When to Request Finance Transactions or Use Award Actions for Possible Direct Payment of Fees

2. Making Funds Available for Potential Payment of Fees and Authorizing the Claimant’s Award

Introduction

This topic contains information on requesting finance activity transactions in preparation for potential payment of fees and authorizing the claimant’s award, including

• when to request finance transactions or use award actions for possible direct payment of fees
• VBMS-A Automated Fee Calculator overrides
• calculating the amount needed for possible payment of fees
• period to use for calculating past-due benefits
• mandatory agent/attorney fee calculator
• calculation of past-due benefits – reductions, offsets, and overpayment
• taking action based on the past-due benefit calculation, and
• handling cases involving Equal Access to Justice Act (EAJA) fees

Change Date

May 1, 2026

8.B. 2.a. When to Request Finance Transactions or Use Award Actions for Possible Direct Payment of Fees

The AAFC must use award actions in VBMS-A or request that the finance activity perform finance transactions to make funds for possible payment of fees in a case when

• substantive and procedural requirements in 38 CFR 14.636(g) have been met
• contains additional fee terms specified in 38 CFR 14.636(h) to the extent consistent with case law, and
• an award of past-due benefits has been prepared by AAFC authorization activity and is in pending status.

If the above requirements to make funds available for possible payment of fees are met, then a fee deduction is required whenever a grant of benefits is made under any of the AMA decision review lanes (supplemental claim, higher-level review, or direct appeal to the Board) as well as grants of individual unemployability and clear and unmistakable error under any claim type. Fees should not be deducted if all agents and attorneys who represented on the case are ineligible for direct payment of fees. The AAFC will make the final adjudication determining whether direct payment of fees is warranted. A deduction of fees does not always represent fee entitlement.

The manual Agent/Attorney Fee Calculator requires only a single AAFC review/signature when it is being routed through finance for an upfront fee deduction as finance personnel complete the second review of the audit.

Important: Effective April 23, 2023, new functionality in VBMS-A automated calculations of the agent/attorney fee amount. Users are still required to complete the manual Agent/Attorney Fee Calculator.

In all cases, except for decisions involving eligibility to the month of the Veteran’s death, and apportionments, AAFCs are required to use VBMS-A to process the fee deduction amount to make funds available for the potential direct payment of fees. The "Total Fee Including Assessment" field displayed in VBMS-A should reflect the entire fee amount, including the assessment fee if applicable, to be paid even if the total fee amount is greater than the retroactive payment of past-due benefits to the claimant. If the fee payment will be split because there is no continuous agent/attorney eligible for direct payment of fees, then any amount to be released to the claimant and any amount to be returned to appropriations must also be included in the "Total Fee Including Assessment" field.

This applies:

• even if, in designated cases, there will be no payout to the claimant from which fees can be withheld
• even if the agent or attorney is no longer the representative, unless the agent or attorney has waived any entitlement to fees in writing (in any form approved for submissions including but not necessarily limited to submissions by mail or e-mail), and
• each time the amount of past-due benefits arising from a particular rating decision changes, including
• when dependency information is received within 1 year of the date of the rating decision, or
• when the Veteran is subsequently found eligible for concurrent receipt of military retired pay (MRP) for any time during the past-due benefits period.

Notes:

• If eligibility to direct payment of fees is denied, but fees are withheld due to a grant of individual unemployability or clear and unmistakable error under any claim type, then fees should be either released to the claimant or returned to appropriations depending on if fees were actually withheld from the net effect of the award. The prohibition against releasing fees until after the expiration of the 65-day appeal period or issuance of a decision by the Board or OGC still applies.
• Some agents and attorneys have submitted universal waivers, which apply to all claimants they represented since the date of the waiver. The waiver may not be uploaded to individual eFolders. For a list of agents/attorneys who have submitted a universal waiver, see Universal Fee Waivers Job Aid.

References: For more information on

• when entering finance transactions into VBMS-A occurs in the process for direct payment of fees and who performs the tasks, see M21-5, Chapter 8, Section B, 1.a
• what constitutes a valid fee agreement, see
• 38 CFR 14.636(g)(1) and (2), and
• M21-5, Chapter 8, Section A, 1.b and d
• regulatory standard for the amount of past-due benefits, see 38 CFR 14.636(h)(3)
• calculation of past-due benefits for direct fee purposes in reduction or offset cases where there may not be a payout, see M21-5, Chapter 8, Section B, 2.e,
• avoiding duplication of payments when releasing claimant's fee portion, see M21-5, Chapter 8, Section B, 4.d
• prohibition on releasing funds and appeal rights, see M21-5, Chapter 8, Section B, 4.b, and
• handling cases where funds were not made available for potential payment of fees, see M21-5, Chapter 8, Section B, 6.

