IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA15-464

Filed: 3 November 2015

Cleveland County, No. 12 CVS 41

THOMAS JEFFERSON CLASSICAL ACADEMY CHARTER SCHOOL, PIEDMONT 

COMMUNITY CHARTER SCHOOL, AND LINCOLN CHARTER SCHOOL, 

Plaintiffs,

v.

CLEVELAND COUNTY BOARD OF EDUCATION, D/B/A CLEVELAND COUNTY 

SCHOOLS, Defendant.

Appeal by defendant from judgment entered 29 January 2015 by Judge Jesse 

B. Caldwell, III in Cleveland County Superior Court. Heard in the Court of Appeals

8 October 2015.

Robinson Bradshaw & Hinson, P.A., by Richard A. Vinroot, Matthew F. Tilley 

and Amanda R. Pickens, for plaintiffs-appellees.

Tharrington Smith, L.L.P., by Deborah R. Stagner, for defendant-appellant.

Christine T. Scheef and Allison B. Schafer, for amicus curiae North Carolina

School Boards Association.

TYSON, Judge.

Defendant Cleveland County Board of Education, d/b/a Cleveland County 

Schools (“CCS” or “Defendant”), appeals from judgment entered in favor of Thomas 

Jefferson Classical Academy Charter School, Piedmont Charter School, and Lincoln 

Charter School (collectively, “the charter schools” or “Plaintiffs”) in the amount of 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 2 -

$54,527.80. The trial court concluded CCS had underfunded Plaintiffs during the 

2009-10 fiscal year. We affirm.

I. Factual and Procedural Background

This case returns to this Court after prior remand to the trial court by a divided 

panel of this Court. See Thomas Jefferson Classical Acad. Charter Sch. v. Cleveland 

Cnty. Bd. Of Educ. (Thomas Jefferson II), __ N.C. __, 763 S.E.2d 288 (2014). 

Plaintiffs commenced this action on 9 January 2012 by filing a complaint, in 

which they alleged CCS had underfunded the charter schools for fiscal year 2009-10. 

Plaintiffs asserted CCS failed to pay them the statutorily required per-pupil amount 

of all money contained in the local current expense fund. Plaintiffs alleged CCS owed 

them approximately $102,480.00 

Plaintiffs asserted CCS wrongfully transferred approximately $4.9 million 

from the local current expense fund into a “special revenue fund” known as Fund 8. 

Monies in the local current expense fund must be shared with charter schools, while 

monies in a special revenue fund are not required to be shared with the charter 

schools.

Plaintiffs sought a declaratory judgment that CCS was statutorily required to 

allocate the funds in accordance with N.C. Gen. Stat. § 115C-238.29H (2009), and 

demanded recovery in the amount of $102,480.00 and attorneys’ fees. CCS timely 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 3 -

served an answer, and denied the transfer of funds to the special revenue fund 

violated any relevant statutory provisions.

A non-jury trial was held on 9 October 2012. On 21 February 2013, the trial 

court entered a final judgment in favor of Plaintiffs and awarded the charter schools 

$57,836.00. Plaintiffs were also awarded attorneys’ fees by separate order. CCS 

appealed both orders.

In an opinion issued 2 September 2014, this Court reversed the trial court’s 

order awarding attorneys’ fees to Plaintiffs. This Court held “the determination of 

whether funds that accrued to the local school administrative unit were ‘restricted’ is 

a conclusion of law rather than a finding of fact.” Thomas Jefferson II, __ N.C. at __, 

763 S.E.2d at 293. 

This Court remanded the case to the trial court for “a revised judgment with 

appropriate findings of fact and conclusions of law as to the funds at issue.” Id. at __, 

763 S.E.2d at 295. This Court instructed the trial court that “[r]elevant findings of 

fact would concern the origin, purpose, and ultimate use of the funds, not their 

designation as ‘restricted.’” Id. at __, 763 S.E.2d at 293.

The hearing after remand was held on 21 November 2014. The trial court 

entered a final judgment on 29 January 2015 in favor of the charter schools and 

awarded them $54,527.80, which represented their “per-pupil share of those moneys 

CCS had included in its Special Revenue Fund that were not, in fact, restricted.” 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 4 -

Defendant gave timely notice of appeal to this Court.

II. Issue

Defendants argue the trial court erred by finding and concluding certain 

revenues were not restricted, and the charter schools were therefore entitled to a pro

rata share of those revenues pursuant to N.C. Gen. Stat. § 115C-238.29H(b) (2009).

III. Standard of Review

“When the trial court sits without a jury, the standard of review on appeal is 

whether there was competent evidence to support the trial court’s findings of fact and 

whether its conclusions of law were proper in light of such facts.” Jackson v. Culbreth, 

199 N.C. App. 531, 537, 681 S.E.2d 813, 817 (2009) (citation and quotation marks 

omitted). “Evidence must support the findings, the findings must support the 

conclusions of law, and the conclusions of law must support the ensuing judgment.” 

Id. (citation omitted).

“The trial court’s findings of fact are binding on appeal as long as competent 

evidence supports them, despite the existence of evidence to the contrary.” Curran v. 

Barefoot, 183 N.C. App. 331, 335, 645 S.E.2d 187, 190 (2007) (citation omitted). “The 

trial court’s conclusions of law drawn from the findings of fact are reviewable de 

novo.” Id.

