Academy Of Dover: IRS Issues, Mold, Legal Fees, & Settlement Issues

Back in March, I found something incredible in regards to how the Internal Revenue Service revoked the 501c3 corporation status of Academy in Dover back in 2012 for failing to file their 990 tax forms for three consecutive years.  It appears they did get this status reinstated with the IRS, but it could also shed some light on their current financial issues.

AoD501c3IRS

I won’t pretend to know who a corporation, even a charter school, goes about getting their 501c3 status reinstated by the IRS.  But they did, on 2/15/2016.  The article I posted in March did not show that date at the bottom the above picture.  But I was contacted by the school who told me they were able to work things out with the IRS.  I was not given the nature of the resolution, but something else I found last night could show possible expenses at the school.

For each year Academy of Dover did not file their tax returns, there could have been continuing IRS penalties.

IRS Tax Penalties For 501c3 Not Filing Returns

The IRS defines gross receipts as:

Gross receipts are the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses.

So if Academy of Dover received over $1 million during any of the years they didn’t file (which they did), they could still be on the hook for a lot of fines.  If the IRS revoked their status in 2012, based on not filing for three consecutive years, and they just filed their 2014 tax return this year (which would be the tax year they got an extension on last year to file by this February), that means they are looking at a minimum of five tax returns that were not filed on time, if at all.  The only one they have posted on their website is the 2014 one.  Guidestar.org, a popular website that shows tax returns for non-profits, only shows the 2014 return as well.  So say they didn’t file a return for five years.  That could be a maximum of $50,000 for each year, totaling $250,000.00.  That could certainly throw a monkey wrench into their budget, especially since they already paid $500,000 over the past fifteen months as part of their settlement to Mosaica.  Adding to this is another settlement in the amount of $30,000 that was due by the end of the year as per their May board minutes.  The minutes did show that half of that would be covered by their insurance.  But with potential IRS penalties up to $250,000 depending on the number of actual years they didn’t file, a $50,000 payment to Mosaica, and another $15,000 settlement, this school sure does rack up the expenses that may not have been necessary if someone didn’t drop the ball somewhere.  Keep in mind, aside from what insurance paid ($15,000), all of this comes from your pocket Delaware taxpayers.

I am merely speculating on this.  They could have reached a deal with the IRS.  As well, they may not face penalties for the years between the revocation of their corporate status with the IRS and when they were reinstated.  Either way though, it is frightening this was never brought up during their various formal reviews, charter renewals, and other DOE “oversight”.  But it is something the board should openly discuss at their next board meeting.  If the Delaware DOE doesn’t address this during their charter renewal process this fall I would be shocked.  Charter schools are required by Delaware law to post their 990 IRS tax returns on their website, something many of them are guilty of not doing.  Better to get it out in the open now.  I don’t see anything in their board minutes aside from the board approving their latest tax return, which is also part of Delaware law for charter schools.

There is one matter which was sent to me anonymously by someone who did not want to be identified.  Apparently, when it rains up to half of the school can flood.  Their sewer gets backed up.  When this happens, students are sent to one side of the building.  Further complicating these issues is a matter of potential mold at the school.  I haven’t seen this addressed in any of the board meetings.  But if there is mold present, that could be very serious for anyone in the building especially if there are spores released into the air.

I have no doubt much of this could be traced back to Noel Rodriguez for some of the years he led the school.  The man was not competent to lead the school, much less do the right thing when it came to the school’s finances.  But he has been gone from the school for almost two years now.  The school could have very well spent a lot of that time trying to reach an agreement with the IRS, on top of the Mosaica issue.  But now is the time for the board and the school to open up about these matters.  It could very well save them from getting their charter revoked!

 

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