Fayette superintendent says there is no discrepancy in $20 million entry, didn't cause financial crisis

vhoneycutt@herald-leader.comMay 27, 2014 

The director of budget and staffing for Fayette County Public Schools sent an email Monday to school board members, saying a $20 million "irregularity" was the cause of the district's current budget crisis.

The email, which Julane Mullins sent to the board late Monday, also questioned Superintendent Tom Shelton's spending and said he was not forthcoming with board members.

"I feel compelled to provide this information to the board to shed light on the facts surrounding the current budget crisis and suspected violations of law and numerous acts of mismanagement, fraud, waste and abuse of authority that have resulted in the current state of affairs," Mullins wrote in the email.

The allegations surfaced one day before school board members were set to meet to resolve issues with a $426.9 million tentative budget that failed to pass at a contentious board meeting on May 19. The issue will now be the first item on the agenda Wednesday when the board meets to try to pass a budget before Friday — the day, by law, the district has to submit a tentative budget to the Kentucky Department of Education.

After the email went public Tuesday morning, Shelton issued a statement saying he was "astounded by these allegations." By Tuesday afternoon, Shelton had organized a news conference in which he said, "the allegations in the memo are untrue — mischaracterizations of very routine accounting procedures."

Mullins' email, provided to the Herald-Leader by board member Amanda Ferguson, said Mullins sent the information about the irregularity to Kentucky Auditor Adam Edelen and Marcia Seiler, executive director of the state Office of Education Accountability. A spokeswoman for Edelen's office said he was reviewing the information.

Shelton told reporters "there are no improprieties" or "mismanagement," and he had asked Edelen's office and the OEA to conduct a full review to reassure the public.

Shelton said he thought Mullins' allegations stemmed from misunderstandings.

Mullins' email said a $20 million journal entry in 2011 was "irregular" because Rodney Jackson, the district's director of finance, made the entry on Dec. 6, 2011, six months after it should have been included. Because of the late entry, Mullins said, the working budget for 2012-13 was approved by the board with numbers that were inflated by $20 million.

Shelton said Tuesday that Jackson had not made an error or done anything wrong. Jackson was in a meeting Tuesday and could not immediately be reached for comment.

Shelton reiterated that in his email to parents and said, "Please also be assured that we are audited each year by an outside firm and have received excellent reviews."

Shelton said the $20 million journal entry that Mullins mentioned had nothing to with the $20 million budget reduction, which Shelton has said he needed to make because the district was outspending its revenues and draining its contingency fund.

"Despite the distraction that these allegations will inevitably cause, our need to reduce spending is essentially a result of declining revenue and increased expenses," he said Tuesday.

'What has led usto this point'

Board chairman John Price said Tuesday that he was reviewing Mullins' email and wanted to look "at it in more detail before I make any comments."

Brenda Allen, the attorney representing Mullins, said she was willing to share 1,000 pages of documents with investigators.

"There are going to be board records, there are going to be board agendas ... emails, and pay records that will either prove or disprove what Ms. Mullins is saying," Allen, a former school district attorney, said.

Mullins said in her email to the board that when she discovered the irregularity, she met with Shelton on Oct. 18, 2012, and showed him the error.

The email said Shelton, after seeing documents about the error, said to Mullins: "Are you telling me the budget for the last two years has been inflated by $20 million with recurring expenses?"

Mullins said she told Shelton that was correct, and once "Tom was made aware of the dire situation," he "failed to advise the Board or to take immediate and decisive steps to address the critical financial situation that faced the district."

"Instead, he continued to spend as if there were no crisis and with some of the expenditures being in violation of board policy," Mullins' email said.

For example, Mullins said, Shelton granted significant pay raises to Chief Operating Officer Mary Wright and Vince Mattox, school chief officer of community and government support, without board approval, and without adjustments in their position descriptions.

Mullins — who said she had worked in the budget and staffing office for 16 years and has been the director of budget and staffing for 10 years — said money was spent for special programs, such as the STEAM Academy and the expansion of the Carter G. Woodson Academy. She said the district picked up additional expenses for Opportunity Middle College, a program that was previously funded with a grant, and spent $360,000 for a match for a grant called Spending Money Smartly. They spent $80,000 for an administrator to oversee that grant, she said.

"All of these had significant budget implications," Mullins said in the email.

Mullins said she was directed — she didn't say by whom — not to "flag" in documents prepared for the board, the salary for Chief Academic Officer Lu Young.

Shelton said Tuesday that any raise he authorized was made with the board's approval. He said that he did ask Mullins whether the budget had been inflated by $20 million but he later determined that no error had been made and he told her that.

At the May 19 board meeting, Ferguson asked Jackson and Wright whether an irregularity had occurred with $20 million in 2011. Both said no.

On Tuesday, Ferguson said "throughout this entire process, my only goal has been to learn the truth about the path to the district's current fiscal predicament."

"I still seek only to discern what has led us to this point and, once determined, put a plan in place to ensure that this never happens again in the Fayette County Public Schools," Ferguson said. "The jobs and lives of too many individuals have been negatively impacted during this time and it does nothing to further our true and ever exigent mission of educating the nearly 40,000 students entrusted to us."

Meanwhile, Mullins raised another issue in the email. She said board policy requires approval for transfers of more than $50,000. But Mullins said in May of 2013 Shelton wanted transfers in his budget in excess of $50,000 to include two $75,000 transfers to NaviGo, a career and college preparation company. NaviGo was founded by one of Shelton's friends, former Kenton County Superintendent Tim Hanner.

Mullins said in the email that Shelton directed that these "budget transfers be made despite the fact that they violated the board policy requiring approval for such expenditures."

Shelton said that allegation was untrue and that he simply paid two $75,000 invoices to NaviGo from his budget.

Mullins said in her email that by coming forward she risked "being retaliated against by the superintendent."

Both Shelton and Allen said Tuesday that they expected Mullins to remain in her job. Shelton said there would be no retribution directed toward Mullins.

Valarie Honeycutt Spears: (859) 231-3409. Twitter:@vhspears

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