NC Board of Education, auditor looking into WS/FCS financial issues
By Tevin Stinson
The Chronicle
State officials are keeping a close eye on the financial issues with the local school district.
The North Carolina Department of Public Instruction (NCDPI) has asked Winston-Salem/Forsyth County Schools (WS/FCS) to provide a detailed plan on how they plan to fix budget shortfalls. The State auditor has also opened an investigation into the district financial records and other information.
What We Know
Last month members of WS/FCS financial team presented findings from a 2023-2024 audit that showed the district spent $93 million on payroll – $10 million more than the $83 million budgeted. Overspending also occurred in employee benefits and charter school payments totaling about $16 million.
The shortfall led the district to draw from its fund balance. Last November the board also voted to use $2.4 million from savings for teachers’ raises and bonuses.
To address the deficit Superintendent Tricia McManus proposed several cost-cutting measures for the remainder of the the 2024-2025 school year and the 2025-2026 school year. In total, cost-cutting measures are expected to save the district $24 million – $8 million this year and $16 million next school year.
Before voting to approve the proposed cost-saving plan, board member Robert Barr let it be known that he has concerns about the district’s financial team. Barr, who worked as a teacher with WS/FCS for over a decade before being elected to the Board of Education in 2014 and again in 2022, said he had lost confidence in the financial team.
“The process of reporting between our CFO, superintendent, and the board, I think somewhere something broke,” said Barr before voting against the cost-savings plan. “Right now, as a board member, my confidence in the stewardship of our finance has been shaken.”
The board approved the cost-saving plan in 5-3 vote. Board members Trevonia Brown-Gaither and Sabrina Cooke joined Barr in opposing the resolution.
A week after the findings from the from the audit were made public, on April 8 Thomas Krans, WS/FCS chief financial officer, announced his resignation. And last week Superintendent Tricia McManus announced her retirement at the end of the fiscal year, leaving the district with even more issues to fix.
State Board Sends Warning
Board member Barr and other members of the WS/FCS Board of Education aren’t the only ones with concerns about the district finances. The N.C. State Board of Education has also raised concerns about the findings from the district’s 2023-2024 audit.
In addition to the $16M non-budgeted spending, the state board also raised concerns about other findings from the audit including: A decline in the unassigned fund balance of $17.7 million, leaving a balance of $5.39 million, which equates to only 0.7% of total expenditures; and a decline in student membership of about 1% from fiscal year 2023, but an increase in the total general fund expenditures of $48.8 million or 7%.
The State Board has directed WS/FCS to provide a detailed explanation of actions taken to mitigate the budget shortfall. According to a letter sent to the district last week, WS/FCS must provide a summary of what they have done to employ or contract officials who can help them take action to correct the fiscal year 2025 and fiscal year 2026 budgets.
The information must be submitted to the State Board of Education no later than May 15. “This communication serves as a warning that you must meet your legal and fiscal oversight obligations to avoid financial sanctions and additional oversight of the district by the State Board of Education and DPI,” the letter states.
State Auditor Opens Investigation
On April 21, State Auditor Dave Boliek sent a separate letter to Superintendent Tricia McManus, informing her that the states auditor’s office will be conducting an investigation into the district’s financial records.
In the letter Boliek directed McManus to inform the auditor’s office of any allegations of fraud or suspected fraud, and anyone with any knowledge of fraud should come forward. “The focus of our investigation will be centered around school district financial records and transactions including but not limited to payroll and use of federal grants,” the letter reads.
“We ask that Winston-Salem/Forsyth County Schools personnel be readily available to assist us with the information needed to assess Winston-Salem/Forsyth County Schools’ internal controls and that reasonable workspace accommodations be made available on site should the need arise.”
According to the letter, the investigation will be led by the head of the Rapid Response Unit, Deputy State Auditor Charles Dingee.
The day after she received the letter from Boliek, during the school board meeting on April 22, McManus announced her retirement.
In response to the investigation and the demands made by the State Board of Education, WS/FCS sent the following statement: “WS/FCS is working diligently to right-size the budget and set us up for fiscal sustainability. We have already implemented a series of cost-saving measures this fiscal year and have more that will go into effect for the next budget year, beginning July 1.
“We have sought assistance from outside experts in public school finance administration to ensure we are headed in the right direction. We will work with NC DPI to provide the assurance it needs that we are meeting our financial obligations.”
Former Superintendent Shares Thoughts
Former WS/FCS Superintendent Don Martin, who led the district from 1995 to 2014, said he was disappointed when he heard the results from the audit. “After hearing the results of fiscal year 2024 audit, I was concerned … but I was hopeful when I read about the budget reductions approved by the WS/FCS Board of Education,” he said.
Martin, who is currently chair of the Forsyth County Board of Commissioners, said during his 19-year tenure as superintendent, he only had one financial officer, and they were committed to not exceeding the budget established by the board. He said he also worked with the board throughout the year to make budget amendments.
This isn’t the first time state officials have had concerns about WS/FCS’ finances. Martin said during the Great Recession, state lawmakers reduced state allotments and at the time the county didn’t allow the school district to maintain a fund balance. “We did not overspend our budget, but we did overspend our revenues that year,” Martin explained.
“The State Auditor’s Office sent us a letter requiring submittal of a plan to restore the over expenditures. We did that and the auditor’s office accepted our plan.”
When asked how the district will get out of this financial hole, Martin said, “The answer to this question depends on how deep the hole is.”
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