“Hide the money”
SMITHFIELD – A troubling audio tape allegedly implicating Johnston County Board of Education members Kay Carroll and Lyn Andrews, and School Chief Financial Officer Stephen Britt discussing how to hide $8 million from the Johnston County Board of Commissioners has surfaced. Superintendent Dr. Eric Bracy also attended the meeting, but by the recording was not involved.
The budget workshop meeting took place March 2022 in Smithfield and was not a public meeting or a quorum of the school board. According to the audio, the group appears to allegedly plot to use Federal Covid-19 ESSER fund line items as a cover for placing millions of local taxpayer dollars.
The secret holding spot for local tax dollars would allow the school board to exceed a reasonable fund balance of $20 million dollars agreed upon by the Board of Education and the Board of Commissioners and keep local taxpayer funds flowing in the upcoming 2022-2023 budget request.
School board Kay Carroll reportedly states in the tape, “If you don’t do that with these county commissioners they are going to continue to say we want that money back. If you are not spending it then you don’t need it and we want it in our account.”
Chief Financial Officer Stephen Britt replied, “So what we could do and how we were working to get you as close to that $35 million was to take $8 million dollars out of ESSER and put it back in local and that will keep fund balance floating about $23 million and then that would give you another $8 million.”
School board member Lyn Andrews said, “So you still got it you just put it in a different place.”
Carroll replied, “I don’t care how you word it let’s get it to that… But hide your money.”
A video (below) explaining and playing the audio clip was released Monday by school board candidates Kevin Donovan and Michelle Antoine. They state they were the “trusted individuals” board member Ronald Johnson spoke of in his rescinded resignation announcement made in July. Johnson was at the March 2022 meeting and captured and gave the audio tape to the pair. Mr. Johnson was placed on unpaid leave from his job and his professional law enforcement career threatened, over what Donovan and Antoine believe is political retribution for his continued whistleblowing.
Mr. Donovan told the Johnston County Report last week, “In May, I received a phone call from Ronald Johnson asking if I could meet with him immediately. I said sure and left my house not knowing why but met with him anyway. When I met with him, he played several recordings and said I am going to give these to you. If something happens and I can’t release them, I need you to do it. I asked him why don’t you release the recordings? He replied, I can’t. The people I thought I can trust, I can’t trust them anymore. He went on to say “my hands are tied and it is about to get worse”. Ronald told me, “this could be dangerous for you, they want to cover this up.” He would never say who they “were” but I could tell he was legitimately concerned. A short time later, I am being called in, interrogated, and intimidated over recordings to be handed over.”
Interviewed by police
In the audio recording above, both Donovan and Antoine said they were questioned by Smithfield Police about any audio recordings they may have.
Mr. Donovan alleges someone tried to bribe him to turn against Ronald Johnson. He also said someone emailed his church and ask that he be removed from his volunteer position, a church he attends with his wife and children.
“I knew that if someone is willing to come after a non-official and his family in this county, no one would be safe from officials trying to bury the truth,” Donovan said, adding he wanted to expose the audio tape and what happened to him for “truth and transparency.”
“I believe it is the right thing to do,” he said.
I don’t understand why we would hide money…
“In this recording, Lyn Andrews, Kay Carroll, and CFO Steven Britt are planning to hide $8 million dollars from the commissioners in order to gain more money. Money has been missing in the past and it appears history is trying to repeat itself if someone doesn’t bring light to the subject. When I met with Ronald (in May), he said board members were meeting behind Dr. Bracy’s back, trying to find ways to move money. He also mentioned that this started in December. The other people and I were hoping Ronald would pull through and be able to release these recordings, but it does not appear that will happen. We have so many needs in the school system. I don’t understand why we would hide money, it just does not make sense,” Mr. Donovan said last week.
According to Donovan and Antoine, an attempt to keep secret extra millions in the fund balance was allegedly first discussed by Kay Carroll in a December 2021 informal budget meeting. At that meeting Board member Johnson was in opposition to any plan or discussion to hide money. When Mr. Johnson heard the plan revived in an informal March 2022 budget meeting, he was able to capture the statements of the meeting participants on an audio file.
The March 2022 audio of the alleged scheme to hide $8 million dollars with full participation by school board members and Chief Financial Officer Stephen Britt not only violates the public trust, but it may have legal implications.
Not the first time?
This is not the first time Mr. Carroll has been accused of hidden funds while on the school board. It appears to be a repeat of 2007-2008, when a secret account with local tax dollars was hidden from commissioners and the public.
Former Johnston County Commissioner Devan Barbour III in a 2016 article revealed the school board had $40 million in the bank when they asked Commissioners in 2007-2008 to borrow $30 million to cover construction cost overruns at the Corinth Holders and Cleveland High School campuses.
