**CONTENTS**

**CHAPTER 7. SCHOOL LIABILITY**

**SUBCHAPTER I. BASIC PROCEDURE**

PARAGRAPH PAGE

7.01 General 7-1

7.02 Background 7-1

7.03 Overview of School Liability Procedures 7-1

7.04 Identification of Potential Liability Cases 7-2

7.05 Determination of Potential Liability 7-2

7.06 Notice to School and VA Response 7-5

7.07 Committee on School Liability 7-7

7.08 Role of District Counsel 7-7

7.09 Prehearing Conference 7-8

7.10 Hearing 7-9

7.11 Committee Panel Decision and Notice to School 7-10

7.12 Appellate Procedures 7-10

7.13 VA Management Responsibilities 7-13

**SUBCHAPTER II.**

**REQUIREMENTS FOR REPORTING ENROLLMENT CHANGES**

**AND**

**METHODS OF DETERMINING \"LAST DATE OF ATTENDANCE\"**

7.14 General 7-14

7.15 Requirements for Reporting Enrollment Changes 7-14

7.16 Determining the Last Date of Attendance. 7-15

**SUBCHAPTER III.**

**EXTENT OF POTENTIAL SCHOOL LIABILITY FOR**

**INDIVIDUAL OVERPAYMENTS**

PARAGRAPH PAGE

7.17 General 7-16

7.18 False Certification Cases 7-16

7.19 Late Report Cases 7-16

7.20 Examples 7-17

7.21 Failure to Report and False Certification Distinguished 7-20

**SUBCHAPTER IV. GUIDELINES FOR SCHOOL LIABILITY DECISIONS**

7.22 General 7-21

7.23 Discussion of Key Concepts 7-21

7.24 Guidelines When Negligence Is the Issue 7-21

7.25 Rule of Reasonable Certainty 7-22

**SUBCHAPTER V. QUESTIONS AND ANSWERS ON SCHOOL LIABILITY**

7.26 Purpose 7-23

7.27 General Questions on School Liability 7-23

7.28 Questions on Subchapter I 7-25

7.29 Questions on Subchapter II 7-27

7.30 Questions on Subchapter III 7-27

FIGURE

7.01 VA Form 22-8804, Report of Potential School Liability 7-4

7.02 VA Form Letter 4-334 7-6

7.03 Sample Pattern Letter Advising School of Certification of Appeal 7-
12

**CHAPTER 7. SCHOOL LIABILITY**

**SUBCHAPTER I. BASIC PROCEDURE**

**7.01 GENERAL**

This chapter provides procedures for implementing the school liability
provisions of title 38. (See 38 U.S.C. 3685 (formerly 1785).) The
procedures for the Finance activity are in a separate manual. In this
chapter, the terms \"Adjudication Officer,\" \"Veterans Services
Officer,\" \"District Counsel,\" and \"Finance Officer,\" also refer to
the designees of such officials unless otherwise indicated; the term
\"school\" means an \"educational institution\" as defined in 38 U.S.C.
3452(c) (formerly 1652(c)) or a \"training establishment\" as defined in
38 U.S.C. 3452(e) (formerly 1652(e)).

*NOTE: Only the regional office with compliance and liaison jurisdiction
over a school will take the actions described in this chapter.*

**7.02 BACKGROUND**

a\. Schools are required to report without delay, the enrollment,
interruption, and termination of attendance for each person enrolled in
programs under chapters 30, 31, 32, 34, and 35 of title 38, chapter 106
of title 10, and section 903 of PL 96-342. (Section 901 of PL 96-342
does not contain this requirement.)

b\. VA may hold a school liable for an overpayment to a claimant if the
overpayment was made as a result of (1) willful or negligent failure of
the school to report excessive absences from a course, or discontinuance
or interruption; or (2) willful or negligent false certification. This
applies to chapters 30, 31, 32, 34, and 35 of title 38, chapter 106 of
title 10, and section 903 of PL 96-342. It does not apply to the section
901 program.

c\. School liability may be recovered in the same manner as any other
debt due the United States. However, any amount collected from a school
shall be reimbursed if the overpayment is subsequently recovered from
the claimant (38 U.S.C. 3685 (formerly 1785)). VA may not withhold the
annual school reporting fee unless liability is not contested or
liability has been upheld by a final decree of a court of appropriate
jurisdiction (38 U.S.C. 3684 (formerly 1784)).

**7.03 OVERVIEW OF SCHOOL LIABILITY PROCEDURES**

a\. The school liability procedures may be summarized as follows:

\(1\) [Identification Phase]{.underline}. VA relies primarily on
compliance surveys to identify potential school liability cases although
other sources may be used. (See par. 7.04.)

\(2\) [Determination of Potential Liability]{.underline}. Upon the
request of the VSO (Veterans Services Officer), the Adjudication Officer
will review compliance survey reports together with other information
available about the school to determine if a school may be found
potentially liable for overpayments. (See par. 7.05.)

\(3\) [Notice to School and VA Response]{.underline}. The Finance
Officer will compute the potential liability and notify the school of
the amount and of its rights under the school liability procedures. (See
par. 7.06.)

\(4\) [Committee on School Liability]{.underline}. A panel of three from
the station\'s Committee on School Liability will decide the case. The
school may challenge the qualifications of proposed panel members. (See
par. 7.07.)

\(5\) [Role of District Counsel]{.underline}. The District Counsel will
present VA\'s case at the hearing and will be present at any prehearing
conference; if no hearing is requested, the District Counsel will
present VA\'s case directly to the panel. (See par. 7.08.)

\(6\) [Prehearing Conference]{.underline}. If a hearing is requested, a
prehearing conference will be held unless specifically waived by the
school. (See par. 7.09.)

\(7\) [Hearing]{.underline}. All hearings will be held under published
hearing rules. (See par. 7.10)

\(8\) [Committee Panel Decision and Notice to School]{.underline}. The
Committee Panel will make its decision based on the evidence of record
including the hearing transcript if a hearing was held. Entire claimant
folders will not normally be reviewed. (See par. 7.11)

\(9\) [Appellate Procedures]{.underline}. A school may appeal an adverse
decision to the School Liability Appeals Board in Washington. (See par.
7.12)

b\. Additional subchapters provide information on special topics:

\(1\) Subchapter II. Requirements for Reporting Enrollment Changes

and Methods of Determining \"Last Date of Attendance\"

\(2\) Subchapter III. Extent of Potential School Liability for
Individual Overpayments

\(3\) Subchapter IV. Guidelines for School Liability Decisions

\(4\) Subchapter V - Questions and Answers on School Liability

**7.04 IDENTIFICATION OF POTENTIAL SCHOOL LIABILITY CASES**

Compliance surveys ordinarily provide the basis for pursuing school
liability. If the VSO believes that a compliance survey shows school
reporting errors which could result in a finding of potential school
liability, the survey report, including the findings on individual
cases, should be referred to the AO (Adjudication Officer) with a
request for a determination of potential liability. If a 100 percent
audit has been performed because of errors found in the initial sample
of records, the results will always be referred to the AO for a
determination of potential liability.

**7.05 DETERMINATION OF POTENTIAL LIABILITY**

**a. General.** Only the AO may make a finding of potential school
liability. Such a finding should ordinarily be based on a 100 percent
audit of school records and not a sample.

**b. Reporting Problem.** Whenever the VSO requests a determination as
to school liability, or other evidence indicates a school may have a
significant reporting problem, the AO must consider the issue of
potential school liability. The AO will consider all known facts about
the school which might have a bearing on school liability. (See subch.
IV.) If circumstances warrant, the AO may request a 100 percent audit of
school records, a liaison visit, or a field investigation to obtain
additional information. Separate procedures apply if there is likelihood
of fraud.

**c. No Liability.** The AO must document the reasons for not holding a
school potentially liable when the VSO has requested a determination as
to potential liability or when a significant reporting problem appears
to exist. If potential liability is not assessed, the AO will advise the
VSO of the reasons for not assessing potential school liability. The VSO
will advise the school of any reporting problem not previously discussed
with the school during the compliance survey exit interview.

**d. Liability Assessed**

\(1\) If the AO determines that the evidence warrants a finding of
potential school liability, he or she will prepare a memorandum of such
determination. The AO must consult with the local District Counsel
before making any finding of potential liability. (If there is doubt as
to the cost effectiveness of pursuing school liability, the AO may
consult with the Finance Officer on this matter. See par. 7.28a.)
However, the final determination of potential liability shall be made by
the Adjudication Officer.

