Superintendent Tom Shelton and a majority of the Fayette County Public Schools board reacted to the state auditor's report Wednesday by emphasizing that no money is missing and no criminal activity was found.
But if they think the auditor's damning assessment of "chronic mismanagement" is any vindication of their performance, they should think again.
The auditor's staff spent the summer combing through the school system's books after budget director Julane Mullins sent board members an email in May alleging that a $20 million budget shortfall resulted from irregular accounting made worse by "numerous acts of mismanagement." She also contacted the auditor.
"Auditors did not find any evidence of alleged criminal activity," Auditor Adam Edelen's office said. "However, they determined that poor financial management, weak policies and failed communications culminated in a weakened financial position for the district."
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The investigation found that errors and mismanagement left the board unaware of the district's true financial situation, and that information was concealed from board members.
Auditors also cited a pattern of high pay, big raises and perks for top administrators with a lack of transparency at a time when school programs are being cut and teachers are scraping for needed classroom supplies.
The schools' Department of Financial Services spent $115,212 on travel, training and reference books over a four-year period. And a trust fund left by a deceased teacher for "enhancement and enrichment of the educational program" was instead used for administrators' travel and training.
The auditor also made note of the number of highly paid administrators. The district has 36 people making more than $100,000 a year — for a total of $4.35 million — including three new positions with salaries totaling $386,000.
Shelton's first response to the audit was to push back. While acknowledging there were problems, he told parents in an email that "some of the state's assertions are based on faulty calculations, factual errors, and false assumptions."
But somebody must have reminded Shelton that the auditor's office is one of the most respected in state government, and that this is hardly the first school system it has investigated. A second email to parents had a much different tone: "I recognize that winning back the trust of our constituents will require swift and bold action."
Shelton's first move was to hire two financial and management consultants — although he couldn't say how much their services would cost.
Shelton is a certified public accountant; finance is supposed to be his strength. Last year, he created a new chief academic officer's position and hired Jessamine County Superintendent Lu Young to fill it. That should have given him more time to focus on management.
Yet, most of the problems the auditor found related to finance and management.
The auditor blamed several problems on a "toxic" relationship between the finance and budget directors. Shelton said he became aware of the problem soon after becoming superintendent in 2011. So why, two years later, is it still a problem?
There is little in this audit to inspire confidence in Shelton's leadership.
Parents, teachers and taxpayers (who just had their school tax assessment raised 2.3 percent) must be convinced that officials are more interested in educating Lexington's children than in staffing central office with well-paid administrators.
Business leaders also need reassurance, because an excellent public school system is vital to Lexington's economy. The auditor's phrase "chronic mismanagement" is sure to resonate through the business community like fingernails on a chalkboard.
All of this comes at a critical time for Fayette County Public Schools, which has begun a major school redistricting process. Redistricting is a nightmare under the best of circumstances, guaranteed to make some people angry no matter how fairly the lines are drawn.
Efforts to restore credibility could be made more difficult by a divided five-member school board.
Chairman John Price and Vice Chairman Melissa Bacon voiced support for Shelton last week, as did board member Daryl Love. But board members Doug Barnett and Amanda Ferguson, whose persistent questioning of management was partially vindicated by the audit, expressed reservations about Shelton's ability to continue as superintendent.
Shelton's annual evaluation, which was postponed because of the audit, is now due. That should be interesting. His employment contract is up for renewal in June 2015.
But board members have as much work ahead of them as Shelton does. They must restore public trust in their ability to work together to provide effective oversight.
This audit is an embarrassment for Lexington as well as for the Fayette County Public Schools, and it should be a wakeup call. Our children deserve better.