Performance audit, Hayden-Winkelman Unified School District

              Performance Audit
Hayden-Winkelman
Unified School District
Division of School Audits
Debra K. Davenport
Auditor General
August • 2012
Report No. 12-10
A REPORT
TO THE
ARIZONA LEGISLATURE
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and
five representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the
operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and
political subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state
agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Ross Ehrick, Director
Ann Orrico, Manager and Contact Person
Jennie Snedecor, Team Leader
Tammy Seilheimer
Brian Smith
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Representative Carl Seel, Chair
Representative Tom Chabin
Representative Justin Olson
Representative David Stevens
Representative Anna Tovar
Representative Andy Tobin (ex officio)
Senator Rick Murphy, Vice Chair
Senator Andy Biggs
Senator Rich Crandall
Senator Linda Lopez
Senator David Lujan
Senator Steve Pierce (ex officio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
August 7, 2012
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Governing Board
Hayden-Winkelman Unified School District
Mr. Jeff Gregorich, Superintendent
Hayden-Winkelman Unified School District
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Hayden-
Winkelman Unified School District, conducted pursuant to A.R.S. §41-1279.03. I am also
transmitting within this report a copy of the Report Highlights for this audit to provide a quick
summary for your convenience.
As outlined in its response, the District agrees with all of the findings and recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on August 8, 2012.
Sincerely,
Debbie Davenport
Auditor General
Student achievement higher than peer
averages—In fiscal year 2010, Hayden-
Winkelman USD’s student AIMS scores
were higher than peer districts’ but lower
than state averages. In addition, two of
the District’s three schools met “Adequate
Yearly Progress” for the federal No Child
Left Behind Act, and the District’s
81-percent high school graduation rate
was much higher than the peer district
average of 68 percent and the state
average of 78 percent.
District operated reasonably
efficiently—In fiscal year 2010, Hayden-
Winkelman USD’s administrative costs
were similar to peer districts’. Further,
although food service and transportation
per-pupil costs were higher than peer
districts’, both programs operated
efficiently with lower per-meal and per-mile
costs, respectively. The District’s plant
operations costs were similar per pupil
and lower per square foot than peer
districts’. However, the District’s facilities
were poorly maintained primarily because
it operated considerably more square feet
than peer districts, much of which was
unnecessary because each of the
District’s schools operated far below their
designed capacities and had done so for
at least 10 years.
Higher student achievement and reasonably efficient
operations
Hayden-Winkelman USD lacks adequate
controls over its computer systems. Four
district employees have more access to
the accounting system than is needed to
perform their job duties. Although no
improper transactions were detected in
the sample we tested, access beyond that
which is necessary to perform job
functions exposes the District to increased
risk of fraud and errors. In addition, the
District did not properly separate its
payroll and personnel functions, and the
District needs to (1) ensure it pays credit
card and vendor balances in a timely
manner to avoid finance charges and late
fees, (2) strengthen password
requirements for its computer network,
and (3) create a formal disaster recovery
plan.
Recommendations—The District should:
••Limit employees’ access to only those
accounting system functions needed
to perform their work.
••Implement proper controls over payroll
processing.
Inadequate accounting and computer controls
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
Our Conclusion
In fiscal year 2010,
Hayden-Winkelman Unified
School District’s student
achievement was higher
than peer districts’ but
lower than state averages.
The District operated
reasonably efficiently
overall when compared to
its peers. The District’s
administrative costs were
similar to peer districts’.
However, it needs to
strengthen some
accounting and computer
controls. Further, despite
higher per-pupil food
service and transportation
costs, both programs
operated efficiently with
lower per-meal and per-mile
costs, respectively,
than peer districts’.
However, although the
District’s plant operations
costs were similar per
pupil and lower per square
foot than peer districts’,
the District’s facilities were
poorly maintained.
2012
August • Report No. 12-10
Hayden-Winkelman
Unified School District
Operational
Area
Hayden-
Winkelman
USD
Peer Group
Average
Administration $1,413 $1,447
Plant operations 1,491 1,473
Food service 505 428
Transportation 570 468
Per-Pupil Expenditures by
Operational Area
Fiscal Year 2010
Percentage of Students Who Met or
Exceeded State Standards (AIMS)
Fiscal Year 2010
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Math Reading Writing
Hayden-Winkelman USD Peer Group State-wide
District’s facilities are poorly maintained
During tours of Hayden-Winkelman USD’s facilities,
auditors observed several maintenance issues that
could pose health and safety concerns. These
issues ranged from water leaks that showed signs
of mildew or mold growth (see photo below) to
exposed wiring and unsafe electrical wall outlets to
broken windows and mirrors.
Unnecessary excess space contributes to poor
condition of facilities—The poor condition of the
District’s facilities occurred primarily because the
District operated and maintained considerably more
square feet in total and per pupil than peer districts.
Because districts receive funding based primarily
on their number of students, Hayden-Winkelman
USD does not receive additional monies for its extra
space and therefore does not have additional
dollars available for operating and maintaining this
extra space.
Further, the District’s extra space is not needed. In
fiscal year 2010, the District’s schools had space
for 1,442 students but a combined enrollment of
only 361 students. The Districts’s elementary,
middle, and high school operated at only 51, 17,
and 19 percent full, respectively. As shown in the
following figure, the District has been operating with
a considerable amount of excess space for at least
10 years.
Inadequate maintenance practices—Further
contributing to the poor condition of the District’s
facilities is its lack of a preventative maintenance
plan and records of maintenance activities.
