"This screams for reform."
Kentucky State Auditor Adam Edelen used strong language this morning to paint a culture of the "It's About Kids" district office that is not about kids, and even went so far as to spend money dedicated for improving instruction for making travel loans to administrators. He called for a strong leader and a reformist board to correct the situation.
Edelen was clear that his office found no evidence of criminal activity but noted a list of disturbing shortcomings that must sting Superintendent Tom Shelton who was brought to the district for his business acumen. Shelton will address his concerns in a press conference this afternoon. The superintendent's briefing will start at 1:30 p.m. in Conference Room C at the district’s main offices, 701 E. Main St.
It is notable that the individual who comes off looking the worst of all is Director of Finance Rodney Jackson whose department is listed over and over again in the findings.
- excessive travel
- violations of the state procurement code when the district contracted with Navigo
- faulty budget assumptions
- a finance director who had little regard for the budget
- ongoing, long-standing, and well-known tensions between the budget and finance directors that went unchecked by the superintendent
- money was apparently hidden within the system
- a breakdown in management
- excessive spending by the superintendent and the board due in part to a foggy financial picture
- a breakdown in communication
- a total lack of transparency over the past four years
- Shelton should have been, and needs to be, directly involved in reforming financial services
- Weaknesses in the budget and financial management processes led to significant errors in the district's working budget. (As Budget Director Julane Mullins had claimed, but Edelen cited poor communications between Mullins and Jackson.)
- The FCPS working environment is not conducive to effective and efficient operations. (Ouch)
- Administrative and Management salary increases outpace other district employees, some without appropriate transparency.
- FCPS circumvented district controls and did not follow procurement guidelines.
- Stoner Fund is not being used consistent with its charter to enhance instruction, but was mostly used for the benefit of the Department of Financial Services, whose members dominate the fund board.
- Travel and professional development in the Department of Financial Services is excessive and often unnecessary.
- Conflicts of Interest including vendors providing perks to employees in the Department of Financial Services.
- Monthly financial reports lack significant information. (Ferguson's big complaint)
- Accounting weaknesses within the Department of Financial Services.
- Current FCPS internal audit structure needs improvement.
Board member Amanda Ferguson who has raised concerns over a lack of information coming to the board posted on Facebook today, "It's a sad day in the #FCPS when we are discussing the questionable actions of adults rather than meaningful achievement of our students."
This from WKYT:
In a special audit of Fayette County Public Schools released Wednesday morning, State Auditor Adam Edelen said auditors found poor financial management, weak policies and failed communications. The audit says those factors contributed to the district's financial instability. The audit did not find any evidence of criminal activity.
"This examination found that unfortunately, it's not all about the kids," Auditor Edelen said.
"Mismanagement of the finances of the state's second largest school district, with an annual budget of more than $400 million, is obviously very troubling. But even more so is a culture within certain elements of management that does not reflect the district's purported values. Our kids deserve better."
The State Auditor's Office began the audit last spring following news of a $20 million shortfall in the Fayette County Public Schools' budget. Concerns over the reasons for the shortfall led to the audit.
Here are some of the specific findings:
Auditors found salary and perk disparities between administrative and educational staff, excessive travel and training in one department, violations of the procurement process and other board policies and potential conflicts of interest.
Auditors found the budget director wasn't notified of certain financial transactions in a timely manner, which caused her to establish a budget that showed the district had $20 million dollars more than it really did. The State Auditor's Office says transactions by the finance director were not illegal, but auditors question whether the availability of money was purposely hidden from the school board and public. Other budgets contained serious errors and led to the passing of unbalanced budgets.
"We understand that school districts, especially those with large budgets, use complex accounting procedures to balance their books," Auditor Edelen said. "But when vast sums of money are committed for various purposes and then decisions are made to routinely use those funds for different purposes after the budget process has ended, we question whether the intent is to conceal the true amount that is available for spending."
Auditors found a lack of transparency when managers altered district salary schedules. Management did not highlight significant changes in administrative pay during the 2013-2014 school year when it presented the schedules for board approval. The numbers rose from $36,726 to $63,299. Auditors found pay for high-ranking administrators rose 24.7% over a four-year period, while average teacher pay increased 9.88%.
Edelen says he's especially troubled by the use of a trust fund left to the district by a deceased Fayette County Public Schools teacher. The fund is used to give loans to administrators for travel and training. Edelen says when the use of the funds was discussed with the director of financial services, he indicated it would be problematic to let teachers and others know the funds were available.
"For two years I have pressed school districts to keep their eyes on the ball and not let resources get gummed up in central office rather than the classrooms where they are needed," Auditor Edelen said. "It is especially critical at a time when administrators are asking everyone else - taxpayers, teachers and parents - to give more and do with less."
This from the Herald-Leader:
State audit highlights ‘chronic mismanagement’ of Fayette schools budget, finances
There's no missing money or criminal wrongdoing, but Kentucky Auditor Adam Edelen's examination of Fayette County Public Schools found "chronic mismanagement" of the district's budget and finances.
