Shenandoah County Public Schools received Tax Credits for which they were not eligible.
In April of 2020, the federal government enacted the Family's First Coronavirus Response Act which required certain private and public sector employers with fewer than 500 employees to provide their employees with emergency paid sick leave and emergency paid medical leave due to absences as a result of covid-19. This help assistance would be paid out through tax credits via the IRS, and employers claimed the tax reliefs through their quarterly Form 941, which is used to report and deposit required tax withholdings.
Although the Shenandoah County Public School Division employs over 1,000 employees, the previous administration applied for the tax credits. This has resulted in the new administration under Superintendent Melody Shepherd and new Finance Director, Angie Stine needing to rectify this problem and pay back funds due the IRS from the current school budget. The unauthorized application clearly falls under former Superintendent Mark Johnston and his administration.
Timeline of events
• April 2, 2020: a poster was sent out from HR Director Linda Hodges to all principals in the school division to inform the employees of their paid sick leave and expanded Family and Medical Leave under the FFCRA.
• October 22, 2020: presumably under the direction of Superintendent Mark Johnston, an SCPS payroll department employee filled out the SCPS 941 for July thru September of 2020 applying for the tax credit.
• December 11 and 18, 2020: Superintendent Johnston mentioned in his Friday Superintendent's letters mentioning details on the FFCRA and meeting with the Shernandoah County Public School Board’s personnel committee to discuss payments and eligibility criteria for SCPS employees out on leave during the pandemic.
• January 8, 2021: an email from HR Director Linda Hodges to Mark Johnston and Finance Director Demetria Brown stated; “ I saw a news release from the US Department of Labor dated 12:31/20 that the payroll credit for covid leave has been extended through March 31st. There has been some discussion about whether or not school divisions are eligible. Demetria - can you please check on this and let me know so that we know if we need to continue tracking this leave separately? Thank you.
• January 8, 2021: Demetria Brown responds via email to Hodges that the FFCRA had expired, but that “it is my understanding that school divisions are eligible for the extended credit as the bill does not appear to exclude specific types of employers.” She also suggested “as such, I would continue to track this leave separately so we can take advantage of the payroll tax credits through March 31st, 2021.”
• January 14, 2021: SCPS employee deposits 1st check from IRS for the tax credit totaling $37,521.48 (July-Sept 2020)
• January 27, 2021: SCPS 941 listing 1083 total employees sent to IRS requesting $94,126.18 reimbursement.
• January 29, 2021: Johnston’s Friday Superintendent’s letter informs employees that the FFCRA was not extended and expired on December 31, 2020.
• February 8, 2021: Demetria Brown emails that “ based on the IRS FAQ link, scps is not an eligible employer under the FFCRA… any leave wages that were paid to employees under the ACT are not subject to the employer's share of Social Security tax. Therefore if we inadvertently paid the employer share of the Social Security tax for the EPSL or EMFLA wages that we paid out to employees taking such leave, that would be the “credit “or refund of those taxes we would have received.”
• April 15, 2021: IRS issues check for $99,649.80.
• June 4, 2021: FFCRA refund deposited by SCPS in amount of $99,649.80 (October-December 2020).
• June 9, 2021: SCPS received letter from the Internal Revenue Service informing that the school division was not eligible for the tax credit in amount of $94,126.18.
• June 28, 2021: FFCRA refund deposited by SCPS in amount of $2,451.53 (October-December 2020).
The Shenandoah County Public Schools received a total of $139,712.81 via checks from the IRS. Including penalties SCPS has had to repay the IRS $148,139.35 in total. Both Mark Johnston and Demetria Brown hold degrees in finance and were apparently not being well effectively supervised by the School Board at that time. These decisions made coincide with the school name changes voted on by the 2020 Board, coincidentally and happened during the Covid-19 shutdown. Current School Board members Marty Helsley, Andrew Keller, and Cynthia Walsh were on the Board at that time. One of the checks received from the IRS was made out to Shenandoah County School Board, which implies that they should have been aware and validated of such large financial transactions. Lack of oversight at the very least is obvious in the situation. However Additionally, some huge significant questions arise after a review: ing this situation.
If Superintendent Johnston was made aware of the Shenandoah County Public Schools not being eligible for the tax credit in February by Brown, why did SCPS deposit checks in June?
The check for $99,649.80 was received by SCPS in April of 2021, but was held and not deposited until June 4, 2021. When asked if checks made out to Shenandoah County Schools were regularly held, present Superintendent Sheppard said “No, they are deposited by SCPS almost immediately “.
The decision to hold that this check is not normal procedure and, unfortunately as both Johnston and Brown are no longer employees of Shenandoah County Public Schools, and neither could not be reached for comment or explanation. I asked Superintendent Sheppard how this type of thing could be prevented from happening again, and she replied ; “That's a great question, through more transparency and further checks and balances.” One thing in this situation that is perfectly clear is that the current Superintendent and her administration are left dealing with still another problem left by their predecessors. Our students, staff, and taxpayers certainly deserve better. Copies of correspondence, checks, IRS forms, and deposit information can be obtained by emailing The Freedom Press. Fpmedia62@gmail.com
Update to this story -in August of 2023 the IRS sent a letter of overpayment and returned over $113k to SCPS. Although it's clear that the school division wasn't eligible, the government returned a large percentage of the money due.
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