\(2\) Authority to sign this memorandum may not be delegated. Any
supporting documents (e.g., compliance survey reports, error analysis)
will be attached to the memorandum, as will a VA Form 22-8804, Report of
Potential School Liability (see fig. 7.01), completed for each case in
which the AO believes there is potential school liability. The
memorandum and attachments will then be forwarded to the Finance Officer
with the claims or other folders.

*NOTE: The Finance Officer will be advised if fraud is indicated. He/she
will take no further action pending a determination by the District
Counsel and the Department of Justice, if applicable.*

**e. Preparation of VA Form 22-8804**

\(1\) [General]{.underline}. Adjudication must complete a VA Form
22-8804 in each case of potential liability. The form provides the
Finance activity with sufficient information to compute the amount of
potential school liability. (Do not use this form for cases involving
correspondence or flight training; instead, refer the required data to
Finance by memorandum. Use VA Form 22-8804 for all benefits including
chapters 30, 106, and section 903 cases; indicate the type of benefit in
item 3.)

\(2\) [Need for Accuracy]{.underline}. It is essential that VA Form
22-8804 be completed accurately. It is anticipated that all forms for a
particular school will be completed on a \"project\" basis and only by
adjudicators who have had special training in school liability
procedures, especially subchapters II and III of this chapter.

\(3\) [Procedures]{.underline}. The key issue in completing the form is
the period of potential school liability (item 5F). This period will
often be shorter than the period covered by the total overpayment. (See
subch. III for detailed instructions and examples.) Complete separate
lines on the form if there is more than one period of liability, or if
there are rate changes within a given period of liability. Instructions
for specific items may be found on the reverse side of the form. General
instructions are shown here:

\(a\) VA Form 22-8804 will always be prepared with the claims (or other)
folder. If the folder is located at another station, temporarily
transfer it in from the other office, photocopy the relevant documents,
and return the folder as quickly as possible.

\(b\) VA Form 22-8804 should not be completed in cases in which the
overpayment for the liability period has already been *recovered.*

\(c\) The original of VA Form 22-8804 will be forwarded to the Finance
activity.

\(d\) A copy will be initialed by the preparer and filed in the
claimant\'s folder on the left flap.

\(e\) Once a school has been notified of its potential liability as
described in paragraph 7.06, no additional VA Forms 22-8804 may be
referred for that school unless they are treated as a separate group of
errors, in which case, the notice procedure of paragraph 7.06 will be
applied a second time.

<table>
<colgroup>
<col style="width: 9%" />
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<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 6%" />
<col style="width: 3%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="5">[<strong>Department of Veterans Affairs</strong></td>
<td colspan="8"><strong>REPORT OF POTENTIAL SCHOOL
LIABILITY</strong></td>
</tr>
<tr class="even">
<td colspan="5">1. Name of Veteran or Eligible Person</td>
<td colspan="4"><ol start="2" type="1">
<li><p>VA FILE NO.</p></li>
</ol></td>
<td colspan="4">3. Overpayment of Benefits Under</td>
</tr>
<tr class="odd">
<td colspan="9">4. NAME AND ADDRESS OF SCHOOL</td>
<td colspan="4"><p><img src="media/image1.emf"
style="width:0.34375in;height:0.26042in" /> CHAPTER 30</p>
<p><img src="media/image2.emf" /> CHAPTER 32</p>
<p><img src="media/image1.emf"
style="width:0.34375in;height:0.26042in" /> CHAPTER 35</p>
<p><img src="media/image1.emf"
style="width:0.34375in;height:0.26042in" /> CHAPTER 106</p></td>
</tr>
<tr class="even">
<td colspan="13">NOTE: The school may be potentially liable for all or
some part of the overpayment in this student's case as shown below.
Complete Items 5A through 5H for each incident of late reporting or
false certification. See reverse for codes to be entered in Item 5A and
for additional instructions.</td>
</tr>
<tr class="odd">
<td>5A. Reason for</td>
<td>5B. Date School signed late</td>
<td>5C. Date of change of</td>
<td>5D. Ending date of</td>
<td colspan="2">5E. Date Late report received in</td>
<td colspan="2"><p>5F. PERIOD OF</p>
<p>POTENTIAL LIABILITY</p></td>
<td colspan="3">5G. ORIGINAL TRAINING TIME AND RATE</td>
<td colspan="2">5H. ADJUSTED TRAINING TIME AND RATE</td>
</tr>
<tr class="even">
<td>Liability (Use codes on reverse)</td>
<td>report or false certification</td>
<td>enrollment status</td>
<td>30 day reporting period</td>
<td colspan="2">VA or Date VA learned of false certification</td>
<td><p>From</p>
<p>(Month, day, year)</p></td>
<td><p>Through</p>
<p>(Month, day, year)</p></td>
<td colspan="2"><p>Training</p>
<p>Time</p></td>
<td><p>Monthly</p>
<p>Rate</p></td>
<td><p>Training</p>
<p>Time</p></td>
<td><p>Monthly</p>
<p>Rate</p></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="13">6. REMARKS</td>
</tr>
</tbody>
</table>

Representation of VA Form 22-8804, April 1991

**Figure 7.01. VA Form 227-8804, Report of Potential School Liability**

**7.06 NOTICE TO SCHOOL AND VA RESPONSE**

**a. Initial Action.** The Finance Officer will review the record to
determine the potential liability. Any VA Form 22-8804 found to be
inadequate will be returned to the Adjudication Officer for correction.
Finance will prepare VA Form 4-5295, Institutional Liability Computation
Sheet, for each case. Separate Finance instructions describe how to
complete this form.

**b. VA Form Letter 4-334 - Notice of Intent to Hold Institution Liable
For Educational Assistance Overpayments.** When the record is considered
adequate, and no fraud is indicated, the Finance Officer will forward VA
Form Letter 4-334 (see fig. 7.02 and par. 7.28b for additional required
text for the December 1979 edition of this form letter) and attachments
to the school by certified mail, return receipt requested. (The District
Counsel will be furnished a copy of this package.) The letter will
notify the school of VA\'s intention to hold the school liable. The
attachments, VA Form 4-5237, Listing of Students Overpaid as Result of
Institution\'s Apparent Noncompliance, VA Forms 22-8804, and VA Forms
4-5295, will identify the students overpaid and will set out in each
student\'s case the actions or omissions by the school which resulted in
school liability being assessed under 38 U.S.C. 3685 (formerly 1785).
Applicable Federal statutes and regulations will be cited by statute and
regulation number. VA Form Letter 4-334 will include the following
information about the school liability procedures:

\(1\) The school will have the option of a hearing or submission of
evidence directly to the Committee on School Liability without a prior
hearing.

\(2\) If the school wishes to exercise its hearing option, a prehearing
conference will be scheduled, unless the school specifically waives the
prehearing conference.

\(3\) The purpose of the prehearing conference is to give the school and
its legal representatives, if any, an opportunity to review and discuss
the record upon which the assessment of potential liability was based;
to discover and consider persons whom they wish to call as witnesses at
the hearing; and to set a mutually convenient date for the hearing. The
list of such witnesses must be furnished to VA at the prehearing. The VA
likewise will submit to the school a list of witnesses it will call.

\(4\) If the school wishes a hearing with no prehearing conference, the
school will be requested to submit a list of proposed witnesses for the
hearing as well as any documentary evidence.

\(5\) The school will be advised that the final decision will be made on
the evidence of record, if additional evidence or a hearing request is
not received within 30 days of the date of receipt of VA Form Letter
4-334. The school will be requested to reply to the Finance Officer by
certified mail.

**c. Action Upon School Response.** The Finance Officer will notify the
officials indicated below who will take the required actions:

\(1\) [School Requests Hearing and Prehearing Conference]{.underline}.
The Adjudication Officer will arrange for the prehearing conference.
(See par. 7.09.) The District Counsel will be present at the prehearing
conference. (See par. 7.08.) See subparagraph (2) below for actions
required to prepare for the hearing.

\(2\) [School Waives Prehearing Conference and Requests Hearing
Only]{.underline}. The Chairperson of the Committee on School Liability
will select the hearing panel members. (See par. 7.07.) The Adjudication
Officer, after consultation with the District Counsel, will notify the
school of the time and place of the hearing. This notice will include a
list of any VA hearing witnesses and a list of the three proposed
hearing panel members (and two alternates) with a brief statement of the
qualifications of each and of the right to challenge. (See par. 7.07.)
The District Counsel will present management\'s case at the hearing.
(See par. 7.08.

