FULTON INDEPENDENT SCHOOL DISTRICT'S FBI INVESTIGATION CLOSED

An FBI investigation into budget discrepancies and alleged "missing money" discovered within the Fulton Independent School District has now been closed, according to FISD Superintendent Terry Sullivan.

"It has been verified by the auditors, and the FBI, there was no missing money, " Sullivan said.

On Monday, Sullivan said the issue with the "$1.1 million discrepancy" was a budgeting error, determined after months of an ongoing investigation by the Federal Bureau of Investigation, as well as the Kentucky Department of Education.

He said as the result of finance department error, because of routine practices in software operation,  which included using the previous year budget and rolling it over each year, then later making adjustments for the new budget year, $1.5 million was shown as the beginning balance in the FY24 budget. 

That, in fact, was the rollover figure from the previous year's budget, as the actual beginning balance for the FY24 year was $0.5 million. 

That error was not located by the District.

Instead, the issue was brought to the District's attention by auditors, and became an audit finding.

Sullivan said there were additional monies transferred to increase the beginning balance of FY24 from $0.5 million to $0.89 million before the audit was released, but that transfer did not resolve the original error and issue. 

Following the presentation of the Audited Financial Statements for the Fulton Independent School District, presented at the Nov. 21 FISD Board of Education meeting, Jeff Rogers, who was then Superintendent of Fulton Independent School District, stated pursuant to Kentucky Revised Statute 156.265, the Fulton Independent School District had conducted audits of the financial records of the local board of education, Carr Elementary School and Fulton High School. 

The district employed the firm of Shad J. Allen, CPA in Richmond, Ky., to perform the annual audit. 

The audit report for the 2022 – 2023 school year, as presented at the Fulton Independent Board of Education meeting Nov. 21, discovered a "significant discrepancy" between the budgeted beginning balance of the 2023 – 2024 budget and the actual amount of funds available, which, was believed to include a $1.5 million carryover. 

Following further research and investigation, it was determined there was a difference in available funds of $1.1 million. 

Rogers said the auditors attributed the shortfall to three key findings: 1. The district’s accounting department did not have a system of internal control over financial reporting that would allow it to prevent, or detect and correct in a timely manner, a significant misstatement in its financial statements, including footnote disclosures; 2. The district was not in compliance with model procurement as required by Kentucky Revised Statute; and 3., Purchase Orders were not being issued for purchases. 

Rogers said In response to these findings the district, working in conjunction with the Kentucky Department of Education, The Kentucky Association of School Administrators, and The Kentucky School Boards Association, had developed a corrective action plan that is being implemented immediately. The plan addressed the concerns identified in the audit and introduced financial best practices to safeguard against future concerns. 

Rogers said once the audit findings were provided, the task at hand was to dig deeper and identify the origin of the differences in budget amounts reported, as compared to amounts actually there and accessible. He said through further research, it appeared there could be a number of areas for consideration, which included better administrative oversight, improvement in operational systems of control and re-evaluation of the District’s stipends paid, which, Rogers said could be considered excessive when compared with similar area school district’s stipends.
 
 “There is no one thing to point out, it was a combination of a number of things. The issues have been identified, and we have great plans to solve them. Our district is not in any jeopardy. The State has been working with us, and we have forwarded information to the Kentucky Department of Education, which they will review," Rogers said.

Superintendent Sullivan said currently, all District spending, or spending proposals pass through his hands, for consideration before any purchase is made. He noted a "whole new team" is in place in the District's central office, and the Board of Education has realigned Superintendent contracts and negotiations.

"My contract is simple. There are no stipends, no extra pay, just salary and the benefits package. I don't even ask for travel reimbursement," Sullivan said.