WCPS: Consulting firm with ties to auditor worked “project to project” with district since 2016, but details and paper trail are M.I.A.

A New Old North records request has revealed that a consulting firm that employs — or has employed — former high-level local and state school officials with connections to Wayne County Public Schools has been working with WCPS since 2016.

But just how much money the district has spent on services provided by School Efficiency Consultants LLC remains unclear — as only one contract, dated Jan. 11, 2017, exists, school officials say.

WCPS communications and public relations officer Ken Derksen said, “While not under contract, WCPS has worked with SEC on a project-to-project basis since 2016, with the last work completed in December 2019.”

Since that time, School Efficiency Consultants has taken down its website.

One of the company’s partners, Leon Rives II, who is also a founder of Rives & Associates, the accounting firm that unveiled WCPS’ financial catastrophe June 3, has had his accounting license suspended.

Rives also was notified by the North Carolina Board of Certified Public Accountant Examiners that, “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,” and that “the subsequent consulting services rendered by (School Efficiency Consultants) for clients that had their audits performed by (Rives & Associates) created a real or apparent lack of independence in violation of 21 NCAC 08N.042(a).”

According to Derksen, the only “contracted work” School Efficiency Consultants did for WCPS during the company’s four-year relationship was for an “Employee Salary Study,” which cost the district $18,500 “plus travel expenses,” in 2017 — the same year salaries at Central Office increased and the district ended with a deficit of $778,223, an uptick of 955 percent from the previous year.

In fact, an accountant from Rives & Associates told the School Board June 3 that overpaying staff was an area of concern and noted that spending on “School Leadership” increased 98 percent from 2016 to 2019, with incremental jumps until 2019, when spending spiked from $535,525 in 2018 to $1,023,760 in 2019.

Here is what we know about School Efficiency Consultants and its connection to Rives & Associates and WCPS:

• Leon Rives II, a founder of Rives & Associates, 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 a records request for contracts between the district and Rives & Associates has not yet been fulfilled by the school district.

• Rives’ partner at School Efficiency Consultants 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 and his firm previously represented 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.”

• Despite a request for the names of the subcontractors working with School Operations Solutions, the district declined to provide that information, saying the question should be directed to Beaulieu.

The following records requests and questions have been submitted to WCPS:

• If WCPS has worked with School Efficiency Consultants on a “project-to-project basis” since 2016, who made those decisions to utilize the company’s services and what were those projects?

• Why are there not contracts?

• How much were they paid?