On Tuesday, North Carolina’s Local Government Commission (LGC) voted in favor of a resolution requiring an outside audit firm to conduct an internal controls audit of the Winston-Salem/Forsyth County School System.
An audit from State Auditor Dave Boliek’s office revealed a $46 million budget deficit for FY 2025. It also showed the school system handed out $75 million in bonuses during the 2022 and 2023 fiscal years, and 350 positions were eliminated.
The audit also flagged multiple practices on the part of WS/FCS, including the use of temporary federal COVID-19 funds for ongoing salary obligations, approving purchase orders without sufficient budgetary authority, delayed account reconciliations, and the improper use of “suspense accounts” — temporary holding accounts that auditors found contained more than $332 million at one point and lacked clear tracking.
The LGC acted under a section of statute that requires that if the North Carolina State Board of Education finds financial mismanagement that wasn’t identified by the original auditor who did the school district’s audit, the state board and the LGC should employ an outside firm to do an internal controls audit of the school system.
The LGC said they have contacted the North Carolina Association of CPAs to ask for recommendations of auditors who might be able to do that type of work, and they will pass the information along to the state board.
Boliek said at Tuesday’s LGC meeting that the public policy purpose of employing an independent auditor to look at processes and controls is to take it out of the hands of the currently employed auditor with Winston-Salem/ Forsyth County Schools.
“That audit firm did not bring to light what our team was able to bring to light,” he said. “It would also not necessarily be fair, given our findings, for us to go in and implement independent controls, so that’s the public policy as best I can read it, and my legal team can read it out of the statute. Hopefully, it will help to right the ship in Winston-Salem and Forsyth County to get their budgetary problems under control. They’re very serious.”
Boliek said that it’s the fourth-largest school system in the state of North Carolina, and the school system responded to the audit by saying that it had no plan to fix it.
He added that even though this issue was brought to the state board, the LGC doesn’t preclude his office from performing additional audits and can continue to issue reports on the school district.
On Sept. 4, the state board ordered a comprehensive financial review of WS/FCS and set a temporary 0.4% monthly interest rate on the district’s outstanding $3.4 million debt to the NC Department of Public Instruction. Officials say the move is intended to limit further penalties while longer-term oversight is arranged.
An appeal committee had recommended extending a grace period on that debt through Nov. 20 and waiving interest entirely. The full board instead approved the 0.4% rate in a 5-4 vote after State Treasurer Brad Briner argued against cancelling interest.
“There’s no such thing as free money,” Briner said during the meeting.
“I’d like to commend the auditor’s office for the comprehensive investigation into this,” he said at Tuesday’s meeting. “I’ve got four teenagers. I don’t get mad very often, but reading this makes me so angry for the people of Forsyth County who elected the school board, who obviously wasn’t paying attention back to 2017. And I bet if you kept going further, you would have seen more. The abject failure for the students in Forsyth County makes me mad, makes me sad. Thank you for identifying it.”
Briner said that from a statutory perspective, the school district has to have internal controls in place by the end of the fiscal year, which would be June 30, 2026.