Although district maintenance workers reviewed the
facilities quarterly and noted the condition of various
aspects of the facilities on checklists, we found that
the maintenance workers noted that conditions were
“okay” even though we observed the various
problems noted earlier. The District also did not
keep documentation of maintenance work
performed, so we were not able to confirm what
maintenance activities were actually performed.
Recommendations—The District should:
••Immediately address any health and safety
hazards.
••Consider having its facilities inspected to
determine if hazards could affect student health.
••Review its building capacity usage to determine
whether any additional schools or sections of
schools can be closed to reduce maintenance
costs.
••Develop and implement a preventative
maintenance program and a process to track
maintenance work orders.
School Building Capacity Versus
Student Enrollment
Fiscal Years 2001 through 2010
Water leak in middle school
••Ensure that credit card and other vendor
balances are paid in a timely manner.
••Increase the complexity requirements of
computer passwords.
••Create and implement a formal disaster
recovery plan.
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
August 2012
A copy of the full report is available at:
www.azauditor.gov
Contact person:
Ann Orrico (602) 553-0333
Hayden-Winkelman
Unified School District
1577
1442
589 526 508 475 437 399
318 393 374 361
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Fiscal Year
Building Capacity Student Enrollment
TABLE OF CONTENTS
continued
page i
Office of the Auditor General
District Overview 1
Student achievement higher than peer districts’ 1
District’s operations reasonably efficient 1
Finding 1: Inadequate accounting and computer controls increase
risk of errors and fraud 3
Payroll process lacks proper separation of duties 3
Authorization for additional pay inadequately documented 3
Finance and late charges incurred because of untimely payments 4
Increased risk of unauthorized access to critical systems 4
Lack of disaster recovery plan could result in interrupted operations or loss of data 4
Increased risk of unintentional release of sensitive information because District
maintained records well beyond legal time limits 5
Recommendations 6
Finding 2: Excess square footage and inadequate maintenance
practices led to poorly maintained facilities 7
Poorly maintained facilities create concern for student health and safety 7
District’s excess space contributes to poor condition of facilities and is not needed 8
Inadequate maintenance practices contribute to poor condition of facilities 9
Closed facilities used to store items that could be sold as surplus 10
Recommendations 11
TABLE OF CONTENTS
page ii
State of Arizona
continued
Finding 3: District’s Proposition 301 performance pay goals easily
met and pay records incomplete 13
Performance pay goals were easily met and pay records were incomplete 13
District accounting for CSF monies not timely 14
Recommendations 14
Appendix
Objectives, Scope, and Methodology a-1
District Response
Tables
1 Comparison of Per-Pupil Expenditures by Operational Area
Fiscal Year 2010
(Unaudited) 2
2 Comparison of Plant Operations Total Costs, Cost Per Pupil, Cost Per Square Foot,
Square Feet Per Pupil, and Total Square Feet
Fiscal Year 2010
(Unaudited) 8
3 Number of Students, Capacity, and Capacity Usage by School
Fiscal Year 2010
(Unaudited) 9
TABLE OF CONTENTS
page iii
Office of the Auditor General
Figures
1 Percentage of Students Who Met or Exceeded State Standards (AIMS)
Fiscal Year 2010
(Unaudited) 1
2 School Building Capacity Versus Student Enrollment
Fiscal Years 2001 through 2010
(Unaudited) 9
Photos
1 Water leak in middle school 7
2 Exposed electrical wiring at high school 7
3 Broken drain grate at middle school 8
4 Damaged wall at high school 8
5 Surplus items stored in unused intermediate school 11
6 Surplus items stored in unused intermediate school 11
concluded
page iv
State of Arizona
DISTRICT OVERVIEW
page 1
Office of the Auditor General
Hayden-Winkelman Unified School District is a rural district located in Gila County about 100 miles
southeast of Phoenix. In fiscal year 2010, the District served 361 students in kindergarten through
12th grade at its three schools located on the same campus.
In fiscal year 2010, Hayden-Winkelman USD compared favorably to peer districts in student
achievement with better AIMS scores and a higher graduation rate. Further, the District’s nonclassroom
operations were reasonably efficient when compared to its peers.1 The District’s administrative costs
were similar to peer districts’ and, despite higher per-pupil food service and transportation costs,
both programs operated efficiently with lower per-meal and per-mile costs, respectively, than peer
districts’. However, although the District’s plant operations costs were similar per pupil and lower per
square foot than peer districts’, the District’s facilities were poorly maintained.
Student achievement higher than peer districts’
In fiscal year 2010, 38 percent of the District’s students
met or exceeded state standards in math, 63 percent in
reading, and 63 percent in writing. As shown in Figure
1, these scores were higher than the peer districts’
averages but lower than the state averages. In that
same fiscal year, two of the District’s schools met all
applicable “Adequate Yearly Progress” (AYP) objectives
for the federal No Child Left Behind Act, while its high
school did not because its fiscal year 2009 graduation
rate of 69 percent was below its 2010 AYP target rate of
76 percent. The District’s fiscal year 2010 81-percent
graduation rate was much higher than the peer district‘s
69-percent average and higher than the State’s
78-percent average.
District’s operations reasonably efficient
As shown in Table 1 on page 2, in fiscal year 2010, Hayden-Winkelman USD spent $211 less per
pupil in total than peer districts and $406 less per pupil in the classroom. The lower classroom
spending was due, in part, to higher per-pupil costs in food service, transportation, and instructional
1 Auditors developed two peer groups for comparative purposes. See page a-1 of this report’s Appendix for further explanation of the peer
groups.
