Jose de Wit
SUN Staff Writer
Published 10/23/08
Los Cariños Charter School administrators plan to ask the state for emergency funding after realizing the school started the school year nearly $100,000 in the red.
The school closed out the 2008 fiscal year, which ended July 1, with $1,458 left in its cash account at Valley National Bank and $95,630 in debt, according to financial reports. The deficit amounts to almost 10 percent of the school’s $1.19 million budget for this school year.
Business Manager Alex Salazar said he has only scratched the surface of what he and Principal Vernon Jaramillo called the “Pandora’s box” that is the school’s finances for last fiscal year, but suspects the bulk of the debt is in employee tax deductions outgoing Principal Victoria Garcia and Business Manager JoAnn Marquez allegedly failed to pay the Internal Revenue Service.
Salazar said it is impossible to tell how much exactly the school owes the IRS, which has so far confirmed to administrators that the school did not submit two of four quarterly reports last year. The IRS determines the amount of taxes owed based on those reports, Salazar said.
IRS spokesman Clay Sanford declined to comment, saying federal disclosure rules prohibit him from commenting on individual cases. The IRS could charge the school penalties of up to 15 percent of the taxes owed for making a late payment unless the school can show there is a reasonable cause for the delay, according to IRS filing instructions for employers.
Expenditures reports for last school year offer some clue on how the school exceeded its budget. For one thing, the school had initially budgeted $877,858, which included a $60,818 cash balance from the previous year, according to budget documents. In reality the school’s cash balance was $15,000 less. The budget also failed to take into account roughly $14,000 the District charges the school each year for accepting and transferring to Los Cariños its state funding, Salazar said.
The school had not budgeted a nursing position last school year. But Carol Manazanares was hired as the school’s nurse and was paid $35,013 last school year, according to expenditure reports.
Also, the budget included $60,000 for Garcia’s salary. It did not include an additional $7,914 she received for “additional duties.” Garcia’s contract for that school year was for $60,000, and does not mention additional stipends.
Garcia could not be reached for comment. She was replaced at the start of this school year by former District superintendent Vernon Jaramillo because she failed to obtain an administrator’s license, according to Los Cariños Governing Board President Father Terry Brennan. Garcia worked as the school’s principal two years with a teaching license, according to her personnel file. Marquez left the school also over the summer to take a job with Blue Sky Builders, an Española-based construction company.
And about $68,000 in miscellaneous contractual services were billed to a budget item labelled as “other energy,” which is supposed to be used for heating materials like heating oil, coal and firewood. Records show some of those payments are for a total of $382 to Carlos Atencio — Marquez’s son, according to Salazar. The records do not specify what those payments were for.
Marquez and her husband, Richard Marquez, filed for bankruptcy in April after defaulting on the mortgage on a property adjacent to their Velarde home.
Brennan said he does not suspect any malfeasance.
Marquez said she does not know any details about the deficit.
“I don’t recall it being in a deficit for $90,000,” Marquez said. “But let me give you a call back.”
She did not return further calls for comment.
Another roughly $19,000 chunk of the school’s debt is from unpaid employee contributions to the state Educational Retirement Board, which Board Deputy Director Jeffrey Riggs said the school has since paid off.
“What hurts is that it comes from our funding for this year, when it’s an expense from last year,” Salazar said.
In a best-case scenario, the school would ride out the school year by plugging its deficit with $97,000 in emergency funds administrators are requesting from the state Education Department. Los Cariños’ Governing Board approved the emergency application in an Oct. 15 meeting.
Salazar said the school is not behind on any current financial obligations, but said he might ask the Board to let him apply for a short-term line of credit to help pay bills in expense-heavy months, such as when employees receive three paychecks the same month. Brennan said the deficit could prevent the school from moving out of its temporary campus at the former Española seventh grade school on Hunter Street to its new campus in Santa Cruz by December, as originally anticipated.
The state Education Department receives two annual allocations from the legislature that total $7 million for school districts’ emergency needs, according to Deputy Secretary of Education Don Moya, who oversees finance for the Department. School districts and charter schools in financial trouble apply for those supplemental dollars, and the Department distributes the money each March after evaluating each entity’s needs. Because many entities vie for a limited pot of money, entities often receive less money than they request, Moya said.
Jaramillo said if that fails — if the Department funds Los Cariños’ request only partially or not at all — the school would have to start trimming costs. Non-essential budget items such as professional development and travel would be the first to go, and the school would “hopefully” avoid any staff cuts, Jaramillo said.
Los Cariños, which operates semi-autonomously under the Española School District, currently has seven teachers for kindergarten through third grade. The deficit also caught Española School District officials by surprise. The District is mandated under state law to monitor the school’s finances.
Superintendent David Cockerham said he found out about the deficit when Department officials called to arrange a meeting with District Business Manager Charlene Sanchez. According to Cockerham, the Department is blaming the District for “loose oversight” of the school. Department spokesman Andy Lenderman declined to comment, saying the matter is under review.
Cockerham said the reason behind the District’s hands-off approach to Los Cariños’ finances is that state law does not provide a mechanism for the District to enforce its responsibilities over its charter schools. He plans to ask the Department to allow the District to take over Los Cariños’ finances if the school does not come up with a satisfactory plan for getting out of debt, or if it runs into trouble in the future.