I had to redo folder permissions as follows for it to work.
1. MOST IMPORTANT. Removed all user groups permission settings from the default folder and Set all All users to none, none, none.
2. Locked permissions for each folders (folder contents set to have permissions of the folder). This had the downside of over writing permissions of some workbooks in their respective folders which needed a different permission setting as compared to the folder.
3. Set reasonable/scaleable permission settings for each folder.