County calls financial consultant to stand
Debbie Goode, a partner with Carr, Riggs & Ingram, testified Thursday afternoon through Friday.
Carr, Riggs & Ingram is the firm the Board of County Commissioners commissioned in the Summer of 2012 to conduct a financial condition review of Union County Public Schools, Goode is based in their Melbourne, Fla. location. The report offered suggestions for potential outsourcing in the district. It also suggested the two boards meet quarterly throughout the year in order to increase communication and “help alleviate tension” between the two boards.
Goode showed boards and slides of her findings after looking through UCPS’ statements, particularly with regard to local funding. She noted a trend of “up and down” in the different expenditures, saying it “sort of seems like money shifting.”
She testified that in a government operation you expect expenditures to be consistent, particularly with operational support. She noted a gap between projected and actual numbers in the 2012-2013 budget, saying she thought their projection would have been closer by May.
There was some confusion about capital items, non-capital inventorial items and capital outlay, which Goode explained and continued to analyze charts for the jury.
In reviewing the school system’s audited comprehensive annual financial reports, she found a notation about three principals that had been promoted to directors. There was a non-compliance issue with the N.C. Department of Public Instruction because their pay was beyond the payscale. The auditor recommended they implement procedures to make sure promoted employees are within the payscale. The board of education fixed the error before the end of the fiscal year, Goode said, citing the report.
Friday morning, Board of County Commissioners Attorney Christopher Cox asked about fund balances available to the Union County Board of Education. Goode testified that as of June 2012, there was about $4.7 million additional funds available.
Goode explained that she took the audited unrestricted numbers from June 2012 and the production information numbers that have not been audited yet. The chart she was explaining was based in part on documents from the school board and comprehensive annual financial reports.
In going through fund balances, Goode testified there was about $4.4 million in the proposed budget that had not been dealt with.
Cox asked what “total funds available” means and Goode said those are funds that can be spent on anything, like capital or operations costs.
Cox asked if the board of education could put the $15 million toward capital expenses, a number reached by looking at fund balances. Goode said yes.
Board of Education Attorney Richard Schwartz began his cross examination Friday morning.
Schwartz asked when Goode was contacted for her services. She said she was contacted in July. She testified that the information she used was based on the information the county requested from the school board. She did not contact the school board because County Manager Cindy Coto said it would not be appropriate, as the two boards were in mediation, Goode testified.
Goode said she was told the county wanted her to find out the financial condition of the schools. She said she did not analyze state and federal funds.
The Child Nutrition Fund was discussed for much of the morning. Goode testified that the school had the option to take out a loan against the Child Nutrition Fund as long as it did not hurt the program, according to a memorandum she found on the NC DPI website.
She testified the letter was from Janet Johnson, assistant chief of Child Nutrition Services in the state. Schwartz asked if Goode had contacted Johnson, she said she had not.
Goode said she was introduced to the idea in talking to the county.
Schwartz asked if she knew that no school system in North Carolina has ever applied for a loan like this and Johnson said she would likely not approve one, Goode said she was not aware of those things. Schwartz also had her read from a piece of evidence that the United States Department of Agriculture does not recommend these loans.
Schwartz mentioned the CAFR awards that the school system has received for the past 11 years for their comprehensive annual report. Goode said the award does not mean everything is correct.
Schwartz asked if it was a hard award to get and Goode replied not really.
The cross-examination turned back to Goode’s display noting unusual trends in the budget. She clarified to Schwartz that they were unusual to her and things she could not explain.
Schwartz asked several times if Goode attempted to contact UCPS, the state department of instruction, a different school system or another entity about her research. Cox objected on the grounds that she could not talk to the other side in a trial, which Judge Erwin Spainhour overruled.
Goode said she did not contact another school system because she did not think these were things that were in every school and she would not ask a finance officer in another school system why a number was off.
Schwartz asked if she was aware of the loss of federal funding through the Edujobs and ARRA programs and she was not fully aware of the circumstances as she did not look at federal funding.
Goode said one year was not so much an “unusual trend” as a large increase that she would have inquired about. In another example, she was focused on the projected and actual expenses being so far off, by about $2.9 million, she testified.
Schwartz asked if the school system had done anything illegal or wrong, Goode said no. He asked if she asked anyone to explain the unusual trends and she said no.
Court will resume Monday at 9:30 a.m.
Spainhour told the jurors that the trial should finish next week.