Barbour stated in 2016, “In 2009…the county finance department began requesting financial information and bank statements from the Board of Education. It became apparent that they had approximately $40 million dollars in reserves. This was alarming because it came on the heels of our having to borrow an additional $30 million to cover the construction of Corinth- Holders and Cleveland High Schools. The Board of Education had estimated the cost to be $30 million each in the Bond Referendum but they actually ended up costing $45 million apiece. First and foremost, this huge amount of money did not belong to the Board of Education or the Board of Commissioners, it belongs to the taxpayers of Johnston County. It was serving no purpose sitting idly in a Johnston County Schools account while the taxpayers were paying approximately $33 million dollars a year in debt service for schools.”
Kay Carroll was the Board of Education Chairman during 2007-08 school year when a First Citizens Bank loan was taken out on behalf of the schools. Dr. Anthony Parker was the Superintendent of Johnston County Public Schools from 2003 to 2009, working with Carroll during this critical 2007-2008 school year.
Dr. Parker was the individual Kay Carroll attempted to bring back to Johnston County as a consultant to help build new schools in 2021. Carroll used a 2021 closed session meeting to influence the signing of a contract for Parker’s consulting company. The contract was drawn for one-year totaling $180,000 plus expenses. The contract issue was brought to light by board member Ronald Johnson. The contract was never awarded.
$30 million loan for “very apparent mismanagement of bond money”
Johnston County Board of Education Chairman Todd Sutton in January of 2020 accused Kay Carroll, a then School Board candidate and former Board of Education Chairman, of taking out a $30 million loan from First Citizens Bank in 2007-2008. The loan, according to Sutton, was due to Carroll’s mismanagement of bond money while building Corinth Holders and Cleveland High Schools. The loan was to be paid back over 20 years using the county schools North Carolina Education Lottery money.
According to Chairman Sutton, “$30 million of bond money that was overspent on the construction of Corinth Holders and Cleveland High Schools. Then Chairman Carroll and the Board of Education secured a loan from First Citizens Bank and Trust for $30 million dollars amortized over the next 20 years.…this loan is being paid back using incoming NC Educational Lottery money”
A response was issued by Kay Carroll to the 2020 accusation by Chairman Sutton. Kay Carroll, who served on the Board of Education from 1992-2008, stated the Johnston County Commissioners took out the First Citizens Bank loan. He additionally claimed the North Carolina Education Lottery money can only be used for construction and debt service.
Mr. Carroll wrote, “April of 2007, ahead of the bond vote, the list of upcoming bond projects was released to the public which included both Corinth Holders High School and Cleveland High School…professional construction experts estimated the cost at $30 million each. The bids for each school came in at approximately $15M more than our original estimate. We stopped everything until a decision could be made as how to proceed.” “At the point that the Commissioners took out the loan for the additional funds, the school board agreed that all lottery funds, from that time on, could be drawn down by the commissioners to help pay off debt service, especially the recent loan. Lottery funds still come to the county for debt service. Lottery funds have never been allowed for classroom expenses – only construction or debt service.”
According to the North Carolina Education Lottery website, Education Lottery money is mostly used for non-instructional support personnel and transportation, as described in this Ed NC article. “In FY 2018, the majority of NC Education Lottery funding (57%) went to non-instructional support personnel, with 19% going to school construction, 12% to pre-kindergarten, 6% LEA transportation, 4% to need-based college scholarships, and 2% to UNC need-based aid.”
The Johnston County Board of Education held a retreat March 7, 2009, which discussed opening timeline for the two new high schools. The Board considered a delayed opening of Corinth and Cleveland High campuses to save $2.6 million in operating costs, all while they sat on $40 million in funds. The schools opened without delay in Fall of 2010, after the discovery of hidden funds by the Board of Commissioners.
2019 financial trouble
A decade after the 2009 mismanagement of funds, the Johnston County School Board was once again in financial trouble. In the fall of 2019 interim Johnston County Schools Superintendent Dr. James Causby had a Fund balance of $880,000 with only $300,000 usable dollars. Just two years prior the fund balance sat at over $10 million.
Dr. Causby cut $7 million from the budget, but still the Johnston County Schools would have been out of money by spring 2020. County Commissioners were requested by the School Board to fund an additional $8.8 million to the school system to finish out the fiscal year. Board members Teresa Grant and Ronald Johnson called for a forensic audit to find any missing funds or wrongdoing with money, versus a wellness audit which would simply find any deficits in funding. A wellness audit is all that resulted. No transparency for this enormous shortfall was provided to the county taxpayers.
Johnston County Report reached out Friday, Aug. 5 for a comment from Board member Kay Carroll and Chief Financial Officer Stephen Britt. As of the publication of this story on Monday, Aug. 8 we had not received a reply requesting an explanation and comment on the audio recording.
In their video statement today, Michelle Antoine and Kevin Donovan call upon NC Auditor Beth Wood to conduct a complete forensic audit of Johnston County Public Schools financial records.
Editor’s Note: The March 2022 audio recording was given in May 2022 to Michelle Antoine and Kevin Donovan by Ronald Johnson. We confirmed with Mr. Johnson he made the recording.