MCRI No. 11

External

Military Compensation Scheme

Safety, Rehabilitation and Compensation Act 1988 (SRC Act)

SUBJECT - RECOVERY OF OVERPAYMENTS

PURPOSE
1. The purpose of this MCRI is to advise Military Compensation and Rehabilitation Service (MCRS) staff of the procedures relating to overpayments of compensation in accordance with the provisions of the SRC Act.

BACKGROUND
1. Section 114 of the SRCA states (in part):

“114. (1) Subject to subsection (1A), if:

(a) an amount of compensation under this Act has been paid to a person in consequence of a false or misleading statement or representation or in consequence of a failure or omission to comply with a provision of this Act;

(b) an amount of compensation that has been paid to a person under this Act should not have been paid; or

the amount concerned is recoverable by the relevant authority from the person in a court of competent jurisdiction as a debt due to the relevant authority.

(1A) Paragraph (1b) does not apply to an amount of compensation that the relevant authority is entitled to recover under section 114B.

(2) Where an amount is recoverable from a person under subsection (1) and an amount is payable under this Act to or for the benefit of that person, the recoverable amount may be deducted from the amount so payable.”

It is clear, in view of the wording of the Act, that the MCRS is legally obliged to recover (or at least to consider recovery of) all overpayments of compensation. It should particularly be noted by Delegates that determinations under section 114 of the SRC Act are NOT generally subject to reconsideration in accordance with section 62 of the Act. The exception is in paragraph 114B(5)(a) (the requirement to determine whether an overpayment of compensation has occurred as a result of a superannuation payment) which provides that such a determination is subject to reconsideration.
Recoveries of compensation payments awarded under the SRC Act are no longer returned to the Department of Finance and Administration. With the move to accrual accounting, all recoveries of compensation monies are to be repaid to the General Ledger account code from which the original payment was made.

POLICY
1. Defence Compensation Instruction 38 is hereby revoked. However, please see paragraph 3.8 below.
2. Overpayments of compensation most often relate to three categories of payment under the SRC Act:

overpayment of medical expenses under section 16,
overpayment of compensation for an employee's incapacity for work, and
overpayment of lump sum compensation under sections 24, (25) and 27.

The above list is not exclusive. Overpayments of compensation under other sections of the SRC Act can occur and they also need to be considered in accordance with the information contained in this MCRI.
MCRS staff should note that all recoveries of compensation monies paid by the MCRS, whether “overpayments” of compensation monies incorrectly awarded, account payments incorrectly paid to suppliers or clients, or repayment of compensation monies following a Third Party Damages action, and regardless of the State or Territory office which paid the compensation in the first instance, should in future be referred to the following address:

Directorate of Funds Control

(Receiver of Public Monies)

R1-2-A168

Russell Offices

CANBERRA ACT 2600

That office will in future handle all recoveries of compensation monies centrally. The telephone number for the Directorate of Funds Control is currently (02) 6265 6351.

Please refer to point 3.5 below for the repayment procedure to be followed in the case of returned Reserve Bank of Australia cheques.

Returned Reserve Bank of Australia Cheques Processed through the Defcare/Dolars Link

Cheque payments processed through then Defcare/Dolars link are sometime not received or banked by the payee for a number of reasons including:

sent to an old or incorrect address;
sent to the wrong supplier;
had already been paid.

In these cases if the original Reserve Bank of Australia cheque is returned, it is important that the cheque is referred to the Policy and Procedures Section of MCRS National Office in Canberra. This is so that a proper reconciliation can be carried out. The cheque will then be sent on to the Department of Defence by Policy and Procedures Section staff. These types of cases are NOT overpayments.

If these cheques are actually banked by the payee they are treated as an overpayment and the processes below apply.

3.7 Process of recovering Overpayments processed through PMKeys or the Defcare Dolars Link

The process to follow in relation to recovery of such payments is as follows:

