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Appears Winston-Salem/Forsyth County Schools played it a little fast and loose with Federal Stimulus Funds resulting in thousands of dollars spent in violation of the terms of the The American Recovery and Reinvestment Act of 2009. These expenditures included over $400 to send students to watch “Ice Age” and “Terminator” as well as a nearly $1,000 trip to Wet and Wild. What is the school system doing sending kids, even 6-12, to an R-rated Movie anyway?

Winston-Salem/Forsyth County Schools (WSFCS) expended $38,400 of ESEA Title I funds on a program that included some expenses that appeared to constitute entertainment, a potentially unallowable use of these funds. WSFCS officials told us that the LEA paid ESEA Title I Recovery Act funds to the Housing Authority of Winston-Salem (HAWS) for a 2009 summer educational program for students entitled the “Summer Teaching Enrichment Program” (STEP). According to STEP officials, the ESEA Title I funds comprised the majority of STEP’s 2009 budget, which also included funding from a local corporation and the local police department. WSFCS and STEP officials described the program as providing remedial academic assistance in reading, math, science, and technology to help students retain educational gains over the summer months. Furthermore, the WSFCS Superintendent said that the district’s arrangement with the STEP program was to use district funds to pay only for teachers’ salaries, and that other sources of funds would be used to pay for noneducational activities. HAWS officials said that they were instructed by a WSFCS official to make sure that all of the children enrolled in the program attended ESEA Title I schools and that they obtained confirmation from the district that all of the children did so. In our review of documents, we found evidence that in addition to paying teachers a total of $17,270 in salaries, HAWS also used ESEA Title I funds to pay for STEP activities that included other salaries and field trip-related expenses, including tickets for movies, a water park, fast food, and other entertainment. The invoice that HAWS provided to WSFCS lacked supporting documentation for the full range of activities paid with ESEA Title I funds. Instead, payment was made at a rate of $800 per child attending the program, but no attendance records were provided in support of the invoice. WSFCS staff could not provide documentation to show that the district obtained multiple bids or price quotes for contracts for goods and services. WSFCS officials also could not provide us with documentation of the district having obtained multiple bids or price quotes for contracts for services. WSFCS officials also acknowledged that for at least one contract, they were not in compliance with WSFCS’s purchasing policy to solicit bids/price quotes for purchases of items costing more than $5,000 but less than $90,000.

GAO Review of LEA Controls over and Uses of Recovery Act Education Funds

Probably the most egregious violation cited by the GOA was the purchase order provided by the Housing Authority of Winston-Salem was not signed off by a Title 1 ESEA Director (Title I of the Elementary and Secondary Education Act of 1965). Per the report, “A WSFCS official with signature authority acknowledged that the signatures on the purchase order were not in accordance with LEA practice.”

The report goes on citing no-bid contracts as well as failures to obtain price quotes prior to use of Recovery Funds which even the school system admitted in at least one case violated not just the Recovery Act but also the school system’s purchasing policies. The school system has since rectified most of not all the cited issues by moving the funding columns from one source to another, instead of using “stimulus funds” they used funds from within the schools budget or via budget amendments. Per Kerry G. Crutchfield, CFO for WSFC Schools:

“We received the final regulations on the more stringent advertising and bidding requirements for purchases and contracts AFTER we were required to submit our budgets in June of 2009 for the 2009-10 school year, Once we received those final regulations, it was our intent to transfer all purchase and contract expenditures to non-Recovery Act funding sources, but until we could process the budget amendments and expenditures transfers through the North Carolina Department of Public Instruction, we had to make expenditures from the sources of funds in our original budgets. The GAO auditors examined our records in the period of time while we were applying for the budget amendments that would transfer these budgets and expenditures to non-Recovery Act funds. After the auditors left and finished their report, the transfers were approved and completed.

The net result is that each expenditure questioned in their report is no longer funded through Recovery Act dollars, We complied with all state and federal regulations in advertising and bidding for those expenditures when not funded through Recovery Act dollars.”

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