Monday, Jan. 14, 2008 | Like everyone, school staffers make mistakes. Over the past three years, San Diego public schools accidentally overpaid roughly $2.7 million to employees, auditors hired by the district discovered. That’s not unusual, auditors said, but the way San Diego Unified gets the money back is.

Payback Time

  • The Issue: Auditors hired by San Diego Unified criticized an unusual policy that allows school employees who are accidentally overpaid to repay the district at their own pace.
  • What It Means: Repayment plans can lag, leaving the district short on money. In the past three fiscal years, the district was repaid roughly one-third of the $2.7 million it was owed by employees, auditors found.
  • The Bigger Picture: Budget experts and school board members have urged the district to alter its policy. But employee unions argue that the existing rule is fair, and complain that it isn’t always enforced.

San Diego Unified allows school employees to repay the district at their own pace, negotiating their own payment plans with the payroll department. In one case cited before the school board, an employee repaid only $25 a month to the school district. Out of the $2.7 million owed, only $917,000 has flowed back into the district’s coffers, auditors found. District staffers caution that more money may have been retrieved by collection agencies, but have trouble specifying how much. Collections can take even longer, with some payments tarrying four or five years, said Accounting Director Ken Leighton.

“It seems like a meaningless policy that doesn’t result in much pay,” said county Treasurer and Tax Collector Dan McAllister, who leads the school district’s Audit and Finance Committee. “You could be paying a long time — and the district will probably never get its money back.”

Change the policy, McAllister urged the school board in December. Board members seemed eager to do so, and asked school staffers to look into altering the repayment policy.

“It’s not a little matter,” said trustee Katherine Nakamura, a member of McAllister’s committee. Repayments “should never stretch more than 10 months,” trustee John de Beck added.

Currently, San Diego Unified is supposed to telephone employees who’ve been overpaid, then prepare a letter outlining the debt and how long the employee has to respond. Employees’ first option is to immediately repay the school district by personal check, or by deducting the money from their next paycheck, said Payroll Director Sue Weir. Their second option is to meet with payroll staffers, and set up a payment plan of their own.

“Our goal is to never exceed the year in which the overpayment is found,” Weir said. “We pursue recovery as diligently as we possibly can, and the majority of our employees are paying back fairly quickly.”

If the employee never replies, payroll staffers send out another warning letter. After 60 days of nonresponse, the schools turn over the debt to a collection agency, Weir said.

Unions that represent teachers and other workers defended the current policy. Ethel Larkin, recently elected president of the union representing blue-collar school workers, said the existing rule is just, and didn’t see a reason to change it. Teachers’ union president Camille Zombro said the overpayment problem is overblown, and the flexible policy — when enforced — works.

“The $25 per month is a red herring, a ridiculous example,” Zombro said. Overpayments are “the district’s mistake in the first place. … What we have right now is reasonable. We don’t need to change the policy. Everyone just needs to pay attention to it.”

McAllister said auditors had never seen a repayment policy as flexible as San Diego Unified’s rule. Auditors from Glendora-based Vicenti, Lloyd and Stutzman could not be reached for comment. But district officials challenged the criticism, saying that San Diego Unified’s policy wasn’t unique. Weir cited similar policies in effect at the Louisiana Department of Education and the state of Oregon’s Department of Administrative Services. Weir had yet to review policies in other California school districts.

Overpayments stem from multiple causes, auditors found. Some employees are paid in advance, then leave midway through their work. Some are absent, but their absences go unreported. Some work the same hours as usual, but end up with a beefed-up paycheck due to someone else’s mistake. Employees’ supervisors sometimes forget to report terminations into a school computer system called PeopleSoft, and their higher-ups sometimes neglect to approve them, Weir said. In the lag time, paychecks keep flowing.

But employees say extra-big paychecks aren’t cause for celebration. Zombro said she was once overpaid “several hundred dollars,” and didn’t notice until the sum was taken out of her next paycheck. Under California labor law, it’s illegal to snip overpayments from an employee’s next paycheck without their consent, Weir said.

“We do everything we can to make sure that doesn’t happen,” Weir said.

Yet sometimes, it still occurs, Zombro said.

“It pointed out to me, personally, why there should be a repayment schedule,” Zombro said.

Peggy Manoogian, a former school counselor who settled a suit against the school district for wrongful termination, shared a similar story. (San Diego Unified is currently suing Manoogian for breach of contract.) Accidentally paid for a month of medical leave, she tallied up what she’d received, and agreed to repay the district roughly $8,500, Manoogian said. According to Manoogian, payroll accountants argued that she owed about $1,000 more. She believes the difference lay in pension contributions and other benefits — dollars she didn’t directly receive.

“I had to figure it out for myself,” Manoogian said. “I didn’t see any purpose in returning to them what they never gave to me in the first place.”

Auditors zeroed in on payment schedules as one possible problem. Many school employees work 10 months a year, but opt to get 12 monthly paychecks. It’s a popular option for teachers, many of whom like the consistency of the 12-month plan, Zombro said. But auditors fretted that such employees are actually paid in advance. Schools start in September, but the fiscal year starts in July. As a result, 10-month employees on the 12-month plan are paid in advance for their work. If an employee leaves San Diego Unified early in the year, they may owe the school district several paychecks.

“Sometimes it’s tough to collect from ex-employees,” Leighton said. When employees disappear and debts are referred to collection agencies, “it’s sometimes four or five years down the road that we collect.”

“We strongly urge the District to reconsider the practice of making advance payments to 10 month employees,” auditors wrote. Instead, they urged San Diego Unified to pay 10-month employees from September through August, aligning payments with the work year.

But with employees loath to change the rule, clamping down on overpayments could be an uphill fight for San Diego Unified.

“The penalty should not be paid only by the employee,” said Jane Bausa, president of the paraeducators’ union, which represents teachers’ assistants and other employees who work under professional supervision. “Some of us meticulously pay attention to our paychecks, but most of us are busy. It goes to a bank, and you don’t even notice it’s overpaid until you balance your checkbook.”

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