B57/1995 DISCOUNTING OF OVERPAYMENTS

DATE OF ISSUE:  3 OCTOBER 1995

DISCOUNTING OF OVERPAYMENTS

INTRODUCTION

The purpose of this instruction is to provide policy guidelines on a Budget 1995/96 initiative, which will enable the Department of Veterans' Affairs (DVA) to offer a discount of up to 20% on overpayments repaid in full within 30 days of the offer.

BACKGROUND

2.Currently, debtors are required to repay their debt in full.  Debts not repaid within three months of the initial advice incur an administrative charge which is added to the debt.  In a significant number of overpayment cases, the debtors are not in a position to repay the debt in full, and recovery is achieved by deducting an amount of money from the fortnightly pension payment until the debt is repaid.

3.This DVA Budget initiative will improve cost effectiveness in recovering debts and will provide DVA debtors with flexibility when negotiating repayment of their debts.

CHANGES

4.Commencing 1 October 1995, a 20% discount will be available to debtors who are willing to repay at least 80% of the total debt in a lump sum, but do not have the capacity to repay the debt in full.

GENERAL ELIGIBILITY

5.If the debtor has liquid assets, or readily available funds* equal to 80% or more, but less than 100% of the total debt (ie the whole of the overpaid amount, not the balance outstanding), consideration should be given to offering a 20% discount on the total debt.  In all circumstances where this offer is made and accepted what is repayable is 80% or more of the total, original debt.

6.The offer can be made in respect of all types of debts, including current debts and debts due from a deceased estate, except where -

• the client or the estate has the capacity to repay the debt in full; and/or

• the overpayment was caused by fraud.

7.For the purposes of overpayments, fraud is defined as -

"a deliberate act of deceit on the part of the pensioner, in order to obtain a higher rate of pension than would otherwise be payable.  The act of deceit may be a knowingly false statement, or a deliberate withholding of information - the outcome of the fraud is that the person knowingly receives monies to which he/she has no legal entitlement".

* Note - For a definition of "readily available funds" refer to the section on Financial Hardship in the General Orders Service Pension.

PROCEDURES

8.The standard "initial recovery letter" (a sample of which is contained in the current Overpayment Management Manual) requests full recovery within 21 days and also advises the person to contact the Department if they are unable to pay the overpaid amount in a lump sum within the prescribed period, or if they wish to discuss the matter.  This letter should continue to be sent in the first instance in all overpayment cases.

9.If after 21 days no reply is received, or the veteran's response is that there is not the capacity to repay the debt in a lump sum, a letter should be sent with a request for the client to contact the Department with a view to commencing recovery negotiation.  Once contact is established and the debtor confirms or advises that a full cash repayment is not possible the following action should be taken -

• Step 1 - the debtor's financial circumstances are examined - ie a Statement of Financial Circumstances (form D2708) should be completed.  It should be noted that where the debtor is a member of a couple, only his/her assets can be taken into account when determining "capacity to repay".  This reflects current policy which clearly states that the partner of a debtor is under no legal obligation to repay their partner's debt **

• Step 2 - a discount offer is made if the client meets the criteria outlined in paragraphs 5 & 6.*

• Step 3 - if the client accepts the offer and pays the agreed amount within 30 days of the offer, the discounted amount is then waived under sub-paragraph 206(1)(b)(i) of the Veterans' Entitlements Act 1986 (VEA).

• Step 4 - if the client does not accept the offer, or fails to pay the agreed amount by the due date, standard negotiation procedures should be resumed - ie a partial lump sum repayment with regular instalments sought, limitation imposed etc.**

Example 1

A veteran has been overpaid service pension totalling $10,000.  He has liquid assets of $8,500.  A 20% discount is offered which he accepts, and provides a lump sum payment of $8,000 within the specified time.

The balance of the debt totalling $2,000 is waived.

Example 2

Client has been overpaid service pension totalling $10,000.  He is no longer in receipt of a pension from DVA and recovery is being achieved by regular cash instalments of $50 per month.  The current level of debt is  $6,500 - ie $3,500 of the original debt has been recovered to date.

Following a review of his financial circumstances, it appears that he has liquid assets totalling $6,000.  Based on the original debt, an offer to discount the remainder of the debt by $2,000 is made, providing the debtor makes a lump sum payment of $4,500 within 30 days of the offer.

* Samples of the discount letters are at Attachments A1 & A2.

**For more information on "capacity to repay" and methods of recovery refer to Chapter 7 of the Overpayment Management Manual

Administrative Charge

10.The discount offer is primarily aimed at recovering the debt quickly, and therefore it is unlikely that an administrative charge would apply.  However, if it is appropriate to offer a discount on a partially recovered debt, and an administrative charge has been calculated, then the total amount of the charge is fully recoverable, and should be added to the amount calculated as being 80% of the original debt.

WAIVER GUIDELINES

11.If the discount offer is accepted and payment is received within the specified period, the amount discounted will be waived under sub-paragraph 206(1)(b)(i) of the VEA.  Current waiver guidelines have been amended to include an additional dot point to enable the waiver of discounted debts.  A copy of the new guidelines is at Attachment B.  Amendments are also being made to current waiver delegations to remove/increase financial limitations for State Office staff in line with advice provided by each State.