Figure 1: Percentage of Students Who Met or
Exceeded State Standards (AIMS)
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010 test results
on Arizona’s Instrument to Measure Standards (AIMS).
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Math Reading Writing
Hayden-
Winkelman
USD
Peer Group
State-wide
page 2
State of Arizona
support. Despite these higher per-pupil
costs, most of the District’s operational areas
operated efficiently based on other cost
measures. However, poorly maintained
facilities indicate that improvements to plant
operations are needed.
Similar administration costs—At $1,413
per pupil, the District’s administrative costs
were similar to the peer districts’ average
of $1,447. However, auditors identified
some administrative practices that need
strengthening (see Finding 1, page 3).
Mixed plant operations costs and
poorly maintained facilities—
Compared to peer districts,
Hayden-Winkelman USD’s fiscal year 2010
plant operations costs were similar per
pupil and much lower per square foot, on
average. However, the District’s facilities are poorly maintained and include maintenance issues
that raise concerns for student health and safety. The District operated considerably more square
feet than peer districts, much of which was unnecessary because each of the District’s schools
operated far below their designed capacities. Because districts receive funding based primarily
on their number of students, having this additional square footage means the District must spread
its limited dollars more thinly across its building space than peer districts. As a result, the District’s
$3.53 cost per square foot was 37 percent lower than peer districts’, but its facilities are in poor
condition. Further, the District did not follow a preventative maintenance plan or keep maintenance
records (see Finding 2, page 7).
Food service program efficient despite higher per-pupil costs—Hayden-Winkelman
USD’s $505-per-pupil food service cost was 18 percent higher than peer districts’ average cost
because the District served more meals per student. Specifically, the District served more
breakfasts, likely because it served breakfast in the classroom to all students each day. Despite
the higher per-pupil cost, the District’s $2.20 cost per meal was much lower than the peer districts’
$3.04 per-meal average. The District was able to keep its food costs low, in part, by preparing only
enough meals for the students it knew would be eating a school lunch based on teacher counts
taken during breakfast deliveries to the classrooms.
Low per-mile transportation costs and efficient bus routes—Although costs were
higher per pupil, Hayden-Winkelman USD’s transportation program operated efficiently with a
$2.37 cost per mile that was 6 percent lower than peer districts’. Further, the District’s cost per
rider was 24 percent lower than peer districts’. In addition to low costs, the District operated
efficient bus routes, filling most buses to an average of 84 percent of seat capacity.
Spending
Hayden-
Winkelman
USD
Peer
Group
Average
State
Average
Total per pupil $9,676 $9,887 $7,609
Classroom dollars 4,610 5,016 4,253
Nonclassroom
dollars
Administration 1,413 1,447 721
Plant operations 1,491 1,473 914
Food service 505 428 366
Transportation 570 468 342
Student support 581 625 581
Instructional
support 506 430 432
Table 1: Comparison of Per-Pupil
Expenditures by Operational Area
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010 Arizona
Department of Education student membership data
and district-reported accounting data.
page 3
Office of the Auditor General
FINDING 1
Inadequate accounting and computer controls increase
risk of errors and fraud
Hayden-Winkelman USD lacks adequate controls over its payroll and accounts payable processing
and its computer network. Although no improper payroll or accounts payable transactions were
detected in the sample auditors reviewed, these poor controls expose the District to an increased
risk of errors and fraud. Further, the District has increased its risk of unintentionally releasing sensitive
information because it maintains student and other records containing sensitive information beyond
the legally allowed time limits.
Payroll process lacks proper separation of duties
The District does not separate payroll and personnel functions. One district employee, with little or
no supervisory review, is responsible for entering new employees into the computerized accounting
system, modifying employee information, entering and editing employees’ time sheets, recording
payroll expenses, and distributing checks. Allowing an individual the ability to initiate and complete
a transaction without independent supervisory review could allow the person to process false
payments or create nonexistent employees.
Authorization for additional pay inadequately documented
The District does not always have adequate documentation showing that additional duties and pay
are approved prior to services being rendered. Auditors reviewed detailed payroll and personnel
records for 30 employees and found that there was no documentation showing prior approval for
some of the additional pay for 15 of the 16 employees who received it in fiscal year 2010. For
example, 7 employees each earned $300 for helping develop the District’s Web site without
documentation of prior approval for the additional duties or pay. In all 15 cases, the District had
proper documentation showing that the employees performed the activities for which they were paid.
However, to ensure that all pay is properly authorized and employees are paid correctly, the District
should document additional duties and related pay in the employees’ contracts or personnel/payroll
action forms and ensure that these documents are properly approved prior to payment as required
by the Uniform System of Financial Records for Arizona School Districts (USFR). This documentation
should be maintained in employees’ personnel files.
page 4
State of Arizona
Finance and late charges incurred because of untimely
payments
In the process of scanning the District’s accounts payable transactions, auditors determined that
the District paid over $1,300 in late fees and finance charges to utilities and credit card
companies during fiscal year 2010 because it did not make payments in a timely manner. In
order to avoid late fees and charges, the USFR states that credit card payments and payments
for blanket purchase orders for items or services purchased on a recurring basis from the same
vendor, such as electricity and gas payments, should be made promptly.
Increased risk of unauthorized access to critical systems
Weak controls over user access to the District’s accounting system and computer network
increases the risk of unauthorized access to these critical systems.
