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C32/2003 Changes to waiver guidelines and to associated delegation levels
DATE OF ISSUE: 19 DECEMBER 2003
Changes to waiver guidelines and to associated delegation levels
Early in 2003 a number of issues surrounding debt management procedures and reporting were identified. In consultation with State offices a detailed project plan was developed, including an action item to examine the policy and procedures surrounding waiver and write-off policy and delegations
Rationalisation for changes
It has become clear that:
- DVA and Centrelink debt recovery policy, particularly in relation to waiver of debts, has diverged over recent years;
- There was the potential for inconsistency across State offices in relation to waiver and write-off decisions; and
- Delegations relating to waiver were not uniform.
The changes agreed by the Repatriation Commission on 28 October 2003 to DVA waiver policy are intended to realign the respective policies as much as possible with Centrelink, particularly in those areas where Centrelink had become seemingly more lenient than DVA, and to introduce uniform delegations across State offices and National Office.
DVA waiver authority
S206(1)(b) of the Veterans' Entitlements Act (VEA) gives the Commission the power to waive or write off the Commonwealth's right to recover a debt. These powers have been delegated to officers in both State offices and National Office and the Commission has endorsed policy guidelines which delegates must consider when making overpayment recovery decisions.
Waiver guidelines to be amended
The DVA waiver guidelines contained in the Overpayment Management Manual (OMM) will be amended in response to the Commission decision, with the result that they align more closely with those applied by Centrelink. Details of the amendments to be included in the OMM (currently being updated) are as follows:
Current DVA policy
For a debt to be waived under this criterion, three conditions must be met:
- the debt must be due solely to administrative error;
- the payment must have been received in good faith; and
- repayment of the debt would cause the debtor extreme financial hardship.
Consideration also needs to be given to whether complete obligations and income and assets statements have been provided, their frequency and timeliness. Where this information has been provided according to departmental standards, it is unlikely that waiver would be appropriate because good faith is unlikely to be a sustainable argument in these circumstances.
For a debt to be waived under this criterion:
- the debt must have been solely due to administrative error; and
- the payment must have been received in good faith.
While the new guidelines state that the debt still must be caused wholly by administrative error and the payment to have been received in good faith, the necessity for a debtor to be in extreme hardship has been removed. The 'good faith' aspect has been reinforced by provision of guidance about what constitutes good faith. That guidance is generally in line with the FaCS Guide provisions but includes several factors unique to DVA.
DVA issues each pensioner a very detailed list of the income and assets taken into account in the granting of their pension, with the specific instruction that they should check the list and advise DVA within 14 days of any incorrect or missing details. Steps also have been taken recently to make the DVA advices even clearer, to ensure that pensioners are fully informed of their obligations in an effort to reduce the number of contentious DVA administrative error overpayments.
In practice, Centrelink currently applies a 'causal link' test to determine good faith, and if the link is broken, then a debt will be raised from the date of the break. For example, a person may in good faith commence receiving more than they are entitled to, due to an administrative error, but at some point their circumstances change eg an increase in wages, and at that point it may be determined that they should have been aware that their entitlement should reduce. If payment continued at the higher rate for some time and then the error was discovered, an overpayment would be raised from the date of the increase in wages.
Notwithstanding the above, if an administrative error causes a debt and it is discovered within 6 weeks of it commencing, it should be recovered. However, if it is not discovered and raised within 6 weeks of it first occurring (or from the end of the notification period if obligations were fulfilled) then the whole debt must be waived, providing the elements of administrative error and good faith are present. By adopting the Centrelink approach DVA will now will cap at 6 weeks the period for which a pensioner can be penalised for a departmental error if good faith is accepted.
Current DVA policy
When an overpayment is increased because the department fails to action a pensioner's advice in a timely manner, then that portion of the debt caused by the department's delay may be waived. One of the conditions that currently must be met for this category to apply is that “the pensioner has notified of a change in circumstances but this notification is late”. This condition was prompted by a specific case in the early 1990s, and has served its purpose.
Where an overpayment is increased because the department fails to action a pensioner's advice of a change in circumstances within six weeks of receiving the advice, the portion of the overpayment caused by the delay must be waived, provided the payment was received in good faith.
This change ensures that pensioners are not disadvantaged in the recovery of overpayments compared with their Centrelink counterparts. The Centrelink approach puts a cap on the amount that can be recovered at 6 weeks. This change applies to both persons who advise the department outside the prescribed notification period after the date of the event and to those that notify within the prescribed timeframe. However, the debt may be waived only if the additional money has been received in good faith. In practice, that means that debts exacerbated by administrative delay in most cases will still be recovered, as the pensioner will normally be aware that their entitlement should have been reduced due to the event causing the notification.
3. Extreme or unusual circumstances
Current DVA policy
One example of extreme or unusual circumstances applying is a debtor who has been imprisoned in lieu of payment of the debt. Another example; in the “compelling and compassionate reasons” mould, is a debtor with a very serious or terminal illness who may require the funds in question to pay for lifesaving treatment, or for his/her funeral. In cases such as these, waiver is appropriate.