8.B. 2.b. VBMS-A Agent/Attorney Fee Calculator Overrides

The VBMS-A Automated Fee Calculator cannot be used for awards involving the following:

• requirement to use the entry of priors
• requirement to use the generate award override (GAO)
• use of pension protected rates
• unprocessed Cost of Living Adjustment (COLA) adjustments
• simultaneous adjustments to awards where only some issues are eligible for fees (for example, rating decisions with multiple EPs being processed)

The "Calculator Override" box must be selected to input the correct fee deduction amount in the cases listed above, and during other scenarios that would prohibit the automated calculation.

Users must complete the Agent/Attorney Fee Calculator as referenced in M21-5, Chapter 8, Section B, 2.e. The AAFC must enter the "Retroactive Amount for Fees," "Agent/Attorney Fee," and the "Assessment Fee Amount" fields. The "Agent/Attorney Fee" amount in VBMS-A should reflect the entire fee amount, including the assessment fee if applicable.

Note: Claims processors should use the override functionality when the VBMS-A Automated Fee Calculator results in incorrect amounts, greater than one cent, that are identified/verified through comparison of the Agent/Attorney Fee Calculator.

References: For more information on the

• regulatory standard for the amount of past-due benefit, see 38 CFR 14.636(h)(3)
• determining the work on which a fee can be charged, see M21-5, Chapter 8, Section A, 1.g
• period to use for calculating the past-due benefit amount, see M21-5, Chapter 8, Section B, 2.c, and
• mandatory use of the Agent/Attorney Fee Calculator, see M21-5, Chapter 8, Section B, 2.e.

8.B. 2.c. Calculating the Amount Needed for Possible Payment of Fees

The Amount that must be made available for potential payment of fees is 20 percent or less (as specified in the direct pay fee agreement) of the past-due benefit, defined in the regulation as the total amount of recurring payments that accrued during the defined period.

References: For more information on the

• regulatory standard for the amount of past-due benefit, see 38 CFR 14.636(h)(3)
• period to use for calculating the past-due benefit amount, see M21-5, Chapter 8, Section B, 2.d, and
• mandatory use of the Agent/Attorney Fee Calculator, see M21-5, Chapter 8, Section B, 2.e.

8.B. 2.d. Period to Use for Calculating Past-Due Benefits

38 CFR 14.636 states that in calculating the past-due benefit, total the payments that accrued during the period

• from the effective date of the award
• through the date of the decision awarding benefits, not the
• date of the notification letter, or
• last day of the month in which the decision awarding benefits was made.

Important:

• 38 CFR 14.636(h)(3) provides that past-due benefits accrue between the effective date of the award and the date of the grant of the benefit by the agency of original jurisdiction (AOJ), Board, or an appellate court. However, in some cases the RO, in implementing an award, must decide a matter that the Board did not (for example initial evaluation and effective date). 38 CFR 14.636(h)(3)(i) explains that when the benefit granted is service connection (SC) then the past-due benefits will be based on an initial disability rating assigned by the AOJ. In that case, the past-due benefit sum is calculated from the effective date of the award to the date of the initial disability rating. Although not explicitly discussed in the regulation, anytime the AOJ is required to assign the effective date of the award the period should also be calculated through the date of the implementing rating by the AOJ. Where a decision by the Board addresses everything needed to implement the decision, such as evaluation and effective date, use the date of the Board decision awarding benefits.
• If DIC benefits are granted as part of a claim for service-connected death or survivor benefits that is eligible for direct payment of attorney fees, those fees should be calculated through the date of the last decision which includes both the grant of eligibility for DIC and the effective date for the DIC benefit. This decision date may be the date of the Board decision, rating decision, or the date that a VSR generates the award.

