SOUTH RIVER — The Board of Education is once again in good standing with the Internal Revenue Service.

The problem began several years ago after voters approved a school referendum in October 1995 allowing for the construction of the current South River Elementary and Middle schools.

As with many other school districts, the board placed the funds for the construction into a high-interest-bearing account. According to state law, however, the board had six months to use the money from that account. But construction on the schools did not begin until late 1996, in part because of changes in state approvals at the New Jersey state Department of Education, board Vice President Greg Palaski said.

"We felt it was a little unjust," said Palaski. "We didn’t deliberately hold money."

With the delay in moving the funds, the account gained more than a $1 million in interest by the time construction actually began, Palaski said.

An audit performed by the district at that time revealed that the board owed money to the IRS.

A tax consultant was then notified, who determined the amount owed. In total, the district paid the IRS $113,860.

"We were all kind of shocked," said Palaski.

The board approved paying the IRS bill at its meeting Thursday.

Palaski assured that the debt will not have any effect on the budget for the upcoming year. But the board could have used the money to fund several school related projects, he added.

"We like spending money on students," said Palaski. "That’s two to three teachers, several textbooks or 33 computers."

—Takesha Pettus