> This is a NOTICE OF INTENT to hold your institution liable for certain
> overpayments of educational assistance benefits. A determination has
> been made that overpayments to the veteran(s) and/or eligible
> person(s), as shown by the attachments to this letter, may have been
> created as the result of your institution's apparent noncompliance
> with proper and timely reporting requirements. The individual(s)
> involved are being notified of their indebtedness.
>
> Section 1785, Title 38, United States Code provides the overpayment is
> created as the result of (1) willful or negligent failure of an
> educational institution to report to the Veterans Administration
> excessive absences from a course, or discontinuance or interruption of
> a course, or (2) false (erroneous) certification by an educational
> institution, the amount of such overpayment, the amount of such
> overpayment shall constitute a liability of such institution, and may
> be recovered in the same manner as any other debt due the United
> States.
>
> Your institution may therefore be liable for the overpayment(s) to
> subject veteran(s)and/or eligible person(s) which now total \$ . This
> amount, however, is subject to reduction in accordance with the
> amount(s) recovered from the veteran(s) and/or eligible person(s).
>
> You are invited to submit, by certified mail, any facts or information
> by rebuttal to the attached evidence of your possible liability.
> Alternatively you may, by certified mail, request a hearing to present
> case, in which event we will first schedule a pre-hearing conference
> unless you express your desire to waive this conference.
>
> The purpose of a pre-hearing conference is to give you and your local
> representative(s), if any, an opportunity to review and discuss the
> record, upon which our assessment of your liability is based, so that
> issues may be properly framed. This conference would also provide an
> opportunity to determine persons who may be called as witnesses at the
> hearing, and to see a mutually convenient date for the hearing. If you
> waive the pre-hearing conference, you are requested to submit your
> documentary evidence and list of proposed hearing witness by mail.
> Upon receipt of this submission, we will forward to you this agency's
> witness list as well as information about the panel members who will
> make the final decision in your case.
>
> If your rebuttal evidence or hearing request is not received by the VA
> within 30 days of the date of your receipt of this letter, our final
> decision as your liability under 30 U.S.C. 1785 will be made on the
> evidence of record.
>
> Sincerely,
>
> Finance Officer

**Figure 7.02. VA Form Letter 4-334**

\(3\) [School Submits Evidence But Waives Both Hearing and Prehearing
Conference]{.underline}. The Chairperson of the Committee on School
Liability will select a panel of three to decide the case. (See par.
7.07.) The District Counsel will present management\'s case to the
panel. (See par. 7.08.)

\(4\) [School Does Not Reply to FL 4-334]{.underline}. If the school
does not reply within 30 days, follow procedure in subparagraph (3)
above.

**7.07 COMMITTEE ON SCHOOL LIABILITY**

**a. General.** A standing Committee on School Liability will be
established at each regional office and a three member panel from this
Committee will make the decision as to liability.

**b. Committee Composition.** The Committee on School Liability will be
composed of a chairperson who must have knowledge of education claims
procedures and such number of committee members as shall be necessary.
The chairperson and the Committee members shall be designated by the
Director of the regional office and shall serve at the discretion of the
Director. Neither the chairperson nor any Committee member shall be
below a GS-9 grade level. There shall be a sufficient number of persons
with backgrounds in the adjudication of education claims to meet the
requirements for panel composition as stated below.

*NOTE: Resumes should be prepared by all potential Committee members for
review by the RO Director to ensure that each potential member is fully
qualified. Copies of all resumes should be maintained by the Director
and should be available for review by Central Office staff. Also, it is
the chairperson of the Committee who is responsible for the oversight of
the Committee\'s operation. The chairperson is responsible for arranging
adequate administrative and clerical support to ensure that all hearings
take place timely and that hearing transcripts and committee decisions
are prepared accurately and dispatched timely.*

**c. Panel Composition**

\(1\) The Committee chairperson shall designate a panel of three
members, one of whom shall be designated chairperson, to decide cases of
school liability. The chairperson of the panel shall conduct hearings.
(When feasible, this person will have had legal training.) At least two
panel members shall have knowledge of education procedures and at least
one of these two members must be from the Adjudication Division. The
third panel member must be from outside the Adjudication division. (Two
alternate panel members will also be designated for each case.)

\(2\) No person will serve on a panel who is from the Finance activity,
District Counsel or who was involved in the investigation or
decision-making regarding the determination of potential liability.
However, this will not prohibit adjudicators who may have prepared VA
Forms 22-8804 from serving on the panel.

**d. Challenges to the Hearing Panel.** The school will be furnished the
names and a brief resume of the qualifications of each designated panel
member. This will be done at the pre-hearing conference or by mail if
there is no preheariong conference. The school will be advised that it
has the right to challenge for good cause the qualifications of any
panel member; that any challenge must be submitted in writing and
received by the regional office Director before the hearing date; and
that the challenge and the Director\'s disposition thereof will be made
a part of the record.

**7.08 ROLE OF DISTRICT COUNSEL**

**a. General.** The District Counsel will present the Department\'s case
at the hearing, if a hearing is held. If a hearing is not held, the
District Counsel will either prepare a written submission or orally
present the evidence for the Committee panel to consider. The District
Counsel will also be present at any prehearing conference and will
assist with framing the issues to be heard at the hearing.

**b. Preparation of Exhibits.** The Adjudication Officer will assist the
District Counsel in preparing exhibits for the hearing or, if no
hearing, for the Committee Panel to consider directly. The exhibits
should include:

\(1\) Copies of pertinent school reports (front and back where
necessary) from VA claims or other folders. (The originals of these
reports will be retained in the folders.)

\(2\) Form Letter 4-334 and VA Form 4-5237.

\(3\) The VA Forms 22-8804 and 4-5295 for individual cases.

\(4\) Any other pertinent documents.

*NOTE: Entire claimant folders will not normally be reviewed by the
Committee Panel nor by the School Liability Appeals Board. Therefore,
the exhibits must be prepared carefully and thoroughly.*

**7.09 PREHEARING CONFERENCE**

When a hearing is requested, a prehearing conference will be conducted
at the regional office unless the prehearing is specifically waived by
the school.

**a. Notice to School and District Counsel.** The Adjudication Officer
will notify the school by certified letter, return receipt requested, of
the date, time, and place of such conference. The District Counsel will
be notified at least 1 week before the prehearing date.

**b. General Procedures**

\(1\) The Adjudication Officer will designate one person who has
knowledge of educational procedures to meet with the school
representative and the District Counsel to review and discuss the record
upon which potential liability is based. The Adjudication representative
shall not participate in any later Committee panel decision. However,
this person shall have authority, at this stage of the proceedings, to
recommend modifying or rescinding the initial determination, subject to
the Adjudication Officer\'s approval. If the school makes a compromise
offer at the prehearing conference, the District Counsel may conduct
preliminary negotiations. (See separate Finance instructions for
additional details regarding compromise offers.)

\(2\) In reviewing and discussing the record, the school\'s
representative will be given the opportunity to review those documents
upon which the finding of potential liability was based (the documents
that will be used as exhibits). Entire claimant folders will not be
reviewed by the school representative.

\(3\) The school will be advised of its right to challenge panel members
as described in paragraph 7.07d. The list of panel members and their
qualifications will be obtained from the Committee chairperson before
the prehearing.

**c. Conclusion of Prehearing Conference.** Every effort will be made to
reach agreement at the prehearing on factual points such as the date
reports were received so that the hearing which follows can concentrate
on the more basic issues of disagreement. At the conclusion of the
prehearing conference, a brief memorandum of understanding will be
prepared by the Adjudication representative listing the basic unresolved
issues, witnesses to be called, hearing date, and any other pertinent
data. This memorandum should be signed by the District Counsel and the
school representative and should become a part of the record.

**7.10 HEARING**

The hearing shall be conducted in accordance with the rules discussed
below.

**a. Attendance of Witnesses.** Each party shall be responsible for the
appearance of witnesses, production of records, and the costs in
connection therewith, necessary for the hearing. VA employees called as
witnesses shall be required to appear in accordance with existing
regulations.