the claimant should be advised of the overpayment and requested to repay the amount owed. If the claimant indicates that he/she is unable to repay the amount in full, he/she should be advised of the option of repayment by instalments. In this situation a “Statement of Financial Circumstances” form should be sent to the claimant with advice that if the claimant is to repay in instalments, it will be necessary to complete that form to enable a decision to be made regarding a reasonable rate of recovery of the debt. The “Statement of Financial Circumstances” form has been revised. A copy of the revised form is attached. It has also been changed in Defcare standard letters.
Where the overpayment arose through the claimant's actions, his/her attention should be drawn to the fact that interest may be charged if the claimant requests that the debt be repaid over a period of more than 12 months and if the MCRS Manager agrees that repayment over such a period is reasonable in the circumstances. In the event that a Manager considers it appropriate to charge interest advice can be sought from the Directorate of Funds Control (Defence Receiver of Public Monies) regarding the rate at which Defence would wish interest to be charged and the manner in which that charge is to be imposed.
if the overpaid amount is to be repaid in one payment, the claimant should be asked to make out a cheque payable to the Directorate of Funds Control , Department of Defence. When the cheque is received from the claimant, it should be forwarded with a covering minute to the Directorate of Funds Control at the Department of Defence with advice of the relevant PMKEYS or Roman payment code(s). A sample of the covering minute is attached and is also available in Defcare standard letters.
if the repayment relates to incapacity payments from the current financial year, the PMKEYS record should be adjusted (“negative cums”) for the individual's “Payment Summary” (Group Certificate). If the repayment relates to previous financial year(s), the covering minute sent to the Department of Defence Directorate of Funds Control must detail the amounts of compensation paid in each of the relevant financial years, again with the relevant PMKEYS payment code(s). Again, a receipt should be requested.
where it is decided that the overpayment is to be recovered by deduction from fortnightly incapacity benefits, the recovery should be instigated via PMKEYS using the appropriate codes. A record should be kept in the overpayment register of the amount to be recovered and the expected date on which the recovery will be finalised. Please note that PMKEYS should NOT be relied upon to cease the recovery of the overpayment automatically. Those MCRS staff who are responsible for recovery of overpayments should therefore use the “tasks” facility in Defcare as a reminder to take action to cease recovery when the overpayment is expected to have been recovered.
in addition to the previous dot point, the “stop payment” facility should be utilised in Defcare to alert Delegates to the existence of the debt if a lump sum payment for permanent impairment is requested and if it is decided that such a lump sum is payable to the claimant. In that event, the amount of the outstanding debt should be deducted from the lump sum permanent impairment payment. Any balance after deduction of the debt should, of course, be paid to the claimant.

3.8 — Regardless of the type of overpayment, once the overpayment has been identified, a record should be set up in the “Overpayment Register” which is kept at each MCRS site in accordance with Department of Defence Departmental Circular Memorandum Number 8/94 which was attached to DCI 38. While it is understood that that Memorandum may no longer be current, the overpayment register is a responsible way to keep a record of identified overpayments. Department of Defence DEFGRAM Number 39/2002 is also relevant and should be followed in such circumstances. It can be seen on the Defence Intranet site at:

http://defweb.cbr.defence.gov.au/home/documents/d — a — t — a/DEFPUBS/DGM02/dg039_02.pdf

COST CENTRE AND ACCOUNT CODES

Advice which has recently been received from the Finance area of the Department of Defence indicates that the following Cost Centre and Account Codes should be used by MCRS staff when repaying compensation monies to the Department of Defence:

COST CENTRES

Cost Centre 355165 for Navy;
Cost Centre 355160 for Army; and
Cost Centre 199020 for RAAF

for both current and previous financial years' payments.

ACCOUNT CODES

Account Code 20687 for Navy;
Account Code 20688 for Army; and
Account Code 20689 for RAAF

for current financial years' payments

Account Code 10000

for all previous financial years' payments.

SPECIFIC OVERPAYMENT CODES

MRG - Mil Comp Gross Overpayment
MRN - Mil Comp Nett Overpayment
MPG - Mil Comp Recovery P/Y Gross Entitlement

