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Auditors issue clean opinion but flag $30M‑plus fund‑balance shortfall for Winston‑Salem/Forsyth schools
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Summary
Forvis Mazars reported an unmodified opinion on the district's FY 2024‑25 financial statements while identifying compliance and internal‑control findings, including a general‑fund deficit on a modified‑accrual basis of roughly $24M (about $29–30M for general fund) and a $59M net deficit on a full‑accrual basis driven largely by pension/OPEB liabilities.
The district’s external auditor delivered an unmodified (clean) opinion on the Winston‑Salem/Forsyth County Schools financial statements for the year ending June 30, 2025, while also reporting multiple compliance findings and a substantial fund‑balance shortfall.
Tyler Beatty of Forvis Mazars told the board on April 21 that the audit opinion provides "reasonable assurance" that the information in the financial statements is materially accurate but does not evaluate whether the results are financially healthy. "We did issue an unmodified opinion," Beatty said.
At the same time, Beatty outlined several reported problems. Using the district’s modified‑accrual (fund) basis, he said the general fund showed a deficit in the low‑to‑mid‑$20‑million range and referenced an overall shortfall of about $30 million as of June 30, 2025. He cautioned that on a full‑accrual basis — which adds long‑term items such as pension and OPEB liabilities — the district’s net deficit enlarges to about $59 million.
The auditor traced the gap partly to a steep decline in federal funding following COVID‑related infusions: federal revenues fell from roughly $146 million in FY23 to about $70 million in FY25, a decrease Beatty described as "a pretty significant hole" in inflows.
The firm also reported a set of compliance items. Federal‑program testing (Title I, special education and supporting effective instruction) produced no findings for FY25, Beatty said. However, the audit included five Yellow Book (government auditing standards) findings — including reporting a deficit fund balance and budget violations — and four findings related to the state public school fund (budget violations, delayed cash reconciliations and allotment overdrafts). The auditor referenced specific program report codes and an allotment overdraft condition (noted in the audit as PRC‑013/PRC‑025 conditions) that triggered state‑level findings.
Board members questioned technical differences among accounting bases during a lengthy exchange. Beatty explained that full‑accrual statements include long‑term obligations such as the state's pension plan proportionate share and therefore show a larger net deficit, while the modified‑accrual statements (commonly used for near‑term budget monitoring) reflect cash, receivables and current liabilities.
Beatty recommended stronger routine controls — monthly cash reconciliations, monthly budget‑to‑actual reporting to the board and clearer monitoring of state positional and dollar allotments — and stressed that corrective action plans are prepared by management and listed in the audit report; auditors do not test implementation until the next audit period. "Corrective action plans are required as part of government auditing standards," he said, but implementation testing occurs later.
What happens next: the audit report and its corrective action plans are available in the audited financial statements and will be part of the district's ongoing finance committee work and oversight. The board discussed tightening central controls and reporting cadence to reduce the chance of repeat findings in the coming year.