**b. Hearing Rules**

[Rule 1]{.underline}. - The chairperson of the panel shall be in charge
and responsible for conducting the hearing including administration of
oaths or affirmations, which shall be required of all witnesses, and
decisions as to admissibility of evidence. The chairperson should be
issued VA Form 4505, Identification Card - Delegation of Authority,
under VA Regulation 2.

[Rule 2]{.underline}. - The District Counsel will serve as VA\'s
management representative and shall present the government\'s case.

[Rule 3]{.underline}. - Rules of evidence applicable in judicial
proceedings will not apply. Any written or oral testimony deemed to be
of probative value will be admissible. Secondary or hearsay evidence
will not be excluded on the basis alone. However, evidence or testimony
which is irrelevant, immaterial, cumulative or unduly argumentative or
repetitious, may be excluded. The chairperson may limit the number of
persons appearing as witnesses. Such limitations must be exercised
within reason.

[Rule 4]{.underline}. - Any panel member, the school representative, or
the management representative shall have the right to question any
witness called for the hearing. Each party shall have the right to
cross-examine any witness.

[Rule 5]{.underline}. - Any objection to a ruling by the chairperson
regarding the inadmissibility of testimony, documentary evidence, or
challenge to a witness, will be made a matter of record together with
the substance, in brief, of the testimony intended or other evidence
concerned. Documentary evidence objected to may be accepted for filing
and future reference.

[Rule 6]{.underline}. - VA shall make a verbatim stenographic or
recorded report of the hearing and shall preserve the stenographic notes
or tapes until the transcript is accepted as accurate by both parties.
The transcript shall become a permanent part of the record, and a copy
shall be furnished free of cost to the school by certified mail, return
receipt requested. The school may utilize a reporter of its choosing, at
its expense. If the school wishes its transcript to become part of the
record, a copy must be furnished to VA free of cost. (VA\'s transcript
will be considered accepted if the school does not contest its accuracy
within 10 days of receipt.)

[Rule 7]{.underline}. - All exhibits shall be identified by the
chairperson in the order of introduction (numerically for VA exhibits
and alphabetically for exhibits introduced by the school). All exhibits
shall be attached to the original of the transcript. True copies of
exhibits, if requested, shall be made and attached to the copy of the
transcript furnished to the school.

[Rule 8]{.underline}. - The hearing shall be conducted in an orderly
manner with dignity and decorum. The conduct of panel members shall be
characterized by fairness, impartiality, and cooperativeness. The
chairperson shall take such action as may be necessary to maintain
decorum.

[Rule 9]{.underline}. - At the close of the hearing, the chairperson
shall inform both parties that they may submit additional written
arguments within 10 workdays of the conclusion of the hearing. The
chairperson shall also inform the school that the notice of the decision
and the appeal rights, if applicable, will be furnished by the Finance
Officer.

[Rule 10]{.underline}. - The panel shall have no authority to decide a
challenge to the constitutionality of statutes and regulations which
provide the basis for assessment of school liability. In the event there
is such a challenge, the Panel will continue

its general duties with respect to hearing the evidence and
deliberations and will document the record to show that a constitutional
challenge was made, without making any ruling so that such matters will
be decided only at the appeal level pursuant to paragraph 7.12e.

**7.11 COMMITTEE PANEL DECISION AND NOTICE TO SCHOOL**

**a. Decision**

\(1\) The Committee panel will convene to consider its decision no
earlier than 10 workdays after the conclusion of the hearing, if a
hearing was held, to allow time for the other party to submit additional
written arguments.

\(2\) The evidence, including the hearing transcript, will be considered
under the guidelines in subchapter III.

\(3\) The decision shall be by majority and shall either affirm, modify
or reverse the finding of potential school liability made by the
Adjudication Officer. The Committee panel must clearly and fully state
its findings and conclusions, and the reasons and basis for the
decision. Applicable Federal statutes and regulations must be cited by
statute and regulation number. The general format for Statements of the
Case (M21-1, pt. I, ch. 18) may be used. The original decision furnished
the school will be signed by the panel members. Any dissenting member
may decline to sign and may submit a separate opinion which will be
retained as part of the record.

\(4\) If the Committee panel affirms liability but modifies the period
of liability for individual students, a revised VA Form 4-5237 should be
attached to the decision showing what changes were made. Revised VA
Forms 22-8804 and 4-5295 will also be furnished for the affected
students. The panel will request the Finance Officer to prepare VA Form
4-5295 and VA Form 4-5237 whenever recomputation of liability is
necessary.

\(5\) The chairperson of the full Committee will carefully review the
panel\'s proposed decision for errors of fact as well as for general
editorial improvements. The chairperson may propose changes for the
panel members to consider. However, the panel members are responsible
for the final decision. The original of the final decision will be
referred to the Finance Officer. Two copies of each decision will be
referred to VA Central Office (225B).

**b. Notice to School**

\(1\) The Finance Officer will prepare a notice letter to the school
enclosing the decision and any dissenting opinion. This notice letter
will be sent by certified mail, return receipt requested. Copies with
the decision enclosed will be furnished to the Director of the regional
office, the District Counsel, the Adjudication Officer and the
Chairperson of the Committee on School Liability. If liability is found,
the letter will demand payment and will include notice of appellate
rights and procedures, stating the 60-day period for such appeal.

\(2\) If the school does not exercise its appeal rights within the
appeal period, the panel decision will become the final Department
decision. The original notice letter to the school will include this
information.

**c. Records.** The Chairperson of the Station Committee on School
Liability will be responsible for maintaining a complete record for each
school liability decision. This should include copies of all
correspondence with the school.

**7.12 APPELLATE PROCEDURES**

**a. Right of Appeal**

\(1\) If the school disagrees with the Committee decision, appeal may be
taken to the School Liability Appeals Board, which shall be located at
VA Central Office in Washington, D.C., as a staff element of the Chief
Benefits Director\'s office.

\(2\) Appeal may be instituted by a letter to the Finance Officer
indicating disagreement with the decision and setting forth the alleged
errors of fact and law.

\(3\) The appeal must be received in VA within 60 calendar days from the
date of the notice letter to the school. An additional reasonable
period, generally not to exceed 30 calendar days, may be allowed if
requested, within which to perfect the appeal. The Chairperson of the
Committee on School Liability will determine if an extension may be
granted.

**b. Certification of Appeal**

\(1\) The Committee chairperson will review the record before submission
to the Appeals Board and certify by memorandum that the record upon
which school liability is based is complete and that all procedural
requirements have been met.

\(2\) The Finance Officer will notify the school that the appeal has
been certified and that witnesses are not allowed to testify on appeal
but that the school has the right to have its representative appear
before the Appeals Board. (See fig. 7.03 for a sample pattern letter.)
The school will be advised to write to the following address if such
representation is desired:

Department of Veterans Affairs

School Liability Appeals Board (20A)

810 Vermont Avenue, NW

Washington, DC 20420

\(3\) The Finance Officer will forward the complete school liability
record to Central Office. Individual claimant folders will not be
forwarded unless requested by the Appeals Board. If the Board wishes to
review individual folders, it will request the station or stations with
the folders to temporarily transfer them to Central Office. The station
with jurisdiction will prepare the folders for submission as follows:

\(a\) A cover sheet or list of the cases submitted, including name and
file number, should be included with each submission.

\(b\) A complete VA Form 70-7216a, Request for and/or Notice of Transfer
of Veterans Records, should be attached to each folder. Item 14,
\"Reason for Transfer and/or Remarks,\" will show \"Appeal of School
Liability\" and will include the name of the school involved.

\(c\) Folders should be sent to the Chairperson, School Liability
Appeals Board (20A).

**c. Composition of the School Liability Appeals Board.** The School
Liability Appeals Board shall consist of a chairperson and board members
appointed by the Chief Benefits Director. Each appeal shall be
considered by a panel of two members designated by the chairperson. The
chairperson will exercise supervision and control over Board functions
and will participate in decisions if the two-member panel does not reach
a unanimous decision. A Board member will be designated to act in the
absence or disqualification of the chairperson.

**d. Board Procedures.** Review is limited to the issues raised by the
school and shall be on the record and not de novo in character.
Witnesses will not be permitted to testify on appeal. The school and the
government shall have the right to have a representative appear before
the panel and present oral argument regarding their respective
positions. Alternatively, the statement of alleged errors of fact and
law submitted by the school may constitute appearance before the Board.
If the Board perceives error in an area not addressed in the appeal, it
shall have authority to correct such error. The Board may not increase
the amount of liability except through the remand procedure of
subparagraph i below.

