Citation Nr: 1332405 Decision Date: 10/18/13 Archive Date: 10/24/13 DOCKET NO. 10-22 504A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Louis, Missouri THE ISSUE Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs educational assistance benefits, in the currently calculated adjusted amount of $3,636.96, or any lesser amount adjusted by offset, to include whether the debt was properly created. REPRESENTATION Appellant represented by: Kathryn E. Shelton, Attorney ATTORNEY FOR THE BOARD J. Connolly, Counsel INTRODUCTION The Veteran served on active duty from August 2000 to January 2001, and February 2003 to November 2003, including various periods of service in the Army National Guard. This matter comes before the Board of Veterans' Appeals (Board) from a May 2009 decision of the Committee on Waivers and Compromises (COWC) of the Debt Management Center of the St. Paul, Minnesota Department of Veterans Affairs (VA) Regional Office (RO) that the Veteran's request for a waiver of the recovery of educational benefits in the amount of $3,696.36 was not timely filed. The Veteran's claim was certified to the Board by the Education Center of the St. Louis, Missouri, VARO. Initially, the Board notes that it is unclear from the record whether any, or all, of the assessed indebtedness in question has been recouped. Nevertheless, in accordance with Franklin v. Brown, 5 Vet. App. 190 (1993), the Board must consider the entire amount calculated. In an August 2011 Remand decision, the Board determined that the matter of the creation of the debt was also at issue and has been included in this appeal. FINDINGS OF FACT 1. The Veteran was originally awarded Chapter 1606 benefits for the period of August 30, 2004 to April 30, 2006, but because it was determined that he should have been awarded Chapter 1607 benefits, he was granted Chapter 1607 benefits from August 30, 2006 through May 13, 2007. 2. The Veteran continued to receive Chapter 1607 benefits for the time period of August 28, 2006 through May 12, 2007. 3. In May 2007 the VA received the Veteran's enrollment certification for the summer of 2007 term, and upon review of the Department of Defense (DoD) database it was determined that the Veteran had been discharged from Marine Corps Selected Reserve, to the Individual Ready Reserve (IRR) in October 2006, changing his eligibility status. 4. The RO terminated the Veteran's Chapter 1607 benefits effective August 28, 2006, creating an overpayment of $3,636. 96; the August 28, 2006 date was later adjusted to October 5, 2006, as the use of the earlier date was erroneous. 5. When the Veteran transferred to the IRR, he was entitled to Chapter 1606 benefits, issued in the amount of $2798.70, in lieu of being counted against the Chapter 1607 overpayment; later adjustments made to the Chapter 1607 overpayment resulted in an adjusted amount of $2,287.32. 6. The creation of the debt was due to a delay in relaying information by the DoD regarding the change in the Veteran's duty status and the Veteran's failure to report that he had been discharged from the Selected Reserve to the IRR. 7. The Veteran bears some fault in the creation of the overpayment. 8. There is no indication of fraud, misrepresentation or bad faith on the part of the Veteran in the creation of this debt. 9. Recovery of the debt in this case would be against equity and good conscience. CONCLUSIONS OF LAW 1. The overpayment of VA of educational assistance benefits, in the currently calculated adjusted amount of $2,287.32, was properly created and not due to sole VA error. 38 U.S.C.A. §§ 5112, 5302 (West 2002 & Supp. 2012); 38 C.F.R. § 3.500 (2013). 2. Recovery of the adjusted overpayment of VA educational assistance benefits, in the currently calculated adjusted amount of $2,287.32, would be against equity and good conscience. 38 U.S.C.A. § 5302 (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS There has been a significant change in the law with the enactment of the Veterans Claims Assistance Act of 2000 (VCAA). See 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5106, 5107, 5126; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326. The Veteran's claim is being granted. As such, any deficiencies with regard to VCAA are harmless and nonprejudicial. The Montgomery GI Bill-Selected Reserve (MGIB-SR) program (Chapter 1606, of Title 10, United States Code) is an educational assistance program for members of the Selected Reserve of the Army, Navy, Air Force, Marine Corps, and Coast Guard, and the Army and Air National Guard. 38 C.F.R. § 21.7520. It was established to encourage membership in units of the Selected Reserve of the Ready Reserve. 10 U.S.C.A. § 16131(a). The Reserve components decide who is eligible for the program. The VA verifies eligibility through the Department of Defense (DoD). VA makes the payments for the program. 