Lexington Country Day School: Where Were the Internal Controls?

INTRODUCTION

May 20, 2007, started like a typical day for Mary Sunshine and her husband, Frank. They had breakfast with the children Mike, 14 and Freda, 16, while discussing the headline news of the day. They saw the children off to the bus stop on their last day of school for the year. Frank was late for work so he waved at Mary as he rushed to his BMW-SUV for the long drive to his insurance executive job. Mary followed shortly in her own BMW-SUV to her accounting job at a local pharmacy. As he drove to work, Frank thought of the children and how lucky he was to find Mary, his wife of 25 years. After all, he fell in love with her the moment he saw her walking into his accounting class during their junior year at Beattyville College. They dated for three years and married after Frank finished graduate school. Little did Frank know that his world was about to change, as his relationship with Mary would face its greatest challenge. As soon as Mary arrived at work, she was met by the local police and arrested for allegedly embezzling $500,000 over a 10-year period from Lexington Country Day School her previous employer. How did all this happen?

BACKGROUND OF LEXINGTON COUNTRY DAY SCHOOL

Lexington Country Day School, located in Coventry, Kentucky, is proudly celebrating its centennial after its humble beginning in 1907 as a day school for boys. It has expanded since this time and is now a coed institution with a pre-kindergarten (the lower school), a kindergarten through fifth (the middle school) and a school for grades six to twelve (the upper school). As a private institution, Lexington Country Day has one of the highest tuition rates in the state. Current annual tuition ranges from approximately $27,000 for pre-kindergarten to approximately $33,000 for the upper school. Tuition includes lunch, books, art supplies, most trips, laboratory fees, and equipment. However, transportation costs to and from school are not included in the tuition. As a result, Lexington Country Day attracts students from high-income families with most parents providing transportation for their children. Lexington Country Day's diversity initiative has resulted in the admission of more children from lower income families, and it provides an alternative paid transportation service for those families.

Lexington Country Day prides itself on its small class sizes. This is reflected in a student-teacher ratio of 8:1. There are currently approximately 1,000 students enrolled at Lexington Country Day: 200 in the lower school, 300 in the middle school and 500 in the upper school. Another distinguishing feature of Lexington Country Day is its qualified faculty, of whom approximately 70% have earned advanced degrees.

THE LEXINGTON COUNTRY DAY EXPERIENCE

Lexington Country Day was founded on the belief that a quality education should be scholarly, including intimate teaching, rigorous academic standards, supported by state of the art facilities. As such, Lexington Country Day's mission is to offer students the foundations of a liberal arts education that will guide them to rewarding purposeful lives. This is achieved through the devotion of its faculty, the spirit and diversity of its students, the excellence of its facilities, and the atmosphere of its beautiful campus.

The Lexington Country Day experience begins with a thorough grounding in the fundamental skills of reading, calculation, and clear expression, as well as a complete college preparatory curriculum. The arts, music and drama programs are also a fundamental part of the experience. Lexington Country Day also believes in stimulating the whole student, so it offers a full range of intramural and interscholastic sports. These include baseball, basketball, fencing, lacrosse, field hockey, softball, track and field and swimming.

GOVERNANCE STRUCTURE

The School

Lexington Country Day is "ruled" by a headmaster, Mr. Greg Fellows, who has been with the school for over 20 years. Mr. Fellows is a Lexington Country Day alumnus and has increased the academic rigor and athletic performance of the school during his long tenure. He is supported by the head of each school each of whom has some autonomy in leading the school within their charge. The Bursar, Director of Admissions and Registrar provide administrative support for all three schools.

Weekly meetings are held by the administrators to discuss academic performance, faculty issues, and other Lexington Country Day business. The administrators include the headmaster, the head of each school and the Registrar, Bursar and Director of Admissions. A monthly meeting is held with the Student Advisory Council, a student group with representatives from each school, to ensure that student issues are fully addressed by the administration.

Monthly meetings are also held by the headmaster with the head of each department ("the Staff Council"). The Staff Council includes the Athletic Department, the Human Resources Director, the Controller, Directors of Facilities and Catering, and two faculty representatives (elected by the general faculty for a two year term). These meetings are meant to ensure that administrators, faculty, and staff are all working to support the Lexington Country Day experience.

Continued in Part 2

Figure 1: Organizational Diagram of Lincoln Country Day School Board of Trustees Parents' Association Headmaster Mr. Greg Fellows Headmaster, Headmaster, Headmaster, The Upper School The Middle School The Lower School