**e. Restrictions on Powers of the Board.** The Board shall have no
authority to decide a challenge to the constitutionality of statutes and
regulations which provide the basis for assessment of school liability.
In the event there is such a challenge, the issue or any other legal
question raised, shall be referred to the General Counsel for an
opinion. All other issues raised by the appeal will be considered and
decided by the Board.

> Dear :
>
> We have received your letter appealing our decision holding your
> institution liable for certain overpayments of educational benefits.
> We are forwarding your case to our Central Office School Liability
> Appeals Board in Washington, D.C. This Board will make a final
> decision as to your liability based on careful review of the entire
> record, including your letter of appeal.
>
> It is not necessary that your school be personally represented at the
> Board\'s review; however, both your school and the Government have the
> right to have a representative appear before the Board and present
> oral arguments regarding respective positions. However, your letter of
> appeal may constitute appearance before the Board. Testimony by
> witnesses is not allowed on appeal. If you intend representation
> before the Board, please write, within 10 days of the date of this
> letter, to the Chairperson of the School Liability Appeals Board
> (20A), Department of Veterans Affairs, 810 Vermont Avenue, NW,
> Washington, D.C. 20420. Appropriate arrangements for your
> representation will then be made by the Board.
>
> The Board will promptly notify you in writing of its decision.
>
> Sincerely,
>
> Finance Officer

**Figure 7.03 Sample Pattern Letter Advising School of Certification of
Appeal**

**f. Disqualification of Members.** A member of the Board shall be
disqualified if such member was employed in the office of original
jurisdiction before appointment as a member of the Board, or if there
are other circumstances which give the impression of bias either for or
against the appellant. Such disqualification shall be made a part of the
record. If a member is disqualified, the chairperson shall appoint a
replacement.

**g. Decision on Appeal.** The Board will decide each issue on appeal by
affirmation, reversal, or modification of the station Committee\'s
decision or by remand of the case to the station Committee if
clarification or further development is deemed necessary. The decision
shall be in writing, signed by the members who participated in the
decision, and shall set forth specifically the issues, findings of fact
and conclusions of law, and the reason for the Board\'s decision, which
shall be the final determination of VA as to school liability. Any
dissenting member may decline to sign and may submit a dissenting
decision.

**h. Notice of Board Decision.** The Board will promptly notify the
school of its decision by certified mail, return receipt requested, and
will include a copy of its decision with the notice letter. Any
dissenting opinion will also be included. The letter will include a
statement that the Board\'s decision is the final administrative
decision of VA. Copies of the transmittal letter and the Board\'s
decision will be furnished to the RO Director, the District Counsel, the
Finance Officer, the Adjudication Officer and the Chairperson of the
station Committee on School Liability, simultaneously with the release
of the decision to the school. If liability is upheld, the Finance
Officer will then institute collection action, which will be suspended
if suit is filed by the school or the government.

**i. Case on Remand**

\(1\) If the Board remands the case to the station Committee on School
Liability for further clarification or development, the District Counsel
and the school shall be notified and furnished a copy of the remand. The
Committee Panel in the office of original jurisdiction shall have the
authority to modify or rescind its earlier decision, including
increasing the amount of school liability.

\(2\) The following procedures will apply:

\(a\) If the Committee Panel affirms the original decision, the case
will be returned to the Appeals Board under the procedures in
subparagraph b above.

\(b\) If the Committee Panel rescinds the original decision, the
chairperson of the Committee will notify the Finance Officer who will
notify the school as provided in paragraph 7.llb.

\(c\) If the Committee Panel partially modifies the liability in the
school\'s favor, the school will be requested to advise the Committee
within 30 calendar days if it wishes to continue its appeal.

\(d\) If the Committee Panel increases the school\'s liability, the
school shall be entitled to the same hearing procedure as is provided in
initial determinations. (See par. 7.06.) Such a procedure shall be
limited to the issue of increased liability.

\(3\) The Finance Officer will inform the school of the Committee\'s
decision. He or she will also inform the Appeals Board if the case is
not to be returned to the Appeals Board for any reason.

\(4\) Cases returned to the Appeals Board shall be considered by the
original panel, if available, and a decision rendered. If either member
of the original panel is not available, a substitute shall be designated
by the chairperson.

**7.13 VA MANAGEMENT RESPONSIBILITIES**

Regional Office Directors are responsible for appointing the members of
the Committee on School Liability (par. 7.07) and for ensuring the
necessary coordination of division activities required by this manual
chapter.

**SUBCHAPTER II.**

**REQUIREMENTS FOR REPORTING ENROLLMENT CHANGES**

**AND**

**METHODS OF DETERMINING \"LAST DATE OF ATTENDANCE\"**

**7.14 GENERAL**

School reporting requirements for specific enrollment situations are
found in 38 CFR Part 21 (e.g., 38 CFR 21.4203 for chs. 34 and 35). This
subchapter describes the requirements for reporting enrollment changes.
It also describes how the \"last date of attendance\" is to be
determined.

**7.15 REQUIREMENTS FOR REPORTING ENROLLMENT CHANGES**

Schools must report interruptions or terminations of training, for any
reason, as well as changes in the number of credit or clock hours (38
CFR 21.4203). The basic rule is that the school must initiate these
reports in time for VA to receive them within 30 days of the date on
which the change occurs. This 30-day rule is qualified in the following
ways:

**a. Nonpunitive Grades.** A school may assign a nonpunitive grade for a
course or subject in which a student is enrolled even though the student
does not withdraw from the course or subject. When this occurs, the
school must report the assignment of the nonpunitive grade before the
earlier of the following dates:

\(1\) Thirty days from the date on which the school assigned the grade,
or

\(2\) Sixty days from the last day of the enrollment period for which
the nonpunitive grade is assigned.

**b. Failure to Reenroll.** For students whose enrollment was certified
for the school year, and the student attends through the end of one term
but fails to return the following term, the school must report the
terminated enrollment within 30 days of the last officially [scheduled
registration]{.underline} date for the subsequent term.

[EXAMPLE]{.underline}: A student was originally certified for the
1989-90 school year; he or she completes the term ending January 2O,
1990, but fails to reenroll for the term beginning February 6, 1990. The
last officially scheduled registration date for the second term is
February 10, 1990. The school would have until March 12, 1990, to submit
a timely report.

**c. Changes Near the Beginning of the Term.** Sometimes changes in
enrollment occur during a \"drop\" period. In such cases, the school
must report the enrollment change to VA within 30 days from the last
date of the \"drop\" period or within 60 days from the first day of the
enrollment period, whichever occurs first.

[EXAMPLE]{.underline}: A term begins on September 15, 1990, and there is
a \"drop\" period which ends on October 7, 1990. A reduction in training
occurs on September 25, 1990. The school would have until November 6,
1990, to submit a timely report.

**d. Unsatisfactory Progress or Conduct.** In general, a school must
report unsatisfactory progress or conduct within 30 days from the date
on which progress or conduct becomes unsatisfactory. However, if
unsatisfactory grades are involved, the 30-day period will begin from
the date on which the school official responsible for determining
whether a student is making satisfactory progress received the final
report indicating that approved satisfactory progress standards have not
been met. However, in no event will a report of unsatisfactory progress
(because of unsatisfactory grades) be considered timely if received more
than 60 days after the end of the enrollment period.

[EXAMPLE No. 1]{.underline}: A student completed a term on January 25,
1990. The school received the final grade reports on March 1, 1990,
which showed that the veteran\'s progress was unsatisfactory as of
January 25, 1990. The school would have until March 26, 1990, to submit
a timely report.

[EXAMPLE No. 2]{.underline}: A veteran was enrolled in a nondegree
course from September 4, 1989 to December 1, 1989. The school has an
attendance policy, approved by the State approving agency, that provides
for dismissal after 10 unexcused absences. The llth unexcused absence in
this case was on October 25, 1989, although the veteran continued to
attend classes after that date. The school would have until November 24,
1989, to submit a timely report of unsatisfactory progress.

**7.16 DETERMINING THE LAST DATE OF ATTENDANCE**

Schools must report the last date of attendance to VA when a claimant
terminates enrollment in resident training. Likewise, schools must
report the last day of attendance in particular resident courses when
the claimant reduces training time but continues in school (38 CFR
21.4203(d)). For changes in independent study courses, the school need
only report the official date of change in status under the practices of
the institution (38 CFR 21.4135(e)(2)(ii).