38 C.F.R. § 21.7540. As in this case, a Guardsman, may initially become eligible when he or she enlists, reenlists, or extends an enlistment as a reservist so that the total period of obligated service is at least 6 years from the date of such enlistment, reenlistment, or extension; or when he or she is appointed, or is serving as a reserve officer and agrees to service in the Selected Reserve for a period of not less than 6 years in addition to any other period of obligated service in the Selected Reserve. 10 U.S.C.A. § 16132; 38 C.F.R. § 21.7540(a)(1). An individual may also establish a higher payment rate for their benefit if they have a skill or specialty designated by the Secretary concerned and other applicable factors as delineated at 10 U.S.C.A. § 16131(h)(1). See 38 C.F.R. §§ 21.7631(g), 21.7636(b). Such higher payment is referred to as a "kicker." The Guardsman must also complete his or her initial period of active duty for training and must be participating satisfactorily in the Selected Reserve; must not have elected to have his or her service in the Selected Reserve credited toward establishing eligibility to benefits provided under Chapter 30, Title 38 of the United States Code; and must have met the requirements for a secondary school diploma (or an equivalency certificate) before applying for educational assistance. 38 C.F.R. § 21.7540(a)(2)- (5). Here, the Veteran graduated from high school in May 2000. Ending dates for eligibility are prescribed by 38 U.S.C.A. § 16133 and 38 C.F.R. § 21.7550. In essence, the ending date for eligibility is the date the individual is separated from the Selective Reserve. There are other provisions that relate to an extension of benefits because of a separation due to disability, etc., but these are not applicable in this case. Finally, the actual period of entitlement can be extended if the individual served on active duty pursuant to orders issued under sections 12301(a), 12301(d), 12301(g), 12302, or 12304 of Title 10 of the United States Code. 10 U.S.C.A. § 16133(b)(4); 38 C.F.R. § 21.7550(b). In addition to the above program, education benefits are also available to members of the Selected Reserve under Chapter 1607 of Title 10 of the United States Code. See 10 U.S.C.A. §§ 16161- 16166. The program, known as the Reserve Educational Assistance Program (REAP), extends benefits to any member of a Guard or Reserve unit who served on active duty after September 11, 2001, for a contingency operation and who served at least 90 consecutive days or more. Individuals become eligible as soon as they reach the 90-day point, regardless of duty status. The period of entitlement to benefits is 36 months. 10 U.S.C.A. §§ 16162, 16163. The individuals are entitled to the benefits while they remain a member of the Selected Reserve of the Ready Reserve, in the case of a member called or ordered to active service while serving in the Selected Reserve. See 10 U.S.C.A. § 16164(a)(1). Termination of assistance will occur when the member separates from the Ready Reserve as provided for under Section 16164(a)(1). See 10 U.S.C.A. § 16165(a)(2). There is an exception that allows for assistance to be provided to a member of the Selected Reserve who incurs a break in service in the Selected Reserve if the member continues to serve in the Ready Reserve during and after such a break in service. 10 U.S.C.A. § 16165(b). The Veteran has disputed the creation of the debt in this case. Alternatively, it is asserted that the debt should be waived. The Veteran contends that the debt in question was created through mistakes made by VA and as such VA is responsible for the debt. Specifically the Veteran maintains that he was erroneously paid Chapter 1607 benefits for the Fall 2006 and Spring 2007 semesters due to a computer error. VA has confirmed that the Veteran was indeed erroneously paid Chapter 1607 benefits for the Fall 2006 and Spring 2007 semesters. However, VA has stated that the incorrect grant of Chapter 1607 benefits for the period after October 6, 2007, are the result of a delay in DoD database updates and the failure of the Veteran to report his change in status from Marine Corps Selected Reserve to the IRR. Upon realization that the incorrect benefits had been granted, the Veteran further contends that the VA made another mistake by then providing the Veteran with the Chapter 1606 benefits that he should have been receiving, instead of applying those benefits to the overpayment created by the incorrectly provided Chapter 1607 benefits. VA stated in a March 2009 letter in response to a Congressional inquiry that the Veteran was erroneously paid both Chapter 1606 and Chapter 1607 benefits for the same period because the debt was not transferred and recouped. VA further stated in that letter that had the Chapter 1606 benefits been applied to the overpayment for the Chapter 1607 benefits, the debt would have been paid in full. As