Six Of Arizona’s 207 School Districts At Highest Financial Risk

Six Of Arizona’s 207 School Districts At Highest Financial Risk

By Terri Jo Neff |

Earlier this month Arizona Auditor General Lindsey Perry published a financial risk analysis of the state’s 207 public school districts, which showed dozens of districts rank at high-risk in one or more of 10 areas of review.

But only six districts finished the review with a designation of “highest risk,” according to Perry’s office. Those districts are Double Adobe Elementary, Elfrida Elementary School District, Flagstaff Unified, Isaac Elementary, Safford Unified, and Wenden Elementary.

Elfrida Elementary is a one-school district in Cochise County which ranked high-risk in 8 of the 10 categories. The district, which had 101 students in Fiscal Year 2020 but only 84 in FY2021, was also on the highest-risk list last year, according to the inspector general.

In response, district officials noted several aspects of the financial risk areas have improved in recent months, albeit not enough to get removed from high-risk status.

“There was a limited possibility that the school was going to be able to get out of all the high risk areas during the year,” the district’s response stated. “However, the COVID relief monies have made quite an impact in the school both budgetary wise and infrastructure wise.”

District officials have used their COVID relief monies in a variety of ways, including spending more than $290,000 for salaries, technology purchases to improve 1:1 computer ratios, and repairs to HVAC systems. Monies were also spent for public health items such as plexiglass, masks, and cleaning supplies. Additional expenditures included an outside cleaning company and a staff aide to help with health scanning of students riding the bus.

Another improvement, according to public records, was addressing the district’s loss of its credit line. As a result, Elfrida Elementary District is now on registered warrant status. In February 2021, the amount was $164,031, but by early November 2021 there were no registered warrants.

“We are striving to not have a registered warrant status at the end of FY2022 by ensuring that the district calls down grant monies monthly and that we do not spend more money than our revenues allow,” the district told the auditor general.

District officials also entered into a food service agreement with the local high school, and a superintendent sharing agreement with another elementary school district.  A full-time teacher position with benefits was not filled; instead, a long-term substitute without benefits has been utilized at a savings of nearly $20,000.  

The audit report further noted Elfrida Elementary District’s primary property tax rate has been frozen since FY 2014, although district officials had not adjusted its budget to stay within the revenue it would generate based on its frozen tax rate. And the report pointed out that COVID-19 funding is short termed.

“As these are one-time monies, to avoid future financial risk and to ensure it will be able to spend within its available cash resources and budget capacity when these relief monies are no longer available to spend after September 30, 2024, the District should plan how it will adjust its spending in areas where its remaining monies are used,” the report noted.

While Elfrida Elementary ranked at high-risk in 8 categories, Antelope Union High School District in Yuma County hit that designation in only 4 of the 10 categories. Which is one reason the district fell off the highest-risk list from last year, according to the auditor general.  

But Perry’s office warns Antelope Union’s data indicates “it could move back in to the highest-risk group in the future” if it does not continue to make progress.

Among the improvements made by Antelope Union officials was a tax levy and a General Fund spending reduction. The district was also aided by COVID-19 federal relief monies, more than $160,000 of which went toward operational experiences through June 30, 2021.

District officials have told auditors they plan to use its remaining relief money for non-operational purposes. In the meantime, the auditor general is recommending Antelope Union begin formulating a spending plan sooner than later, as COVID-19 funds dry up in 2024.  

However, another problem is facing Antelope Union High School District’s finances.

Last June, Perry’s office notified the State Board of Education about accounting and bookkeeping problems with Antelope Union. As a  result, the Board deemed Antelope Union in noncompliance with the Uniform System of Financial Records for Arizona School Districts (USFR) due to deficiencies dating back to June 2018.  

This means the district is not receiving certain state monies. Which once lost, stay lost.

“The District will remain in noncompliance until cleared by the State Board of Education,” Cristan Cable, Director of the Auditor General’s accountability services division, told AZ Free News.

Cable explained that Antelope Union cannot be cleared by the Board until auditors determine the cited deficiencies have been resolved. Those deficiencies were first brought to the attention of the Antelope Union governing board back in 2019. At the time, a corrective action place was provided to district officials but there is much work remaining.   

“The State Board of Education will reconsider the District’s noncompliance when we are able to report to the Board that the District has addressed its deficiencies either based on our subsequent review at the request of the State Board of Education or based on our review of the District’s fiscal year 2022 or a later financial and compliance audit performed by the District’s independent auditors,” Cable said.