IV. Analysis
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 5 -

Former N.C. Gen. Stat. § 115C-238.29H governed the allocation of funds 

between local school administrative units and charter schools during the 2009-10 

school year, which is the relevant time frame in this appeal. N.C. Gen. Stat. § 115C238.29H (2009). N.C. Gen. Stat. § 115C-238.29H(b) required the local school 

administrative unit to “transfer to the charter school an amount equal to the per pupil 

local current expense appropriation to the local school administrative unit for the 

fiscal year” for each student who attends a public charter school. N.C. Gen. Stat. § 

115C-238.29H(b). 

This Court held the phrase “local current expense appropriation” is 

“synonymous with the phrase ‘local current expense fund’ in the School Budget and 

Fiscal Control Act, N.C.G.S. § 115C-426(e).” Francine Delany New School for 

Children, Inc. v. Asheville City Bd. of Educ., 150 N.C. App. 338, 347, 563 S.E.2d 92, 

98 (2002), disc. review denied, 356 N.C. 670, 577 S.E.2d 117 (2003). N.C. Gen. Stat. 

§ 115C-426(e) defines “local current expense fund” as:

The local current expense fund shall include 

appropriations sufficient, when added to appropriations 

from the State Public School Fund, for the current 

operating expense of the public school system in conformity 

with the educational goals and policies of the State and the 

local board of education, within the financial resources and 

consistent with the fiscal policies of the board of county 

commissioners. These appropriations shall be funded by 

revenues accruing to the local school administrative unit 

by virtue of Article IX, Sec. 7 of the Constitution, moneys 

made available to the local school administrative unit by 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 6 -

the board of county commissioners, supplemental taxes 

levied by or on behalf of the local school administrative unit 

pursuant to a local act or G.S. 115C-501 to 115C-511, State 

money disbursed directly to the local school administrative 

unit, and other moneys made available or accruing to the 

local school administrative unit for the current operating 

expenses of the public school system.

N.C. Gen. Stat. § 115C-426(e) (2009). See N.C. Const. art. IX, § 7(a) (“[A]ll moneys, 

stocks, bonds, and other property belonging to a county school fund, and the clear 

proceeds of all penalties and forfeitures and of all fines collected in the several 

counties for any breach of the penal laws of the State . . . shall be faithfully 

appropriated and used exclusively for maintaining free public schools.”); Francine 

Delaney, 150 N.C. App. at 339, 563 S.E.2d at 93.

The applicable 2009 version of N.C. Gen. Stat. § 115C-426(c) permitted the 

creation of “other funds . . . to account for trust funds, federal grants restricted as to 

use, and special programs.” This Court interpreted this statutory provision in two 

related cases. 

In Sugar Creek Charter School, Inc. v. Charlotte-Mecklenburg Bd. of Educ. 

(Sugar Creek I), this Court held county appropriations specifically earmarked for two

particular programs were subject to the mandatory provisions of N.C. Gen. Stat § 

115C-238.29H(b). 188 N.C. App. 454, 460, 655 S.E.2d 850, 854, disc. review denied, 

__ N.C. __, 667 S.E.2d 460 (2008). This Court’s decision emphasized the fact that the 

school board had failed to set up a “separate special fund” for these programs, and 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 7 -

placed the appropriations in the school board’s local current expense fund. Id. at 460-

463, 655 S.E.2d at 855-56.

This holding was expanded in Sugar Creek Charter School, Inc. v. CharlotteMecklenburg Bd. of Educ. (Sugar Creek II), 195 N.C. App. 348, 360-61, 673 S.E.2d 

667, 676, appeal dismissed and disc. review denied, 363 N.C. 663, 687 S.E.2d 296 

(2009). In Sugar Creek II, this Court concluded several sources of revenue with either 

a designated purpose or for a special program were subject to the per-pupil 

distribution, because the funds were placed in the local current expense fund, as 

opposed to a separate fund. This Court reiterated its prior holding in Sugar Creek I

that “[b]ecause Defendants have held these moneys in their local current expense 

fund, they are required to share these moneys with Plaintiffs.” Sugar Creek II, 195 

N.C. App. at 361-62, 673 S.E.2d at 676 (citation omitted). 

Based on Sugar Creek I and II, this Court held “the provisions of Chapter 115C 

. . . do not require that all monies provided to the local administrative unit be placed 

into the ‘local current expense fund[.]’” Thomas Jefferson Classical Acad. Charter 

Sch. v. Rutherford Cnty. Bd. of Educ. (Thomas Jefferson I), 215 N.C. App. 530, 543, 

715 S.E.2d 625, 633 (2011), disc. review denied and appeal dismissed, __ N.C. __, 724 

S.E.2d 531 (2012). “Rather, Sugar Creek I and II clearly indicate that it is incumbent 

upon the local administrative unit to place restricted funds into a separate fund.” Id.

at 544-45, 715 S.E.2d at 634. This Court further stated “[i]f the funds are left in the 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 8 -

‘local current expense fund,’ then they are to be considered in computing the per pupil 

amount to be allocated to the charter school.” Id. at 545, 715 S.E.2d at 634.

While these prior cases clearly indicate local school boards are permitted to 

place certain restricted funds in a separate fund, so as to not require their inclusion 

in the charter schools’ pro rata share, “restricted funds” were not defined until this 

Court’s recent decision in Thomas Jefferson II. Thomas Jefferson II, __ N.C. App. at 

__, 763 S.E.2d at 292 (noting “we have never defined what ‘restricted funds’ are or 

who has the authority to make that determination.”).

