North Carolina’s largest recipient of private school voucher funds, Trinity Christian School in Fayetteville, has a history of delinquencies when it comes to paying federal and state taxes, court records show.

The school is currently at the center of allegations that its athletic director embezzled hundreds of thousands of employee withholding dollars intended to go to the state Department of Revenue between 2008 and 2015.

In July 2004, the state Revenue Department issued a Certificate of Tax Liability to Trinity Christian School’s parent organization, Truth Outreach, Inc., for failure to pay withholding taxes to the state in the amount of $95,408 between 2001 and 2004.

Information about that tax debt—which the Cumberland County Clerk’s office says has been repaid—surfaces after the recent disclosure of allegations that the athletic director, Heath Vandevender, embezzled $388,422 from employee withholding money that was to go to the N.C. Department of Revenue.

Vandevender is said to have “aided and abetted the [Truth Outreach Center, Inc.] to embezzle, misapply, and convert to its own use $388,422.68 in North Carolina Withholding Tax,” according to a  Department of Revenue news release. [Truth Outreach Center is the nonprofit umbrella organization that includes Trinity Christian School.]

The state tax debt during early 2000s isn’t the only tax issue the organization has faced. The U.S. Internal Revenue Service filed a tax lien against Trinity Christian’s parent organization in 1997 for failing to pay $33,285 in federal payroll taxes between 1991 and 1994.

That debt was repaid almost one year after the federal government filed the tax lien, the Cumberland County Court’s clerk said.

Opposed to paying taxes on religious grounds

It is noteworthy to consider these instances because Trinity Christian School is the state’s largest recipient of taxpayer-funded private school vouchers, known as “Opportunity Scholarships.”

Since North Carolina launched the private school voucher program in 2014, more than $1.2 million in taxpayer dollars have gone to Trinity Christian to subsidize tuition for low-income students.

There are few provisions to ensure accountability and transparency for private schools’ use of taxpayer funds in the program. Curricular standards for voucher schools don’t exist, monitoring of academic outcomes are not adequate by most educators’ standards, and financial oversight is weak compared with how the state monitors tax dollars flowing to other types of nonprofit organizations.

Despite growing concerns over the lack of adequate and appropriate standards for accountability and transparency over the use of public funds at the more than 300 private schools receiving vouchers—93 percent of which are religious schools—lawmakers plan to spend $1 billion on school vouchers over the next decade.

Just a handful of top voucher schools are required to provide taxpayers with some clues about how they are spending funds. Those that receive more than $300,000 in voucher funds in a school year must submit a financial review. For 2015-16, only three of the state’s 328 participating voucher schools met that threshold.

While Trinity Christian was one of those, the financial review submitted for the 2015-16 school year didn’t meet “generally accepted accounting principles,” the NC State Education Assistance Authority said in February. The Authority noted that a balance sheet and a statement of cash flows were not included in a very thin set of financial documents. The school and the Authority are in talks now about a new deadline for the school to submit a revised, complete financial review.

One note did standout in the financial documents Trinity Christian did submit, under a section labeled “Payroll Taxes.”

“The organization has filed an election for exemption from employer social security taxes by certifying that it is a church controlled organization which is opposed for religious reasons to the payment of social security taxes. Therefore, no expenses for payroll taxes are reflected in the financial statement.”

It’s not clear if the federal government granted this exception to Trinity Christian. What is clear is that the school, which has received $1.24 million in taxpayer-funded state vouchers since 2014, says it is opposed on religious grounds to the payment of taxes. Records reveal it has been less than fully cooperative over the past 25 years when it comes to paying payroll taxes to both  North Carolina and the federal government—and, according to records has at times allegedly failed to do so altogether.

Strengthening accountability and transparency

A bipartisan group of North Carolina state senators acknowledge that the state’s voucher program needs to be more accountable to the public.

A bill filed in the state Senate, “NC Comprehensive School Accountability,” seeks to strengthen oversight for the voucher program, but it only deals with limiting the choices of standardized tests private schools can administer in an effort to make students’ academic progress more comparable and more easily understood.

Sen. David Curtis (R-Gaston), one of the bill’s sponsors, says he’d like to do more.

“If what you’re saying is entirely accurate,” Curtis said about the financial concerns presented by the Trinity Christian case, “we will look at tightening financial oversight. I’ll commit that to you,” he said.

One step in the right direction, said Durham CPA Mig Murphy Sistrom whose firm specializes in nonprofit tax advice, would be  to require voucher schools to be subject to the same kind of financial oversight that the state requires of most organizations receiving state grants.

Among many requirements for organizations that receive state funds, which includes the promise of opening up your books at any time to the NC State Auditor for review, there’s also this one: A statement of no overdue tax debts.

While such a provision might not have caught Trinity Christian’s past instances of tax delinquency, it could have revealed the school’s most recent financial questions prior to the state sending millions to the school through vouchers.

With bill introduction and action deadlines approaching, there’s not much time left for new bills to be heard in the state legislature.

“It will need to be heard in the next two weeks,” Curtis said late last week, if his bill to improve voucher accountability is to survive the legislative session—and bring any improved financial oversight is to the school voucher program.

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