CONSIDERATIONS

MCRS staff are reminded that the issue of recovery of overpayments is very often a sensitive one and is often the subject of Ministerial and Ombudsman enquiries. Overpayments are also subject to external scrutiny, particularly from audit authorities. It is in the interests of the MCRS function that close attention is paid to the management of recovery of overpayments and that a clear understanding of the recovery process is developed by relevant MCRS staff.
Decisions regarding recovery of overpayments can also be affected by the manner in which the overpayment occurred. For example, in some cases, it is necessary to revoke a decision finding liability to pay compensation (thus “creating” an overpayment) where a previous Delegate made an error in the initial liability decision. Such action should not of course be taken lightly (MCRI 5 is relevant in such cases - please refer where appropriate). In other cases, the overpayment may have occurred as a result of misleading or incorrect information provided by the claimant (please see Part 8 of this MCRI which deals with Fraud and which may be relevant in such circumstances). Decisions regarding the rate at which it is reasonable to seek to recover any such overpayment can be affected by such considerations. In the first example mentioned above, it may be reasonable to allow more time for the claimant to repay if the overpayment is to be recovered in one payment, or to recover the overpayment at a lower rate and/or over a longer period. In the second example, it may be considered appropriate to allow the claimant less latitude for repayment.
Delegates and Managers should note that the intention of recovery of overpayments is never to cause the employee or claimant financial hardship. The recovery process should be a cooperative one in which a reasonable rate of recovery can be negotiated and agreed with the employee or claimant where it is not possible for the obligation to repay to be met by a single payment.
Where it proves impossible to come to some agreement with the claimant regarding recovery of the overpayment, and the claimant is not actually receiving payments under the SRC Act, the matter should be referred by the MCRS Manager, through the Director P&P, to the Directorate of Funds Control at the Department of Defence in Canberra with a summary of the action which has been taken to try to negotiate or effect recovery.
Since it is actually the Department of Defence's money which has been overpaid, the possibility of instituting legal action to effect recovery will be a matter for consideration by the Department of Defence. However, because of the service level agreement between the MCRS (Department of Veterans' Affairs) and the Department of Defence, it is important for MCRS staff to do everything possible to effect repayment where that is possible.

WRITE-OFF OF A DEBT
1. Section 114C of the SRCA empowers Comcare (and, by delegation, certain MCRS Delegates) to write-off a debt due to the Commonwealth. Advice received from Department of Defence has confirmed the primacy of the SRCA provisions regarding recovery of debts over Department of Defence instructions. The act of writing-off a debt does not preclude the Commonwealth from reinstating the debt at some later time if the circumstances surrounding the debt change (i.e., it does not expunge the debt in law).
2. A decision whether or not to write-off a debt can only be taken by a Level 7 Delegate in some State/Territory offices or by a Level 7 or Level 8 Delegate in MCRS National Office. Any cases in which write-off of a debt is requested, and which cannot be decided locally by MCRS staff, should be referred to MCRS National Office for consideration. It will only be possible to consider any such matters if a submission (endorsed by the relevant MCRS Manager/Team Leader) is received in National Office detailing:

the circumstances of the overpayment (how it occurred);
confirmation of the amount of the overpayment;
a history, supported by documentation, of the attempts made to recover the overpayment;
advice as to whether the claimant can objectively be considered to have any reasonable capacity to repay the debt at the present time or in the future - a completed Statement of Financial Circumstances form will be relevant to this matter;
the MCRS Manager's opinion (if any) as to whether it is likely that the Commonwealth would be successful in a Court of Law to effect recovery of the overpayment. There are legal officers in each DVA office who should be able to provide basic advice as to the prospects of a successful recovery if the action were to go to Court;
advice as to whether it is considered to be cost-effective for the Department of Defence to pursue recovery of the overpayment (i.e., will it cost more to recover the debt than the debt is worth?);
what remedial action has been taken (where applicable) to prevent further similar overpayments in the future; and
any other factors which may have a bearing on the viability of pursuing recovery of the debt.

WAIVER OF A DEBT

Section 114D of the SRCA empowers Comcare (and, by delegation, certain MCRS Delegates) to waive the right to recover from a person the whole or part of a debt. A decision to waive a debt can only be made by a Level 8 Delegate in MCRS National Office.
The waiver of a debt to the Commonwealth is a process where, in a particular instance, a decision is made to renounce a debt (i.e., the legal existence of the debt is removed and the debt cannot be reinstated at a later time). There are no specific Department of Defence criteria for waiver of a debt and it is therefore a power which is rarely exercised. Cases are examined individually, and an approval for waiver will only be given where the circumstances are judged to be of such a compelling nature that the Commonwealth has a moral obligation to waive the debt.
One example of where the Commonwealth may have a moral obligation to waive the debt is where the debt arose because of MCRS error, the payment was received in good faith by the claimant and the claimant is suffering severe financial hardship which would probably be worsened by recovery of the debt. All three criteria need to be met and supported by evidence before a request for waiver could possibly be granted. Even if all of these criteria appear to be met, the claimant should not be given any indication that a request for waiver either will be successful, or is likely to be successful.
All matters relating to recovery of overpayments of compensation where waiver of the debt is requested, must be referred to the Director, Policy and Procedures Section of the MCRS's National Office in Canberra for consideration with a comprehensive minute as indicated at paragraph 6.2 above.