In Thomas Jefferson II, this Court relied on our prior holdings in Sugar Creek 

I and II, and Thomas Jefferson I, and concluded “the local school administrative unit 

may deposit any ‘restricted’ funds into a fund separate from the current expense 

fund.” Id. (citations omitted). This Court set forth the proper legal framework under 

which to analyze “restricted” funds:

We further conclude that the determination of which funds 

may be placed in a separate fund is a question of law and 

not solely in the discretion of the local school board, given 

the mandatory language found in the budget statute [N.C. 

Gen. Stat. § 115C-426(e)]. . . . 

Because the issue of whether funds are “restricted” 

or not is an issue of law, we further hold that the 

determination of whether funds that accrued to the local 

school administrative unit were “restricted” is a conclusion 

of law rather than a finding of fact. . . . Relevant findings 

of fact would concern the origin, purpose, and ultimate use 

of the funds, not their designation as “restricted.”
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 9 -

Id. at __, 763 S.E.2d at 293 (citation omitted).

This Court continued by noting “‘[r]estricted’ is not a term found in any of the 

relevant statutes,” but is “the Court’s shorthand for those monies that can be placed 

in a separate fund, i.e. those from ‘trust funds, federal grants restricted as to use, and 

special programs’ which must be accounted for separately.” Id. (quoting N.C. Gen. 

Stat. § 115C-426(c)).

This Court explained in order to determine which funds were “restricted,” “the 

question is . . . whether the funds have a limited use and specific purpose, such as to 

fund a special program.” Id. (citation omitted). By contrast, “unrestricted funds are 

those that could be used for all of the K-12 population without restriction.” Id.

(emphasis in original). We held “[b]ased on the prior cases and the language of the 

applicable statutes, we define ‘restricted’ funds as those funds which have been 

designated by the donor for some specific program or purpose, rather than for the 

general K-12 population of the local school system.” Id. (emphasis supplied).

Defendant argues the trial court erred by finding various sources of revenue 

were not restricted, and concluding these funds are subject to a per-pupil distribution 

to the public charter schools. The following sources of revenue are specifically at 

issue: (1) tuition/fees; (2) indirect costs; (3) Medicaid reimbursement; (4) E-Rate; (5) 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 10 -

Juvenile Crime Prevention Council; (6) Dropout Prevention Grant; (7) ROTC; (8) 

WorkForce Investment Act; and (9) Gear Up Grant. We address each one in turn.

A. Tuition/Fees

Defendant argues the trial court erred by finding the funds labeled

“Tuition/Fees” were not restricted, and therefore subject to per-pupil distribution to 

the charter schools. We disagree. 

The trial court made the following finding of fact regarding the origin, purpose, 

and use of the tuition/fees funds: 

15. CCS included moneys designated as “Tuition” and 

“Tuition/Fees” in its Special Revenue Fund during fiscal 

year 2009-10. This money consisted of the payment of 

tuition and fees CCS received from parents of students 

residing outside of Cleveland County. CCS receives tuition 

and fees to educate its students, including out-of-district 

students, and these funds are used for CCS’s general 

operating expenses and its general K-12 educational 

program. The parents that pay tuition and fees to CCS 

place no restriction on CCS’s use of those funds.

The trial court concluded as a matter of law that the money listed as “tuition” 

and “tuition/fees” were not restricted based on this finding of fact. 

CCS argues the money listed as “tuition/fees” was restricted because the money 

was “paid to the Board by the Rutherford County Board of Education to provide a 

teacher assistant for a single, specific special education student who resided in 

Rutherford County but attended CCS.” CCS contends this money differs from the 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 11 -

money listed as “tuition,” which was paid directly from parents. CCS asserts the trial 

court failed to make findings of fact with respect to the origin, purpose, and use of the

“tuition/fees” funds.

David Lee (“Mr. Lee”), the chief financial officer for CCS, was asked at trial 

whether he had stated in his deposition that the local source money, including money 

for tuition/fees, was not restricted. He responded in the affirmative. Dr. Nellie Aspel 

(“Dr. Aspel”), the director of exceptional children for CCS, testified CCS “sign[ed] an 

annual contract and then we hire the teacher assistant. And then each month we 

invoice Rutherford County for that month’s portion of that TA pay.” The Individuals 

with Disabilities Act requires CCS to provide such services to students with 

disabilities in accordance with their individualized education plans (“IEPs”). See 20 

U.S.C. § 1400, et seq. Regardless of whether CCS receives reimbursement for this 

particular student from Rutherford County, providing these services is part of CCS’s 

general operating costs. 

We have reviewed the evidence of record and the transcript, and fail to see a 

significant distinction between the money paid to CCS by Rutherford County Schools, 

and tuition paid by parents of CCS students residing in Cleveland County. Both 

sources of tuition funds were used for CCS’s general operating expenses and its 

general K-12 population. 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 12 -

Competent evidence supports the trial court’s findings of fact regarding the 

tuition/fees funds. These findings of fact support the trial court’s conclusion of law 

that this money was not restricted based on origin, purpose, or use. See Thomas 

Jefferson II, __ N.C. App. at __, 763 S.E.2d at 293. This argument is overruled. 

B. Indirect Costs

Defendant argues the trial court erred by finding the funds labeled “indirect 

costs” were not restricted and subject to the statutory per-pupil distribution to the 

charter schools. We disagree. 

