The Scarsdale school board has reprimanded two administrators involved in the cover-up of $1.7 million in IRS penalties in the payroll-tax scandal that brought Superintendent Thomas Hagerman’s resignation in May.
In agreements approved by the board Tuesday, Assistant Superintendent Stuart Mattey and Treasurer Jeff Martin said they kept Hagerman informed of the issue, but neither reported the matter to the Board of Education as required by their duties.
In exchange for their acknowledgement of their involvement in the cover-up, the district agreed that it would not file disciplinary charges against them. Mattey may also have to take training in best practices for business officials.
Martin was glad that the agreement included the fact that he kept Hagerman informed about the IRS issue.
"That was the nicest part of the agreement," said Martin, 55, who will retire this fall after 26 years in Scarsdale. "It tells the truth. I had no idea the superintendent didn't tell the school board."
In a June 14 letter to the school board, Mattey apologized for his inaction.
"The purpose of this brief letter is to formally apologize to you for failing to exercise the degree of diligence expected of me in the general supervision of the operations of the business office directly related to certain errors that occurred in the filing and payment to the Internal Revenue Service of the district's payroll taxes," he wrote. "I also apologize for failing to recognize that reporting the matter to the superintendent was insufficient in meeting my duty to the Board of Education."
Hagerman didn't inform the school board of the IRS dispute until a payment of $844,000 was due in late March. That's when the school board said they first learned of the payroll tax snafu.
Martin will remain on the district payroll until October, when he intends to retire. Mattey will continue in his post as one of the state’s highest paid assistant superintendents, with a salary of $278,577.
Matter was 'no secret'
The issue with the IRS dates back to February 2020 when the district’s business office incorrectly filed the district’s payroll taxes. A deposit that was supposed to be for $1,048,570 was mistakenly sent for only $148,570, according to Martin's affidavit. That created an ongoing problem, as one later payment was taken to pay the IRS for penalties imposed because the early payments were short by about $900,000.
The district learned of the potential fines in January 2021, according to a confidential memo from Martin and Mattey to the school board, obtained by Tax Watch through a Freedom of Information request.
Martin said it was common knowledge among more than 40 employees in the district's central office that Scarsdale and the IRS were embroiled in the matter.
It was a time when the IRS was overwhelmed by its increased duties during the early days of the COVID pandemic. After Scarsdale was notified about payroll tax errors, Martin said it was difficult to get a call back from the IRS. Once Scarsdale was assigned a revenue officer, Martin said the district was told not to worry about a notice from the federal government that it may file a lien against the district for payroll tax arrears.
"She told us not to worry about it," Martin said. "Then she retired, the IRS sent the notice of the lien, and for some reason, the superintendent didn't tell the board."
He said employees in the office would occasionally joke about the problems officials had with reaching the IRS.
"It was no secret in the entire central office — not just the finance office," said Martin.
School board Vice President Amber Yusef said there would be no comment from the board because board President Karen Ceske had "a family commitment."
Efforts were unsuccessful to reach Hagerman, who will become head of school at the Latin School of Chicago, one of the city's premier private schools.
On Tuesday, Ceske reported that the district received verbal confirmation from the IRS that abatement of certain penalties were approved for several improper filings. But the district is still awaiting written confirmation.
She said an IRS letter indicated that the district will receive a refund of $100,000 in a few weeks regarding one overpayment in 2020.
Questions on transparency
In keeping with a culture of secrecy that kept these issues from the public eye for more than two years, the agreements with Mattey and Martin were approved with no discussion on Tuesday, in the school board’s final meeting the 2021-22 school year.
The agreements appeared on the board’s consent agenda, reserved for routine, noncontroversial issues. They were labeled on the agenda as “stipulation agreements,” with no mention that they involved the district officials involved in the payroll tax matter. Both agreements said if either were found guilty of misconduct, punishment could include dismissal from Scarsdale employment.
The agreements with Mattey and Martin were not listed among the “highlights” touted by the school board on its website. You had to click on the agenda item on the district website to discover who was involved.
Scarsdale resident Robert Berg said it was a replay of the board action in June of 2021, when it sought to approve a contract, raise, and bonus for Hagerman on the consent agenda.
“They tried to sneak it by, unnoticed,” said Berg. “It’s typical that Scarsdale will pull a stunt like this.”
Mayra Kirkendall-Rodriguez, a financial risk analyst and active school volunteer, said she was “very disappointed to see that the Scarsdale Board of Education buried information about sanctions of Messrs. Martin and Mattey in the consent agenda with a title 'Stipulation Agreements' that did not describe what the documents are about."
Mattey did not return phone messages left at his office.
Raises for Scarsdale officials
Keeping secret the IRS matter spared the Scarsdale Board of Education from the bad news while the board considered raises for Mattey, Martin, and Hagerman in 2021.
In late April, Scarsdale resident Eileen Donovan questioned the school board’s decision to grant Hagerman a one-year extension on his multi-year contract. She was referring to the controversial one-year extension of his contract, valued at close to $500,000, as well as a $5,000 bonus and annual raise of 2.75%.
In June 2021, after Mattey’s office learned of the IRS fines and before the school board was informed, the school board gave Mattey a raise of 3.8%, to $278,577.
This June, following revelations about the IRS issue, the school board granted raises of between 2.2% to 3.5% to five of the district’s six non-union administrators. But Mattey did not receive a raise for 2022-23.
Martin did not receive a raise for the upcoming 2022-23 school year. But while the school board remained in the dark about the IRS issue, he received a 2.6% raise to $188,549 for the 2021-22 school year.
Follow Tax Watch columnist David McKay Wilson on Facebook or Twitter @davidmckaywils1. He has written about Hudson Valley public affairs since 1986. Check out his latest columns at lohud.com
This article originally appeared on Rockland/Westchester Journal News: Scarsdale schools treasurer says IRS fines were 'no secret' in office