**a. College-Level Courses.** Even though *daily* attendance records are
not required, the school must establish an adequate reporting system to
detect enrollment changes soon after they occur and to provide timely
reports to VA. When an enrollment change occurs, any of the following
methods may be used to determine the last date of attendance: (1)
attendance records; (2) grading reports; (3) last date on which
examination or other papers filed; (4) last day of activity in the
instructor\'s records; or (5) a statement from the student as to the
last day of his or her attendance.

**b. Noncollege Degree Courses.** For enrollment terminations prior to
December 18, 1989, the last day of attendance shown in the official
attendance records must be used in reports to VA. For terminations on
and after December 18, 1989, the school may use the same methods listed
in subparagraph a above.

**SUBCHAPTER III.**

**EXTENT OF POTENTIAL SCHOOL LIABILITY FOR**

**INDIVIDUAL OVERPAYMENTS**

**7.17 GENERAL**

A school may be potentially liable for an overpayment directly resulting
from either a false certification or a failure to timely report a change
in status. This subchapter provides instructions for determining the
extent of potential school liability in individual cases.

*Note: The decision as to whether school liability will be assessed or
not will always be made under the guidelines of subchapter IV.*

**7.18 FALSE CERTIFICATION CASES**

False certification includes both intentional and unintentional false
certification as described in paragraph 7.23c. When an overpayment
results from a false certification, the school will be potentially
liable for any overpayment which occurred before the date VA first
learned of the false certification.

**a. Adjudication Procedure.** Adjudication should report the entire
period covered by the false certification as the period of potential
school liability, item 5F, on VA Form 22-8804. (The only exception would
be that enrollment periods covered by payments made after the date VA
first learned of the false certification should be excluded.)

**b. Finance Procedure.** Finance will compute the amount of potential
liability on VA Form 4-5295. This computation will be in accordance with
separate Finance instructions.

**7.19 LATE REPORT CASES**

This includes the categories \"willful failure to report\" and
\"negligent failure to report\" described in subchapter IV.

**a. Payments Excluded From Liability.** When late reports result in
overpayments, the school will [not]{.underline} be potentially liable
for the following:

\(1\) Those amounts paid (checks actually released) before the end of
the allowable 30-day reporting period (see subch. II);

\(2\) Those amounts paid (checks actually released) after the report of
change in status is received in VA;

\(3\) The amount of an advance payment at the beginning of an enrollment
period;

\(4\) The amount of any additional overpayment created from the date of
withdrawal back to the beginning of a term because the claimant failed
to establish mitigating circumstances in accordance with 38 U.S.C.
3680(a)(3) (formerly 1780(a)(3)).

**b. \"Critical Period\" Defined.** The \"critical period\" is the
period starting the day after the end of the 30-day reporting period and
ending on the day notice of the change in status is received in VA. The
\"critical period\" is needed to compute the period of potential
liability as described in subparagraph c below.

**c. Period of Potential School Liability - Late Reporting.** In cases
of late reporting, Adjudication will determine the period of potential
liability separately for each enrollment period as follows:

\(1\) Determine when the award was authorized in the Target system.

\(2\) Determine what payments were issued based on this award during the
\"critical period\" and determine the enrollment period covered by these
payments. This enrollment period is the period of potential school
liability.

*NOTE: Adjudication will determine the period of potential liability by
examining the award document and payment histories, when available in
Target, and projecting what payments would normally have been made
during the \"critical period.\" Finance will be responsible for
computing the actual amount of liability and verifying (from microfilm
records, if necessary) when payments were actually made.*

**7.20 EXAMPLES**

The examples below illustrate how to compute the period of liability in
late reporting situations. In all cases, it is assumed, unless otherwise
stated, that the award was processed near the beginning of the term and
that regular first-of-the-month payments were made. However, the
principles for determining periods of liability apply equally to cases
with irregular monthly payments (e.g., all chapter 30 cases or nondegree
cases under all chapters).

**a. Withdrawal Near Beginning of Term.** Enrollment Period: September
5, 1989 through June 9, 1990 (non-advance-payment case)

[Last Day of Drop Period]{.underline}: September 25, 1989

[Withdrawal]{.underline}: September 21, 1989

[End of 30-day period]{.underline}: October 25, 1989

[Notice Received in VA]{.underline}: November 15, 1989

[Critical Period]{.underline}: October 26 through November 15, 1989

[Period of Potential School Liability]{.underline}: October 1 to October
31, 1989 (i.e.,the period covered by the payment due on November 1,
1989)

[Reason]{.underline}: School may be liable for the check issued on
November 1, 1989, since this is the only payment during the \"critical
period.\"

**b. Advance Payment Case.** Same facts as in subparagraph a above only
an advance payment was issued at the beginning of the term.

[Period of Potential School Liability]{.underline}: None

[Reason]{.underline}: No check was issued in the \"critical period\"
because of the advance payment. The first check after the advance
payment would have been due on December 1, 1989.

**c. Retroactive Payment Case.** Same facts as in subparagraph a above
only the award was not processed until November 2, 1989. The first check
was issued during the \"critical period\" and covered the period
September 5 to October 31.

[Period of Potential Liability]{.underline}: September 22 to October 31,
1989.

[Reason]{.underline}: School may be liable for the entire overpayment
made during the \"critical period.\"

**d. Case With Existing Accounts Receivable.** Same facts as in
subparagraph a above only an accounts receivable of \$1,000 existed at
the beginning of the term. No checks were actually issued in the
\"critical period\" but the accounts receivable was reduced by offset.

[Period of Liability]{.underline}: October 1 to October 31, 1989.

[Reason]{.underline}: The existence of an accounts receivable has no
bearing on the calculation of school liability. In effect, a school may
be held liable for erroneous credits to a claimant\'s account as well as
for erroneous check amounts actually issued.

**e. Withdrawal - Notice Over 30 Days But No Liability**

[Enrollment Period]{.underline}: February 6 to June 9, 1990

[Withdrawal]{.underline}: April 10, 1990

[End of 30-Day Period]{.underline}: May 10, 1990

[Notice Received in VA]{.underline}: May 20, 1990

[Critical Period]{.underline}: May 11 through May 20, 1990

[Period of Potential Liability]{.underline}: None

[Reason]{.underline}: No payments were made during the \"critical
period.\"

**f. Failure to Reenroll**

[Enrollment Period]{.underline}: September 2, 1989 thru June 10, 1990

[Failed to Reenroll For Term Beginning]{.underline}: February 6, 1990

[Late Registration Date]{.underline}: February 11, 1990

[End of 30-day period]{.underline}: March 13, 1990

[Notice Received]{.underline}: May 15, 1990

[Critical Period]{.underline}: March 14 through May 15, 1990

[Period of Potential Liability]{.underline}: March 1 through April 30
(i.e. the period covered by payments due April 1 and May 1.)

[Reason]{.underline}: Notice of failure to reenroll not received within
30 days from the late registration date for the new term.

**g. Reduction and Withdrawal**

[Enrollment Period]{.underline}: Full time from January 5 to May 2, 1990

[Reduction to 1/2 time]{.underline}: February 26, 1990

[Withdrawal]{.underline}: March 27, 1990

[End of 30-day periods]{.underline}: March 28, 1990 for reduction and
April 26, 1990 for withdrawal.

[Notice of Both Changes]{.underline}: April 16, 1990

[Critical Period]{.underline}: March 29 through April 16, 1990

[Period of Potential Liability]{.underline}: March 1, 1990 to March 31,
1990 (i.e. the period covered by the payment due April 1) for difference
between the full-time rate and the one-half-time rate only. Item 5H of
VA Form 22-8804 will be completed to show one-half-time training.

[Reason]{.underline}: No school liability can be considered for the
withdrawal since notice of the withdrawal was timely filed. However, the
school is potentially liable for the overpayment resulting from the
training time change since this report was not timely filed. The extent
of liability for March is the difference between the full-time and the
one-half-time rates although the entire payment from March 27 to the end
of the month is an overpayment.

**h. Multiple Adjustments**

[Enrollment Period]{.underline}: September 12, 1989 through June 15,
1990 at Full Time

[Reduction to 1/2 time]{.underline}: November 15, 1989

[Resumption to FT]{.underline}: February 6, 1990

[Withdrawal]{.underline}: March 5, 1990

[End of 30-day period for reduction]{.underline}: December 15, 1989

[End of 30-day period for withdrawal]{.underline}: April 4, 1990

[Notice of all changes]{.underline}: April 15, 1990

[Critical Periods]{.underline}: December 16 thru April 15, 1990 and
April 5, 1990 thru April 15, 1990.

