Investigations critical of Menifee County schools' legal spending; other investigations prompt audit

vhoneycutt@herald-leader.comJune 26, 2014 

Kentucky's state auditor, the education commissioner and the attorney general all released findings critical of Menifee County school officials in the past 10 days.

Kentucky Education Commissioner Terry Holliday sent district officials a letter Wednesday noting the other investigations and explaining why his department would conduct a management audit.

"It is clear there are significant deficiencies in the Menifee County School District which indicate the presence of critically ineffective or inefficient management," he said.

Among the investigations was one from the state auditor.

In a June 19 letter to the school board chairman, Kentucky Auditor Adam Edelen noted the fiscal year 2014 budget for legal services increased from $2,000 to $50,000 even though the district's financial situation is declining.

In his letter to Menifee County Board Chairman Wendell Back, Edelen said "we recommend the board take efforts to curtail expenditures and thoroughly analyze the need for incurring legal expenses given that increased spending in this area will result in funds no longer being available for other priority budget areas, such as funding for instructional and classroom expenses."

Edelen's examination provided several recommendations to strengthen procedures and internal controls governing legal services spending.

On Thursday, Back said the board had already corrected many of the recommendations by renegotiating the attorney's contract.

"Those that haven't been already addressed are being reviewed and proper action will be taken in the near future," he said.

Edelen's letter did not name the board attorney whose fees prompted the examination. But the school board attorney who was hired January 2013, Dana Fohl of Lexington, told the Herald-Leader that Edelen did not find "instances of questionable transactions, overbilling, double billing, and other entries suggesting impropriety; nor did the auditor make any findings that the legal services performed were not legally necessary."

"Unfortunately, the auditor did not contact us during the investigation," she said. "If he had, he could have easily discovered the increase in legal fees was a direct result of the increased legal issues the board faced, the most noteworthy of which was a superintendent who had been serving on an illegal contract to the tune of" $120,000 per year.

However, Edelen's spokeswoman, Stephenie Hoelscher, said Thursday in response to Fohl's statement that it was not evident that significant costs were incurred regarding the superintendent's contract.

"We looked at the actual billings of the attorney that specifically identified legal services performed for the District," Hoelscher said.

Superintendent Charles Mitchell on Wednesday said he could not comment on the legal case. Mitchell said he is retiring June 30 and an interim superintendent has been named.

In one finding in his letter, Edelen noted that the district's contract with the board's attorney did not require full board approval to request legal services and recommended that change.

Edelen found that the budget and actual expenditures for legal services increased substantially from fiscal year 2011 to 2014. In fiscal year 2011, the district's legal services budget was $1,515 with actual expenditures of approximately $1,800; however, in fiscal 2014 the budget for legal fees had increased to $50,000, with $27,865.47 expended as of June 19, 2014 and invoices for $3,806.72 pending approval for a current total of $31,672.19.

State law requires school districts' budgets to include a minimum reserve, known as a contingency fund, of 2 percent of the district's total budget.

Holliday's letter said the fund is projected to decrease below the required 2 percent by the end of the current fiscal year.

"Given the district's difficult financial situation, increases in expenditures of any type would negatively affect the district's deficit situation," Edelen's letter said.

Edelen also found that an apparent conflict of interest existed with the board attorney providing legal guidance to a current board member on an individual basis.

Hoelscher said Thursday that a review of attorney billings identified legal services provided regarding a board member's attendance at board meetings. Hoelscher said an Office of Education Accountability report concluded that a board member was "illegally incurring charges for the Menifee County School District by individually contacting and assigning work to the board attorney."

Edelen's letter to Back did not identify the board member.

"As concluded by OEA, we recommend the board ... not allow the use of public funds for individual board members to engage the services of the board attorney," the letter said.

Fohl said "contrary to the inference one might draw from the report, there simply was no conflict of interest.

"We were never engaged by nor did we perform legal work separately for any individual board member, let alone the one identified in the report," she said. "In fact, the board member identified had separately retained private counsel to assist in the identified legal matter. As part of the duty to the board, it was necessary to gather information from this member."

Also on Wednesday, Attorney General Jack Conway initiated removal proceedings in Menifee Circuit Court for board member Benny Deskins under a state law that requires that a board of education member be removed from office for having three consecutive unexcused absences from regular meetings.

Deskins' attorney Ned Pillersdorf of Prestonsburg said Deskins intended to contest his removal.

"He had legitimate reasons for missing," Pillersdorf said. "We should not remove able officials from office for technical violations."

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

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