Edelen, in the findings released Wednesday in a 74-page report, said accounting errors were the catalyst for the district's budget cuts earlier this year.
The Fayette County Public Schools audit detailed 10 key findings, including weaknesses in budget and financial-management processes, administrative and management salary increases that outpace other district employees, excessive and unnecessary travel, misuse of a trust fund, and conflicts of interest.
"This examination found that unfortunately, it's not all about the kids," Edelen said in a news release. "Mismanagement of the finances of the state's second-largest school district, with an annual budget of more than $400 million, is obviously very troubling. But even more so is a culture within certain elements of management that does not reflect the district's purported values. Our kids deserve better."
The superintendent issued a statement Wednesday morning to parents:
"Despite our agreement with much of the report, we must point out that some of the state's assertions are based on faulty calculations, factual errors, and false assumptions. There are serious inaccuracies in four of the report's 10 findings. We also take issue with the language in the report that seemingly vilifies one employee while minimizing the impact of the mistakes of others. Portions of this review amount to little more than 'he-said-she-said.'The release of the Auditor of Public Accounts' review this morning affirms the fact that there is, and never was, any money missing in the Fayette County Public Schools. We also welcome the assurance that there has been no criminal activity. It is vital for our community to hear that all public dollars are accounted for and that the allegations of improper journal entries causing a budget shortfall are absolutely not true.
"The report also shows that tough decisions lie ahead for our district. Many of the findings contained in the auditor's report are deeply troubling and I assure our employees, families, and community-at-large that our leadership team will not allow adult issues at the district office to distract from our core mission of serving children."
The report said the findings indicate "chronic mismanagement of the district's budget and finances that have contributed to financial instability" and that "errors and misrepresentations in the budget process over several years weakened the district's ability to address budget imbalances in the current year."
In his response to the findings, Fayette Superintendent Tom Shelton disputed several of the findings, including the audit's report that accounting errors led to the district's $19 million budget cuts. Shelton agreed with some portions of the findings and said that the district would overhaul its budget and finance system.
In addition to poor financial management, weak policies and poor communications culminated in a weakened financial position for the district, the auditor said.
Auditors identified salary disparities between administrative and teachers, excessive travel and training in the financial services department, and violations of the procurement process and other board policies.
Edelen began investigating in May after budget director Julane Mullins made allegations that centered on a $20 million discrepancy in the budget.
Auditors found that Mullins did not become aware of certain financial transactions in a timely manner, which led to her establishing a budget that reflected $20 million more than the district had to spend. The financial transactions made by finance director Rodney Jackson were not illegal, but auditors questioned whether the availability of the money was purposely hidden from the school board and public, Edelen said in a news release. Subsequent budgets also contained significant errors, leading to the passage of unbalanced budgets.
"We understand that school districts, especially those with large budgets, use complex accounting procedures to balance their books," Edelen said. "But when vast sums of money are committed for various purposes and then decisions are made to routinely use those funds for different purposes after the budget process has ended, we question whether the intent is to conceal the true amount that is available for spending."
Auditors found a lack of transparency in giving the school board information about salaries.
Edelen said there are currently 11 teachers in the district — most of whom are in high poverty schools — asking for money to buy basic supplies for the classrooms on a national crowd-funding website.
"Parents struggle to afford items on long back-to-school lists and teachers pay for resources for their classrooms out of their own pockets," Edelen said. "Now, teachers are taking to the Internet to get help buying basic necessities like science kits and dictionaries while administrators are granted big raises and other perks that aren't offered to teachers."
Edelen's audit also notes as troubling the use of a trust fund left to the district by a deceased Fayette County teacher for the "enhancement and enrichment of the educational program." The district can use the interest and as much as 10 percent of the principle each year. The fund balance was more than $1.1 million on June 30.
The fund is used to grant loans to administrators for travel and training. When the use of that money was discussed with the director of financial services, he indicated that it would be problematic to promote the availability of that money to teachers and others.
"Concealing the trust fund from educators so that only bureaucrats reap the benefits is just greedy," Edelen said.
The Department of Financial Services spent more than $115,212 for travel, training and reference books in a four-year period, Edelen found. Auditors found unnecessary and excessive travel and training. The district paid for Rodney Jackson, the director of financial services, to receive his superintendent certification. After the audit, he refunded the full amount to the district.
Auditors also found that Shelton circumvented controls and violated its procurement process to contract with a vendor that provides college preparation services. The contract is a potential conflict of interest, but auditors were unable to determine that the superintendent benefits directly from his relationship with the vendor's CEO Tim Hanner of NaviGo.
Auditors identified other possible conflicts of interest in the district during the examination.
Edelen said there was evidence that Mullins informed management during the 2014-15 budgeting process that the 2013-14 working budget did not balance and that the superintendent suggested that she "fix the 12-13 actual to flow ..."
The examination found that the journal entry did have an impact on the 2011-12 budget because the impact of the journal entry was not reflected in the working budget's beginning balance. Because of that error, the adopted working budget was not balanced, because once the effect of the journal entry is taken into consideration, the estimated expenditures exceeded the revenues.