by Matthew Holloway | Jun 7, 2026 | Education, News
By Matthew Holloway |
The Arizona Auditor General found that Apache Elementary School District (AESD) improperly received state funding for out-of-state students and more than $27,500 in excess transportation funding, while raising concerns about employee benefits, technology controls, and the future viability of the eight-student district.
The Auditor General’s Office also reported that one audit finding was omitted from the public report because of its “sensitive nature” and was communicated directly to the district’s governing board and management.
According to the audit highlights, AESD, located on the Arizona-New Mexico state border, served just eight students during fiscal year 2024, with four of those students residing in neighboring New Mexico. Auditors found the district failed to comply with state requirements governing the admission and reporting of out-of-state students and improperly received state funding for those students. The report recommended that the district evaluate operational alternatives given the small number of Arizona students it serves.
The audit found that the district improperly claimed funding for out-of-state students and failed to charge tuition as required by state law. Auditors also concluded that the district improperly reported transportation miles associated with transporting out-of-state students to and from their homes in New Mexico, along with other reporting errors.
The report stated that the district “paid parents to transport students but did not ensure that all reported mileage and transported students were eligible for State funding and reported data was accurate.”
According to the report, those errors resulted in the district receiving more than $27,500 in excess transportation funding during fiscal year 2025 that it will likely be required to repay to the state.
The Auditor General recommended that the district work with the Arizona Department of Education to correct its student enrollment and transportation reporting errors and ensure future compliance with state requirements. Auditors also recommended that if the district continues admitting out-of-state students, it should charge tuition in accordance with state law.
In addition to the funding issues, auditors found that the district may have violated the Arizona Constitution’s Gift Clause by providing unauthorized fringe benefits to two employees. According to the report, the benefits were not included in employee contracts and were not approved by the district’s governing board prior to being provided. Auditors recommended that the district consult legal counsel to determine whether a Gift Clause violation occurred and, if so, report its determination to the Arizona Attorney General’s Office.
The audit also identified deficiencies in the district’s cash-handling procedures. Auditors reported that the district did not consistently prepare receipts when cash was collected and did not always make deposits in accordance with required timelines, increasing the risk of loss or theft.
The report further found weaknesses in the district’s information technology controls. According to auditors, employees and external users had excessive access to sensitive computerized data, while the district lacked comprehensive system monitoring, security awareness training, and an IT contingency plan. The Auditor General concluded that these deficiencies increased the risk of unauthorized access to sensitive information, data loss, errors, and fraud.
Auditors also recommended that the district work with the Cochise County School Superintendent’s Office to evaluate alternative operational structures. Potential options identified in the report include consolidating with another school district, operating as a transportation school district, or dissolving the district and requiring students to attend a nearby district.
The report noted that the majority of the district’s administrative spending was “for superintendent and business manager salaries and benefits.”
According to the Auditor General, the district’s governing board had three filled positions during fiscal year 2024, though one board member later resigned and only two of the three positions were filled when the report was issued in May 2026. The district’s small enrollment prevented the Arizona Department of Education from assigning a school letter grade or publicly reporting student achievement data in order to protect student privacy.
In its formal response to Arizona Auditor General Lindsey Perry, AESD agreed with the audit findings and stated it has already begun implementing corrective actions. Superintendent Loy Ann Guzman wrote, “While some recommendations already have been implemented, the district will continue to work diligently to complete administration of the remaining items and will work to improve the processes and procedures moving forward.”
The district reported that it has instituted procedures requiring proof of residency for enrolled students, worked with the Arizona Department of Education to correct enrollment reporting errors, and does not currently plan to admit out-of-state students. The district also agreed to evaluate operational alternatives with the Cochise County School Superintendent’s Office, review potential Gift Clause issues with legal counsel, improve cash-handling procedures, and implement additional information technology safeguards.
Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.
by Ethan Faverino | Jul 5, 2025 | Education, News
By Matthew Holloway |
The Arizona Department of Education sent information to the State Treasurer’s Office earlier this week regarding supplemental dollars to be sent to Arizona public schools following a shortfall this year. The information confirms funding will be sent to schools immediately, following the newly signed state budget.
As soon as the new state budget was signed into law, the Department of Finance personnel began working on this process, ensuring that schools would not face funding shortfalls.
This move by the Department of Education makes sure that schools will receive full payments for June and beyond, avoiding the crisis that emerged at the end of the 2025 fiscal year.
