Review of VBA’s Processing of Adverse Actions for Service-Connected Disability Compensation

The VA Office of Inspector General (OIG) examined whether Veterans Benefits Administration (VBA) staff processed adverse actions in accordance with policies and procedures. Adverse actions are unfavorable changes to disability benefits based on changes in entitlement or the evaluation of a service-connected disability. Under 38 C.F.R. § 3.103 (38 U.S.C. § 5104), disability compensation cannot be terminated, reduced, or adversely affected unless the veteran has first been notified of the action. The OIG found that VBA claims processors did not always follow the law designed to ensure veterans receive due process related to adverse actions.

The OIG team estimated that, in calendar year 2024, claims processors made one or more errors in about 34 percent of cases involving proposed and final decisions for reduction of veterans’ service-connected disability compensation. Errors included claims processors not providing sufficient notification before taking adverse action, not updating rating decision codesheets, improperly applying effective dates, and not taking adverse action. Because of these deficiencies, the OIG estimated that veterans were improperly paid at least $16.9 million for proposed adverse action cases closed from January 1 through December 31, 2024. Additionally, the OIG estimated that at least $964,000 in ongoing monthly improper payments will occur until these errors are resolved. The OIG team also reviewed a sample of cases from January 1 through September 30, 2025, where there was no final rating decision date and found that claims were closed prematurely during that period as well.

The OIG made four recommendations to improve processes and ensure compliance with laws, regulations, and policies. The principal deputy under secretary for benefits concurred with the findings and recommendations.