Student Tax Funds Mistakenly Diverted

Cal State Northridge officials mistakenly took nearly $70,000 in 1996 state income tax refunds that were owed to more than 700 students, university officials have acknowledged. The university claimed the money to collect alleged student debts--even though the students owed nothing.

The tally could climb much higher after the state completes all of its income tax returns. And despite learning of the problem four months ago through student complaints, no effort was made to halt the diversion of income tax refunds until inquiries were made by The Times.

The university’s interim controller, Robert J. Kiddoo, said the names of hundreds of students were reported to the state Franchise Tax Board by mistake, the result of either human error or computer software problems. The school has so far returned $69,823.55 to students, he said.

Campus finance officials last week began efforts to halt the so-called tax refund offset, which is administered by the tax board.

The state controller is authorized to collect funds owed to state agencies such as Cal State Northridge by taking the money from tax refunds and California Lottery winnings. Last year, the state collected $44 million in unpaid debts from 403,000 income tax filings on behalf of 170 government agencies.

Cal State Northridge submitted its list of debtors to the state board Dec. 1, 1996, said Stephanie Levy, manager of the school’s student aid office.

*

University officials say they do not know how many students were mistakenly labeled campus debtors. Last year the school submitted a list of 6,963 students to the state in an effort to collect alleged debts totaling $3.2 million. Kiddoo said the school must now check the entire list for errors.

Hundreds of remaining state income tax refunds to Cal State Northridge students are still being processed, state records show.

Kiddoo said campus workers were reluctant to retrieve the list from the state when they learned of the errors this winter because “they didn’t want to cause a problem.” Also, they were uncertain whether the state would give back the list, he said.

Computer programmers are still trying to figure out what happened, Kiddoo said.

But the university should have alerted state authorities as soon as it discovered the problem, said Jim Sheppard, spokesman for the tax board.

“We don’t want to be in the business of offsetting someone’s refund when a student doesn’t owe any money,” Sheppard said. “Any time an agency has a problem, they have to go through their accounting books and make corrections immediately. They have to correct their records and inform us.”

Most agencies, he said, have a policy of returning mistakenly diverted refunds within 48 hours.

“If the university was aware of the problem months ago, then that is when they should have notified us,” Sheppard said.

So far, the school has received 1,484 refunds of its students, totaling $158,000, Kiddoo said. Of those refunds, 713 were mistakenly diverted and the money later returned to students, he said. The remainder covered actual debts for items such as tuition, rent and lab fees.

*

Ironically, the collection effort came as the result of a California State University audit published last year that called for reforms in the way the Northridge campus handles its money. CSU auditors criticized Northridge for not collecting unpaid student debts through the income tax offset provision.

Kiddoo said the school’s efforts will probably now cost more than they will receive.

Students who said they had never missed a payment to the campus expressed anger at being reported as delinquent debtors to state income tax officials.

“It’s a shame that a university administration that prides itself in its business and accounting programs can’t handle its own books, or take responsibility for its mistakes,” said Debi Berzon-Leitelt, a senior majoring in sociology. “I want the university to absolve me, because it is not my fault. I feel like a highlighted deadbeat.”

The Sherman Oaks woman, who wants an apology from the school, only recently received her $95 refund after calling university officials to complain. The first student complained to the school in late January, said Levy, manager of the Student Aid Office.

*

The current disclosures represent the second incident of bookkeeping troubles at Cal State Northridge in recent months.

The Times earlier this year reported that the school, through lax record-keeping, had allowed $675,000 in unpaid debts to accumulate, mostly through outstanding travel and salary advances to employees. As of last month, the debt had been reduced to less than $80,000.

In an effort to rectify that problem, the school wrote off $81,000 in alleged debts by current and past employees. A dozen current employees included on the list, which was made public by the state controller’s office, said they owed the school nothing.

Cal State Northridge President Blenda J. Wilson, after completing an investigation of the problem, acknowledged lax record-keeping and other past problems keeping track of state money. Art Elbert, vice president of administration and finance, later apologized to faculty members for the mistake.