Broad access to accounting system—Auditors reviewed the District’s user access
report for the six users with access to the accounting system and found that four district
employees have more access to the accounting system than they need to perform their job
duties. Having employees with system access beyond what is required for their job duties
exposes the District to increased risk of errors, fraud, and misuse of information, such as
processing false invoices or adding nonexistent vendors or employees. The District should
review and further restrict its employees’ access to the computerized accounting system to
ensure no one employee has the ability to initiate and complete a transaction without
independent review and approval.
Weak password requirements—The District needs stronger password requirements for
its computer network. Although the District’s network passwords are user-defined and must
be changed periodically, the passwords have a low-complexity requirement—that is, the
passwords need not contain numbers or symbols. Common practice requires passwords to
be at least eight characters and contain a combination of alphabetic and numeric characters.
This practice would decrease the risk of unauthorized persons gaining access to the District’s
systems.
Lack of disaster recovery plan could result in interrupted
operations or loss of data
The District does not have a formal, up-to-date, and tested disaster recovery plan even though
it maintains critical financial and student information on its systems and network. A written and
properly designed disaster recovery plan would help ensure continued operations in the case of
page 5
Office of the Auditor General
a system or equipment failure or interruption. Although the District creates backups of critical data
and stores the backups in a secure location, the District does not regularly test its ability to restore
electronic data files from the backups, which could result in the loss of sensitive and critical data.
Disaster recovery plans should be tested periodically, and modifications made to correct any
problems and ensure their effectiveness.
Increased risk of unintentional release of sensitive information
because District maintained records well beyond legal time limits
Hayden-Winkelman USD retained documents containing student records and other sensitive
information beyond legal time limits. For example, the District maintained files containing National
School Lunch Program (NSLP) reimbursement applications and claims as well as personnel and
accounts payable files dating back to the 1960s. The Arizona State Library, Archives, and Public
Records issues records retention schedules for various types of records. School districts and other
public entities are required to destroy records after the scheduled retention period expires. For
example, the schedules state that documents such as the NSLP reimbursement claims and
purchase documents should be destroyed 4 years after the fiscal year in which they were created or
received.1 Not only is maintaining these records beyond the periods listed in the retention schedules
illegal, it increases the likelihood that sensitive information from the records could get unintentionally
released.
1 Arizona State Library, Archives, and Public Records. General Records Retention Schedule for School Districts and Charter Schools, Student
Records. Schedule Number 00-11-53 and General Records Retention Schedule for All Public Bodies, Finance Records. Schedule Number
00-11-76.
page 6
State of Arizona
Recommendations
1. The District should implement proper controls over its payroll processing to ensure
adequate separation of duties or alternatively establish an appropriate review process as
a compensating control.
2. The District should ensure that additional duties and related payments are addressed in
employment contracts or personnel/payroll action forms, approved in advance of the work
being performed, and maintained in employee personnel files.
3. The District should ensure that credit card and other vendor balances are paid in a timely
manner to avoid finance charges and late fees.
4. The District should review employee access to the accounting system and modify access
to ensure that an employee cannot initiate and complete a transaction without independent
review and that each employee has only the access necessary to meet their job
responsibilities.
5. The District should implement and enforce password length and complexity requirements.
6. The District should create a formal disaster recovery plan and test it periodically to identify
and remedy any deficiencies.
7. The District should dispose of records according to the Arizona State Library, Archives, and
Public Records retention schedules.
page 7
Office of the Auditor General
FINDING 2
Excess square footage and inadequate maintenance
practices led to poorly maintained facilities
Hayden-Winkelman USD’s buildings and grounds appear poorly maintained and raise concerns for
student health and safety. The poor conditions are caused, in part, by the District’s operating and
maintaining considerably more square footage per pupil than peer districts and by its inadequate
maintenance practices. Further, the District has a large amount of additional space that it uses to
store outdated equipment, computers, unused furniture, and other items at a cost to the District.
These items could be sold as surplus and the proceeds used to help maintain the District’s facilities.
Poorly maintained facilities create concern for student health and
safety
During tours of Hayden-Winkelman USD’s facilities, auditors observed several maintenance issues
that could pose health and safety concerns. Specifically, as shown in Photo 1, toilets and showers
in both the middle school and high school had water leaks and showed signs of possible mildew or
mold growth creating potential health and safety hazards and unsanitary conditions for students.
Other potential health and safety hazards observed by auditors include exposed wiring and unsafe
electrical wall outlets (see Photo 2), broken windows and mirrors, rusted metal door kick plates and
plumbing fixtures with sharp edges, broken or missing drain grates underneath drinking fountains
and in other areas regularly accessed by students (see Photo 3, page 8), and damaged walls (see
Photo 4, page 8).
Photo 2: Exposed electrical wiring at high school
Source: Auditor General staff.
Photo 1: Water leak in middle school
Source: Auditor General staff.
page 8
State of Arizona
District’s excess space contributes to poor condition of facilities
and is not needed
The poor condition of the District’s facilities occurred primarily because of the District’s excess
square footage, which has been in existence for at least 10 years. Because districts are funded
primarily on their number of students, Hayden-Winkelman USD does not receive additional
monies for its excess space and therefore does not have additional dollars available for operating
and maintaining this excess space. Further, the District’s larger facilities are unnecessary
because all three of its schools have operated at far below their designed capacities for at least
10 years.