OVERPAID TAX

12.Where there has been an overpayment of pension it is possible that the person may have paid a greater amount of tax that would have been payable if pension had been paid at the correct rate.  Once the overpayment has been repaid, income (ie service pension) has been reduced and the veteran may be eligible for a reassessment of tax liability based on amended income statements which are issued by the Department upon request.

13.For the purposes of tax liability, "discounted" debts will be deemed to have been repaid in full - ie amended tax statements will be provided for the total amount of debt at the time the discounted amount is paid.

EVALUATION

14.Currently, all debts are recorded on the Windows Based Pensioner Overpayment Recovery System (WinPORS).

15.In order to gather statistical information on the number of discounted debts and the monetary levels associated with this type of debt, it will be necessary to correctly record all debts that fall within this category, to produce basic "print out" type reports and to collate the statistical information contained therein for supply to and analysis by the Communications Operation and Review Section of National Office.

16.It is envisaged that these reports will be required at the end of each financial year, with the first report covering debts raised during the period 1 October 1995 to 30 June 1996.  The data which will need to be recorded, the recording methodology, and the reporting procedures are fully outlined at Attachment C.

CONTACT OFFICERS

17.Any queries relating to this instruction should be directed to Freda Widawski on telephone (02) 2137487.

MURRAY HARRISON

DIVISION HEAD

COMPENSATION

PLEASE NOTE THAT ATTACHMENTS C1, C2 AND C3 ARE AVAILABLE ONLY IN HARD COPY FORMAT AND ARE NOT INCLUDED ON 'THE GENERAL'

Attachment A1

SAMPLE SUGGESTED DISCOUNT LETTER

<e>>

<s>>

<n>>  <e>>  <e>>

<e>>

YOUR FILE NUMBER IS  <o>>

Dear <n>>

I refer to an overpayment of  <n>> totalling <t>>.

You recently advised that you are not in a position to repay this debt in full and requested that alternate methods of repayment be considered.

From the Statement of Financial Circumstances which you recently completed, I note that you have liquid assets currently located in <k>> totalling  <t>>.  This equals approximately 80% of the total amount which you owe to the Department.

I am able to offer you a discount on your debt, if you repay <t>> within 30 days of receipt of this letter.  The balance of your debt totalling  <t>> will be waived.  This means that the Department will not ask you to repay this amount at this time or at any time in the future, and represents a discount of  <%>> on the total debt.

For the discount to apply, payment of the amount of <t>> must be made in full to the Receiver/Collector of Public Monies at the above address, no later than <e>>.  If payment is made by mail, please cross your cheque or money order "Not Negotiable".  If you pay in person at this office, payment may be made in cash.

If there is any reason why you are unable to take up this offer, or if you wish to discuss the matter further, please contact me on the above number as soon as possible.

Your sincerely

<k>>

for Deputy Commissioner

Attachment A2

SAMPLE SUGGESTED DISCOUNT LETTER - FOR DEBTS PARTIALLY RECOVERED

<e>>

<s>>

<n>>  <e>>  <e>>

<e>>

YOUR FILE NUMBER IS  <o>>

Dear <n>>

I refer to an overpayment of  <n>> totalling <t>>, currently being recovered by <d>>.

From a recent review of your financial circumstances, it appears that you may be in a position to repay <t>> in a lump sum.  This, together with the <t>> you have already repaid, equals approximately 80% of the total original amount which you owed to the Department.

I am able to offer you a discount on your total debt, if you repay <t>> within 30 days of receipt of this letter.  The balance of your debt totalling  <t>> will be waived.  This means that the Department will not ask you to repay this amount at this time or at any time in the future, and represents a discount of  <%>> on the total debt.

For the discount to apply, payment of the amount of <t>> must be made in full to the Receiver/Collector of Public Monies at the above address, no later than <e>>.  If payment is made by mail, please cross your cheque or money order "Not Negotiable".  If you pay in person at this office, payment may be made in cash.

If there is any reason why you are unable to take up this offer, or if you wish to discuss the matter further, please contact me on the above number as soon as possible.

Your sincerely

<k>>

for Deputy Commissioner

Attachment B

CURRENT AND NEW WAIVER GUIDELINES

Current guidelines

A delegate may exercise the discretion to waive recovery of a debt only where he/she is satisfied that:

• a debt is under $200;

or

• the debt arose as a result of an administrative error, and the payment was received in good faith, and the recovery would cause extreme financial hardship to the person(s);

or

• there are extreme or unusual circumstances surrounding the debt where it may be appropriate to waive recovery;

or

• the debt was increased by administrative delay.

New guidelines

A delegate may exercise the discretion to waive recovery of a debt, or part of a debt only where he/she is satisfied that:

• a debt is under $200;

or

• the debt arose as a result of an administrative error, and the payment was received in good faith, and the recovery would cause extreme financial hardship to the person(s);

or

• there are extreme or unusual circumstances surrounding the debt where it may be appropriate to waive recovery;

or

• the debt was increased by administrative delay;

or

• the Department has recovered at least 80% of the original value of the debt from the debtor, and the Department and the debtor agree that this amount is in full satisfaction of the whole debt, and the debtor does not have the capacity to repay a greater proportion of the debt.