[Period of Potential Liability]{.underline}: December 1 to February 6,
1990 (i.e. the period covered by the payment due January 1 and February
1, 1990 and part of the period covered by the payment due March 1,
1990).

Reason: The school may be liable for part of the overpayment resulting
from the reduction in training since notice of the reduction was late.
There can be no liability resulting from the withdrawal, even though
notice was late, since no payments were due in the critical period from
April 4 to April 15, 1990.

**7.21 FAILURE TO REPORT AND FALSE CERTIFICATION DISTINGUISHED**

Difficulty occasionally arises in distinguishing between failure to
report and false certification. The distinction is important since the
period of liability will be greater in false certification cases. The
following examples should be helpful in making the distinction:

a\. A school has a fall term from September 5 through December 10, 1989.
There is a 20-day \"drop\" period. The school submitted an enrollment
certification signed September 10, 1989, indicating that a student
enrolled September 5, 1989, for the fall term. On November 15, 1989, the
school furnished notice that the student registered but failed to
attend. This is a case of failure to promptly report a change in status,
not of false certification. The period of potential liability would be
from October 1 to October 31.

b\. Assume the same situation as in subparagraph a above except that the
initial enrollment certification was signed September 30, 1989, after
the end of the \"drop\" period. This is a case of false certification.
The school would be potentially liable for the entire overpayment from
September 5 through October 31, 1989.

**SUBCHAPTER IV. GUIDELINES FOR SCHOOL LIABILITY DECISIONS**

**7.22 GENERAL**

The guidelines in this subchapter will be used whenever school liability
is considered by the Adjudication Officer, the RO\'s Committee on School
Liability, or the School Liability Appeals Board. It must be emphasized
that one overall decision will be made with respect to all of the
individual cases for a particular school which have been identified for
potential school liability.

**7.23 DISCUSSION OF KEY CONCEPTS**

There are basically four concepts in 38 U.S.C 3685 (formerly 1785) under
which a school may be held liable. They are as follows:

**a. Willful Failure to Report.** This refers to intentional failure or
refusal by the school to make required reports of enrollment changes. It
also includes intentional failure or refusal to make timely reports. To
hold a school liable under this concept, the evidence must show with
reasonable certainty that there was an intentional failure on the part
of the school to make required reports or to make timely reports. (Note:
If fraud is indicated, the District Counsel must first be consulted
before the Adjudication Officer makes any finding of potential school
liability.)

**b. Negligent Failure to Report**. This refers to a negligent failure
to make reports of enrollment changes or a negligent failure to make
such reports in a timely manner. See paragraph 7.24 below for guidelines
as to what constitutes negligent reporting.

**c. False Certification.** This is a certification that is contrary to
the actual facts. The falsity may involve enrollment dates, hours of
training, or any other item certified. There are two types of false
certification:

\(1\) [Willful]{.underline}. Such cases should initially be referred to
the District Counsel. If the District Counsel returns the case with an
opinion that there is no violation of Federal criminal statutes or if
the U.S. attorney declines prosecution, school liability for false
certification may then be considered. To hold a school liable, the
evidence must show with reasonable certainty that the school
intentionally made a false certification.

\(2\) [Negligent]{.underline}. School liability for negligent false
certification may be considered when the school appears to have been
[negligent]{.underline} in making accurate reports to VA. See paragraph
7.24 below for guidelines as to what constitutes negligent reporting.

**7.24 GUIDELINES WHEN NEGLIGENCE IS THE ISSUE**

In many cases,the fundamental issue to be decided is whether or not the
school negligently failed to report or timely report changes in
enrollment or negligently submitted false (erroneous) certifications. No
simple error rate can be given which would define negligent reporting.
Instead, it must be determined if the school failed to exercise
reasonable care in making timely and accurate certifications to VA. All
relevant factors must be carefully considered including the following:

**a. Allowance for Occasional Clerical Error or Occasional
Administrative Delay**

\(1\) Consider the number of reporting errors compared to the number of
VA students enrolled over a given period; and

\(2\) Consider the number of reporting errors compared to the
approximate number of required reports for the period covered by the
survey. (For example, a survey reviewed 100 records over a 3-year
period. There were 10 reporting errors that caused overpayments. The
school needed to submit 250 reports for these cases over the 3-year
period. Therefore, the error rate as a percentage of required reports
for the survey period was 4.0%.)

**b. The School\'s Past Reliability in Reporting.** Consider the
findings of past compliance surveys and the school\'s response to any
reporting deficiencies that were brought to its attention.

**c. The Adequacy of the School\'s Reporting System.** A school will be
considered negligent if it does not establish a reporting system that
can produce accurate and timely reports. However, a school with a
basically adequate reporting system will not be held liable if
inaccurate or late reports were due to computer or human error which
could not have been prevented by the exercise of reasonable care.

**d. The Extent of Noncompliance With Reporting Requirements.** Consider
the nature and seriousness of the reporting errors, and consider the
length of delay involved in cases of delayed reports.

**7.25 RULE OF REASONABLE CERTAINTY**

School liability decisions will always be considered on the basis of the
rule of reasonable certainty. This rule dictates that a determination of
school liability is not founded merely on conjecture or likelihood or
even probability, but rather on circumstances sufficiently compelling to
warrant a reasonable person to believe the determination is correct.

**SUBCHAPTER V.**

**QUESTIONS AND ANSWERS ON SCHOOL LIABILITY**

**7.26 PURPOSE**

This subchapter clarifies certain issues that arose in previous
subchapters.

**7.27 GENERAL QUESTIONS ON SCHOOL LIABILITY**

**a. State Schools.** Can liability be assessed against State-supported
schools?

[Answer]{.underline}: Yes. There is no distinction between public and
private schools in 38 U.S.C. 3685 (formerly 1785).

**b. Compromise.** Are compromise procedures applicable to school
liability?

[Answer]{.underline}:

\(1\) Yes. Compromise of school liability debts is encouraged. The
Finance Officer is authorized to negotiate a compromise settlement if a
school makes an offer. Detailed compromise procedures are in Finance
instructions.

\(2\) It should be noted that the Adjudication Officer may modify or
rescind the initial finding of potential liability based on arguments or
evidence presented at the prehearing conference. However, any compromise
offer must be referred to the Finance activity.

**c. Waivers and Compromises.** How do requests for waiver or compromise
affect school liability?

[Answer]{.underline}

\(1\) Waiver - A waiver of VA\'s right to collect from a claimant does
not constitute a waiver of VA\'s right to collect from the school. The
waiver concept does not apply to school liability.

\(2\) Compromise - Offers of compromise on debts of \$20,000 or less are
handled at the field level. For offers on debts of \$20,000 or more,
call Financial Management in Central Office at \[(202) 273-5570\]. See
separate Finance instructions for detailed procedures on compromises.

**d. School Closed or Bankrupt.** Should a station pursue school
liability if a school has closed, is in bankruptcy, or has merged?

[Answer]{.underline}: Always consult the District Counsel as to the
likelihood of successful collection in such cases. The administrative
expenses of collection vs. the likelihood of collection should always be
carefully considered. (See separate Finance instructions.)

**e. Central Office Assistance**. Which elements in Central Office may
offer assistance on school liability?

[Answer]{.underline}:

\(1\) For questions on specific procedures in this chapter, contact the
Procedures Staff (224B) of the Education Service.

\(2\) For questions on Finance procedures, contact the Benefit Payment
and Policy Division (047F2) of the Finance Service.

\(3\) For questions on policy or for advice in particular situations,
contact the Program Administration Staff (225B) of the Education
Service.

\(4\) For matters related to appeals, contact the Chairperson of the
School Liability Appeals Board (20A).

\(5\) For General Counsel assistance, contact the Assistant

General Counsel (021).

**f. Administrative Expense Consideration.** What is the administrative
expense consideration?

[Answer]{.underline}:

\(1\) Pre-Liability - If warranted, the Adjudication Officer should
consult the Finance Officer and the District Counsel early in the
liability procedure to determine if the cost of conducting the entire
administrative procedure is justified in light of the amount of
potential liability and the likelihood of collection.

\(2\) Liability Established - Guidelines for termination of school
liability debts are the same as for any other debt. See separate Finance
instructions.

