Interest, Penalties, and Administrative Costs

Role and responsibility

S-1 admin specialists and IPAC pay clerks track the interest, penalty, and administrative cost accrual on delinquent Marine debt. The S-1 chief counsels the Marine on the financial impact of delay in resolving the debt. The IPAC pay clerk verifies the DFAS interest, penalty, and administrative cost calculations against the Marine pay record. The S-1 officer signs by direction on the debt posture brief reflecting interest accrual.

Source documents flow from the demand letter date (the interest accrual start date), the Treasury Current Value of Funds Rate (the interest rate basis), the DoDFMR Vol 16 Chapter 7 penalty rules, the DFAS Component administrative cost schedule, and the Federal Claims Collection Standards at 31 CFR Part 901. Outputs include the certified interest calculation, the penalty assessment, the administrative cost recovery, the total debt balance, and the impact assessment on waiver remission applications.

Interest, penalty, and administrative costs add to the principal debt. A small debt resolved quickly stays small. A delayed debt with interest, penalty, and administrative costs becomes a multi-component liability.

Trigger events

• Marine debt enters delinquent status (past the initial 30-day due process window).
• Debt sits delinquent past 90 days, triggering penalty assessment.
• DFAS calculates monthly interest, penalty, and administrative cost.
• Marine inquires on the total debt balance at the waiver remission application.
• Treasury Current Value of Funds Rate changes (annual or as published).
• Marine elects voluntary repayment and requests the total balance with interest, penalty, and administrative cost.

Interest, penalty, and administrative cost framework

DoDFMR Vol 16 Chapter 7 implements 31 USC 3717 at the DoD level. The three components apply to delinquent debt:

• Interest. Accrues from the date of the initial demand letter at the Treasury Current Value of Funds Rate (CVFR). The CVFR is published annually by Treasury per DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 paragraph 070201.
• Penalty. Assessed at 6 percent per annum on debt delinquent more than 90 days per 31 USC 3717 and DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 paragraph 070301.
• Administrative costs. Recovered for the cost of processing and collecting the delinquent debt. DFAS Component administrative cost schedule applies per DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 paragraph 070401.

The three components accrue separately and are reported on the DFAS debt statement. A waiver under 10 USC 2774 typically waives the principal but does not always waive accrued interest, penalty, and administrative cost depending on the basis. A remission under 10 USC 6161 typically resolves the full debt balance.

Processing workflow

1. Identify the interest accrual start date. The date of the initial demand letter is the interest accrual start per DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 paragraph 070201.
2. Pull the current Treasury CVFR. The Treasury publishes the CVFR annually. Apply the CVFR effective on the interest accrual start date.
3. Calculate accrued interest. The accrued interest equals the principal multiplied by the CVFR rate multiplied by the time elapsed in years since the accrual start date.
4. Track the 90-day penalty threshold. The penalty applies on debt delinquent more than 90 days from the initial demand letter date. Calculate penalty at 6 percent per annum from the 90-day mark.
5. Calculate administrative costs. Apply the DFAS Component administrative cost schedule per DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 paragraph 070401.
6. Build the total debt balance. The total balance equals the principal plus accrued interest plus penalty (if applicable) plus administrative costs.
7. Verify the DFAS calculation against the IPAC reconciliation. The IPAC pay clerk verifies the DFAS interest, penalty, and administrative cost calculation against the source data.
8. Counsel the Marine on the financial impact. The S-1 chief briefs the Marine on the cost of delay and the rate of interest, penalty, and administrative cost accrual at the demand letter receipt.
9. Reflect the total balance on waiver remission applications. The DD Form 2789 reflects the principal, the accrued interest, the penalty, and the administrative costs.
10. Process the waiver or remission outcome. On approval, the DFAS debt closeout includes the principal and the components as resolved per the waiver remission decision.

Systems of record and forms

Systems

• DFAS Debt Statement. The DFAS-issued statement reflecting the principal and the interest, penalty, and administrative cost components.
• Treasury CVFR Publication. Treasury annual publication of the Current Value of Funds Rate.
• MCTFS. Reflects the principal debt entry.
• IPAC Reconciliation Tool. Internal IPAC verification of DFAS calculations.

Forms

• DFAS Debt Statement. Issued at demand letter and at each accrual cycle.
• Interest Penalty Administrative Cost Calculation Worksheet. Internal worksheet supporting the DFAS calculation.
• Voluntary Repayment Plan. Marine election of voluntary repayment with the total balance.
• Total Debt Balance Statement. Reflects the principal plus components for waiver remission application.

Common pitfalls

• Interest accrual start date wrong. The IPAC pay clerk uses the debt creation date instead of the demand letter date. Apply the demand letter date as the accrual start per DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 paragraph 070201.
• Penalty applied before 90 days delinquent. The penalty applies only on debt delinquent more than 90 days per 31 USC 3717. Verify the 90-day threshold before assessment.
• Administrative cost not separated from interest. The three components accrue separately and report separately on the DFAS debt statement. The IPAC pay clerk separates the components.
• Treasury CVFR misapplied. The IPAC pay clerk applies a stale CVFR rate. Verify the current Treasury CVFR publication at every accrual cycle.
• Waiver remission application without component breakdown. The DD Form 2789 reflects only the principal. Include the accrued interest, penalty, and administrative costs in the application per DoDFMR Vol 16DoDFMR Vol 16 Chapter 7.

Decision points

• Voluntary repayment timing. The Marine elects voluntary repayment to stop the interest, penalty, and administrative cost accrual. The S-1 chief counsels the Marine on the savings from early voluntary repayment.
• Waiver coverage of accrued components. A waiver under 10 USC 2774 covers the principal. Coverage of accrued interest, penalty, and administrative cost depends on the basis of the waiver. The S-1 chief routes the package with the component-specific request.
• Compromise of accrued components. Per 31 USC 3711 and DoDFMR Vol 16DoDFMR Vol 16 Chapter 7, DFAS compromises the accrued components on documented basis. The S-1 officer routes the compromise request.

Authority

This sub-page maps to NAVMC 3500.3E T-R event 0111-GENA-2018 Process Waivers or Remissions of Indebtedness. The interest, penalty, and administrative cost framework sits under DoDFMR Vol 16DoDFMR Vol 16 Chapter 7 Interest Penalties and Administrative Costs, 31 USC 3717 Interest and Penalty on Claims, 31 CFR Part 901 Standards for the Administrative Collection of Claims, and the Treasury Current Value of Funds Rate publication.

Related references

• DoDFMR Vol 16 Chapter 7 Interest, Penalties, and Administrative Costs. Primary framework.
• DoDFMR Vol 16 Chapter 2 General Instructions for Collection of Debt. Demand letter framework anchoring the accrual start date.
• 31 USC 3717. Interest and Penalty on Claims statutory authority.
• 31 CFR Part 901. Federal Claims Collection Standards for administrative collection.
• Treasury Current Value of Funds Rate. Treasury-published rate for federal debt interest.