CONCORD — The Internal Revenue Service says the Mt. Diablo school district owes $833,000 in unpaid payroll taxes and penalties from 2006-07.

The district may not owe that much, Superintendent Gary McHenry told the Times. District employees are checking whether their numbers match the IRS account.

"There are amounts in dispute with the IRS," he said.

Trustee Gary Eberhart said Monday that McHenry should have notified the board about the large liability, which he noticed on a spreadsheet he received as background information for teacher negotiations.

"It's unclear how long this has been sitting around, but at least a year" Eberhart said.

Eberhart questioned it during a Sept. 23 meeting. At that time, Assistant Superintendent Richard Nicoll said the amount was related to money that either was not paid on time or was not properly paid during the 2006-07 school year.

The district has about six weeks to respond to the IRS, McHenry said.

"There were payments made in previous years," he said. "The amount that was paid was insufficient."

Part of the confusion is the result of staff turnover in the fiscal services division, he said. Both the payroll manager and the chief financial officer employed by the district at the time the payments should have been made have resigned.

In addition, the district contracted with Automatic Data Processing during the time in question.


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The superintendent said he did not know if the problem occurred at Automatic Data Processing or in district's payroll office.

Both the IRS and Automatic Data Processing declined to comment for this story.

The district's current payroll manager met with the IRS on Sept. 19 to try to figure out whether there were discrepancies in the federal government's records.

Eberhart said Monday that McHenry gave the board information showing the district paid three penalties totaling about $105,452 between December 2006 and June 25, 2007.

"So, somehow, this has been happening over and over again," Eberhart said. "The board of education has never approved any of these payments to my knowledge."

McHenry told the board at the Sept. 23 meeting that he informed the board about penalties in 2006.

McHenry said last week that he believed a $325,000 charge was a penalty for the $46,275 amount that had already been paid.

The other $508,000 was still being sorted out.

Board president April Treece said the district was cooperating with the IRS.

"We're certainly looking into the validity of the IRS claims and as we go back," Treece said.

"This was something that came up in late 2006, early 2007, so that requires us to, I think, not overreact."

Theresa Harrington covers the Mt. Diablo school district. Reach her at 925-945-4764 or tharrington@bayareanewsgroup.com.