Consultant who helped restructure WCPS Finance Department before the $5 million deficit is back to help “fix” district books again

A partner in the consulting firm that worked on a “project-to-project basis” with Wayne County Public Schools from 2016 to 2019 — a man credited, by former WCPS superintendent Dr. Michael Dunsmore, with helping “to train our finance officer” and “restructure” the district’s Finance Department — is among the subcontractors working for a new consulting firm that was likely hired in violation of North Carolina Open Meetings Law in the wake of a damning audit report that showed WCPS had a net worth of -$3.6 million.

School Operations Specialists President Aaron Beaulieu confirmed, via email, that Ricky Lopes is among the subcontractors working with his firm in Wayne County — and was being used “on a limited basis due to his knowledge and previous experience with the district.”

But just what Lopes’ experience with the district entails is unknown, as WCPS could only produce one contract, for a 2017 “Employee Salary Study,” from its 4-year relationship with School Efficiency Consultants, the company Lopes was listed as a partner in before its website was shuttered earlier this year.

In a press release obtained by the New Old North, School Efficiency Consultants characterized itself as “a company that superintendents, human resource officers, and finance officials engage to offer recommendations for more efficiently using staff and funds” — a firm that “helps school districts make every dollar count.”

Founding partner Hank Hurd, a former North Carolina public school superintendent and former Department of Public Instruction chief financial officer, was once quoted as saying that with the support of School Efficiency Consultants, “school districts save millions of dollars in operations funds that are then used to support teaching and learning.”

Just when in 2016 the firm was first hired for one of the “projects” the district has yet to define — or reveal the price tag of — is unclear.

But Dunsmore, who was hired in 2015, was credited, by the firm, as saying that when he came to Wayne County, Lopes “was one of my first phone calls.”

A screenshot from the now-shuttered School Efficiency Consultants website.

The following fiscal year, WCPS finished with a deficit — one that has grown substantially in the years since.

According to an audit report completed by Rives & Associates, an accounting firm who’s co-founder is also a partner in School Efficiency Consultants, that was presented to the Board of Education June 3, WCPS finished 2016 with a deficit (the difference between revenues and expenditures) of $73,743 and a fund balance of $7,017,875.

The next year, 2017, the district ended the year with a deficit of $778,223 — a deficit uptick of 955 percent — and a fund balance of $6,280,314.

In 2018, the district recorded a $3,491,395 deficit — a deficit uptick of 349 percent — and a fund balance of $2,755,873.

In 2019, the deficit was up to $11,982,691, a 243 percent increase from the previous year, while the fund balance moved from positive territory to -$2,416,692. However, additional liabilities increased the district’s deficit load to $5,394,060.

The auditor highlighted four areas where significant increases were posted over the same period. 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. Systemwide Support Services, Support and Development, spending increased from $273,798 in 2016 to $1,077,298 in 2019. Significant increases also were noted in technology and financial and human resources support.

In addition, the audit firm included some statistics from the end of the 2014-15 school year.

That year, WCPS finished with a fund balance of $7,091,618 and ended the year in the black with $1,553,793. The deficits began the following year.

Before his departure, Dunsmore indicated that there were a variety of factors influencing the district’s $5 million deficit — an Exceptional Children funding discrepancy from the state; a slight decrease in average daily membership — the student enrollment number used to allocate state-funded resources to the district — and some cuts in state and federal funding. He said the district had used some of those state and federal funds to offset some of its “over-allocation” expenses, including extra classes and personnel.

However, in the auditor’s presentation, it was noted that state and federal funding have increased steadily over the years, with $125,454,638 in the fiscal year ending June 30, 2015, and $140,103,732 in the fiscal year ending June 30, 2019.

Numbers provided by Dunsmore and members of his cabinet during the district’s 2020-21 budget presentation indicated that the local funding that the county receives has also increased — from $19,835,579 in fiscal year 2018-19 to $21,325,991 in 2019-20 — an increase of $1,490,412.

The amount the county has provided the district for capital outlay has stayed steady at $2 million.

Beaulieu, a former Durham Public Schools chief financial officer who was interim superintendent of the district while WCPS interim Superintendent Dr. James Merrill was superintendent of neighboring Wake County, said he expects to make a presentation to the BOE June 29.

According to the North Carolina Secretary of State, School Operations Specialists LLC was formed in February of this year. The firm does not have a website and whether or not Beaulieu has any partners is unclear.

When asked about how WCPS learned about School Operations Specialists, School Board vice chairman Jennifer Strickland said the group had done work in Wayne County before, but had to “reorganize” after a partner in their former organization got into legal trouble.

Board members never discussed hiring the firm — nor did they solicit bids for the services — in open session.

North Carolina Press Association general counsel Amanda Martin said discussing contract labor and discussing hiring the firm in executive session were likely illegal.

“I don’t think any of that (regarding School Operations Specialists) is legal,” she said. “It sounds to me as if almost everything about the consulting contract was done in violation of Open Meetings Law.”

The district’s contact with the firm 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 lists the maximum cost of services at $41,000, but notes that “based on initial findings, additional services may be identified or required.”

For more on the relationship between Rives & Associates, School Efficiency Consultants and WCPS, click here.