FRAUD

Where an overpayment of compensation appears to have arisen out of fraudulent actions by the claimant, the matter should be considered for prosecution. All such prosecutions are handled by the National Fraud Control Unit (NFCU) in DVA's National Office in Canberra. The telephone number to contact should MCRS Managers wish to discuss cases involving possible fraudulent actions is (02) 6289 6627.
It should be noted that the sooner a matter is referred for possible prosecution the greater is the likelihood of success. Individual offices of the MCRS are not to undertake any investigations relating to a possible prosecution unless directed to do so by the NFCU. Where any questions arise relating to possible prosecution action, the relevant MCRS office should contact the NFCU as soon as possible.

Enquiries
1. Any enquiries regarding the information contained in this MCRI should be referred to Craig Boyd by e-mail at craig.boyd@dva.gov.au or by 'phone on (08) 9366 8571, to Jason Puric at jason.puric@dva.gov.au or (02) 6289 6051, to Mike Armitage at mike.armitage@dva.gov.au or (02) 6289 4899 or to Wendy Johnson at wendy.johnson@dva.gov.au or (02) 6289 6182.

Mark Travers

Director

Policy and Procedures

MCRS National Office, Canberra

February 2003

Date

Directorate of Funds Control

(Receiver of Public Monies)

R1-2-A168

Russell Offices

CANBERRA ACT 2600

SUBJECT - OVERPAYMENT OF COMPENSATION BENEFITS UNDER THE SAFETY REHABILITATION AND COMPENSATION ACT 1988 (SRC ACT) TO

(???? insert employee's/claimant's name and employee's service number????)

1.The attached cheque has been received from Mr/Mrs/Ms ???????? in repayment of an overpayment of compensation under the SRC Act. The amount was overpaid for (e.g., weekly compensation benefits, medical expenses, lump sum compensation for permanent impairment etc).

It appears that the amount of compensation should be repaid to:

Cost Centre ?????? and
Account Code(s) ?????

3.It would be appreciated if you could arrange for the compensation monies to be repaid and also for a receipt to be prepared and referred to me at the following address:

Delegate's name

Military Compensation and Rehabilitation Service

Rest of MCRS address

Name

Delegate SRC Act

Enclosure

STATEMENT OF FINANCIAL CIRCUMSTANCES

File Reference:Total debt outstanding: $

Name:

Address and phone Number:

Married: Yes/No — Spouse name:

Age of Dependants

Please provide details of you and your spouses (if applicable) assets and liabilities in the table below. Asset values should reflect current market prices. If deemed necessary supporting documentation may be requested from you to verify information provided on this form.

Asset

$ Value

Liability

$ Value

Home

Cash in accounts

Shares, debentures, etc

Vehicles – List model and year

Other real estate – address

Other assets in excess of $500 – provide details

Mortgage – Name of mortgagee

Credit cards– Name of provider

Personal loans – Name of provider

Car loans – Name of provider

Store cards – Name of store

Other debts – Provide full details

TOTAL ASSETS

TOTAL LIABILITIES

Please provide details of your and your spouses (if applicable) income and expenses in the table below. Unless otherwise stated all $ figures should be per fortnight net. If you have expenses greater than normal please attach a statement explaining why.

(pq) is per quarter (pa) is per annum

Income

Expenditure

Wages – Self

Spouse

Name of spouse's employer

Other income - provide details

Car costs - Petrol

Registration (pa)

Insurance (pa)

Maintenance (pa)

Child Support payments

Rent/Board

Groceries

Home mortgage

House and contents insurance

Medical insurance

Investment loan(s)

Personal/car loans(s)

Credit cards minimum payment

Store cards minimum payment

Education (pa)

Electricity (pq)

Gas/Wood (pq)

Telephone/Internet (pq)

Rates (pa)

Clothing (pa)

Medical expenses (pa)

DFRDB or other superannuation

Other expenses – provide details

TOTAL INCOME

TOTAL EXPENSES

I offer to pay $ per fortnight.

I authorise the Military Compensation and Rehabilitation Service to make any enquires necessary to establish my ability to meet the proposed payment rate. I declare that the information supplied is true and correct.

Signature ___________________________ — Date ____________________

23:00 — 29/05/03