Notes:

• Non-monetary issues such as dependents educational assistance (DEA) do not impact the period for which fees are entitled.
• When using the agent/attorney fee calculator in VBMS-A, enter the actual date of the decision awarding benefits in the "Calculate Through Date" field.
• When using the manual, spreadsheet-based Agent/Attorney Fee Calculator, enter the day after the date of the decision awarding benefits as the last date in the Effective Date column. The calculator will then automatically populate the date of the decision awarding benefits in the Through column date field.

Example 1: A Board decision dated August 18, 2025, grants an increase for PTSD from 50% to 100% with an effective date of May 15, 2025. A rating decision dated August 20, 2025, implements the Board decision with no changes but also grants eligibility to DEA.

Analysis 1: The Board decision is the decision granting benefits, since it provided an exact evaluation and effective date for the increase. Although the rating decision granted DEA, that is a non-monetary issue which does not impact the period for which fees are calculated. The calculate through date in VBMS-A is therefore August 18, 2025. On the spreadsheet-based Agent/Attorney Fee Calculator, the last date in the Effective Date column should be August 19, 2025.

Example 2: A Board decision dated July 12, 2025, grants service connection for hypertension but does not assign any evaluation or effective dates. A rating decision dated July 14, 2025, implements the Board decision, assigning an evaluation of 20% with an effective date of June 1, 2025.

Analysis 2: The rating decision is the decision granting benefits since the Board decision did not provide an evaluation or effective date for hypertension. The calculate through date in VBMS-A is therefore July 14, 2025. On the spreadsheet-based Agent/Attorney Fee Calculator, the last date in the Effective Date column should be July 15, 2025.

Example 3: A VSR prepares an award on August 12, 2025, for additional benefits for a Veteran's spouse based on receipt of a VA Form 21-686c. The form was received a month after a rating decision granted an initial evaluation of 50% for the Veteran, who was previously not service connected, on a supplemental claim. The award is authorized on August 13, 2025.

Analysis 3: The date the first VSR prepared the award is the date of the decision awarding benefits. The calculate through date in VBMS-A is therefore August 12, 2025. On the spreadsheet-based Agent/Attorney Fee Calculator, the last date in the Effective Date column should be August 13, 2025.

References: For more information on

• past-due benefits, see
• VAOPGCPREC 18-1995, and
• 38 CFR 14.636(h)(3), and
• mandatory use of the Agent/Attorney Fee Calculator, see M21-5, Chapter 8, Section B, 2.e.

8.B. 2.e. Mandatory Agent/Attorney Fee Calculator

When the AAFC takes action to make funds available for potential payment of fees under M21-5, Chapter 8, Section B, 2.a, the AAFC will use the Agent/Attorney Fee Calculator to calculate the

• amount of past-due benefits awarded
• agent or attorney fee, if entitlement to a fee is established
• amount that will be paid to the Veteran/beneficiary, if fees are payable, and
• applicable assessment (only on claims with a continuous agent or attorney eligible for direct payment of fees).

The worksheet of calculator results must be uploaded to VBMS.

Notes:

• When using the calculator to correct a prior VA administrative error in the calculation of fees on an award do not charge an additional assessment.
• For claims without a continuous agent or attorney eligible for direct payment of fees, the applicable assessment is calculated differently and will instead be calculated on the Fee Allocation Calculator. See M21-5, Chapter 8, Section B, 3.f.
• The calculator is not required when the calculated amount of past-due benefits (before any offset or reduction) is $0. See M21-5, Chapter 8, Section B, 2.g.

References: For more information on

• the role of the AAFC in calculating the amount of past-due benefits and the amount to be made available for fees, see M21-5, Chapter 8, Section B, 1.a
• the amount of past-due benefits to make available for potential payment, see M21-5, Chapter 8, Section B, 2.b
• the period to use when calculating past-due benefits, see M21-5, Chapter 8, Section B, 2.d, and
• assessments, see M21-5, Chapter 8, Section B, 3.f.

8.B.2.f. Calculation of Past-Due Benefits – Reductions, Offsets, and Overpayment

In some cases, the gross amount of an award of past-due benefits will require adjustment due to operation of another legal provision, such as those relating to concurrent receipt. In those cases, the claimant will not receive the full amount or value of the award and might not receive any payment.

Calculating the past-due award amount for fee purposes using the post-adjustment amount and requiring a non-recurring payment to the claimant as opposed to using the full award amount based on evaluation and effective date in these cases can affect the value of the agent’s or attorney's fee.

