September 28, 2001

Dear Mr. McClain:

     On February 21, 2001, the Department of Veterans Affairs (VA) submitted a final rule entitled, "Exclusions from Income" to the Office of Management and Budget (OMB) under Executive Order (E.O.) No. 12866 for review. This rule would amend VA adjudication regulations to exclude from countable income, in certain VA compensation and pension programs, income received under the Victims of Crime Act of 1984 (VOCA). However, compensation under VOCA would not be excluded when net worth is used as the determining factor in eligibility. This regulation was submitted to OMB as a direct final rule, stating that notice and comment under the Administrative Procedure Act was unnecessary because the rule is interpretative.

     As part of OMB review, OIRA often shares agency draft regulations with other agencies that have an interest in the area being regulated. In this case the Department of Justice (DOJ) raised serious concerns with the VA rule. DOJ noted that the Social Security Administration does not include VOCA compensation in net worth determinations if the award was within nine months of the eligibility determination. The VA rule would thus create inconsistencies across the government in how VOCA is being interpreted.

     Discussions between VA and DOJ staff have failed to resolve the issue. DOJ staff is now extremely busy in the wake of the recent tragedies requiring further interagency discussions on this issue to be postponed. Since the "Exclusions from Income" rule has been under review for more than 90 days and a resolution of the issues involved will take some additional time, I am returning the rule to the Department for your reconsideration. VA staff should continue to attempt to resolve the issue with DOJ when their staff becomes available. If resolution is not reached, OMB will convene an interagency meeting to facilitate a policy solution. We look forward to continuing to work with you to improve this rulemaking effort. Thank you for your patience.