Similar dollars spread over more square feet—As shown in Table 2, in fiscal year 2010,
Hayden-Winkelman USD spent a similar amount in total and per pupil on plant operations as
peer districts spent, but the District operated and maintained considerably more square feet
in total and per pupil. With so many square feet over which to spread costs, the District’s cost
per square foot was
low. However,
operating more
building space per
pupil is costly to the
District since the
majority of its
funding is based on
its number of
students, not its
amount of square
footage. Because
the District does not
receive funding for
Source: Auditor General staff.
Photo 3: Broken drain grate at middle school Photo 4: Damaged wall at high school
Source: Auditor General staff.
District Name
Total
Expenditures
Cost
Per
Pupil
Cost Per
Square
Foot
Square
Feet Per
Pupil
Total
Square
Feet
Hayden-Winkelman USD $538,852 $1,491 $3.53 423 152,773¹
Average of the peer group 585,287 1,473 5.57 283 115,160
Table 2: Comparison of Plant Operations Total Costs, Cost Per
Pupil, Cost Per Square Foot, Square Feet Per Pupil, and
Total Square Feet
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010 Arizona School Facilities Board
and district square footage reports and district-reported acounting data.
1Does not include 26,449 square feet of closed space.
page 9
Office of the Auditor General
its additional square footage, its ability to properly clean, repair, and maintain the extra square
footage is negatively impacted. For example, although the District employs a similar number of
plant operations staff, each employee is responsible for maintaining more square footage than
employees at the peer districts, on average. Specifically, the District employed one plant operations
employee for every 25,700 square feet of building space, while the peer districts employed one
plant operations employee for every 17,400 square feet. In addition, the District also has fewer
dollars available per square foot to heat, cool, and
purchase repair and maintenance supplies, further
impacting its ability to properly care for its facilities.
District’s excess space is not needed
because schools operate far below
capacity—As shown in Table 3, the District’s
three schools were each operating at well below
their designed capacities, ranging from 17 percent
full to 51 percent full. For example, according to
Arizona School Facilities Board reports, the high
school was designed for 746 students. Yet, in fiscal
year 2010, the District had only 139 high school
students and only 361 students in total. The
District’s student enrollment has been well below its
buildings’ capacities for many years. For example,
the cumulative capacity for the District’s three
schools is 1,442 students. However, as shown in
Figure 2, the District’s fiscal year 2001 student
enrollment of 589, which was already below building
capacity, decreased by 39 percent to 361 students
in fiscal year 2010. In fiscal year 2009, the District
closed its intermediate school because of declining
enrollment. Since the District continues to have a
considerable amount of excess space despite the
closure of one school, it should consider whether it
should close additional schools or unused sections
of schools to help reduce maintenance costs.
Inadequate maintenance practices
contribute to poor condition of
facilities
The District does not have adequate maintenance practices to ensure its facilities are properly
maintained. The District does not follow a preventative maintenance plan or keep records of its
maintenance activities. Following a preventative maintenance plan is an important component in
facilities management because it helps protect the facilities, minimizes costly emergency repairs,
Table 3: Number of Students, Capacity, and
Capacity Usage by School
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of district-reported fiscal year
2010 average daily membership information obtained from the
Arizona Department of Education and fiscal year 2010 capacity
information obtained from the Arizona School Facilities Board.
School Name
Number of
Students Capacity
Capacity
Usage
Hayden High School 139 746 19%
Leonor Hambly Middle School 67 395 17%
Winkelman Elementary School 155 301 51%
Total 361 1,442
Figure 2: School Building Capacity Versus
Student Enrollment
Fiscal Years 2001 through 2010
(Unaudited)
Source: Auditor General staff analysis of district-reported fiscal years
2001 through 2010 average daily membership (student
enrollment) information obtained from the Arizona Department
of Education and fiscal year 2010 capacity information
obtained from the Arizona School Facilities Board.
1577
1442
589 526 508 475 437 399
318 393 374 361
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Fiscal Year
Building Capacity Student Enrollment
page 10
State of Arizona
and helps protect the safety of students and employees. District officials stated they were more
reactive than proactive with building repairs but that maintenance workers reviewed the District’s
facilities quarterly and noted on checklists the conditions of various aspects of the facilities,
including plumbing fixtures, electrical equipment, and heating and cooling equipment. However,
auditors reviewed the checklists and found that maintenance workers indicated that plumbing
fixtures throughout the District were “okay” even though auditors’ observations of those same
areas found leaking toilets and showers as indicated earlier.
Further, although the District has a manual work order process, documentation of the work
performed is not kept. District officials stated that once a work order is completed, the work order
documentation is thrown away. Additionally, the District does not track the work orders from start
to finish or track maintenance trends. Considering the unsanitary and potentially unsafe
conditions previously mentioned and the District’s lack of maintenance or work order
documentation, auditors were unable to confirm what maintenance activities employees were
actually performing.
Closed facilities used to store items that could be sold as
surplus
In addition to the excess space in its schools, an additional 26,500 square feet of excess space
resulted when the District closed buildings because of declining enrollment. Although the
District’s decision to close a school appears to have been necessary and has resulted in
reduced plant operations costs, the closed school is still owned by the District and affects the
District’s building maintenance efforts and costs in the following ways:
•• Closed facilities must still be maintained at minimum levels—Although this space is
closed, it still must be maintained at minimum levels. For example, one of the closed
buildings is the District’s former intermediate school. Because the District still needs to
continue operating the school’s fire suppression system, it could not shut off water and
electricity to the building, and it still must heat and cool the building, although at minimum
temperatures. The District sets the building’s temperature at 90 degrees during the hotter
months and at 55 degrees during the cooler months. Therefore, the closed space still
generates costs for the District.
