Kentucky Auditor Adam Edelen found no wrongdoing in a special examination of the Fayette County School District earlier this year, spokeswoman Stephenie Hoelscher said.
But Edelen's office did find a potential conflict of interest that resulted in Superintendent Tom Shelton stepping up efforts to develop a district ethics code, Shelton said.
The exam found that a potential conflict of interest existed between Fayette County Schools employees and vendor Scholastic Inc., the world's largest publisher and distributor of children's books, according to its website.
Shelton, who became superintendent in 2011, said he was concerned that the district did not have an ethics code and conflict-of-interest policy before the July special examination was released. He said the code should be in a final form within the next few months.
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The auditor's report said that in December 2009, after agreeing to purchase materials from Scholastic Inc., Fayette County Schools employees were invited to a conference in Nashville. Scholastic waived the conference registration fee and provided free lodging for the employees. Evening entertainment was provided by way of an open bar, the exam said.
Although the conference was presented by Scholastic as an opportunity to network with other education professionals, the nature of the conference and timing of the invitation gave the appearance of a gratuity, the auditor's exam said.
In reviewing the documentation, these benefits appear to have been offered based on the school district doing business with Scholastic Inc, the auditor exam said.
Based on analysis of financial information provided to the auditor, Fayette County Schools spent more than $1.5 million with Scholastic from 2009 through 2012. Most of that spending, totaling $780,909, occurred during fiscal year 2010, the same year as the conference, the examination said.
School employees were either unaware of the importance of maintaining arm's length in dealings with vendors or lacked proper training, the examination said.
If employees with purchasing authority receive perks from vendors, future objectivity in procurement decisions could be questioned, the exam said.
Kyle Good, a spokeswoman for Scholastic Inc., said Friday that the school district had been a customer since 2000. The "professional development events were to provide educators with access to some of the top minds working on math and literacy education," including educators from Harvard and Vanderbilt, she said.
"The large purchase of our education technology programs were made prior to the conferences, which were in December 2009," Good said.
Shelton said he did not think there was a true conflict of interest, but he said district employees showed poor judgment.
"The way you fix poor judgment is that you improve your policies and procedures so that people don't have to make that judgment call," he told the Lexington Herald-Leader. "They can clearly see what behavior is expected and what's not allowed."
The special examination pointed to two state laws. One says it is "a breach of ethical standards" for any employee or former employee to give, request or receive gifts that are tied to decisions. And the other prohibits employees from demanding, accepting or agreeing to accept gratuities, kickbacks or offers of employment based on any contract.
The examination suggested that Fayette County revise its policies and procedures to specifically define what benefits constitute a gratuity. Also, the examination suggested training for staff on maintaining arm's length relationship with vendors.
"Conflicts of interests, and the appearance thereof, should be avoided so that all stakeholders can remain confident that Fayette County Schools is operating both as a good steward of public funds and in the best interest of the students," the examination said.
District officials agreed to review and revise policies and procedures to specifically define what benefits constitute a gratuity. School officials created mandatory training for all executive management that occurred in July.
District officials have developed a form that must be filled out in advance of a trip. The form notes the purpose for the trip, how it will benefit a job and who is going so there is no potential conflict of interest, Shelton said.
The special examination was one of several that Edelen's office has conducted of school districts in Kentucky this year.