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Following letters from the North Carolina State Auditor and the North Carolina Department of Public Instruction lambasting the Winston-Salem/Forsyth County Schools’ recently-revealed budget shortfalls, the district has released an update and potential plan for moving forward.

The Thursday release from the school district comes after State Auditor Steve Boliek released a letter on Tuesday sent to the district on April 21 declaring that the school district would be audited.

The State Board of Education and NCDPI also sent a letter to the district on May 1 stating that the state received the WS/FCS audit for the most recent fiscal year four months late and threatening sanctions if the school district is unable to comply with state regulations. 

“We have recently read press reports related to the overspent budget and overall negative financial health of your school district. In addition, we have received correspondence from concerned citizens in your community about your looming budget shortfall for the fiscal year 2024-2025 year in the amount of approximately $16,000,000,” wrote the state board in the letter.

The state board’s letter revealed that the WS/FCS 2024 audit showed

• A decline in the unassigned fund balance of approximately $17.7 million, leaving the district with only $5.39 million, or 0.7 percent of its expenditures.
• A decrease in student membership of approximately one percent but an increase in total expenditures of $48.8 million or approximately seven percent.
• Over $16.2 million in expenditures that were not in the budget, including $9.6 million more from the general fund than had been appropriated, $1.6 million more spent from federal funds than appropriated and $5 million more spent from the Child Nutrition Fund than appropriated.

The financial issues have raised concerns that the district would be unable to make payroll for the year, which the district says is the primary goal following the hiring of HIL Consultants.

“Our top priority is to ensure all staff members are paid through the end of the fiscal year, June 30,” Superintendent Tricia McManus is quoted as saying in a release from the district.

McManus announced her resignation from the district on April 22. According to the release, McManus has said that the budget played no part in her decision to retire. Chief Financial Officer Thomas Kranz announced his resignation on May 9. The release stated that McManus plans to appoint an interim CFO while the district is searching for a permanent replacement.

The district stated in the release that it has taken “critical actions” to address the budget shortfall, the exact figures of which are being determined.

“Our community places its trust in us to manage public funds with accuracy and accountability. We did not meet that standard. We are already taking corrective action. Our goal is not only to fix past issues, but to rebuild trust and ensure this never happens again,” McManus said.

The district implemented $8 million in planned savings in March, including reducing substitute costs by assigning central office staff to open positions where needed, freezing hires, freezing spending and reducing take-home cars.

The changes for the upcoming fiscal year, which should save $21.5 million, were also announced in March and included furloughing the highest paid central office staff, reducing staff cell phones and take-home cars and completely restructuring the central office operations. The restructuring will affect 116 jobs, with 76 positions being eliminated with Board of Education approval.

The release from the district stated that HIL’s early analysis has found that the district has been overspending state funding meant to cover personnel costs, which McManus stated she was not aware of in March. It also states that the district added hundreds of jobs to meet the “increased needs of students” since 2019, while simultaneously losing student enrollment during the COVID-19 pandemic, meaning less funding.

“Maintaining the financial health of Winston-Salem/Forsyth County Schools is of utmost importance to the district. To make the best financial decisions, you need to have accurate fiscal projections. As hard as it is to eliminate positions, we would have done more before this year if we had known we were overspending,” McManus said. “If we had accurate projections, we would have made different decisions.”

The district will provide more information early next week, according to the release.