The trial court made the following finding of fact with regard to indirect costs: 

19. CCS included moneys designated as “Indirect Cost 

Allocated” in its Special Revenue Fund during fiscal year 

2009-10. This money consisted of reimbursements from 

the federal government for a portion of CCS’s “general 

overhead” expenses, which CCS received in connection 

with its operation of federal programs. CCS refers to these 

expenses as “indirect costs.” As CCS acknowledges, 

indirect costs are not attributable to any particular 

program within CCS, and include various general 

operating expenses, such as accounting, payroll, 

purchasing, facilities management, and utilities. The 

federal government does not place any restriction on how 

CCS uses the reimbursements it receives for indirect costs.

Testimony at trial tended to show the origin, purpose, and use of the funds for

indirect costs. Mr. Lee testified the federal government placed no restrictions on the 

portion of the federal grants CCS received in relation to indirect costs and operating 

expenses. Mr. Lee stated the money received from federal grant funds for indirect 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 13 -

costs are spent in the normal operations of the school district, and are not spent for 

any restricted programs or expenses. 

Although indirect costs may be connected to federal grant money for a 

particular program, this fact does not per se make these funds restricted. In Thomas 

Jefferson II, this Court stated “the question is . . . whether the funds have a limited 

use and specific purpose, such as to fund a specific program.” Thomas Jefferson II, __ 

N.C. App. at __, 763 S.E.2d at 293 (citation omitted). 

Mr. Lee further testified the indirect cost money is “plain money that goes in 

[the] current expense fund” and was “spent for current operating expenses.” Mr. Lee 

explained no one required him to deposit the money into a separate fund, and he did 

so on his own volition. Mr. Lee’s testimony supports the trial court’s findings of fact 

that these funds “consisted of reimbursements,” because they were part of the federal 

grant reimbursement money CCS received. Mr. Lee’s testimony also supports the 

trial court’s finding of fact that the funds were not “designated by the donor for some 

specific program or purpose[.]” Thomas Jefferson II, ___ N.C. App. at ___, 763 S.E.2d 

at 293. 

The trial court’s findings of fact regarding funds labeled “indirect costs” are

supported by competent evidence. Any evidence to the contrary does not change our 

analysis regarding the classification of these funds. Under the applicable standard 

of review, it is for the trial court to “pass[] upon the credibility of the witnesses and 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 14 -

the weight to be given their testimony and the reasonable inferences to be drawn 

therefrom.” Knutton v. Cofield, 273 N.C. 355, 359, 160 S.E.2d 29, 33 (1968). “The trial 

court must . . . determine what pertinent facts are actually established by the 

evidence before it, and it is not for an appellate court to determine de novo the weight 

and credibility to be given to evidence disclosed by the record on appeal.” Coble v. 

Coble, 300 N.C. 708, 712-13, 268 S.E.2d 185, 189 (1980) (citations omitted).

The trial court’s findings of fact support its conclusion that these funds were

not restricted based on their origin, purpose, and use. See Thomas Jefferson II, __ 

N.C. App. at __, 763 S.E.2d at 293. The trial court did not err by finding these funds

should have been included in the local current expense account and apportioned to

the charter schools on a per-pupil basis. This argument is overruled.

C. Medicaid Reimbursement

Defendant argues the trial court erred by concluding the Medicaid 

reimbursement funds were not restricted. We disagree.

The trial court made the following finding of fact regarding the Medicaid 

reimbursement funds:

27. CCS used moneys designated in its audit as 

“Medicaid Reimbursement” for its general operating 

expenses during its 2009-10 fiscal year. CCS received 

these reimbursements for services CCS provided for 

students with individual education plans (“IEP's”), i.e., in 

accordance with federal law, which requires both CCS and 

the Charter Schools to provide such services to students 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 15 -

with learning disabilities. The evidence shows that CCS 

used other moneys from its general funds to operate its IEP 

programs as well, and that the federal government does not 

restrict the use of the reimbursement funds once received 

by CCS.

Testimony regarding the origin, purpose, and use of the Medicaid 

reimbursement funds tended to show the following: Dr. Aspel stated she was 

responsible for Medicaid billing for direct services. Dr. Aspel explained students with 

special needs are given an IEP. An IEP is an outline of special education or 

specialized instruction-related services students with disabilities will receive 

throughout the school year. These students are part of the general K-12 population 

enrolled throughout CCS and the charter schools. 

Dr. Aspel testified CCS, as the local education agency (“LEA”), provides 

services to any disabled students according to the student’s IEP. The federal 

government subsequently reimburses the LEA for “what [they have] already 

delivered.” Mr. Lee also admitted the $162,098.00 CCS received as “Medicaid 

Reimbursement” was not restricted. 

Dr. Aspel explained “[t]he Medicaid [reimbursements] go back into the 

exceptional children’s budget to help offset the cost of the employment of the physical 

therapist, occupational therapist, speech therapist, and all the specialized equipment 

that they need to deliver the services that are on the IEP.” As discussed supra, federal 

law requires both CCS and the charter schools to provide these services to students 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 16 -

with disabilities regardless of whether Medicaid provides reimbursements. The 

Medicaid reimbursements merely serve as an alternative source of funding to recoup

expenses CCS is mandated to incur and provide for certain students with IEPs. These 

students are part of the general K-12 population. 