Attachment C

EVALUATION

1.Recording on WinPORS

To ensure that the statistical data which will be used for evaluation purposes is meaningful, it is essential that:

(1)all discounts provided after 1 October 1995, are correctly recorded on WinPORS, under Transaction Entry Type -"Waiver Discount (CR)" - ie transaction type no 40;

(2)all debts have a correct "date debt raised" recorded;

(3)where the original overpayment amount is reduced or increased as a result of an appeal, the adjustment is recorded under Transaction Entry Type -

(i)"Appeal (CR)" if amount is reduced;  or

(ii)"Appeal (DR)" if amount is increased.

(4)Under no circumstances should the Transaction Entry Type - "Other Type Not Listed (CR) or (DR) " be used without consulting the Overpayment Management Unit (OMU) supervisor .

2.Producing reports

Three different reports will be available for evaluation purposes :

(1)A full report *- "discfull" - which provides details of all cases finalized within a particular period.  This report contains the following information on each debt

• debt number

• debt raised date

• overpayment amount - ie the original debt amount plus or minus any adjustment due to appeal

• administrative charge amount - ie the amount of administrative charge (not included in the "overpayment amount")

• discount amount - the amount discounted or waived

• amount recovered - total amount recovered ie the "overpayment amount", less any discount amount, plus any administrative charge amount.

Because of the significant number of debts which are finalized in a financial year, this report can be rather large (eg up to 33 pages for NSW for the year 1993/94) and as such it is envisaged that it will only be produced upon request.

(2)Two summary reports *

(i)"Non Discounted Overpayments - "discsum1" - provides a summary of all debts finalized within a particular period which were not discounted

(ii)"Discounted Overpayments" -"discsum2" - provides a summary of all debts finalized within a particular period which were discounted

*Copies are at Attachments C1,2,&3

Detailed below are step by step instructions for the production of the above reports

1.Open Quest by double clicking the Quest icon

2.Click on Open button

3.Click on Query button

4.The Activity dialogue box will open

5.Select the file required by clicking on it once - ie "discull.qqt" (full report); or "discsum1.qqt"(summary of non- discounted debts); or "discsum2.qqt"               (summary of discounted debts).

6.Click OK

7.Your file query is now open

8.Click Query on Menu bar across the top of the screen (not the toolbar button)

(ie next to "File", "Edit"and "View")

9.Click on Conditions

10.Conditions dialogue box opens

11.Type date from and to in the box under Ranges

e.g. 1/7/93 (space) AND (space) 30/6/94 (use cap locks).

Note this will not be necessary for the first report, for the period "1/10/95 - 30/6/95" as this will have been set up.

12.Click on Apply button - when button turns grey, go to step 13

13.Click on OK button

14.Click File in menu bar

15.Click on Save in the drop box

16.Click on File in the menu bar

17.Click on Close in drop box

18.Click on Open button

19.Click on Report button

20.Select the relevant report file -  ie "discull.qrp" (full report); or "discsum1.qrp"(summary of non- discounted debts); or "discsum2.qrp"               (summary of discounted debts).

21.Click OK

22.It will come up with a message in the "Report Activity Note" box.

"The linked document is not open. Open query [Query file name]"

23.Click on OK

WAIT ..........................................................

........................................................!

24.The report will appear in design mode. Do not tamper with this

25.Click on File in menu bar

26.Click on Print in drop box

27.Print report dialogue box opens

28.Click on OK - this will print the report

29.Click on File in menu bar

30.Click on Close in drop box - this closes the "Report"

31.Repeat steps 29 and 30 to close "Query"

32.Click on File in menu bar

30.Click on Exit in drop box  =  EXIT

3.Reporting to Communications, Operations and Review (COR)

(1)As detailed in paragraph 14 of the DI, it is envisaged that reports will be required by National Office on an annual basis, at the end of each financial year, with the first report due at the end of the financial year 1995/96, covering the period 1/10/95 to and including 30/6/96.

(2)The two summary reports only should be provided in the first instance .  It is believed that these will more than adequately address any questions that might arise in terms of number of debts recovered, discounts provided, associated monetary values, average levels of debt/discount etc.

(3)Should more detailed information be necessary - for example if there is a need to isolate those debts raised after a particular date, say after 1/10/95; this can be obtained by requesting a full report (note that the report has been formatted to sort debts in date order).

4.Contact Officers

(1)The documents required to produce the reports will be provided on floppy disk to the Manager, OMU, in each State.  If assistance is required in loading these files onto the hard drive, it is suggested that the State Information Technology area be approached.

(2)All other queries of a "technical" nature regarding the recording of information on WinPORS and the production of reports, should be directed to Ian Campbell in the Queensland State Office on telephone (07) 2238533.  Questions concerning reporting to COR should be directed to COR's Director on telephone (06) 2896429.