The court, in Rosinski v. Wilkie, 32 Vet. App. 264 (Fed. Cir. 2020), addressed VA’s obligations to agents/attorneys under 38 U.S.C. 5904(d) in cases when deciding entitlement to direct payment of fees, but an applicable statutory provision requires a reduction or elimination of payment. The court held that in a case involving MRP, fees must be calculated and directly paid to the agent/attorney based on the pre-reduction amount of the award. A non-recurring payment to the claimant is not a pre-requisite to payment of fees under a direct pay fee agreement.

In the following categories of cases, which implicate award adjustments, calculate past-due benefits based on the award amounts prior to reduction. For all attorney fee calculations, use gross rates for both the new and old award amounts.

• MRP
• drill pay
• severance or separation pay
• benefits payable under 38 U.S.C. 1151 after settlement of a tort claim
• limits on compensation payments to incarcerated Veterans under 38 U.S.C. 5313
• Survivor Benefit Plan payments, and
• existing claimant debt to the United States Government.

On June 4, 2025, OGC informed VBA that VAOPGCPREC 12-93 is superseded by caselaw since that opinion was provided. The past-due benefit ward itself, irrespective of whether an actual payment will be made to the claimant, must be used to determine the amount of fees to be paid to an agent or attorney. Federal debt offset statutes do not authorize the collection of a claimant's debt from funds to be paid to an agent or attorney as fees. Accordingly, agent and attorney fees must not be reduced due to any existing debts owed by the claimant to the United States Government.

Where an agent/attorney seeks direct payment of fees based on the invalidation of a debt or the waiver of an overpayment, the amount of past-due benefits is the total that VA has recouped from the claimant as of the date of the decision invalidating the debt or granting the waiver, not the full amount of the debt.

References: For more information on

• elections and waivers in MRP cases and concurrent entitlement, see M21-1, Part VI, Subpart ii, 4.A
• prohibition against duplication of VA compensation and certain separation benefits and recoupment, see M21-1, Part VI, Subpart ii, 2
• effects of incarceration on VA benefits, see M21-1, Part VI, Subpart iii, 1.A
• fees in cases involving limitations to compensation for incarcerated Veterans under 38 U.S.C. 5313, see Snyder v. Nicholson, 489 F.3d. 1213 (Fed. Cir. 2007)
• fees involving representation on invalidation of a debt or waiver of overpayment, see Gumpenberger v. Wilkie, 973 F. 3d 1779 (Fed.Cir. 2020)
• recovering fee amounts paid by VA when, due to reduction, there was not a non-recurring payment to the claimant from which to directly pay fees, see M21-5, Chapter 8, Section B, 6.e, and
• withholding, paying fees, and corrective action for failure to withhold prior to the January 30, 2020, decision in Rosinski, see the historical M21-1, Part I, Chapter 3.C attachment Historical_M21-1I_3_SecC_1-24-20.docx.

8.B.2.g. Taking Action Based on the Past-Due Benefit Calculation

The table below provides guidance on the next action to take based on the past-due benefit amount calculation derived from M21-5, Chapter 8, Section B, 2.c - e.

Scroll sideways to see the full table.

References: For more information on

• duties of the AAFC, see M21-5, Chapter 8, Section A, 2.c
• requesting transactions to make funds available for payment of fees, see M21-5, Chapter 8, Section B, 2.h
• making a direct pay fee decision, see M21-5, Chapter 8, Section B, 3
• EPs 290 and 400, see M21-4, Appendix B, and
• releasing fee amounts, see M21-5, Chapter 8, Section B, 4.

8.B. 2.h. Handling Cases Involving Equal Access to Justice Act (EAJA) Fees

Equal Access to Justice Act (EAJA) fees are payments that a court has ordered VA to pay to an attorney for representation before the court.

Important: EAJA fees are not paid from the claimant’s award. EAJA fees may appear on the Veteran’s electronic record as a payment made jointly to the claimant and the attorney but should never be offset from a direct payment of fees, even when VA fails to withhold fees.

Where a claimant’s attorney receives fees for the same work under VA’s fee statute and EAJA, the attorney is responsible for refunding the amount of the smaller fee to the claimant.

References: For more information on

• the EAJA offset provision, see Ravin v. Wilkie, 30 Vet.App. 310 (2019), and
• failure to enter transactions to make funds available for payment of fees, see
• M21-5, Chapter 8, Section B, 6, and
• VAOPGCPREC 12-1997.