We emphasize that under the applicable standard of review, “findings of fact 

by the trial court in a non-jury case are conclusive on appeal if there is evidence to 

support those findings.” Montague v. Montague, __ N.C. App. __, __, 767 S.E.2d 71, 

74 (2014) (citation and quotation marks omitted). “[I]t is not for an appellate court 

to determine de novo the weight and credibility to be given to evidence disclosed by 

the record on appeal.” Coble, 300 N.C. at 712-13, 268 S.E.2d at 189. 

The trial court’s findings of fact regarding Medicaid reimbursement funds 

indicate the funds originated from the federal government as the donor. The trial 

court also found these funds were used by CCS to provide services for students with 

IEPs in the general K-12 population, in accordance with federal law. The transcript 

and evidence clearly show the donor of the funds did not designate or restrict the 

funds for a specific purpose. Competent evidence supports the trial court’s findings 

of fact. 

These findings of fact support the trial court’s conclusion of law that the

Medicaid reimbursement funds were not restricted based on their origin, purpose, or 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 17 -

use. See Thomas Jefferson II, __ N.C. App. at __, 763 S.E.2d at 293. This argument 

is overruled. 

D. E-Rate

Defendant argues the trial court erred by concluding E-Rate funds were not 

restricted. We disagree.

The trial court’s finding of fact regarding the E-Rate funds stated:

29. During 2009-10, CCS used moneys designated in its 

audit as “E-Rate — Other Unrestricted” to reimburse other 

moneys paid out of its current expense fund for internet 

and telecommunications. CCS received the “E-Rate”

reimbursement funds for operating federal programs. The 

evidence shows that CCS used moneys from its general 

fund to pay for CCS’s telephones, internet, and 

telecommunications. Providing internet, telephones, and 

telecommunication services to school buildings is a utility 

cost and part of the operating expenses of CCS’s general 

educational program, and such money is not used for any 

special program. The federal government does not restrict 

the use of the reimbursement funds once received by CCS.

Testimony regarding the origin, purpose, and use of the E-Rate funds tended 

to show the following: Dr. Cheryl Lutz (“Dr. Lutz”), the director of technology services 

for CCS, testified E-Rate is a federal program, which reimburses the school system

for a percentage of what it pays for telecommunications and Internet access. The 

amount of federal reimbursement is calculated based on the school system’s free and 

reduced lunch numbers from across the general K-12 population. 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 18 -

According to Dr. Lutz, CCS contracts with and pays a vendor for Internet and 

telecommunications services. CCS is reimbursed by the federal government under 

the E-Rate program for a portion of the money previously expended for Internet and 

telecommunications services. CCS is required to apply and be approved for the ERate program, before it purchases the services and must submit a reimbursement 

form. 

CCS funds these services from its local current expense fund prior to 

reimbursement from the E-rate program. All CCS K-12 students, staff, faculty, and 

bus drivers may utilize the Internet and telecommunications services. The transcript 

and evidence clearly show the donor of these funds did not designate or restrict these

funds for some specific purpose. 

The trial court’s findings of fact regarding the E-Rate funds indicate the federal 

government was the origin of these funds. The trial court also found the E-rate funds 

were used for Internet and telecommunications services for all CCS K-12 students, 

staff, faculty, and bus drivers. 

The trial court’s findings of fact are supported by competent evidence. These 

findings of fact support the trial court’s conclusion that the E-Rate funds were not 

restricted based on the origin, purpose, and use of the moneys. See Thomas Jefferson 

II, __ N.C. App. at __, 763 S.E.2d at 293. This argument is overruled.

E. Juvenile Crime Prevention Council 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 19 -

Defendant argues the trial court erred by concluding the Juvenile Crime 

Prevention Council (“JCPC”) funds were not restricted. We disagree.

The trial court’s finding of fact regarding the JCPC funds states:

33. CCS included moneys designated as “JCPC” in its 

Special Revenue Fund during fiscal year 2009-10 to hire 

and pay for three school counselors. CCS received this 

federal grant money to pay for the salaries and benefits of 

personnel that trained, managed, and supported at-risk 

students in grades K-12. The evidence revealed that in 

2009-10, CCS chose to use the grant to offset salaries and 

benefits for two school counselors, and to combine this 

grant with another federal grant, Governor’s Crime 

Commission, to offset the compensation of another school 

counselor. These counselors served students in CCS’s 

general K-12 population and were therefore part of its 

general program. The provision of hiring and paying the 

salaries and benefits of school counselors for students in 

grades K-12 is a part of CCS’s current operating expenses.

Testimony regarding the origin, purpose, and use of the JCPC funds tended to 

show the following: Rodney Borders (“Mr. Borders”) served as the director of 

alternative programs for CCS during the 2009-2010 school year. Mr. Borders

explained CCS sets up an alternative program for students who are “at risk as far as 

attendance, discipline problems, hardships in the lives, that need a smaller 

environment.” Mr. Borders testified the alternative programs are funded by JCPC 

moneys, which are obtained through a federal grant. 

Mr. Borders explained the JCPC funds were combined with another grant from

the Governor’s Crime Commission to hire and pay the salaries and benefits of 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 20 -

additional life skills counselors. Mr. Borders testified the JCPC funds were also used 

to pay the salaries of life skills counselors currently employed by CCS. The life skills 

counselors were available to all K-12 students in Cleveland County schools. 

