A proposed corrective action plan to tackle the "chronic mismanagement" that state Auditor Adam Edelen found in Fayette County Public Schools will be unveiled to school board members at a meeting at noon Monday.
"This will be an opportunity to update the board and get their input on our progress to date in addressing the issues outlined in the audit," Superintendent Tom Shelton said.
Board chairman John Price said he expected that board members would offer recommendations on what else they would like in the plan and would see "whether we agree or disagree at this juncture."
Edelen released several findings Sept. 17 after his office spent the summer investigating allegations made by district budget director Julane Mullins and others. Mullins, in allegations sent to the board and the state auditor in May, said the district's $20 million shortfall was caused by irregular accounting but worsened with numerous acts of mismanagement. The district typically has an annual general fund budget of more than $400 million.
Edelen's report said that while there was no criminal wrongdoing, chronic mismanagement of the district's budget and finances had contributed to financial instability. Errors and misrepresentations in the budget process over several years weakened the district's ability to address budget imbalances, the report said, and opportunities to strengthen the district's financial position were missed or overlooked.
Shelton has agreed that the budget and financial system should be overhauled, but he told Edelen in a response to the special examination that he "vehemently" disagreed the deficiencies put the district in financial jeopardy.
Shelton has taken some action, assuming direct supervision of the budget and financial services departments and hiring outside consultants to help with the corrective action plan. Additionally, district staff is providing what Shelton says are improved financial reports to the board. Edelen found that the information previously provided each month was insufficient to clearly communicate the district's rapidly changing financial position.
Edelen's report said that during the examination, financial services director Rodney Jackson informed the auditors that the cost of obtaining his superintendent certification was paid with district professional development funds. Subsequent to the examination, auditors were informed that Jackson was refunding the full amount to avoid potential inconsistencies because other employees might have paid for their own certifications. Because of the lack of documentation maintained by the district, auditors could not ascertain the amounts being paid on behalf of employees for certifications.
Also, Edelen found that weaknesses in the budget and financial management processes led to significant errors in the district's working budgets.
This was due to a poor budget process and ineffective communication between the Department of Financial Services and the Department of Budget and Staffing Services, Edelen's report said.
As a result, he said, an intentionally misrepresented budget was adopted by the board and submitted to the Kentucky Department of Education. These issues led to a weakened financial position culminating in the request for a $19 million reduction in the 2014-15 budget, the findings said.
Edelen recommended that the district extensively evaluate the budget to develop "a process more conducive to strategically managing district resources in an effective and efficient manner. "
Shelton said in his response that he, Jackson and Mullins' supervisor at the time, chief operating officer Mary Wright, were not involved in the decision last spring to arbitrarily change numbers to make the budget appear balanced.
But Edelen said auditors were provided with evidence that the budget director informed district management during the 2014-15 budget preparation process that the 2013-14 working budget did not balance, and that the superintendent suggested she "fix the 12-13 actual to flow."
Edelen's office found that while those instructions could be open to interpretation, the management team has the collective responsibility to ensure that vital budget and financial information is accurate.
"It is a highly unusual and questionable practice for management to abdicate sole responsibility for the budget of such a large entity to a single person. ... It is concerning that those in the director's chain of command express a lack of responsibility for the procedural failures noted in the examination," the report said.
Edelen's report said that as the fiscal situation grew dire for the district from 2011 to 2014, Mullins indicated she was convinced she was being blamed unfairly for the need for a budget cut.
Shelton told the Herald-Leader in an interview that the allegations were made to the board and Edelen after district officials discovered the budget was inaccurate and district officials had decided to reorganize. Shelton has said that as part of the corrective action plan he will investigate every allegation about Jackson or his department. That includes favoritism in hiring, nepotism, excessive travel and irrelevant training.
But Shelton has said that he thought it was unfair to criticize Jackson for actions that had been approved by district officials, and that auditors had interviewed only one segment of employees. He said he also thought the findings "vilified" Jackson "while minimizing the impact of the mistakes of others."
Whether he disputes findings or not, Shelton has said, it doesn't diminish Edelen's report or the steps the district will take in the corrective action plan board members will discuss Monday.