RALEIGH — A new state audit report following up on financial and budgetary issues in the Winston-Salem/Forsyth County Schools district shows approximately $15 million in expenditures in fiscal year 2025 that were kept off the books until September 2025 and backdated to June 30, 2025.
The North Carolina Office of the State Auditor (OSA) released the follow-up report on March 5, detailing Winston-Salem/Forsyth County Schools’ (WS/FCS) improper recording of the $15 million, among other issues.
The follow-up Rapid Response Special Report builds on an initial August 2025 audit that uncovered a $46 million budget deficit stemming from mismanagement of $75 million in COVID-era federal funds, unreconciled budgets and inadequate internal controls.
“Winston-Salem/Forsyth County Schools remains far from having healthy budgeting practices in place,” State Auditor Dave Boliek said in a press release. ”Approximately $15 million in expenditures were not properly recorded for months, and the school system yet again failed to complete monthly reconciliations.
“Winston-Salem/Forsyth County Schools is one of the largest school districts in North Carolina. The additional findings of financial misconduct the team uncovered in our follow-up show a failure to keep their books straight. Winston-Salem/Forsyth County Schools owes parents, teachers, and students accountability.”
In the transmittal letter included in the follow-up report, Boliek called the $15 million kept off the books “most concerning.”
Overall, the OSA’s latest report concludes that WS/FCS has not made significant progress in addressing financial issues, with persistent failures in basic accounting duties.
“Our updated engagement discovered that in addition to our initial findings, WS/FCS overspent State Public School Fund allotments (and) understated expenditures,” the report states, also noting it “once again did not perform accurate and reliable monthly budget-to-actual reconciliations.”
The report highlighted three other key findings, underscoring weaknesses in budgeting, accounting and oversight.
First, WS/FCS incurred significant overdrafts in State Public School Fund (SPSF) allotments from the North Carolina Department of Public Instruction (DPI).
In September 2024, the Finance Office transferred $16.99 million from the Non-Instructional Support Program (PRC-003) to the Restart Schools Program, exceeding PRC-003’s available balance of $13.92 million and creating an immediate overdraft.
The overdraft grew to $11.34 million by April 2025, and the transfer was not recorded in the accounting system until January 2025, which the report says allowed continued overspending based on inaccurate fund availability. The WS/FCS Board of Education retroactively approved the transfer on March 25, 2025, without verifying balances, in effect ratifying the overdraft that had persisted for six months.
DPI flagged the issue, but its system lacked automated checks, permitting the negative balance to compound until late in the fiscal year.
Recommendations by the OSA on the overdraft finding include implementing automated fund availability checks, adopting policies against deficit-creating transfers and coordinating with DPI for accurate records.
Second, WS/FCS failed to perform monthly reconciliations of budgeted versus actual revenues and expenditures, repeating a deficiency found in the August 2025 audit. The current report says this failure inhibited timely variance detection and corrective actions, and the OSA recommended preparing monthly reconciliations by revenue source to make sure they are current, as well as implementing documented reviews with traceable schedules.
Third, the board authorized a zero-interest internal loan of up to $6 million from the federally funded Child Nutrition Fund (CNF) on June 11, 2025, to cover cash shortfalls. Only $2 million was borrowed; an addendum added interest and a June 30, 2026, repayment schedule. The OSA’s report says the agreement lacked terms for interest, repayment or penalties, raising compliance risks under federal and state guidelines, and it recommended amending the agreement to confirm the principal, include interest and schedules and secure the board’s approval.
In its response, WS/FCS acknowledged all findings and outlined corrective actions, including launching the Tyler ERP system in July 2025 for fund checks, reinstating monthly reconciliations since August 2025, developing standard operating procedures by July 2026 and hiring key finance roles.
The district emphasized transparency through a corrective action tracking document and an established community portal, noting a balanced FY 2026 budget and reductions in force to improve cash flow. Additionally, the response referred to WS/FCS’s “observations and recommendations” report from Dec. 31, 2025.