The trial court’s findings of fact regarding the JCPC funds indicates the origin 

of the funds was from the federal government. The JCPC funds were used to pay the 

salaries of life skills counselors. These life skills counselors were available to the 

entire K-12 population of CCS. 

The trial court’s findings of fact regarding the JCPC funds are supported by 

competent evidence. These findings of fact support the trial court’s conclusion that 

the JCPC funds were not restricted based on origin, purpose, and use. See Thomas 

Jefferson II, __ N.C. App. at __, 763 S.E.2d at 293. This argument is overruled.

F. Dropout Prevention Grant

Defendant argues the trial court erred by concluding funds designated as the

Dropout Prevention Grant were not restricted. We disagree.

The trial court’s finding of fact regarding the Dropout Prevention Grant states:

35. CCS included moneys designated as “Dropout 

Prevention Grant” in its Special Revenue Fund during 

fiscal year 2009-10. CCS received this state funded grant 

for purposes of providing a dropout prevention program as 

part of its general K-12 educational programs and school 

curriculum. The evidence revealed that CCS was given 

discretion in deciding how to spend the funds received from 

the Dropout Prevention Grant. For the 2009-10 fiscal year, 

CCS decided to spend the funds to purchase computer 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 21 -

software programs and general K-12 curriculum programs, 

to pay for the salaries and benefits of three CCS employees, 

specifically two teaching assistants and a truancy court 

coordinator for CCS, and to provide staff development for

school counselors. Those employees were each employed 

by CCS in its general K-12 program.

Testimony regarding the origin, purpose, and use of the Dropout Prevention 

Grant tended to show: Tony Fogelman (“Mr. Fogelman”), the career and technical 

education director for CCS, oversaw the Dropout Prevention Grant. He explained the 

Dropout Prevention Grant was a “state-funded grant that provides resources to public 

school systems, for them to make the decision as to how they want to best spend their 

money to prevent dropouts, keep kids in school.” 

Mr. Fogelman testified the Dropout Prevention Grant was targeted at all CCS 

students. For the 2009-2010 school year, CSS used the Dropout Prevention Grant to 

pay for two teaching assistants and a truancy court coordinator. 

The trial court’s findings of fact regarding the Dropout Prevention Grant 

indicate the origin of these funds was from North Carolina state government. The 

transcript and evidence clearly show the Dropout Prevention Grant was intended to 

benefit the entire K-12 student population. CCS exercised discretion over how to 

spend the funds, in furtherance of its goal of preventing students from dropping out 

of school. 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 22 -

The trial court’s finding of fact regarding the Dropout Prevention Grant is 

supported by competent evidence. The findings of fact support the trial court’s 

conclusion that the funds designated for the Dropout Prevention Grant were not 

restricted based on origin, purpose, or use. See Thomas Jefferson II, __ N.C. App. at 

__, 763 S.E.2d at 293. This argument is overruled.

G. ROTC

Defendant argues the trial court erred by concluding the Reserved Officers’ 

Training Corps (“ROTC”) funds were not restricted. We disagree.

The trial court’s findings of fact regarding the ROTC funds state:

44. CCS included moneys designated as “ROTC” in its 

Special Revenue Fund during fiscal year 2009-10 to 

reimburse the salaries of its high school teachers teaching 

reserve officers’ training corps courses (“ROTC”). CCS 

offers ROTC courses to high school students as part of its 

general high school program and regular high school 

curriculum.

45. CCS received ROTC moneys from the federal 

government in connection with its operation of federal 

programs. During 2009-10, CCS used other moneys from 

its general fund to pay for the salaries and benefits of its 

ROTC teachers in the K-12 population, and the federal 

government provided a reimbursement to CCS for such 

expenditures. The federal government places no 

restriction on the use of the reimbursement funds once 

received by CCS.

Evidence regarding the origin, purpose, and use of the ROTC funds tended to 

show the following: Mr. Lee testified the ROTC funds are reimbursed by the United 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 23 -

States Armed Services for partial payment of ROTC instructors’ salaries. The 

instructors’ salaries are initially paid out of the current expense fund. CCS is 

subsequently partially reimbursed by the federal government. Mr. Lee testified the 

ROTC funds were included in the current expense fund prior to the 2009-2010 school 

year. 

The trial court’s findings of fact indicate the origin of the ROTC funds was from 

the federal government. These funds were used to reimburse ROTC instructors’ 

salaries paid from CCS’s current expense fund. The transcript and evidence clearly 

show the federal government did not restrict the ROTC funds to a specific purpose. 

Competent evidence supports the trial court’s finding of fact that “[t]he federal 

government places no restriction on the use of the reimbursement funds once received 

by CCS.” These findings of fact support the trial court’s conclusion that the ROTC 

funds were not restricted based on origin, purpose, or use. See Thomas Jefferson II, 

__ N.C. App. at __, 763 S.E.2d at 293. This argument is overruled. 

H. WorkForce Investment Act 

Defendant argues the trial court erred in concluding WorkForce Investment 

Act (“WIA”) funds were not restricted. We disagree.

The trial court’s findings of fact regarding WIA funds state:

52. During 2009-10, CCS used moneys designated in its 

audit as “WIA,” meaning WorkForce Investment Act, to 

support, prepare, and train students to enter the workforce 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 24 -

upon graduation from high school. The provision of 

preparing and training high school students for the 

workforce is part of CCS’s general educational program 

and its regular curriculum.

