While Cariños Charter School’s Board members and administrators racked up $28,000 in travel expenses over the past three years, the school apparently failed to pay federal taxes on employee salaries and literally went broke.
The school had $197,525 in its coffers in June 2006, shortly after opening. That amount dwindled to $155,045 in April 2007 and $49,424 in June 2007.
By May 2008, the balance had dropped to $11,269. During that month Valley National Bank charged the school $150 for maintaining insufficient funds in the account after overdrawing it by $5,200. The bank levied a $175 charge the following month for the same problem when administrators overdrew the account by $12,571, ending the month of June 2008 with $1,442 in the account.
“People are human and they do make mistakes,” former principal Victoria Garcia said. “All you can do is learn from your mistakes if it’s an honest mistake.”
In any case, no one seems to have learned from Cariños’ overdraft mistakes.
In June 2009, Cariños’ bank account dipped $42,000 into the red, resulting in $850 in insufficient funds charges, according to bank statements.
Former Business Manager Alex Salazar, who was in charge of the school’s finances at that time, said the most recent overdraft was because the Internal Revenue Service took money directly out of Cariños’ account to make up for unpaid taxes during the school’s first two years in operation, despite the fact the school had a $30,000 balance with the IRS.
“That never should have happened,” Salazar said. “We had a credit balance, and they still took that money anyway. ”
David Stell, a spokesman for the IRS, said federal laws prohibit him from releasing information on whether or not the school has paid its taxes.
But Cariños began in November 2008 issuing numerous checks to the IRS. The school at that time owed the IRS about $100,000 for employee tax deductions Garcia and former business manager JoAnn Marquez allegedly failed to pay, according to a previous SUN report.
“During the first few years of operations, before Vernon (Jaramillo) and myself got there, the school was not withholding taxes to the IRS,” Salazar said. “It accumulates really fast, and on top of that the IRS assesses you fines and penalties.”
Employers are required to withhold between 15 and 20 percent of an employee’s salary for tax-funded programs like Social Security, Medicare and federal and state unemployment benefits. The IRS can assess interest and up to a 15 percent penalty for unpaid federal taxes, federal law states.
Boad President Father Terry Brennan agreed with Salazar’s take.
“When JoAnn (Marquez) took over as business manager, she did the best she could to bring herself up to speed on what the requirements are for charter schools to be spending,” Brennan said. “When it came to taxes, she was not aware of all the taxes that needed to be paid, so early on some taxes didn’t get paid.”
Garcia refuted Salazar’s and Brennan’s claims, saying she paid the IRS electronically and Salazar was the one who failed to pay taxes. She also said she documented her electronic payments in a receipt book and that one payment for $6,137 labeled “ETF,” which is hand-written onto a May 2008 bank statement, is evidence of one of those electronic payments.
Deanna Gomez, who now oversees the school’s business operations on behalf of the state Coalition for Charter Schools, said she has yet to locate such a receipt book and declined to say whether or not the “ETF” payment was legitimate. Garcia came to Marquez’s defense.
“Come on,” Garcia said. “You cannot go two years without paying the IRS.”
But according to Cariños’ bank statements, you can.
Bank records from Cariños’ main operating account show check payments to the IRS amounting to $89,878 between 2006 and the end of Marquez’ tenure in June 2008. That amount is roughly $20,000 short of what would have been 15 percent of the school’s payroll for both of Marquez’s years in charge.
Between November 2008 and July 2009, the school paid the IRS a total of $254,273, bank records state. That year, the school’s payroll only grew by about $60,000.
Salazar said the $254,273 payment accounts for the $100,000 owed in back taxes, plus interest and penalties, and the school’s taxes for fiscal year 2009. He said as far as he knew the tax issue has been resolved.
Brennan said he met with the IRS to discuss reimbursements for any overpayments, and the IRS wrote the school a check Dec. 17, 2009, for $36,677, which Gomez said was for such a reimbursement.