EXCLUSIVE: New Old North investigation tracks connections, contracts in WCPS deficit cleanup

An out-of-town accountant with a now-suspended license.

His accounting firm, which had ties to the consultants called in to clean up school districts after their audits were completed.

Connections between former local and state school officials who work or have worked for the former consulting company.

A glowing endorsement of that consulting firm by the former Wayne County Public Schools superintendent and his statement that the same firm was called in to work with the district and helped “restructure” the WCPS Finance Department and saved the district “over $1.5 million” — during the time when Wayne County Public Schools was operating under ever-increasing debt and a diminishing fund balance.

Troubling revelations from an audit performed for WCPS by that same accounting firm.

An interim WCPS superintendent who has connections to some of the players involved in the new and old consulting firms.

The quick hiring of a new consulting firm — contracted by the Wayne County Board of Education behind closed doors, in violation of Open Meetings Law — run by a former Durham Public Schools chief financial officer and interim superintendent. And a revelation that he is hiring unidentified subcontractors to perform the work of figuring out how Wayne County schools got $5 million in debt.

A comment by the Wayne BOE’s vice chairman that the current consulting firm the district just hired to clean up the mess in the county schools was reorganized under a new name because of a problem inside its ranks with someone associated with the former firm.

An overlap between the former DPS interim superintendent’s leadership of that district and that of the new WCPS interim superintendent’s leadership of neighboring Wake County.

And an out-of-town attorney tied to former WCPS Superintendent Dr. Michael Dunsmore who now provides legal counsel for Wayne County Public Schools who has connections of his own — and runs a firm specializing in education law that represents many districts across the state.

An ongoing New Old North investigation launched in the wake of the revelation that Wayne County Public Schools is facing a $5 million budget shortfall — and that its several-million-dollar negative fund balance has been on a downward trend for more than 4 years — has uncovered a lot of connections and questions.

It started with the audit presentation June 3 by Rives & Associates LLP, an accounting firm with several offices across the state.

Here is what we know now:

• Leon Rives II, a partner in Rives & Associates and the namesake of the firm’s founder, was ruled against in a multi-million-dollar fraud case earlier this year. His firm was also sued in 2013 — and settled out of federal court — after allegedly hiding its ties to a company it was auditing ahead of its purchase by another company.

• A “Notice of Hearing” from the North Carolina State Board of Certified Public Accountant Examiners dated March 17, 2020, says the board has received evidence which, if “admitted at hearing,” would show that Rives was a founding partner in School Efficiency Consultants, a firm brought in to solve financial crises after they were discovered by Rives’ other accountants.

“By auditing clients during the same time period that (School Efficiency Consultants) was providing consulting agreements on a contingency basis, the Respondents have potentially violated 21 NCAC 08N.0303,” the notice reads, adding that “the subsequent consulting services rendered by (School Efficiency Consultants) that had their audits performed by (Rives & Associates) created a real or apparent lack of independence in violation of 21 NCAC 08N.042(a).”

• Leon Rives II’s accounting license has since been suspended.

• School Efficiency Consultants no longer has a website, but a screenshot obtained by the New Old North reveals a connection between the company and Wayne County Public Schools — specifically, a testimonial credited to former WCPS Superintendent Dr. Michael Dunsmore praising the firm and one of its partners, Ricky Lopes.

• WCPS’ annual audit was executed by a local accounting firm, Carr, Riggs & Ingram CPAs and Advisors for the 2013-14 and 2014-15 fiscal years.

• Copies of those audits are on the WCPS website, however, those performed after 2014-15 are not and records requests for contracts between the district and Rives & Associates and School Efficiency Consultants have not yet been fulfilled by the school district.

• Rives’ partner at School Efficiency Consultants, LLC, is Hank Hurd, a former North Carolina public school superintendent and former Department of Public Instruction chief financial officer.

• Another partner in School Efficiency Consultants, Lopes, is a former associate superintendent of Cumberland County Public Schools.

• An LLC formed in April 2019 by Kathy Isenhour, a former finance officer and associate superintendent for Hickory City Schools, was called School Efficiency Consulting, LLC, before it was dissolved.

• Lopes and Hurd served with former Wake County Public Schools Superintendent and WCPS’ new interim Superintendent Dr. James Merrill on the Joint Legislative Task Force on Education Finance Reform’s School Funding Committee in 2017. The task force was created by the N.C. General Assembly to begin “the important work of examining North Carolina’s school finance system.”

• Isenhour, Hurd and Lopes are all named in testimonials published on the now-defunct School Efficiency Consultants website.

• Aaron Beaulieu, the owner of School Operations Solutions, was interim superintendent of Durham Public Schools in 2017.

• Merrill was neighboring Wake County’s superintendent at the same time.

• The Wayne County School Board held discussions about hiring School Operations Solutions, which falls under contract labor, in an executive session likely violating Open Meetings Law, North Carolina Press Association lead counsel Amanda Martin said.

• After that executive session, the board announced the contract and the hiring of Merrill.

• School Operations Solutions does not have a website, but the limited liability company was created in February 2020. The primary address listed for the company is linked to Beaulieu, but the “Registered Agent” is listed as “United States Corporation Agents, Inc.”

• Hurd, Lopes, Isenhour and Beaulieu have all been members of — and served as officers for — the North Carolina Association of School Business Officials. Hurd, Lopes and Isenhour are all past presidents of the association. Beaulieu was its treasurer.

• In 2017, education attorney Richard Schwartz was hired to represent the Wayne County Board of Education. Schwartz previously acted as legal counsel for Tyrell County Public Schools, the district former Superintendent Dr. Michael Dunsmore left for the WCPS job in 2015.

• Schwartz and Beaulieu served together on the Public School Forum of North Carolina, “a nonpartisan champion of better schools” a few years ago.

• When asked about School Operations Solutions and how the district heard about the firm, Wayne County Board of Education Vice Chairman Jennifer Strickland told the New Old North that the group had to “reorganize” after a partner in their former organization got into legal trouble.

• The district’s contract with School Operations Solutions states that Beaulieu would “manage” the $140/hour effort, but that he would be “supported by various subcontractors with school finance experience and the DavenportLawrence (an advisory firm) team with high level experience in cost reduction and revenue enhancement … with government agencies.”

• The contract with School Operations Solutions lists the maximum cost of services at $41,000, but notes that “based on initial findings, additional services may be identified or required.”

The New Old North has requested the following documents from WCPS and asked the following questions. None of those requests have yet been filled.

WCPS public relations officer Ken Derksen told the New Old North that there was a delay in responding to the requests because of the change in leadership in the district, but assured NON that the requests would be fulfilled.

Merrill is slated to officially take over the district on June 27. School Operations Specialists is, according to multiple board members, already at work.

The records requests and questions submitted to the district include:

• Is Wayne County currently under contract with School Efficiency Consultants? If so, how long has School Efficiency Consultants done work for WCPS?

• What are the start and end dates for contracts with School Efficiency Consultants?

• What are the names of the subcontractors working with School Operations Specialists?

• A copy of attorney Richard Schwartz’ contract and all legal billing from the 2019-20 fiscal year.

The Board of Education is scheduled to meet Friday at 9 a.m. at Central Office to discuss the budget and finances.