53. CCS received the WIA funds as a federal grant 

through Isothermal Community College, which distributes 

moneys under the WorkForce Investment Act program to 

school systems within the state. The evidence reveals that 

CCS had discretion in deciding how to spend this grant for 

training students to enter the workforce upon graduation.

In 2009-10, CCS chose to use this grant to offset the 

salaries of two employees to work at CCS’s Job Link Center 

and to pay the hourly wages of students that were placed 

in the workforce through the program.

Testimony regarding the origin, purpose, and use of the WIA funds tended to 

show the following: Mr. Lee testified WIA is a program administered by the 

Isothermal Community College to transition CCS students into the workforce. Mr. 

Fogelman testified he was responsible for overseeing WIA money. 

Mr. Fogelman stated WIA is a federal program through which the federal 

government distributes money to the states. He explained the states allocate this

money in the form of block grants to school systems through workforce development 

boards. 

Mr. Fogelman testified CCS submitted a grant application to the workforce 

development board, in which it requested a certain amount of WIA funds. CCS 

largely spent the money it received to pay the salaries of students who were working 

for various employers through the program. WIA funds were also used to pay two 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 25 -

employees who worked at the Job Link Center, which assists students in finding 

employment. 

Mr. Fogelman stated WIA funds were primarily used to serve the general K12 population of CCS, because the program is open to every age-eligible student. He 

testified every student in the school, who qualified, could participate in the program. 

The trial court’s findings of fact regarding WIA funds indicate the funds 

originated from the federal government and were allocated throughout North 

Carolina. WIA funds were used to pay two employees at the Job Link Center and to 

pay the salaries of those students who participated in the program. 

Competent evidence supports the trial court’s findings of facts regarding WIA 

funds. These findings of fact support the trial court’s conclusion that WIA funds were 

not restricted based on the origin, purpose, and use of these funds. See Thomas 

Jefferson II, __ N.C. App. at __, 763 S.E.2d at 293. This argument is overruled.

I. Gear Up Grant

Defendant argues the trial court erred by concluding the Gear Up Grant funds 

were not restricted. We disagree.

The trial court’s finding of fact regarding the Gear Up Grant funds states:

55. CCS included moneys designated as “Gear Up Grant”

in its Special Revenue Fund during fiscal year 2009-10.

CCS received this grant from the University of North 

Carolina to support providing programs that would 

increase the number of students attending a post-
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 26 -

secondary educational institution. The provision of 

providing a program to students in grades K-12 to increase 

the number of students who attend college is part of CCS’s 

general educational programs and its regular curriculum. 

The evidence revealed that CCS was given great discretion 

in deciding how to spend its general funds in order to 

receive reimbursement funds from the Gear Up Grant. In 

2009-10, CCS used moneys from the Gear Up Grant to 

reimburse expenses for tutoring services CCS provided to 

K-12 students, to pay for the salaries and benefits of CCS 

personnel, and to provide after-school activities. The 

University of North Carolina does not restrict the use of 

the reimbursement funds once received by CCS.

Testimony regarding the use, origin, and source of the Gear Up Grant funds 

tended to show the following: Juan Cherry (“Mr. Cherry”), a Graham Elementary 

School counselor, served as the “Gear Up coordinator” during the 2009-2010 school 

year. Mr. Cherry testified Gear Up is a federal grant program designed to increase 

the number of students who enter and succeed in post-secondary education. CCS’s

Gear Up program was a part of the grant received by the state. The North Carolina 

Gear Up grant program was administered by the University of North Carolina. 

Defendant provided tutors, toured university campuses, hosted mentoring programs, 

and other programs to their students through the Gear Up program. These programs 

were aimed at achieving higher college attendance rates. 

CCS initially spent money out of its current expense fund, and was reimbursed

through the Gear Up Grant program on a monthly basis for the money spent on the 

program. CCS deposited the reimbursement money into its restricted fund. Mr. 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 27 -

Cherry testified the Gear Up Grant money was spent on the general K-12 student 

population, with the intention of increasing the number of CCS students who attend 

college. 

The trial court’s findings of fact regarding the Gear Up Grant funds indicate 

the origin of these funds was from the state government to the University of North 

Carolina. These funds were spent on various programs aimed at achieving higher 

college attendance rates among CCS students. The programs were made available to 

the general K-12 population of CCS. 

Competent evidence supports the trial court’s finding of fact that “[t]he 

University of North Carolina does not restrict the use of the reimbursement funds 

once received by CCS.” These findings of fact support the trial court’s conclusion that 

the Gear Up Grant funds were not restricted based on origin, purpose, or use. See 

Thomas Jefferson II, __ N.C. App. at __, 763 S.E.2d at 293. This argument is 

overruled.

V. Conclusion 

The trial court properly concluded certain funds, discussed supra, were not 

restricted. The trial court’s findings of fact regarding the origin, purpose, and use of 

certain funds are supported by competent evidence contained in the record and 

transcript. 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF 

EDUC.

Opinion of the Court

- 28 -

These findings of fact support the trial court’s conclusions of law that these 

funds were not restricted, and must be included in the per-pupil share of funding 

allotted to the charter schools. The order from which defendant CCS appealed is 

affirmed.

AFFIRMED.

Judge McCULLOUGH concurs.

Judge BRYANT concurs in part and dissents in part by separate opinion.
No. COA15-464 – Thomas Jefferson Classical Acad. Charter Sch. v. Cleveland Cnty. 