such, the Veteran contends that the debt is the result of mistakes made by the VA and therefore that VA was solely responsible for the Veteran being erroneously paid benefits. In addition, the Board observes that the Veteran was in fact sent a letter in March 2009 which informed him that he had no current debt. Historically, the Veteran was originally awarded Chapter 1606 benefits for the period of August 30, 2004 to April 30, 2006. It was subsequently determined that he should have been awarded Chapter 1607 benefits, which resulted in greater monthly benefits. He was granted Chapter 1607 benefits from August 30, 2006 through May 13, 2007. The Veteran continued to receive Chapter 1607 benefits for the time period of August 28, 2006 through May 12, 2007. The Veteran's eligibility for the Chapter 1607 benefits was confirmed in the DoD database before each award was processed. In May 2007 the VA received the Veteran's enrollment certification for the summer of 2007 term, and upon review of the DoD database, it was determined that the Veteran had been discharged from Marine Corps Selected Reserve, an active drilling unit of the Marine Corps Reserve (MCR), to the IRR in October 2006, changing his eligibility status. VA confirmed that information with the MCR. VA was unaware of the transfer until May 2007 because the DoD records were not updated immediately with regard to the Veteran's status and VA relies on DoD records. This transfer terminated the Veteran's eligibility under Chapter 1607 which meant that the Veteran was not entitled to any Chapter 1607 benefits that he received after October 6, 2006. The Veteran's Chapter 1607 benefits were terminated effective August 28, 2006, creating an overpayment of $3,636. 96. However, the Veteran was entitled to Chapter 1606 benefits during that time frame. The Chapter 1606 benefits that the Veteran should have been receiving were subsequently issued in the amount of $2,798.70, in lieu of being counted against the Chapter 1607 overpayment. The Veteran's Chapter 1606 benefits continued through October 27, 2007. The Board notes that the Treasury Offset Program payment totaling $694.00 was applied to the Chapter 1607 overpayment, reducing the amount to $2,942.96. In March 2009, it was determined that the Veteran was entitled to Chapter 1607 benefits for the period of August 28, 2006 to October 5, 2006, totaling $526.63. This amount was applied to the Veteran's overpayment reducing the Veteran's overall balance to $2,416.33. The Veteran's Chapter 1606 benefits for the period of October 5, 1006 to October 27, 2007 were restored, and then extended to December 15, 2007. The difference of $129.01 was applied to the Chapter 1607 overpayment, reducing the balance to $2,287.32 In the Board's August 2011 Remand decision, it was noted that a May 2009 decision on waiver of indebtedness issued by the Committee on Waivers and Compromises (COWC) stated that according to the Debt Management Center (DMC) Centralized Accounts Receivable Online System (CAROLS) letter screen, the Veteran was notified with regard to the overpayment by a letter dated June 23, 2007. The Board notes that this letter is not included in the file, but also that the Veteran does not dispute that he received a notification letter at that time. However, the Veteran contends that upon receipt of the letter, he contacted VA and was informed that the switch between Chapter 1606 and Chapter 1607 benefits was a common computer "bug" and that others had incorrectly received the same notice letter. As a result the Veteran believed that the notice of an overpayment had been a mistake. As previously noted by the Board, in order for the Board to determine that the overpayment was not properly created, it must be established that the Veteran was legally entitled to the benefits in question or, if there was no legal entitlement, then it must be shown that VA was solely responsible for the Veteran being erroneously paid benefits. Sole administrative error connotes that the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran's actions nor his failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C.A. § 5112(b) (9),(10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997). The United States Court of Appeals for Veterans Claims (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). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits in excess of the amount to which he or she was entitled. 