The Winston-Salem/Forsyth County Schools Board wants to know how the district’s $14.3 million fund balance in 2018 halved as of June 30, 2019, the end of its fiscal year.
The annual system audit, presented to the board earlier this month, showed the school system spent $7.2 million in fund balances in the last fiscal year. The board had previously approved an expenditure of $2.2 million from the fund balance, but the district ended up spending an additional $5 million from that fund, mostly to cover payroll. At the end of last June, the fund balance was $7.1 million, down from $16.2 million in 2017.
A fund balance is similar to a savings account. Government agencies draw on it cautiously, and usually for one-time expenses.
April Bell of audit firm Dixon Hughes Goodman noted the drastic drop in the fund’s balance during an interview with the board on Tuesday.
“What’s important about this is that it doesn’t put you in a great position for FY20, the year you’re finishing now, and for FY21 as well,” Bell said.
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School board members expressed surprise and dismay at this and other findings in the audit. Typically, when the Ministry of Finance transfers money from one account to another, an amendment to the budget is presented to the council for a vote. The audit team told the board that they found no evidence that these procedures had been followed.
“He should have appeared somewhere and we should have voted. Is that okay?” Board member Marilyn Parker asked Bell during a board business session earlier in May.
“Yeah, that’s usually what we see,” Bell replied.
The recognition of fund balances was one of many issues reported by the audit team. He also found that the capital expenditure fund balance ended the year with a deficit of $1.4 million, which is in violation of state law. This fund had nearly $2 million in 2017 and had dropped to around $3,000 in 2018.
The investment fund is used for the purchase of land, equipment for buildings and the improvement of school grounds.
The district also spent $1.2 million more than planned for special populations from the state Public Schools Fund and $51,913 more than it planned for child nutrition.
In some cases, auditors reported the same issues in 2018.
The finance department was also cited for the way it recorded certain transactions and adjustments to its budget. Some of those transactions were not reviewed and did not include required supporting documentation, Bell said.
In its response to those findings, the school district said some of the errors were due to high turnover and employees who lacked the appropriate “skills.”
The finance department has had three directors since 2016. The latest, Andrea Gillus, started working for the district in January. She was hired by new Superintendent Angela Hairston. Neither Hairston nor Gillus were involved in the audited budgets.
The budget in question was passed by the Board of Education in September 2018, a delay caused by budget issues with the state. More than half of the nine board members were replaced in the November 2018 elections.
Additionally, the district underwent a leadership change in the 2018-19 budget year. Beverly Emory served as superintendent until March 2019 and was succeeded by Kenneth Simington, who served on an interim basis until August 2019 when Hairston took over.
Council member Lida Calvert-Hayes expressed concern that money was being spent without the council’s knowledge.
“Based on the audit, it is clear that some of our fund balance has been used inappropriately. There has been a lot of transition during this time. I am extremely disappointed as I was constantly asking at regular meetings from the board the balance of the fund, as have several others. We were told that details would follow,” she said.
The school board was not allowed to have a fund balance for years, according to Parker, who served four terms on the board and was appointed to the board in September 2019 to fill the unexpired term of Lori Goins Clark.
“When we were able to have a fund balance, we were always very intentional about why we spent the fund balance. We had a lot of discussions about that in general,” Parker said. “So yes, it’s very surprising that part of the fund balance is being spent without the board having a say.”