Performance audit, Prescott Unified School District

              Performance Audit
Prescott Unified
School District
Division of School Audits
Debra K. Davenport
Auditor General
May • 2012
Report No. 12-05
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
Mike Quinlan, Manager and Contact Person
Chris Moore
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
May 31, 2012
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Governing Board
Prescott Unified School District
Mr. David Smucker, Superintendent
Prescott Unified School District
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Prescott
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 June 1, 2012.
Sincerely,
Debbie Davenport
Auditor General
Student achievement higher than peers
and state averages—In fiscal year 2010,
Prescott USD’s student AIMS scores were
higher than both peer districts’ and state
averages. Further, seven of the District’s
nine schools met “Adequate Yearly
Progress” for the federal No Child Left
Behind Act, and the District’s 85-percent
high school graduation rate was slightly
higher than the peer group average of 83
percent and the state average of 78
percent.
Lower operational costs—Prescott USD
operated with lower per-pupil costs in
administration, plant operations, food
service, and transportation than its peer
districts.
Prescott USD’s fiscal year 2010 per-pupil
spending of $6,261 was $835 less per
pupil than its peer districts’ and one of the
lowest per-pupil spending amounts in the
State. The District had less money
available primarily because it (1) did not
receive additional funding through
voter-approved budget overrides to
increase its budget, (2) received less
student transportation funding because it
drove fewer miles, and (3) received less
state funding related to student
demographics because the District had
fewer students with special needs and
fewer English language learners.
Prescott USD has a long-standing, very
open school choice policy, allowing its
students to attend any of its schools. As a
result, district officials estimated that about
one-half of its elementary school students
attend a different school than they would
with traditional school boundaries. To
accommodate its school choice policy,
the District has developed an uncommon
hub-style student transportation system
with transfers similar to many public
transportation systems. For example, a
typical Prescott USD morning bus route
will involve drivers picking up students at
pick-up points before making stops at
several schools where some students are
dropped off, some are picked up, and
some stay onboard for the next school.
Student transportation riders
misreported—Based on cost-per-mile
measures, the District’s transportation
Transportation program helps provide students school
choice, but better controls and oversight over rider
counts and fuel cards needed
REPORT Higher student achievement and lower operational costs
HIGHLIGHTS
PERFORMANCE AUDIT
2012
May • Report No. 12-05
Our Conclusion
In fiscal year 2010, Prescott
Unified School District’s
student achievement was
higher than both its peer
districts’ and state averages,
and it spent less per student
than peer districts in
administration, plant
operations, food service, and
transportation. To
accommodate its school
choice policy, the District has
developed an uncommon
hub-style student
transportation system with
transfers similar to many
public transportation
systems. As a result, district
officials estimated that about
one-half of its elementary
school students attend a
different school than they
would with traditional school
boundaries. However, this
transportation system makes
it more difficult to track
ridership, and the District
over-reported its number of
riders. The District also
needs to improve controls
over its fuel purchase cards
and access to critical
information systems.
Prescott Unified
School District
Operational
Area
Prescott
USD
Peer Group
Average
Administration $625 $748
Plant operations 718 874
Food service 280 322
Transportation 247 396
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
Prescott USD Peer Group State-wide
Prescott USD lacks adequate controls over its
computer systems. Seven district employees have
complete access to the entire accounting system,
and many employees have administrator-level
access to make changes to computer network
settings. Although no improper transactions were
detected in the sample we reviewed, access
beyond that which is necessary to perform job
functions exposes the District to increased risk of
errors and fraud. In addition, the District does not
have procedures in place to ensure that only current
employees have access to critical applications. We
found that four user accounts in the student
information system and one user account in the
accounting system were linked to employees who
no longer worked for the District. Further, the District
needs to strengthen password requirements for its
critical systems, better secure wireless access to its
network, and create a formal disaster recovery plan.
Recommendations—The District should:
• Limit employees’ access to only those
accounting system functions needed to perform
their work.
• Review and reduce the number of users with
administrator-level access.