38 C.F.R. § 1.962. The Veteran contends that any overpayment is sole VA error and that he is therefore not responsible for the debt. The Board remanded this case for certain pertinent documents to be obtained, concerning the Veteran's request for a waiver/dispute of the debt. The Board specifically requested: (1) the first RO letter notifying the Veteran of the termination of his Chapter 1607 benefits due to his change in eligibility (2) any dated VA requests and responses from DoD/DHS as to the Veteran's eligibility to receive educational assistance under Title 10 of the United States Code and the termination/suspension of such benefits; (3) the DMC's initial notice of indebtedness and right to request waiver; (4) any correspondence received from the debtor in response to the DMC's initial notice of indebtedness and right to request waiver, to include any FSR; and (5) any COWC determination(s) and notice(s) to the Veteran. Also, the Board requested that the RO/AMC indicate whether notice was provided to the Veteran that his receipt of educational benefits would terminate if he did not complete the entire 6 years of his MSO and whether it was his responsibility or that of the DoD/DHS to keep VA apprised of his duty status. Other documents were also requested. In response, some of the documents were obtained, but not all. In particular, although the RO/AMC in a May 2012 supplemental statement of the case indicated that it was the Veteran's responsibility to notify VA of his change in duty status from the Selected Reserves to the IRR, there is no citation to any controlling regulation. Likewise, while the RO/AMC indicated that the Veteran was provided information contained in his Notice of Basic Eligibility (NOBE) which can be found (blank copy) on the internet, and which stated that the Veteran's entitlement to unused educational benefits expires, in pertinent part, when he separates from the Selected Reserves, the RO/AMC did not address the situation at hand. Specifically, the Veteran separated from the Selected Reserves to immediate transfer to the IRR. He remained entitled to educational benefits the entire time, albeit under different programs. The Board does not find that any specific notice was sent to the Veteran informing him that he had to notify VA when he changed from Selected Reserves to the IRR so that his educational benefits could be adjusted under a different program. However, that being noted, it is clear that VA relies on DoD data regarding a Veteran's status. There was a delay in the relay of information from DoD to VA in this case. And, there is some merit to the RO/AMC's assertion that the Veteran should have been aware of the duplicate and excessive payments based on prior awards and based on information provided to him when he was later awarded educational assistance benefits under Chapter 1606. As noted, VA regulations provide that an adjustment to overpayment indebtedness may be warranted when the overpayment involves sole administrative error in which the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran's actions nor failure to act must have contributed to payment pursuant to the erroneous award. In this case, there was not sole VA administrative error. The overpayment was created due to the delay in relaying information to VA by DoD such that the Veteran's education benefits could be promptly adjusted. "Sole VA error" connotes that the overpayment in question was created because VA alone bore responsibility in the Veteran being erroneously paid. That is not the case here. VA received delayed notification from DoD regarding the Veteran's status. Once VA had the correct information, action was taken to terminate the Veteran's Chapter 1607 benefits and grant the award of Chapter 1606 benefits. As noted, the termination of Chapter 1607 benefits resulted in the creation an overpayment of $3,636. 96. The Board notes that the Chapter 1606 benefits were initially issued instead of applied to the overpayment (the later award of Chapter 1606 benefits as well as the funds from the Treasury Offset Program payment were properly applied against the debt, reducing the total to $2,287.32); however, the Veteran is responsible for the amount of education benefits that were issued in duplicate because he ceased to be eligible for educational benefits under Chapter 1607 when he was discharged from Marine Corps Selected Reserve. So, he was no longer eligible to receive the benefits that he received under the Chapter 1607 program after he left that service component. Therefore, the Board finds that the creation of the debt at issue, as to the adjusted and reduced amount of $2,287.32 was proper. VA was obligated to terminate the Chapter 1607 benefits once VA received the DoD information that the Veteran's military status had changed and he was no longer eligible for those benefits. Likewise, VA was obligated to commence the Chapter 1606 award because the Veteran became eligible for those benefits. The actions undertaken were proper in this case so that the Veteran's education was funded under the appropriate educational programs based on his eligibility. With regard to the matter of whether a waiver is warranted, it must be initially determined if the request for a waiver was timely; that is within 180 days of the notification to the Veteran of the overpayment. In