**g. Collections from Claimants.** How do collections from claimants
affect school liability balances?

[Answer]{.underline}: Every dollar which is collected or offset from a
claimant whose overpayment is part of a school\'s liability balance will
be used to reduce the liability balance at the time a prescribed
recalculation is performed.

**h. Referral to Department of Justice.** What effect does a referral of
an individual claimant\'s overpayment to the Department of Justice for
enforced collection have, if that overpayment is also part of a school
liability balance?

[Answer]{.underline}: None.

**i. School Liability Balances.** What is the obligation of the regional
office to keep school liability balances current?

[Answer]{.underline}:

\(1\) The obligation of the regional office Finance activity is
generally to maintain a current balance once a year. However, if a
school expresses a bona fide desire to pay or to offer a compromise,
then a current balance will be computed. Reductions of the balance will
reflect only collections posted to individual master records maintained
at the Hines BDC. Collections made through U.S. attorneys will be
handled in the same manner as any other collection or offset made from
overpaid claimants. Only collections which are posted to individual
master records may be used in computing the current school liability
balance.

\(2\) The above rules are also valid for the purpose of making refunds
to schools if a total in excess of the school\'s original liability
amount has been collected from the school and the claimants combined.

\(3\) Note that any compromise agreement should always contain a
provision to the effect that refunds to the school will only be made
when the collections from the school and the claimants combined exceed
the original liability amount - not the compromise amount.

**7.28 QUESTIONS ON SUBCHAPTER I**

**a. Paragraph 7.05 - Determination of Potential Liability**

[Question 1]{.underline}: Is there an established error rate which would
suggest a finding of potential school liability?

[Answer]{.underline}: No percentage has been set for determining an
allowable error rate since the gross number and seriousness of the
errors must be considered. In the last analysis, there is no substitute
for sound judgment which fairly assesses all known facts about the
school\'s reporting problems. See subchapter IV for the guidelines for
establishing school liability.

[Question 2]{.underline}: May significant improvement in a school\'s
reporting be taken into account in considering potential school
liability?

[Answer]{.underline}: Yes. As noted in subchapter IV, all relevant
factors are to be considered when negligence is the issue, including the
school\'s past reliability in reporting. The extent of past reporting
errors must be weighed against any improvement. But improvement should
not be viewed as a means to justify obvious and apparently blatant
negligence in the past. A case against a school may be restricted to
those overpayments covering the period in which the most serious
discrepancies occurred.

[Question 3]{.underline}: May the Adjudication Officer consider the
administrative expense of collection vs. the likelihood of collection as
the basis for not holding a school potentially liable?

[Answer]{.underline}: No. But he or she may consult with the Finance
Officer on this issue at the time potential liability is being
considered. Any joint decision to forego school liability proceedings
for this reason must always be documented. The Finance Officer will be
responsible for the analysis upon which this decision is based. (Once a
school liability debt has been established by the Station Committee
Panel, only the Finance Officer has termination authority on debts, and
then, only in cases under \$20,000.)

[Question]{.underline} 4: Can a school be potentially liable for an
education loan?

[Answer]{.underline}: No. School liability would not be applicable to
the loan program.

**b. Paragraph 7.06 - Notice to School and VA Response**

[Question 1]{.underline}: To what school official should a notice of
potential liability be addressed?

[Answer]{.underline}: The notice letter should be addressed to the
highest administrative official at that school. In most cases, this
would be the President.

[Question 2]{.underline}: When a school is notified of its potential
liability, should it be advised to retain its records of the affected
students?

[Answer]{.underline}: Yes. It would be in the best interest of both the
government and the school for the school to retain its records. The
following language

should be added to the notice letter to the school as shown in figure
7.02. \"The usual requirement for retention of VA student records is 3
years from termination of enrollment. However, you are requested to
retain all records pertaining to the affected students until the school
liability issue is resolved. The authority for this request is 38 CFR
21.4209(f).\"

**c. Paragraph 7.07c - Panel Composition**

[Question 1]{.underline}: May adjudicators who created an overpayment or
who computed the period of potential liability serve on a hearing panel
for the affected school?

[Answer]{.underline}: Yes. The creation of an overpayment or the
computation of a period of potential liability is considered a routine
adjudicative function and does not involve judgment as to potential
liability.

[Question 2]{.underline}: May an adjudicator who reviews a compliance
survey report and recommends that potential school liability be assessed
serve on the hearing panel that decides the case?

[Answer]{.underline}: No.

[Question 3]{.underline}: Can the Adjudication representative at the
prehearing conference serve on the hearing panel that decides the case?

[Answer]{.underline}: No.

[Question 4]{.underline}: Can a compliance survey specialist serve on a
hearing panel?

[Answer]{.underline}: Yes, but not if he or she was involved in a survey
of the affected school which led to the finding of potential liability.

[Question 5]{.underline}: How far can a school go in challenging the
qualifications of panel members?

[Answer]{.underline}: A school has the right to challenge the
qualifications of any panel member \"for good cause.\" As a general
rule, an allowable challenge will involve something in the member\'s
background or work experience (especially prior dealings with the
school) which could reasonably raise a question of possible bias against
the school. VA should attempt to accommodate any reasonable challenges
to proposed panel members.

[Question 6]{.underline}: How detailed should resumes of the panel
members be?

[Answer]{.underline}: The [resume]{.underline} should be a brief summary
of the individual panel member\'s qualifications. This should include
the member\'s educational background, prior work experience before
joining VA, and all VA positions held and their general duties. When a
panel is assigned a particular case, each member should add any personal
or professional dealings he or she has had with the school.

**d. Paragraph 7.09 - Prehearing Conference**

[Question 1]{.underline}: May the memorandum of understanding prepared
at the prehearing conference include an agreement to withdraw certain
cases from potential liability status?

[Answer]{.underline}: No. The Adjudication representative may recommend
that certain cases be withdrawn, but the final decision is the
Adjudication Officer\'s. The memorandum of understanding should address
the issues described in paragraph 7.09c.

[Question 2]{.underline}: Is there any time limit for scheduling the
prehearing conference or the hearing?

[Answer]{.underline}: No. But a prehearing conference should be
scheduled within 30 days of the school\'s request if possible. Also, a
hearing should be scheduled within 30 days of the prehearing conference
if possible.

**e. Paragraph 7.10 - Hearing**

[Question 1]{.underline}: Can a school call a VA employee as its witness
in a hearing?

[Answer]{.underline}: Yes. However, as noted in hearing rule 3, the
chairperson of the hearing panel may limit the number of persons
appearing as witnesses if deemed necessary.

[Question 2]{.underline}: With regard to hearing rule number 4, are
there any restrictions on the type of questions that may be asked of a
witness?

[Answer]{.underline}: No. Rules applicable to formal judicial
proceedings will not apply. The chairperson may exclude evidence or
testimony which is irrelevant, immaterial, cumulative or unduly
argumentative.

**7.29 QUESTIONS ON SUBCHAPTER II**

[Question]{.underline}: If an IHL (institution of higher learning) does
not keep attendance records but determines the last date of attendance
by one of the approved alternate methods in paragraph 7.16, how can the
school be held liable for an untimely report?

[Answer]{.underline}: The law prohibits VA from requiring daily
attendance at IHL\'s but at the same time requires schools to report
without delay any change in enrollment. (38 U.S.C. 3684(a) (formerly
1784(a)) and 3685 (formerly 1785)) VA\'s position is that a school has
30 days to report a change in enrollment (subject to certain
qualifications) regardless of what method is used to determine the date
of the changes. In effect, schools are responsible for monitoring the
pursuit of VA students on a continuing basis to the extent necessary to
meet timely reporting standards.

**7.30 QUESTIONS ON SUBCHAPTER III**

[Nonpunitive Grades]{.underline}

[Question]{.underline}: Should school liability be applied to
overpayments resulting from nonpunitive grades (with no mitigating
circumstances) given at the end of a term?

[Answer]{.underline}: No. School liability is generally not applicable
to that part of an overpayment caused by the failure to establish
mitigating circumstances. (See par. 7.19.) In the case of nonpunitive
grades at the end of a term

(without mitigating circumstances), there would be no potential school
liability since the amount of the overpayment would not be affected by a
failure to timely report.

*NOTE: If a student withdraws from any subject, the school must always
report the last date of attendance regardless of whether a punitive or
nonpunitive grade is assigned. School liability may be applicable if the
withdrawal is not reported timely.*