Fayette County Public Schools Superintendent Tom Shelton and the district's chief operating officer both said Wednesday that they wish they had acted more quickly to fix the district's budget and finance problems.
But Shelton and Mary Wright cited immediate steps they are taking to restructure the district's budget, staffing and finance operations.
Kentucky Auditor Adam Edelen's 64-page examination pointed to "chronic mismanagement" in the district's budget and finances, but Shelton said the district was never in dire financial condition. Shelton also said he had discussed budget problems with board members at a meeting several months ago.
Shortly after Edelen released the findings, the school district emailed parents a statement from Shelton, highlighting the fact that there wasn't any money missing and "all public dollars are accounted for."
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"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," he said, noting that he would address the recommendations at an afternoon news conference.
Shelton did not push the issue about factual errors and false assumptions at the news conference.
Rather, Shelton took responsibility for the district's financial issues, and he said he could continue to lead the district.
"Ultimately, it is all my responsibility," Shelton said.
The relationship between financial services director Rodney Jackson and budget director Julane Mullins was described in the examination as "toxic," and auditors viewed that relationship as the cause of errors. Shelton said he thought things had recently improved, but he said that it needed to improve more.
Wright, the direct supervisor of both Jackson and Mullins, said Wednesday that she disagreed that there was chronic mismanagement in the district.
"We were going through a lot of steps to make sure we were pulling things in line," she said. "I wish we had started earlier with the more intense evaluation and efforts to bring things in alignment and under control."
Asked whether Mullins, who raised the allegations that Edelen investigated, and Jackson would keep their jobs, Shelton said the district is assessing processes in that department. That assessment also will look at allegations raised in Edelen's report.
"All public dollars are accounted for, and the original allegations of improper journal entries causing a budget shortfall are absolutely not true," Shelton said. "But there are still tough decisions ahead for our district."
Shelton said the auditor's report was deeply troubling, and the district would have an immediate response.
Two people will be brought into the district to help. One is Kyna Koch, who formerly oversaw finance, data, facilities, transportation and school food service as the associate commissioner of district support services for the Kentucky Department of Education.
Koch will help Shelton develop a comprehensive plan to overhaul budget and finances that will go to the school board for approval and then to Edelen within 60 days. Koch also was finance commissioner for the Lexington-Fayette Urban County Government. Koch said she hoped that the improvements would be something "the district can hold on to for a very long time."
Mike Thompson, an organizational-behavior professional with more than 40 years of experience building workplace teams, also will begin working with employees on conflict-resolution training.
"It is absolutely about kids in Fayette County, but certainly these adult issues have clouded that," Shelton said. "We are going to take bold action to change the behaviors, habits and culture in our district's central office to consistently reflect those values."
Shelton, who became superintendent in 2011, said that early in his tenure, he noticed significant areas of dysfunction resulting from a serious lack of communication between the Department of Budget and Staffing and the Department of Finance.
Shelton said the district received a grant to streamline budget and staffing practices and provide greater transparency. The added scrutiny uncovered many of the same findings that Edelen found in this review, including budget figures that were changed without board or superintendent knowledge, "plug figures" being used to make budgets appear to balance, and improper financial reports being used in the development of the budget.
"We had already begun taking steps to correct these problems and to look at restructuring our operations, and this was imminent last spring, but we had to put those plans on hold when these allegations were made," Shelton said. "That is why we welcomed the external perspective of the state auditor."
The district will conduct an exhaustive review of practices in budgeting, accounting, internal auditing, trust-fund administration, salary determinations, employee educational benefits, budget transfers, employee professional memberships, vendor services, nepotism, procurement, professional leave and travel, fraud protection, conflicts of interest and ethical behavior. These were all issues that Edelen noted in the findings.
Shelton said he wanted to know more about Edelen's concerns over a trust that was intended to provide money for teachers but allegedly had been used for travel. Shelton said a major area of focus also will be on communicating financial information to the school board and to the public.
Shelton cited what he thinks are factual errors included in the auditor's report, but he said the district will embrace the 48 recommendations contained in the audit and "will begin implementing changes swiftly."
He sent parents an email with that message Wednesday night.
"I fully embrace the recommendations in the audit and I feel strongly that arguing about inaccurate information in the report is counterproductive," he said.
As superintendent, Shelton said he recognizes that "winning back the trust of our constituents will require swift and bold action. Although it's good news that no money is missing and there was no illegal activity, we must immediately begin addressing the shortcomings identified in today's Auditor of Public Accounts review of budget and finances in our school district."