June 2007, the Veteran was sent notice of the overpayment of educational assistance benefits. Since his request for a waiver was not received until May 2009, the AOJ denied his claim for a waiver the recovery of the overpayment. The Veteran and his representative contend that he contacted VA with regard to the debt, he was told that there was no debt. However, when he later was informed again that he had a debt in December 2007, he diligently requested a waiver within the timeframe. The Board finds credible the Veteran's reports. The record contains at least one correspondence where the Veteran was informed that there was no debt remaining. The confusion regarding whether there was an overpayment or not was generated when the Veteran's Chapter 1607 benefits were retroactively terminated and his eligibility for Chapter 1606 benefits were applied. There was apparent delayed communication regard the proper source of the Veteran's educational award, and, as such, it is reasonable that the Veteran would have attempted to inquire as to the overpayment and been told that there was none because he was in the process of being paid under the Chapter 1606 program. Therefore, and in affording all reasonable doubt to the Veteran, his request for a waiver is deemed timely. VA law and regulations provide that recovery of an overpayment may be waived if there is no indication of fraud, misrepresentation, or bad faith, on the part of the person or the persons having an interest in obtaining the waiver, and recovery of such indebtedness would be against equity and good conscience. See 38 U.S.C.A. § 5302(c); 38 C.F.R. §§ 1.962, 1.963. In the absence of fraud, misrepresentation, or bad faith, consideration may be given as to whether recovery of the overpayment would be against equity and good conscience. The standard "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) the fault of the debtor; (2) balancing of faults between the debtor and VA (3) undue hardship of collection on the debtor; (4) whether collection would defeat the purpose of an existing benefit to the Veteran; (5) whether failure to collect a debt would result in the unjust enrichment of the Veteran; and (6) whether the Veteran changed positions to his detriment in reliance upon a granted VA benefit. See 38 U.S.C.A. § 5302; 38 C.F.R. § 1.965(a); Ridings v. Brown, 6 Vet. App. 544, 546 (1994). In reviewing the elements listed at 38 C.F.R. § 1.965(a) and (b), the Board finds that there is no evidence of fraud, misrepresentation or bad faith on the part of the Veteran. There is no evidence indicating that the Veteran misrepresented any material facts, or that he intentionally sought an unfair advantage, with knowledge of the likely consequences, that resulted in a loss to the government. Rather, the Veteran has made consistent and seemingly credible statements. Therefore, the elements pertaining to "equity and good conscience" must be addressed. The Board finds that the Veteran was partially at fault in the creation of the debt because he was required to inform VA of any changes in his drilling status and he failed to report to VA that he had received payments under two programs for the same period of training. Although VA also receives information regarding the Veteran's drilling status from DoD, the Veteran as well had some obligation to report this change to VA. As noted above, the debt at issue was created when DoD delayed informing VA of the Veteran's change in duty status. VA was not at fault. The Veteran and his representative assert that there is undue hardship because due to the unexpected change in educational programs and creation of the debt, the Veteran has taken on student loans. In addition, they basically asserts that the Veteran changed positions to his detriment in reliance upon a granted VA benefit because he thought his educational assistance benefits were higher and he was also told that he had no debt. The Board has considered all of the evidence of record. Of significance, the Board acknowledges that there was certain confusion in this matter regarding the transfer of benefits between the two educational programs, the calculation of the proper amount of benefits, the repeated adjustments to the Veteran's award, the unclear notices, and, again, the fact that the Veteran bore some fault; but the delay of information from DoD was equally as relevant. In light of the foregoing and in balancing the necessary elements, the Board finds that it would be against equity and good conscience to require the Veteran to repay the overpayment debt and his request for a waiver of his debt in the adjusted amount of $2,287.32 is granted. ORDER A waiver of the overpayment of educational assistance benefits, in the calculated amount of $2,287.32, is granted. ____________________________________________ S. L. Kennedy Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs