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.

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.

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!

 

Academy of Dover Is Not A 501c3 Corporation As Stated In Their Charter, DOE Needs To Revoke Their Charter Now

The Academy of Dover is not listed as a 501c3 corporation with the Internal Revenue Service.  The Academy of Dover’s charter, which firmly states they are a 501c3 non-profit corporation, is not real.  The Delaware Department of Education put the charter school under formal review last year.  This was their fourth formal review in 12 years.  This did not come up at all during that process.  As well, their auditor, Barbacane, Thornton, & Company LLP, wrote about this in the last three years of audits they did for the school.

For the past three years, their auditor made note of this in their yearly audit of the school.  Each year provides a link to the full audit:

2013

2014

2015

And yet, for all three years, it states the exact same thing.  Ironically, the link for their 2012 audit, which may have shed some light on this situation, comes up as a blank pdf file.

How has this never been publicly disclosed until now?  Actually, it was disclosed a few years ago but it was buried in a comment section on Kilroy’s Delaware.  It was during July of 2013, which as any blogger can tell you isn’t exactly a big audience at that time of the year.  Especially an education blog!  But a commenter wrote exactly what I am telling you now but no one picked up the baton and ran with it.

But this tells me this information has been out there for a while now.  I would have a very hard time believing nobody at the Delaware DOE knew this.  I’m sure they read the annual audits.  But the fact these audits say the exact same thing three years in a row is astonishing.  With the school involved in a $2 million dollar lawsuit as well as former Head of School Noel Rodriguez’ personal theft of school funds, how does this not come up at all?  Who is reading these audits at the DOE?

The oversight for Delaware DOE authorized charters falls on the DOE.  It was right in front of them the whole time and I have never seen it publicly questioned.  It never came up in their formal review meetings last spring.  I know this because I attended all the meetings.  Transparency and this school have never been the best of friends.  But this… the DOE needs to act.  Their 501c3 status was revoked over four years ago.  They have been operating in the dark for over four years.  Granted, they could be trying to work things out with the IRS.  But if they aren’t a 501c3, even though they are still listed as such with the Delaware Department of Corporations…

And if anyone is wondering why charters need more oversight, this is exactly why.  Avi at Newsworks wrote an excellent article today about more charters under investigation in Delaware, including ones that were already under past investigations.  I’m just going to come right out and say Senate Bill 171 would give us more of what we have: fraud, lies, and auditors copying and pasting the same information year after year.  House Bill 186 would allow information, like what I am writing now, the ability to be seen.  Who knows what other skeletons are buried out there in Delaware charters?

One last thought…charter schools are required by the State of Delaware, in Title 14, paragraph 509, that they must have their IRS Tax Form 990 on their website.  Academy of Dover has not had this on their website since at least 2008 since the IRS said they hadn’t posted a return the last three years in 2011.  So we have a law and nobody is making sure this even happens?  Hello Jack Markell… this is transparency calling… your DOE has a lot of explaining to do.  But let’s get Academy of Dover taken care of first.  They have been out of compliance with their approved charter for over four years.  It’s time the DOE and the non-elected State Board of Education make a real decision instead of “probation” four times…