Newly Released Records Reveal Serious Questions About School Financial Crisis

Kay Carroll Releases Documents, Shares His Concerns

CFO Email: “We could be in violation…”  “I do not feel comfortable approving anything for payment until we have a plan”   

Former Johnston County Board of Education chairman Kay Carroll, who is also a current candidate for the school board, said Friday newly released Public Records he obtained this week raise serious questions about the current financial crisis facing Johnston County Public Schools. Mr. Carroll shared some of the records including some brand new concerns raised by the documents and emails.

“The school system’s financial records are audited every year as of June 30. The audit reports from 2009-2018 are currently on the school system’s website.  Although, school systems are not required to keep a specified percentage of money in the fund balance (or savings account), that account is critical in keeping the system afloat if county, state, or federal allocations are late in arriving for teacher payroll in the fall, as is often the case. It is also imperative for big ticket items that suddenly need repair or replacement like roofs, boilers, chillers, or damage during severe storms.  Based on the information I have received from the Johnston County Public School System in the past day or two, I offer the citizens a brief timeline as to the loss of their tax money.”

The following is the Fund Balance or Savings Account Data from the official audits:

*Part of this $11 million dollar withdrawal is tied up in the $20 million plus that was transferred to the commissioners from 2010 to 2013. 

 “Through our public records request, we have not been given any emails or copies of any correspondence between the Board and the Commissioners related to this $20 million plus transfer. Prior to this last audit, Dr. Renfrow asked and received an additional $1.5 million dollars to finish paying expenses for last school year, but it is apparent that the financial collapse began long before he took the job,” Carroll said.

What happened to our money?
“Our savings that were built up over decades are now gone. Where were the warnings? Did anyone actually read the audits? What happened to our money?”

“This week I received a series of emails as a result of my public records request that were sent from Art Stanley (the school system’s chief finance officer) to Superintendent Ross Renfrow in January of 2019. In the excerpt from one of them, Mr. Stanley appears to be desperate for direction.”

Date: 1/2/2019 4:35:03 PM From: “Arthur Stanley” To: “David Renfrow”

I want to follow up on your conversation with the Board in December’s meeting to see if they provided you any direction on how to address this situation.  If [you] were unable to speak with the Board, could you do so at the January 2019 Board meeting?  We could be in violation of General Statute 115(c)-441, which deals with budgetary accounting issues in particular incurring obligations and 115(c)-425 which deals with a balanced budget.  We probably need to get Jimmy’s opinion on both statutes.

It appears our options could be limited.  We can ask the Commissioners for the additional funding which is about 3 million or decrease the local supplements that teachers and assistant principals would receive in June.  Please keep in mind that the state has to get their funds back before anything else can take place.

We need a plan in place to take care of this situation.  I do not feel comfortable approving anything for payment until we have a plan.  In statute 115(c)-441, I could be held responsible if I give a false certification on payment

Mr. Renfrow’s response was: Think it best if y’all meet with Jimmy this week.  Schedule him in with you, Art, Tabitha…I am away at a meeting on Thursday and Friday. I can meet Tuesday morning…

Auditors Letter
And then there is an excerpt from a letter sent from the auditors, dated Oct. 4, 2019 addressed to the Board of Education.

The Board’s General Fund has experienced a significant decline in financial condition over the past two years.  The General Fund reported losses of ($2,494,879) and ($5,922,011) for the years ended June 30, 2018 and 2019, respectively, and has a fund balance of only $888,835 at June 30, 2019.  In addition, the Board’s General Fund must provide cash flow support for the School Food Service Fund in order to ensure expenditures of the School Food Service fund are paid in a timely manner.  The Board’s School Food Service Fund has experienced a significant decline in financial condition over the past three years.  The Fund experienced cash declines of ($891,036), ($161,917) and ($52,198) for the years ended June 30, 2017, 2018 and 2019, respectively, and has a cash balance of only $131,961 at June 30, 2019. We recommend that the Board closely monitor these situations and take steps to increase cash reserves and fund balance in its General Fund and School Food Service Fund.

“In addition, in the videos of the Board of Education meetings (on their website) from Nov. 2017 (Dept. B, minute 17) and November 2018 (at the 36 minute mark), the finance officer reviews the latest audit issues with the fund balance. There are questions and remarks about needing more state and local funding, but no one asks how they can amend the current budget to make it more in line with the money they have.”

“There is a whole other story woven into this budget problem having to do with Cenergistic, a company that touts itself as saving energy but, in fact has cost us greatly on many different levels. I will give details soon about this issue in a separate article,” Mr. Carroll said.

Catastrophic Financial Decisions
“Besides catastrophic financial decisions that have been made over the past 10 years that have led us into virtual bankruptcy, there is an even greater issue with the failure, over the same ten year period, to adequately oversee the education of our children. I will also address this issue very soon.”

