Special examination of Fayette schools will be broader than a typical audit

It’s going to be more than a routine look at the financial books of Fayette County Public Schools when the state’s auditor launches a “special examination” of the district.

A traditional financial audit focuses on verifying the accuracy of an organization’s financial statements and ensuring compliance with accounting standards.

But the “special examination” that’s planned for the district will go much deeper: It will assess FCPS’ operations, performance and compliance with requirements, said Joy Markland, spokesperson for Kentucky Auditor Allison Ball.

“We are still determining the full scope of this special examination,” Markland said Wednesday.

Ball announced the operational and performance-based audit Tuesday.

“We have heard from parents and other constituents who are concerned about the state of FCPS. These concerns have included the $16 million shortfall and the recent move to increase local taxes,” Markland said.

“Auditor Ball takes her role as a watchdog of taxpayer dollars seriously and has decided to conduct a special examination.”

How long the special examination will take “will be directly informed by the scope of the examination, which is still to be determined,” she added.

Ball is also conducting audits of the Kentucky Department of Education and Jefferson County Public Schools in Louisville.

House Bill 825, which was passed by the 2024 Kentucky General Assembly, required an audit of the state’s education department. The last budget bill, House Bill 6 in 2024, provided an appropriation to complete the Jefferson County audit.

The Fayette school district has a $16 million budget shortfall and held a May 27 vote to increase the occupational license tax for schools that Republican Attorney General Russell Coleman said was unlawful.

According to Coleman’s opinion, the vote by Fayette school board chair Tyler Murphy, vice-chair Amy Green and board member Penny Christian to ask the fiscal court to increase the occupational license tax rates for schools from 0.5 % to 0.75 % was not handled properly.

Proper notice was not given and a public hearing was not held.

On Monday, Murphy suggested to the superintendent and board that they “pause” raising the occupational license tax for schools. The Fayette County school board agreed and canceled a June 23 public hearing and vote on increasing the tax.

The school board reached a consensus to convene a committee — a broad-cross section of people, including students and staff, community members, business leaders, faith leaders and others - to dive into budget issues. That is separate from Ball’s examination.

Murphy said the district committee could look at what it takes to run a district the size of Fayette County and review revenue sources and spending patterns.

Committee members would work closely with district officials, Murphy said, and make recommendations for the 2025-2026 working budget and for the long term that are focused on students.

District officials said previously they plan a 20% cut in each department.

District officials blame the shortfall on several factors:

▪ More than a decade of flat state funding.

▪ The expiration of temporary federal relief.

▪ Inflationary pressures that have significantly increased operating costs.

▪ Historic compensation increases for staff that were long overdue.

Some Lexington residents have expressed concerns about a lack of transparency in how the school board handled the tax increase process.

Notice of the May 27 vote was made known to the public only when it was attached to an online meeting agenda on the Memorial Day weekend before the scheduled meeting.