(1) When it is discovered that an administrative error resulted in an underpayment of LIHEAP benefits, it may be corrected by increasing the benefit award to cover the underpayment.

(a) For purposes of determining financial eligibility, such retroactive corrective payments will not be considered as income.

(2) Except as provided in (3), current and future program year payments of LIHEAP benefits will be reduced the full amount of prior overpayments, unless the administrative cost of recouping the overpayment would exceed the amount of such overpayment.

(3) When it is discovered that the local contractor caused an overpayment of LIHEAP benefits, at the sole discretion of the department, the local contractor may be required to repay the entire overpayment to the department, rather than the overpayment being withheld from the household's future payments.