“If, on this Monday, February 3, 2020, the Commissioners agree to give the school board the $8 million they are asking for, what happens for next year’s budget, because if the school system asked for an additional $1.5 million in June, cut out $3 million in July, let Dr. Causby cut out $7 million when he got here, and they still need $8 million to get through the next four months, there was really a $19 million shortfall in one year!”

Throwing Money At The Problem
“Are the commissioners going to fund that much additional money in their allotment to the schools for next year? What is the BOE Finance Committee doing with the audit information? Will the BOE be forced to cut 400 plus positions as Dr. Causby warned? What is anyone doing about the problem other than throwing money at it?”

Current Board of Education Clueless On Managing Funds 
“Apparently, the current Board of Education is clueless as to how to manage funds or even read an audit. In a recent article in the Johnstonian News, Todd Sutton called on the board “to focus on the school system’s budget, its dire financial straits . . .”  It seems that neither the BOE or County Commissioners are taking this seriously, or the audit would already be under way.  So, what are they doing? Wasting time!”

“Calling for an audit and not doing it immediately is like getting a year-end audit and being told you are burning through your fund balance – spending more than you have and not making corrective actions – they are both disastrous.”

“In this crisis, we do not need another cursory audit, but a comprehensive, line by line wellness audit where funding and expenditures are TRACKED back 10 years. We need to know who had the authority to commit funds, who had the responsibility to track them, and what caused 8 out of the last 11 budgets to exceed the funds they had been allocated. The taxpayers in this county deserve to know WHAT WENT WRONG, WHEN IT WENT WRONG, WHERE IT WENT WRONG, AND HOW TO CORRECT IT!!!”

Budgetary Disaster Is Impacting The Classroom
“The real concern here is the impact the budgetary disaster is having on education in the classroom. I have been concerned ever since we started hearing about the issues of the budget problems, the claims that have been made about some of the things going on with finances, and the lack of urgency,” Carroll stated.

Lack of Urgency
“I have seen on the Board of Education, and even the County Commissioners who fund the Board of Education, no urgency in calling for an audit to find out where the problems are, where the issues are and how long it has been going on.  It is plain to see this has been going on the last six to 8 years and the fund balance has been dwindling, but there has been no conversation publicly, I have been able to see, on how to get this budget back in balance,” Mr. Carroll said.

“If we ever are going to be able to get this corrected and headed back in the right direction we need to know where the financial issues are. Based on this audit I think is appropriate to have, it will also go in and tell us where we are out of balance or heavy in positions, even in the Central Office.  It will tell us if we have the correct student-teacher ratio, principal-assistant principal ratio (and) help us get everything back in order and show us the direction we need to go and get back on track. We need to support teachers, students, and the classrooms.”

Carroll said the Public Records Request has raised even more questions and school officials are working to compile additional data he and his attorney, Jack O’Hale, have requested.   “When you get the information it raises questions and sends you in a direction to find additional answers. When we got the records – there are some things we did not have that we asked about – so they are putting those together. Some of the records we received we believe are not complete, so we are having to come back and rephrase our records request to more accurately get the information we want.”

Taxpayers Need To Know What’s Going On 
Asked what message he would like to convey to the current school board after reviewing some of the financial records this week, Mr. Carroll said without hesitation, “I know the school board has called for an audit but it should be in process right now, not two to three months from now. It should be the proper audit to answer the issues that we need answered. Taxpayers need to know what’s going on.”

“I have not heard an explanation from anybody saying what the problem is. All I have heard is that we need more money from the County Commissioners, more money from the state and they’re underfunding, creating some of the problems.”

“The obligation of the Board of Education is if you’re being underfunded by the state, you have to make adjustments in your budget. Your obligation is to have a balanced budget.”

Carroll continued, “Some of the emails in this article tell us expressly the financial officer is very alarmed he is about to be in violation of paying bills the budget resolution does not cover. We do know those budget statutes require money to be on hand to pay for a bill, and the bills must be approved by the Board of Education or in the budget as it was approved.”

“The goal of everybody here I believe is to improve our school system and get it back in order and focus on what education suppose to be about. Educate our children. Support our children. Have a good environment to teach in. That is my goal. Having the answers to these financial issues is a major stumbling block to get back to that.”

“How in the world can you prepare the next years budget when you don’t know what’s gone wrong in the last 4, 5, or 6 years budgets.  If you don’t have a stable budget, how do you put an end to this?”

Unity or Financial Chaos?
“We can talk about unity all we want to, but unity is always going to be disrupted when we have this financial chaos going on here,” Mr. Carroll said.  “Our public schools are not owned by the Board of Education. They are owned by the citizens of Johnston County who want answers, not a cover-up.”

Editors Note: Mr. Carroll highlighted several sections in his email to us. The yellow highlights were made by Mr. Carroll and not JoCoReport.