Citation Nr: 21065835 Decision Date: 10/27/21 Archive Date: 10/27/21 DOCKET NO. 19-31 849 DATE: October 27, 2021 REMANDED Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits, to include the question of whether the overpayment was properly created is remanded. REASONS FOR REMAND This matter on appeal to the Board of Veterans' Appeals (Board) was remanded by the Board to the VA Agency of Original Jurisdiction (AOJ) in December 2019 for additional development. However, as outlined below, the Board finds that The record reflects that the Veterans VA compensation benefits were retroactively reduced because he was incarcerated. Under pertinent VA laws and regulations, any individual who is entitled to compensation or to dependency and indemnity compensation and who is incarcerated in a Federal, State, local, or other penal institution or correctional facility for a period in excess of sixty days for conviction of a felony (where, as here, committed after October 7, 1980) shall not be paid such compensation or dependency and indemnity compensation, for the period beginning on the sixty-first day of such incarceration and ending on the day such incarceration ends, in an amount that exceeds (A) in the case of a veteran with a service-connected disability rated at 20 percent or more, the rate of compensation payable under section 1114(a) of this title; or (B) in the case of a veteran with a service-connected disability not rated at 20 percent or more or in the case of a surviving spouse, parent, or child, one-half of the rate of compensation payable under section 1114(a) of this title. 38 U.S.C. § 5313 (a); 38 C.F.R. § 3.665 (a). VA was also providing an apportionment of the Veteran's award to the Veteran's spouse who died in December 2006, but it appears that the VA payments continued to be negotiated. The Veteran contends that he had no knowledge of the status of the apportionment payments. An October 2018 letter notified the Veteran that his benefits had been adjusted based both on his incarcerated status and due to the death of his spouse. He was then notified that an overpayment of $37,077.71 had been created. A letter was also sent to his spouse indicating that an overpayment of $69,440.00 had been created; however, as noted, she had apparently died which was the reason for the overpayment. The Committee on Waivers and Compromises (Committee) referenced both the Veteran's incarcerated status as well as the termination of the apportionment, but indicated that the amount of the overpayment was $37,077.71. The Board noted in its prior remand that the Veteran contended that the amount of the overpayment is incorrect for two reasons. First, he asserts that they were prematurely terminated based on his incarcerated status and second, he did not bear responsibility for the apportionment being negotiated. Therefore, the Board found that the Veteran had challenged the proper creation of the debt. As such further appellate review by the Board on the Veteran's waiver claim was deferred pending formal adjudication of his challenge to the validity of the debt. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). The Board remanded the case for the creation issue to be addressed. Thereafter, the Veteran indicated that his stepdaughter was also on the same account that he had where the apportionments funds were deposited. He explained that she negotiated the payments and paid off his wife's debts, including a mobile home, after she died. He said that he did not use any of the monies. It is noted that the Veteran is service a life sentence in prison. In a September 2020 Memorandum, the AOJ indicated that the existing amount of the debt ($37,077.71) is valid and is not the result of a VA error. When the VA converted computer systems, the Veteran received an additional amount that was previously withheld for incarceration, this was effective December 1, 2008. This amounted to an overpayment of $37,077.71 to which the Veteran was not entitled. Because this was a system malfunction or programming error, it is not treated as an administrative error. Under manual reference III.v.1.I.3.c. "The erroneous payment of benefits because of a system malfunction or programming error is not considered an administrative error under 38 C.F.R. § 3.500(b)(2) and should not be treated as such." The AOJ stated further that the incarceration adjustment date was previously April [REDACTED], 2002. The 61st day of the Veteran's incarceration was actually April [REDACTED], 2002. The correct start date of the VA withholding for incarceration is April [REDACTED], 2002. The AOJ noted further that the error had been corrected and started his incarceration adjustment effective April [REDACTED], 2002. It appears from an audit that it was determined that the AOJ owed the Veteran $19.47 in light of the minor change in start date for the incarceration status. Otherwise, as indicated by the AOJ, the AOJ apparently paid out $37,077.71 to the bank account of the deceased spouse because a computer system error paid what the Veteran would have been entitled to receive if he had not been incarcerated OR because there was some other lump sum payment. However, the audit appears to show the overpayment initially derived from a delay in reduction due to incarceration. Th other discrepancies are not adequately explained. Th supplemental statement of the case (SSOC) then reference the Veteran's incarceration status and that his spouse had died, but did not address a payout of any kind due to a computer error, and the issued listed is limited to the waiver matter and not the creation issue although the SSOC addressed the aforementioned matters in the body of the SSOC. The Board finds further development is necessary. First, the AOJ should determine and delineate by amounts in a memorandum and audit: (1) what amount of the overpayment was caused by a delay in reducing the Veteran's benefits due to incarceration; (2) what amount of the overpayment was caused by retroactively removing the Veteran's spouse after she died; (3) who are the authorized parties on the bank account where the VA payments were directly deposited or where VA checks were cashed; (4) did the apportionment payments continue to be deposited into that account after the spouse died; (5) when did the computer system error occur and was there a lump sum payout due to that error and if so, the amount thereof and was it paid into the same bank account; (6) following the computer system error, were amounts withdrawn from the bank account and by whom. The AOJ should then reconsider the validity of the debt and if the Veteran's actions contributed to that debt. If a debt remains, the matter of entitlement to a waiver of the recovery should be reconsidered and an SSOC encompassing both matters should be furnished. The matters are REMANDED for the following action: 1. The AOJ should determine and delineate by amounts in a memorandum and audit: (1) what amount of the overpayment was caused by a delay in reducing the Veteran's benefits due to incarceration; (2) what amount of the overpayment was caused by retroactively removing the Veteran's spouse after she died; (3) who are the authorized parties on the bank account where the VA payments were directly deposited or where VA checks were cashed; (4) did the apportionment payments continue to be deposited into that account after the spouse died; (5) when did the computer system error occur and was there a lump sum payout due to that error and if so, the amount thereof and was it paid into the same bank account; (6) following the computer system error, were amounts withdrawn from the bank account and by whom. 2. The AOJ should then reconsider the validity of the debt and if the Veteran's actions contributed to that debt. If a debt remains, the matter of entitlement to a waiver of the recovery should be reconsidered and an SSOC as to both matters should be furnished to the Veteran and his representative. S. L. Kennedy Veterans Law Judge Board of Veterans' Appeals Attorney for the Board J. Connolly, Counsel The Board's decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.