Citation Nr: 23039211 Decision Date: 07/14/23 Archive Date: 07/14/23 DOCKET NO. 18-47 287 DATE: July 14, 2023 REMANDED Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits, due to incarceration, in the amount of $17,935.19, to include the question of whether the overpayment was properly created, is remanded. REASONS FOR REMAND The Veteran served on active duty in the United States Army from January 1989 to December 1991. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a January 2018 decision of the Committee on Waivers and Compromises (COWC) of the agency of original jurisdiction (AOJ). The Veteran failed to report for requested Board hearings, thus, his hearing request is deemed withdrawn. 38 C.F.R. § 20.603. 1. Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits, due to incarceration, in the amount of $17,935.19, to include the question of whether the overpayment was properly created, is remanded. The Veteran contends that the debt amount of $17,935.19 was improperly created. In his Notice of Disagreement and Substantive Appeal, he asserts that he was entitled to a 30 percent disability rate because of his two children and that the most he owed was $3,902. 24. Of note, the Board observes that the date of the Veteran's incarceration was February 25, 2015, yet the 61-Day Rule Calculator incorrectly listed February 24, 2015 as the first full day of incarceration. Applying the correct first full day of incarceration, the 61st day would be April 27, 2015. Under pertinent VA laws and regulations, compensation benefits are not to be paid to (or for) a veteran who is imprisoned in a Federal, State, or local penal institution as the result of conviction of a felony or misdemeanor for any part of the period beginning sixty-one days after such individual's imprisonment begins and ending when such individual's imprisonment ends. 38 U.S.C. § 1505; see also 38 C.F.R. § 3.665. At the time of his incarceration, the Veteran was in receipt of a 30 percent disability rating for post-traumatic stress disorder (PTSD) since July 8, 2010. In October 2015, VA received information that the Veteran was incarcerated following a felony conviction, beginning February 25, 2015. In July 2017, the Colorado Department of Corrections responded to VA's query regarding the Veteran's incarceration status and reported that the Veteran was paroled on May 19, 2016. See also January 2019 Report of General Information in which the Veteran verified he was released on May 19, 2016. In August 2017 the Veteran was notified by VA that his benefits were to be reduced to $133.57, effective April 25, 2015 through May 19, 2016, due to his incarceration. As noted above, sixty-one days after February 25, 2015 would have been April 27, 2015. In October 2017, the Veteran was notified of the incarceration adjustment. The letter showed the Veteran's benefit amount of $463.75, with the amount withheld due to his incarceration listed as $330.58 and the amount paid as $133.17. In November 2017, VA Debt Management Center informed the Veteran that he was overpaid $17,935.19 and proposed to withhold $133.57 per month until the overpayment was recouped. In January 2018, the COWC denied his waiver request. The Veteran timely appealed this denial. In this case, the Veteran has challenged the proper creation of the debt. As such, further appellate review by the Board of Veterans' Appeals (Board) on the Veteran's waiver claim must be deferred pending formal adjudication of his challenge to the validity of the debt. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991) ("when a Veteran raises the validity of the debt as part of a waiver application... it is arbitrary and capricious and an abuse of discretion to adjudicate the waiver application without first deciding a veteran's challenge to the lawfulness of the debt asserted against him or her"); VAOPGCPREC 6-98 (July 24, 1998) (holding that when a veteran challenges the validity of the debt and seeks waiver of the debt, the Agency of Original Jurisdiction (AOJ) must first fully review the debt's validity and, if the office believes the debt to be valid, prepare a written decision fully justifying the validity of the debt before referring the waiver request to the Committee on Waivers and Compromises). 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. 38 C.F.R. § 1.911(c)(1). Resolution of the creation issue must precede consideration of the waiver issue. In that consideration of the propriety of the creation, for a determination that the overpayment was not properly created such that the debt was not valid, it must be established that the Veteran was either legally entitled to the benefits in question or, if the Veteran was not legally entitled, then it must be shown that VA was solely responsible for the Veteran 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. VAOPGCPREC 2-90 (July 17, 1989); 55 Fed. Reg. 27757 (1990). 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 or her failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112 (b)(9), (10); 38 C.F.R. § 3.500 (b)(2); 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 ("the 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). Here, it is unclear to the Veteran, as well as to the Board, how the $17,935.19 debt amount was calculated. Accordingly, a remand is required for a paid and due audit and a formal adjudication of the Veteran's challenge to the validity of the debt. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). The matters are REMANDED for the following action: 1. Provide the Veteran with a paid and due audit of compensation benefits that make up the debt in the amount of $17,935.19. This should include an explanation of how the debt was created. This audit should be provided to the Veteran and his representative and a copy of this should be placed in the claims file. 2. Once the audit is complete, the AOJ should formally adjudicate the matter of the validity of the $17,935.19 debt, to include addressing the assertion that it was created due to sole VA administrative error, as well as the incorrect sixty-one day calculator date of April 25, 2015. 3. If any portion of the debt is deemed valid, the matter of both the validity of the debt and entitlement to a waiver should be returned to the Board for adjudication. T. REYNOLDS Veterans Law Judge Board of Veterans' Appeals Attorney for the Board L. Nelson 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.