overpayment of benefits would not be against equity and good conscience. The Veteran is solely at fault in the creation of the debt, and failure to repay the debt would result in unfair gain to him. Also, recovery of the overpayment would not defeat the purpose for which the benefits are intended, and he had not relinquished a valuable right or incurred a legal obligation in reliance on his VA benefits. As to the question of financial hardship, persuasive evidence has not been presented to show that the Government's right to full restitution should be moderated. As the preponderance of the evidence is against the petition for waiver, the benefit of the doubt rule does not apply, and the appeal in the matter must be denied. 38 U.S.C.A. § 5107(b). ORDER The appeal challenging the propriety of the creation of the overpayment of additional VA disability compensation for a spouse is granted to the extent that the proper amount of overpayment is $2, 361, and not $2,691. The appeal seeking waiver of recovery of the overpayment ($2,361) is denied. ____________________________________________ George R. Senyk Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs