Española Public Schools could owe the Internal Revenue Service more than $1 million in fines for failing to submit health insurance forms from 2016-18, when the district’s finances were under control of the state Public Education Department.

Española School District Executive Director for Business and Financial Services Richard Halford said he received a letter from the IRS on Wednesday morning that indicated the agency needed at least another 60 days to determine the extent of the penalty.

Española Superintendent Bobbie Gutierrez, who recently announced plans to retire at the end of this school year, said the district has been working on the problem since first receiving a notice from the IRS in September.

“We sent all of our information and our justification for what happened. We’re hoping they will consider waiving the penalty, but we’ll just have to wait for their decision,” Gutierrez said. “Shortly after we got our finances back, we discovered this fiscal agent from the [Public Education Department] neglected to make some of these payments. We’ve been working with the IRS about this for a while.”

The Public Education Department, which did not respond to requests for comment Wednesday, took control of Española Public Schools’ finances in the fall of 2016, citing a lack of fiscal management and accountability on the part of the district. Financial control was returned to the school district in the summer of 2019.

Halford said Española Public Schools received a notice in September about a $430,000 penalty for failing to submit forms that prove district employees were offered a health insurance plan in 2016. He said the district then submitted the forms for 2016, 2017 and 2018.

If the district is penalized for all three years, it could mean a penalty of about $1.2 million. The district’s cash balances, Halford said, are between $2 million and $2.5 million.

“Maybe all at once would be the best way to swallow the pill, but that would bring us under $1 million in cash balances,” Halford said. “Basically we’d be pretty strapped.”

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