Bd. of Educ. 

BRYANT, Judge, concurring in part and dissenting in part.

I concur in the majority opinion affirming the trial court’s findings and 

conclusions regarding the restricted or nonrestricted nature of certain funds; 

however, I dissent from the majority’s holding that the trial court’s findings of fact 

and conclusions of law support its determination that “indirect costs” and “E-rate” 

funds are nonrestricted. 

Indirect Costs

The majority opinion holds that the trial court did not err in finding and 

concluding that “indirect costs,” which are a percentage of the total federal grant 

funding that pays for the operating expenses incurred by the school system to 

implement federally funded grant programs, are nonrestricted revenues. I 

respectfully disagree with this holding. This Court has noted that “ ‘federal grants 

restricted as to use’ . . . clearly have operating expenses . . . but that fact does not 

make the funds ‘unrestricted.’ ” Thomas Jefferson et al. v. Cleveland Cnty. Bd. of 

Educ., ___ N.C. App. ___, ___, 763 S.E.2d 288, 293 (2014) (“Thomas Jefferson II”) 

(instructing the trial court on remand to determine whether funds are restricted). 

The trial court specifically found that CCS received indirect costs “in connection with 

its operation of federal programs.” Because the origin of revenue for indirect costs 

was the federal grants themselves, and because the federal grant money was 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF

EDUC.

BRYANT, J., concurring in part and dissenting in part

2

restricted to specific purposes, the funding for operating expenses incurred in 

connection with those grants is likewise restricted. 

Additionally, even though the trial court found that “[t]he federal government 

[did] not place any restrictions on how CCS uses the reimbursements it received for 

indirect costs,” it nonetheless acknowledges those funds are received in connection 

with CCS’s operation of federal programs. See id. (“[W]e define ‘restricted’ funds as 

those funds which have been designated by the donor for some specific program or 

purpose . . . .”). 

Finally, the majority opinion focuses quite a bit on Mr. Lee’s testimony. With 

regard to his testimony, it is notable that the trial court found that indirect costs 

“consisted of reimbursements from the federal government,” when Mr. Lee testified 

exactly to the contrary. He testified that indirect costs “are not reimbursements at 

all. They are in fact a part of the full [federal] grant.” It is unclear from the record 

that there is evidence to support this finding of fact by the trial court. Further, the 

findings by the trial court confirm that the origin and purpose of the indirect costs 

were restricted. Here, the trial court found that “CCS received [the indirect costs] in 

connection with its operation of federal programs,” whose funds were restricted. To 

then say that the government placed no restriction on the use of those funds is not 

supported by the record, and further, violates the mandate of the Court in Thomas 

Jefferson II as to the definition of “restricted” funds. See id. For these reasons, I 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF

EDUC.

BRYANT, J., concurring in part and dissenting in part

3

disagree with the majority opinion regarding indirect costs, and would hold that the 

indirect costs are restricted funds. 

E-Rate

The majority opinion also holds that the trial court did not err in finding and 

concluding that E-Rate funding was made available by the federal government for 

unrestricted use for the entire K–12 population and was not used for any special 

program. Again, I disagree. 

The majority opinion, as did the trial court, disregards the origin of the E-Rate 

funds. The trial court’s findings are insufficient to support its conclusion that the ERate funds are not restricted. The trial court, in defiance of the mandate of Thomas 

Jefferson II, made conclusory findings as to use, but failed to make findings 

concerning the funds’ origin and purpose. While it is true that all CCS students, staff, 

and even bus drivers could use the Internet and telecommunications services 

provided for by the E-Rate funds, the funds were essentially restricted because of the 

nature of the strict application and approval process, which goes towards the funds’ 

“origin and purpose.” See id. at ___, 763 S.E.2d at 294 (instructing the trial court on 

remand to determine whether funds are restricted by examining and making findings 

of fact about the origins, purpose, and uses of the challenged funds). Evidence in the 

record shows that the funds originated from the federal government for very specific 

technological purposes and that the funds were used for those specific purposes. 
THOMAS JEFFERSON CLASSICAL ACAD. CHARTER SCH. V. CLEVELAND CNTY. BD. OF

EDUC.

BRYANT, J., concurring in part and dissenting in part

4

Specifically, E-Rate funds are made available to reimburse a school only after 

certain pre-approved purchases are made. CCS was required to obtain approval for 

the purchase of qualified technology services in advance and only then could the 

school system purchase the service. Once CCS purchased the pre-approved 

telecommunications and internet access, the school system was eligible to submit an 

application for reimbursement at a set rate. 

E-Rate funding was not made available by the federal government for 

unrestricted use for the entire K–12 population. Rather, the E-Rate funds were 

provided by the federal government for a specific purpose. Therefore, the trial court’s 

finding of fact which includes the statement that “[t]he federal government does not 

restrict the use of the reimbursement funds once received by CCS,” is not supported 

by the evidence. To the contrary, the evidence established that E-rate funds would 

never have been provided to defendant but for its compliance with the federal 

government’s lengthy and detailed approval process to ensure that only qualified 

technology services were purchased. 

Despite who ultimately benefited from the use of the technology, the funds

were restricted in that pre-approval was required and the funds were used for their 

specified purpose. Accordingly, I would reverse the trial court and find that the Erate funds were restricted by the donor—the federal government—and required to be 

used for a specific purpose.