Financial hardship alone does not constitute special circumstances. In Beadle and D-GSS (1984), the AAT held that for special circumstances to exist, the circumstances must be “markedly different from the usual run of cases.” They must have “a particular quality of unusualness that permits them to be described as special”. In SDSS v Hulls (1991) the Federal Court held that it was not possible to make a complete list of the factors to consider in determining whether special circumstances exist, but that each case must be considered on its own merits.
There has been no change to this category of waivers. When a delegate determines that extreme or unusual circumstances apply and pursuit of the debt is inappropriate, a debt should be waived. The OMM will expand on the above examples to clarify the application of this category.
4. Overpaid tax amount
Current DVA policy
Where a pension debtor has repaid an income support overpayment in full, the period of the overpayment exceeds a four year span and the person had a tax liability which cannot now be adjusted by the ATO, the amount equal to the excess tax paid should be waived. This category was created in reaction to criticism of DVA by the Ombudsman in early 1990s for its stance on a particular case.
This class will be retained.
Current DVA policy
Where the debtor has made no attempt to deceive the department, and has at least 80 percent but less than 100 percent of the available funds necessary to repay the debt, the portion unpaid ie 20 percent or less, may be waived after the larger portion is paid.
If a person has not attempted to deceive or defraud the department, has readily available funds equal to at least 80 percent but less than 100 percent of the debt and full repayment of the agreed amount is made in a lump sum, then the unpaid portion ie 20 percent or less, of the debt must be waived ie the optional nature of waiver is removed.
6. Ministerial waivers (Debts Under $200)
Current DVA policy
Small debts may be waived if they are not economic to recover. This class of waiver is also known as 'Ministerial waivers', in that the Minister has gazetted them as a 'class' of debt that may be waived if uneconomic to recover. In practice, since the 2001 introduction of the Debt Management and Recovery System, DVA can now efficiently and economically recover quite small debts. Therefore if the debtor remains in payment, the debt should generally be recovered, providing other circumstances such as the cost of investigation and the time to calculate the debt do not indicate otherwise.
Clarification of current policy
When a debt is, or is likely to be, less than $200, consideration must be given to the cost effectiveness of recovery. In most cases debts over $50 should be recovered. However, factors which should be considered include: the cost of investigation; the likely amount of the debt; what is involved in raising the debt ie recording the debt and advising the debtor; and ease of recovery. When the person is continuing in payment, almost any debt is cost effective to recover and therefore should be recovered.
7. Notional Entitlement
Current DVA policy
Unlike Centrelink, DVA has no current category like the 'Notional entitlement' class of waiver.
DVA even quite recently has raised debts involving loss of entitlement to Partner Service Pension, for example, when the debtor would otherwise have been entitled to a SSA payment such as Age Pension, but Centrelink is not able to backdate the SSA claim to offset the VEA debt. In such cases, it would be reasonable for DVA to calculate a 'notional entitlement' to Age Pension and waive an equivalent portion of the debt.
While not an exact alignment of the two agencies' legislation or policy, it does recognise that while a client did not have entitlement to one form of taxpayer-funded income support payment for some reason, they did have concurrent notional entitlement to another income support payment.
DVA has therefore adopted a new, parallel class to the SSA category of 'Notional entitlement'. When a cancelled pensioner has entitlement to another payment, the notional entitlement may be offset against the overpaid pension. For example, a Partner Service Pensioner who is divorced without his/her knowledge but continues to receive PSP for some time may have had a concurrent entitlement to age pension under the Social security Act 1991. If Centrelink grants the person a pension, their 'notional entitlement' may be considered as established and an equivalent amount for the period in question may be offset against the VEA debt and waived.
Inconsistency of delegations
The debt management review has also highlighted a number of inconsistencies in waiver and write-off delegations across States. Uniformity of delegation across functional levels is seen as desirable to ensure that there is some consistency in relation to the monetary value of waiver or write-off that can be exercised by a particular position in any State or in National Office.
Change in delegation levels
Commission decision CM5524 changes the waiver and write-off delegations for income support and disability compensation debts as follows
The Commission retains its unlimited power under legislation to waive, write off or defer recovery of debts and has delegated its power in the area of Disability and Compensation debt waiver as follows:
- unlimited to the Secretary;
- $50,000 to Deputy Commissioners, Division Head, Compensation and Support, and Branch Heads, Income Support and Disability Compensation;
- $30,000 for State Directors Compensation and National Office Director Compliance and Review;
- $20,000 for National Office Director Policy Section and the State Assistant Directors Compensation/Income Support;
- $15,000 for the managers of the State debt recovery units, National Office Assistant Director, Compliance and Review and National OfficeTeam Leader, Data Matching Investigations Unit (DMIU);
- $5,000 for APS 5s in State debt recovery units, VCES and bereavement units and the National Office DMIU;
- $2,500 for APS 4s and 3s in those units; and
- $500 for junior death processing staff.
Note that ISSOs/SPOCs and their team leaders do not have waiver delegations.
19 December 2003