A payment issued in error can be cancelled. Canceling a payment indicates that a payment has not been received. For example, a payment may be cancelled if a participant reports that a check has been lost in the mail. A payment is cancelled at the payment instruction level. When a payment instruction is cancelled, the status of the payment instruction changes from "issued" to "cancelled". All of the instruction line items within the payment instruction are also cancelled and their status changes from "processed" to "cancelled".
A payment may also be cancelled because the bank account has been closed or an error in instrument details may require the cancellation of the payment. When a payment is cancelled, the reason for canceling the payment is recorded. On cancellation, the payment instruction is negated rather than deleted from the system. This is for accountability and traceability purposes. A new reversal instruction is created to cancel out the amount of the payment instruction. A reversal instruction line item is also created for every instruction line item that was rolled up into the payment instruction.
Any payment that has been cancelled can be reissued to the original nominee or to an alternative nominee. For example, a check payment that has been lost can be reissued to the original nominee. Payments can be reissued using any of the nominee's active delivery patterns. For example, an original payment issued monthly by check can be reissued daily by cash.
A payment that has been cancelled can be reissued and have an applied, or un-applied, deduction created against it. This creates a deduction, which is visible to a caseworker as per any other deduction on the system, including a full deduction history. A deduction created when reissuing a payment is processed into the reissued payment, and in the case of an applied deduction, applied against the overpayment. This achieves a reduced payment issued to the client for the cover period in question. Invalidating payment with a replacement payment, as described below, is an alternative mechanism to achieve a reduced payment to a client. Whether to use reissue payment with deduction applied or invalidate payment with replacement payment, depends on whether the change in circumstance is recorded before the payment is canceled. For example if a payment is issued to a client and the client dies during this period. If the agency is first notified of the death prior to payment being returned (or perhaps payment issuance later fails if, for example, bank account were closed), the date of death is recorded which generates a change in circumstance and hence an overpayment is created. At this point, to get a new payment issued for the period up to the date of death, Invalidate Payment cannot be used as the period has already been reassessed and therefore there is no longer a payment only for the cover period in question; the payment and the reassessment result (payment correction or over/under payment) need to be considered together for this period. In this scenario a reduced payment can be issued for the cover period by canceling the payment and reissuing with a deduction applied to the overpayment case.
When a payment is reissued, new payment instruction and payment line items are created. The cancelled payment instruction and its instruction line items have a status of "cancelled". The new payment instruction has a status of "issued", and the new payment instruction line items have a status of "processed". A payment can be reissued during the cancellation process or after the payment instruction has been cancelled.