•• District uses space to store items that could be sold as surplus—The District uses the
closed buildings to store unneeded and outdated items, such as extra filing cabinets, desks,
and tables; old computer and office equipment; and outdated textbooks. Although the
District has a surplus policy, district officials stated that they did not know how to properly
dispose of unused furniture and equipment. According to Arizona Administrative Code
R7-2-1131, school districts should dispose of surplus property through competitive sealed
bids, public auctions, or other approved methods. Selling these surplus items could raise
some additional monies that the District could potentially use to help improve the condition
of its facilities. As shown in the pictures on page 11, these unused items are not stored in any
organized manner, making it difficult for the District to (1) know what items it has available,
(2) determine the condition and value of the items, and (3) protect the items from theft.
page 11
Office of the Auditor General
Recommendations
1. The District should immediately address any health and safety hazards, such as those
observed by auditors, including water leaks, exposed electrical wiring, and other hazards.
2. Because signs of possible mold growth and other potential health hazards were identified, the
District should consider having its buildings inspected by a qualified individual with sufficient
knowledge and experience to determine if the potential health hazards could affect student
health.
3. The District should review its building capacity usage to determine whether additional schools
or unused sections of schools can be closed to reduce maintenance costs.
4. To ensure that its buildings are properly maintained and that no further health and safety
hazards recur, the District should develop and implement a preventative maintenance program,
including a process to ensure that maintenance work orders are tracked and maintained for
the appropriate amount of time.
5. The District should follow its surplus property policy and properly dispose of its surplus
property in accordance with the policy and Arizona Administrative Code R7-2-1131.
6. Because its closed school continues to generate costs, district officials should consider
options that could potentially generate additional income such as renting out the facility to a
local group, business, or government entity.
Source: Auditor General staff.
Photo 5: Surplus items stored in unused
intermediate school
Source: Auditor General staff.
Photo 6: Surplus items stored in unused
intermediate school
page 12
State of Arizona
page 13
Office of the Auditor General
FINDING 3
District’s Proposition 301 performance pay goals easily
met and pay records incomplete
In fiscal year 2010, Hayden-Winkelman USD spent its Classroom Site Fund (CSF) monies for
purposes authorized by statute.1 However, the District’s performance goals for middle and high
school teachers were easily met and did not have specific measurement criteria. Further, the District
did not maintain documentation showing whether elementary school teachers who received
performance pay monies actually met their goals and did not account for some of its CSF monies to
the extent required by statute and the Uniform System of Financial Records for Arizona School
Districts (USFR).
Performance pay goals were easily met and pay records were
incomplete
In fiscal year 2010, the District’s CSF performance pay plan goals for the middle school and high
school were easily met because they required only that middle school teachers incorporate math
skills into their curriculum and high school teachers incorporate vocabulary skills into their curriculum.
However, students were not required to show improvement in either of these areas. Awarding
teachers performance pay for such easily obtained goals seems contrary to the goal of performance
pay systems, which are to provide powerful incentives for improved outcomes. Further, the goals did
not include specific measurement criteria for determining whether eligible employees met the goals.
For example, rather than requiring pre- and post-test scores to demonstrate improvement, the
District’s goals required only that teachers collect students’ work throughout the school year. Despite
the absence of measurement criteria, each middle school and high school teacher received an
average of $1,648 for achieving these goals.
Additionally, the District did not always maintain documentation showing that elementary school
teachers met their goal of integrating technology into their classrooms and how the amount of
performance pay paid to them was determined. As a result, the District could not show that its
employees had met the required performance measures for the performance pay monies they
received for fiscal year 2010. School districts are required to retain this type of documentation for 4
years as required by state records retention schedules.2
1 In November 2000, voters passed Proposition 301, which increased the state-wide sales tax to provide additional resources for education
programs. Under statute, these monies, also known as Classroom Site Fund monies, may be spent only for specific purposes, primarily
increasing teacher pay.
2 Arizona State Library, Archives, and Public Records. General Records Retention Schedule for All Public Bodies, Finance Records. Schedule
Number 000-11-76.
page 14
State of Arizona
District accounting for CSF monies not timely
In fiscal year 2010, the District did not record detailed salary and benefit payments from
Proposition 301 base pay in the specific fund designated for it, as required by statute and the
USFR. Instead, employee salaries and benefits were initially paid from the Maintenance and
Operation Fund, and the base pay amount was subsequently transferred to the appropriate fund
at fiscal year-end. Documentation was not available to show which employees actually received
CSF base pay monies and how much each employee was paid. Further, because the District
did not maintain detailed records to document that the amount transferred to the base pay fund
was properly calculated, auditors could not determine whether the transferred amount matched
the amounts that should have been paid to each eligible employee.
Recommendations
1. To promote improved performance, the District should establish meaningful performance
goals that specify the level of student improvement required and provide specific
measurement criteria.
2. The District should ensure that it retains adequate documentation for the required time
period to demonstrate that performance pay goals were met.
3. To ensure that accounting records are maintained in sufficient detail to demonstrate that
CSF monies were spent in accordance with statute and the District’s plan, the District
should record and account for all revenues and expenditures in the separate Classroom
Site Funds throughout the year and not just at year-end.