At the close of FY2025, Arizona’s education system faced a shortfall of just under $200 million, which was due to several factors.
The biggest factors in this shortfall were caused by recalculation of Statewide Average Daily Membership, the Qasimyar tax lawsuit, the Empowerment Scholarship Account, and the Qualifying Tax Rate Levy.
The recalculation of the state’s Average Daily Membership (ADM) caused a $45 million adjustment. This is the state’s method for counting enrolled students, which determines how much funding public schools receive per student. The state had overestimated student enrollment, likely due to increased withdrawals as families opted for other methods of schooling, some paid for by the Empowerment Scholarship Account (ESA).
In an unexpected blow to the state’s finances, Arizona settled Qasimyar v. Arizona. This was a tax lawsuit over disputed property assessments, resulting in a large payment of $69 million from the state’s general fund. This same fund also supports public education, causing a significant amount to be taken away from public schools across the state.
Arizona’s ESA program exceeded its projected cost by $52 million in FY2025. With more families taking advantage of the program than people anticipated, the general fund was strained even more, reducing resources for public schools.
The last big blow to public school funding was the Qualifying Tax Rate Levy, which is a property tax that contributes directly to school funding. This brought in $17 million less than what was projected.
Despite all the financial pressures, the Arizona Department of Education took early action. Before the new budget’s approval, ADE had already distributed roughly 63% of June’s payment.
With the new budget in place, the remaining balance will be paid immediately, restoring full funding levels for schools.
Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.
by azfreenews1 | Jun 11, 2021 | Economy, News
By Terri Jo Neff
Gov. Doug Ducey was expected to call a special session any day now to address the legislative stalemate of 11 budget bills which have been the subject of some opposition even among the Republican majority. So his announcement Thursday of a special session related solely to funding for natural disasters caught many lawmakers off guard.
“I am calling a special session to make sure we have the resources needed to contain current wildfires, possible flooding, and any other natural disasters that arise from this emergency,” Ducey said in his announcement. He did not include a start date for the special session but legislators have been told it will take place next week.
News of the special session unrelated to an overall budget package came as Ducey and key Republican legislators representing communities burning under the Telegraph and the Mescal fires toured the damage. It also came one day after the governor said he would be agreeable to working with the Democrat caucus to resolve the budget stalemate that threatens Ducey’s last chance transition Arizona to a flat rate income tax.
Democrats, however, have been outspoken against the current wording of the flat tax portion of the budget package, although some have left the door open for passing the majority of the spending bills, as well as a tax cut funded by Arizona’s more than $1 billion surplus.
It is more likely, however, that Ducey and legislative leaders will need to amend the 11 bills in order to get the necessary 31 votes in the House and 16 votes in the Senate. If that cannot be done in the next week or so, the governor can call another special session dealing exclusively with the budget. Or lawmakers could end up approving with a bare-bones “skinny” budget to avert a state government shutdown on July 1.
Sen. Michelle Ugenti-Rita tweeted Thursday she supports Ducey’s special session to deal with the wildfires. But she could not resist a poke at the governor for his response this year compared to last year during the COVID-19 pandemic.
According to Ugenti-Rita, Ducey’s “leadership solution” last year was “to shutdown the economy, support the legislature prematurely ending session, issuing 50+ executive orders and steadfastly refusing to convene a special session” which she and other lawmakers requested.
“Now, under the guise of another emergency, you want to wait until next week to call the legislature into special session. I find your call for a special session in this scenario incongruent with your past decisions,” she tweeted, pointing out the legislature was in session on Thursday “ready and available to help” but both chambers adjourned until next Monday because key lawmakers were with Ducey touring fire damaged communities.
A vocal critic of this year’s budget package is Sen. Paul Boyer, who has called for one-time tax cuts for one-time revenues. “Rebate taxpayer’s money now,” he tweeted earlier in the week. “That is conservative.”
Some lawmakers in the Republican majority like Boyer object to the amount of the surplus which would get returned to taxpayers as tax cuts under the current budget bills. They point to the fact the cuts would likely also result in less shared revenue to Arizona’s cities and towns, while not focusing enough on the state’s debt, including serious under-funding issues with the Arizona Public Safety Personnel Retirement System.
The Joint Legislative Budget Committee and staff from Ducey’s office are expected to continue working on a proposed compromise over the next few days.
