State Auditor Releases Report On Harlan County High School Construction Project

During the Kentucky Board of Education Audit Committee meeting, State Auditors presented a report detailing the doubling of costs on the construction of a new high school in Harlan County. The report also offers specific recommendations to bring stronger oversight and accountability to the school construction process. The school, under construction to consolidate Harlan County’s three public high schools, was originally projected to cost $23 million. The current cost is estimated to be between $48 and $53 million. The facilities’ construction is not complete, yet it is scheduled to open at the beginning of the next school year.

The report, requested by the Kentucky Board of Education, found that the project began with an estimated cost that was not accurate. All school construction processes begin with a simple form, known as the BG-1, which equates the available revenue for a project to its estimated cost. However, the BG-1 does not reflect the actual cost of the project.

In 2003, the initial BG-1 form indicated the project would cost $23 million. This initial estimate matched the resources available. However, the construction bid process did not begin until 2006. This was partly due to the lack of an approved state budget during the 2004 General Assembly. During the three-year interval, construction projects throughout the nation underwent an annual 15% inflation rate caused, to some extent, by the increased cost of construction materials as a result of Hurricane Katrina repairs. The cost of fuel also skyrocketed during this time period.

The initial BG-1 form also contemplated that the school would be 173,450 square feet with a student capacity of 1,300. However, the actual building under construction is 220,000 square feet.

The site chosen for the new school was a portion of farmland assessed by the Harlan County Property Valuation Administrator at $90,350 for 488 acres. Based upon a real estate appraisal the Harlan County School District bought 105 of those acres for over $1 million. The Kentucky Real Estate Appraisers Board later disciplined the real estate appraiser because the appraiser was not appropriately licensed to do work on a project of that size.

Also, the Harlan County Board of Education has reached its maximum bonding capacity and the Board plans to utilize operational savings from the three closed high schools to pay for a portion of the remaining cost of the project. Some parts of the project are being delayed until funding becomes available. In the future, financial pressures will continue on the Harlan County School Board because the county is losing population and the school system is anticipated to become smaller.

The report also found that the Kentucky Department of Education does not provide direct on-site supervision of projects. The Department has four employees to monitor over 1,000 projects that are ongoing at any given time. Only one architect reviews all projects in the planning stage and one architect reviews projects in the construction stage.

The Auditor’s Office recommends that the General Assembly determine the role of the Department of Education in school construction projects, and the Department should be provided sufficient resources to adequately carry out that role. The report also recommends the BG-1 form should be revised to provide clear, understandable, and accurate cost analysis. The report states that previous recommendations made by the Office of Education Accountability should be implemented.

“The Harlan County School project should serve as a valuable lesson for policy makers. In order to compete in the world economy, Kentucky’s students need modern facilities like the high school being built in Harlan County. It would have been simply impossible for the school to have been built for the original cost estimate and in fact the cost doubled. Once a project begins, it becomes almost impossible to stop, and we are not recommending that construction stop. If the actual costs had been known, building the new school may not have been as compelling to the decision makers. It is critical that accurate cost analysis be conducted at the beginning of the process so that policy makers can make decisions based upon accurate data,” State Auditor Crit Luallen said

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