APPENDIX
page a-1
Office of the Auditor General
Objectives, Scope, and Methodology
The Office of the Auditor General has conducted a performance audit of the Hayden-Winkelman
Unified School District pursuant to A.R.S. §41-1279.03(A)(9). Based in part on their effect on
classroom dollars, as previously reported in the Auditor General’s annual report, Arizona School
District Spending (Classroom Dollars report), this audit focused on the District’s efficiency and
effectiveness in four operational areas: administration, plant operations and maintenance, food
service, and student transportation. To evaluate costs in each of these areas, only current
expenditures, primarily for fiscal year 2010, were considered.1 Further, because of the underlying law
initiating these performance audits, auditors also reviewed the District’s use of Proposition 301 sales
tax monies and how it accounted for dollars spent in the classroom.
In conducting this audit, auditors used a variety of methods, including examining various records,
such as available fiscal year 2010 summary accounting data for all districts and Hayden-Winkelman
USD’s fiscal year 2010 detailed accounting data, contracts, and other district documents; reviewing
district policies, procedures, and related internal controls; reviewing applicable statutes; and
interviewing district administrators and staff.
To analyze Hayden-Winkelman USD’s operational efficiency, auditors selected a group of peer
districts based on their similarities in district size, type, and location. This operational peer group
includes Hayden-Winkelman USD and 17 other union high school and unified school districts that
also served between 200 and 599 students and were located in town/rural areas.2 To compare
districts’ academic indicators, auditors developed a separate student achievement peer group using
poverty as the primary factor because poverty has been shown to be strongly related to student
achievement. Auditors also used secondary factors such as district type, size, and location to further
refine these groups. Hayden-Winkelman USD’s student achievement peer group includes
Hayden-Winkelman USD and the 20 other unified districts that also served student populations with
poverty rates greater than 33 percent. Additionally:
•• To assess the District’s student achievement, auditors reviewed the Arizona’s Instrument to
Measure Standards (AIMS) passing rates, “Adequate Yearly Progress” for the federal No Child
Left Behind Act, and high school graduation rates. AIMS passing rates were compared to the
state-wide average and the average of the student achievement peer districts.
1 Current expenditures are those incurred for the District’s day-to-day operations. They exclude costs associated with repaying debt, capital
outlay (such as purchasing land, buildings, and equipment), and programs such as adult education and community service that are outside
the scope of preschool through grade-12 education.
2 The operational peer group excludes two districts that each received such high levels of additional funding that they skewed the peer-spending
averages.
page a-2
State of Arizona
•• To assess whether the District’s administration effectively and efficiently managed district
operations, auditors evaluated administrative procedures and controls at the district and
school level, including reviewing personnel files and other pertinent documents and
interviewing district and school administrators about their duties. Auditors also reviewed
and evaluated fiscal year 2010 administration costs and compared these to peer districts’.
•• To assess the District’s financial accounting data, auditors evaluated the District’s internal
controls related to expenditure processing and scanned all payroll and accounts payable
transactions for proper account classification and reasonableness. Additionally, auditors
reviewed detailed payroll and personnel records for 30 of the 90 employees who were paid
at least $1,000 and reviewed supporting documentation for 30 of the 2,263 accounts
payable transactions. Auditors also evaluated other internal controls that were considered
significant to the audit objectives. After adjusting transactions for proper account
classification, auditors reviewed fiscal year 2010 spending and prior years’ spending trends
across functional spending areas.
•• To assess the District’s computer information systems and network, auditors evaluated
certain controls over its logical and physical security, including user access to sensitive data
and critical system, and the security of servers that house the data and systems. Auditors
also evaluated certain district policies over the system such as data sensitivity, backup, and
recovery.
•• To assess whether the District’s plant operations and maintenance function was managed
appropriately and functioned efficiently, auditors reviewed and evaluated fiscal year 2010
plant operations and maintenance costs and district building space, and compared these
costs and capacities to peer districts’.
•• To assess whether the District was in compliance with Proposition 301’s Classroom Site
Fund requirements, auditors reviewed fiscal year 2010 expenditures to determine whether
they were properly accounted for and appropriate. Auditors also reviewed the District’s
performance pay plan and analyzed how performance pay was being distributed.
•• To assess whether the District’s food service program was managed appropriately and
functioned efficiently, auditors reviewed fiscal year 2010 food service revenues and
expenditures, including labor and food costs, compared costs to peer districts’, reviewed
the Arizona Department of Education’s food service monitoring reports and observed food
service operations.
•• To assess whether the District’s transportation program was managed appropriately and
functioned efficiently, auditors reviewed and evaluated required transportation reports, driver
files, bus maintenance and safety records, bus routing, and bus capacity usage. Auditors
also reviewed fiscal year 2010 transportation costs and compared them to peer districts’.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
The Auditor General and her staff express their appreciation to the Hayden-Winkelman Unified
School District’s board members, superintendent, and staff for their cooperation and assistance
throughout the audit.
DISTRICT RESPONSE
DISTRICT RESPONSE
2. The District should ensure that additional duties and related payments are addressed in
employment contracts or personnel/payroll action forms, approved in advance of the
work being performed, and maintained in employee personnel files.
District Response: The District agrees with the finding and recommendation. The
District will immediately implement a personnel/payroll action form that is approved in
advance of work being performed and is included in the individuals personnel file.
3. The District should ensure that credit card and other vendor balances are paid in a
timely manner to avoid finance charges and late fees.
District Response: The District agrees with the finding and recommendation. The
District will review its process and procedures for processing payments and work
diligently to avoid late fees and charges over the coming school year.
4. The District should review employee access to the accounting system and modify access
to ensure that an employee cannot initiate and complete a transaction without
independent review and that each employee has only the access necessary to meet
their job responsibilities.
