Winston-Salem/Forsyth County Schools Faces Financial Scrutiny: 5 Key Measures for Recovery

The Winston-Salem/Forsyth County Schools (WS/FCS) district is under intense scrutiny following a state audit revealing years of overspending and poor budgeting practices. While the audit found no evidence of fraud, it highlighted significant financial mismanagement contributing to a current $46 million budget deficit. The district is now focused on implementing corrective measures to regain financial stability and public trust. This article details the five key measures outlined by the North Carolina State Auditor and the district’s response.

Audit Findings and Key Concerns

The North Carolina Office of the State Auditor (OSA) released a special report in August 2025 detailing the district’s financial issues. The audit identified several critical problems, including a failure to reduce staffing levels in line with declining student enrollment, continued funding of positions after the expiration of federal COVID-19 relief funds, and a pattern of budget overrides by the former Chief Financial Officer, Thomas Kranz. Between July of last year and May 9, 2025, Kranz approved 311 purchase orders exceeding the budget, adjusting the budget for only 33 of those overrides. Previous audits, dating back to 2017, had already flagged overspending and poor accounting practices, issues that persisted through four different CFOs and superintendents.

Five Key Measures for Financial Recovery

The State Auditor outlined five key measures WS/FCS must implement to address its financial challenges:

1. Monthly Account Reconciliation

The auditor emphasized the need for monthly reconciliations between budgeted amounts and actual expenditures. This proactive approach aims to identify and address potential problems before they escalate. Regular reconciliation will allow for timely course correction and prevent further budget imbalances.

2. Timely Expense Recording

The audit criticized the district for delaying expense recording, sometimes backdating entries. Accurate and timely recording of expenses is crucial for maintaining a clear and reliable financial picture. Prompt recording ensures that financial reports reflect the true financial position of the district.

3. Balance Checks Before Budget Transfers

The auditor recommended reviewing account balances before transferring funds between budget categories to avoid overdrafts and ensure sufficient funds are available. This practice promotes responsible budget management and prevents financial instability.

4. Clear Rules for Internal Loans

A loan from the Child Nutrition Fund raised concerns due to a lack of clearly defined terms. The auditor requested that future internal loans specify the amount, interest rate, repayment term, and payment conditions in writing. Formalizing these terms will ensure transparency and accountability in internal financial transactions.

5. Strengthened Controls and Supervision

The report stressed the importance of enhanced financial discipline, improved management review, and consistent monitoring of financial activities. Stronger internal controls and oversight are essential for preventing future mismanagement and ensuring responsible stewardship of public funds.

District Response and Implementation

During a meeting of the WS/FCS Board of Education on March 10, 2026, Interim Superintendent Don Phipps acknowledged past failures and detailed actions taken to correct them. The district has already begun implementing periodic reconciliations and a two-year action plan to standardize processes and strengthen accountability. An addendum to the Child Nutrition Fund loan was approved in January to ensure repayment with appropriate interest this fiscal year.

The district recognizes the need for stronger internal processes and succession planning to address systemic inefficiencies and a lack of controls that have existed for nearly a decade. The district is working with HIL Consultants to improve its financial practices.

Looking Ahead

The WS/FCS faces a significant challenge in complying with these five measures and demonstrating consistent financial control to the community. The focus has shifted from identifying the problem to implementing sustainable solutions and rebuilding public trust. The district’s ability to adhere to these measures will be a true test of its commitment to financial responsibility.