District Response: The District agrees with the finding and recommendation. The
District will develop an action plan to create a separation of duties within the District
Office to ensure safeguards are in place to not allow any one employee to have the
ability to initiate and complete any transaction. In addition, the District will complete an
audit of its access to specific accounting and payroll programs.
5. The District should implement and enforce password length and complexity
requirements.
District Response: The District agrees with the finding and recommendation. The
District will implement the password policy of a minimum of 8 characters and numbers
in length. The password must have at least one alpha character and a number. The
password will expire every 180 days and will lock the account after 5 unsuccessful login
attempts.
6. The District should create a formal disaster recovery plan and test it periodically to
identify and remedy any deficiencies.
District Response: The District agrees with the finding and recommendation. The
District has adopted the practice of running the verification tool for all the backups to
ensure all the files in the backup are physically intact, readable and can be restored in
the event that it is needed. In addition, the backups will be tested on a monthly basis to
ensure the integrity of the data. The District is in the process of deploying and adding an
additional server to hold replicas of all the virtual machines and use in the case of
hardware failure to ensure business continuity.
7. The District should dispose of records according to the Arizona State Library, Archives,
and Public Records retention schedules.
District Response: The District agrees with the finding and recommendation. The
District will destroy all documents and records according to the Arizona State Library,
Archives, and Public Records retention schedules within the next 6 months.
Finding #2: Excessive square footage and inadequate maintenance practices led to poorly
maintained facilities
1. The District should immediately address any health and safety hazards, such as those
observed by auditors, including water leaks, exposed wiring, and other hazards.
District Response: The District agrees with the finding and recommendation. The
District has begun to correct the problems identified by the Auditor General. Specific
emphasis is on all areas identified as a health and safety issue. The District will work
diligently to address all areas of concern over the next few months. The District has
made new management changes and has worked to address the areas discussed with
the Auditor General’s Staff.
2. Because signs of possible mold growth and other potential health hazards were
identified, the District should consider having its buildings inspected by a qualified
individual with sufficient knowledge and experience to determine if the potential health
hazards could affect student health.
District Response: The District agrees with the finding and recommendation. The
District will have an independent health inspector complete an inspection of the areas
identified by the Auditor General’s staff as a potential health or safety risk to the
students within 6 months.
3. The District should review its building capacity usage to determine whether additional
schools or unused sections of schools can be closed to reduce maintenance costs.
District Response: The District agrees with the finding and recommendation. The
District will review its classroom space and the potential to close a school or section of a
school based on enrollment and program needs over the school year.
4. To ensure that its buildings are properly maintained and that no further health and
safety hazards recur, the District should develop and implement a preventative
maintenance program, including a process to ensure that maintenance work orders are
tracked and maintained for the appropriate amount of time.
District Response: The District agrees with the finding and recommendation. The
District will develop a complete maintenance plan that addresses the items identified
within the Audit and create a road map to keep District facilities in proper condition
over the coming years. The District’s Maintenance Plan will be presented to the
Governing Board within three months.
5. The District should follow its surplus property policy and properly dispose of its surplus
property in accordance with the policy and Arizona Administrative Code R7‐2‐1131.
District Response: The District agrees with the finding and recommendation. The District will
complete a thorough inventory of excess furniture, equipment and instructional‐related items
and follow its surplus property policy and Arizona Administrative Code R7‐2‐1131 in order to
hold an auction during the 2012‐13 school year. Monies collected from the auction will be used
to target health and safety issues discussed within this Audit.
6. Because its closed school continues to generate costs, district officials should consider
options that could potentially generate additional income such as renting out the facility
to a local group, business, or government entity.
District Response: The District agrees with the finding and recommendation. The
District has made an effort over the years to work with Government agencies to possibly
lease portions of the District. Unfortunately, none of the entities were able to rent or
lease the property due to budget issues during the recent difficult financial times. The
District will continue to make efforts to work with Government agencies that would be
able to meet school safety concerns, such as fingerprints screening. All available space is
located within twenty‐five yards of buildings being used for classrooms and instruction.
Finding #3: District’s Proposition 301 performance pay goals easily met and pay records
incomplete
1. To promote improved performance, the District should establish meaningful
performance goals that specify the level of student improvement required and provide
specific measurement criteria.
District Response: The District agrees with the finding and recommendation. The
District has made significant changes to its 301 Performance Plan and has specifically
addressed this issue. More emphasis has been placed on measurable academic goals
based on AIMS and other reliable assessments. The District recognized the need to
make the performance goals measurable and will continue to strengthen performance
goals and criteria to measure achievement.
2. The District should ensure that it retains adequate documentation for the required time
period to demonstrate that performance pay goals were met.
District Response: The District agrees with the finding and recommendation. The
District will retain all records and documentation of all performance goals for each
individual teacher. The Superintendent will review and ensure that the 301
documentation for all individual and site performance goals is retained for future audits
and review.
3. To ensure that accounting records are maintained in sufficient detail to demonstrate
that CSF monies were spent in accordance with statue and the District’s plan, the
District should record and account for all revenues and expenditures in the separate
Classroom Site Funds throughout the year and not just at year‐end.
District Response: The District agrees with the finding and recommendation. The
District has consulted with the District’s legal counsel to help properly identify and
document 301 based salary monies paid to teachers. The District will pay out 301
monies directly from each of the 301 funds.
Once again, we thank you for your thorough and diligent review. The District is committed to
maximizing its financial resources and improving our academic and business systems.
Sincerely,
Jeff Gregorich, Superintendent