• Ensure that terminated employees’ system
access is promptly removed.
• Implement and enforce password requirements.
• Secure wireless access to its network.
• Create and implement a formal disaster
recovery plan.
Lack of computer controls to adequately protect sensitive information
• Vehicles fueled not identified—The billing
statements do not identify the vehicle that was
fueled, making monitoring of fuel purchases
more difficult. For instance, the District was
unable to calculate miles per gallon for each
vehicle as a reasonableness test of the fuel
purchases.
• Review of billings identified some unusual
purchases—We scanned seven of the vendor’s
billing statements and identified some unusual
purchases, such as a diesel bus fuel card
used to purchase premium unleaded fuel
and occasions when a fuel card was used to
purchase fuel more than one time per day or
used to purchase fuel at odd times in the night.
Recommendations—The District should:
• Evaluate and implement methods for
determining accurate student rider counts.
• Better secure the fuel cards.
• Ensure receipts are submitted for all purchases.
• Work with its fuel vendor to ensure billing
statements identify the vehicle fueled.
• Investigate unusual purchases.
program appears efficient with a cost per mile of
$2.67, which is 21 percent lower than the peer
districts’ average. However, its cost per rider could
not be determined because the District did not
accurately count the number of riders transported.
Specifically, the District double-counted some riders
because they rode more than one bus both to and
from school each day.
District needs to strengthen controls over fuel
cards—Because Prescott USD does not own its
own fuel tank, it provides fuel cards to bus drivers
and maintenance workers to obtain fuel from a local
vendor’s site. In fiscal year 2010, district employees
charged a total of $209,000 on 75 fuel cards. We
noted several issues with fuel card use.
• Fuel cards not adequately secured—Fuel
cards were kept in each bus, which remained
unlocked when not in use.
• Fuel purchase receipts missing—Although the
District reviews its billing statement and requests
that employees submit all fuel purchase
receipts, district officials indicated and we found
that receipts were often missing.
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
May 2012
A copy of the full report is available at:
www.azauditor.gov
Contact person:
Mike Quinlan (602) 553-0333
Prescott Unified
School District
TABLE OF CONTENTS
continued
page i
Office of the Auditor General
District Overview 1
Student achievement higher than state and peer districts’ averages 1
District’s operational costs lower than peer districts’ 1
Finding 1: Transportation program helps provide students school
choice but better controls and oversight over rider counts and fuel
cards needed 3
Student transportation riders misreported 3
District needs to strengthen controls over fuel cards 4
Recommendations 5
Finding 2: District lacks sufficient computer controls to adequately protect
sensitive information 7
Increased risk of unauthorized access to critical systems 7
Lack of disaster recovery plan could result in interrupted service or loss of data 8
Recommendations 9
Other Findings 11
1. District did not accurately report its costs 11
Recommendation 11
2. Inadequate recordkeeping of some special purpose funds 11
Recommendation 12
3. Classroom Site Funds not paid in accordance with District’s performance pay plan 12
Recommendation 12
TABLE OF CONTENTS
page ii
State of Arizona
concluded
Appendix
Objectives, Scope, and Methodology a-1
District Response
Table
1 Comparison of Per-Pupil Expenditures by Function
Fiscal Year 2010
(Unaudited) 2
Figure
1 Percentage of Students Who Met or Exceeded State Standards (AIMS)
Fiscal Year 2010
(Unaudited) 1
DISTRICT OVERVIEW
page 1
Office of the Auditor General
Prescott Unified School District is located in Yavapai County. In fiscal year 2010, the District served
5,406 students in kindergarten through 12th grade at its nine schools.
Overall, in fiscal year 2010, Prescott USD compared favorably with peer districts in both student
achievement and operational efficiencies.1 The District’s student achievement was higher than both
its peer districts’ and state averages, and it spent less per student than peer districts in administration,
plant operations, food service, and transportation. The District’s overall spending was also lower than
the state and peer districts’ averages because it had less money available to spend. However,
auditors noted some areas for improvement, which are discussed later in this report.
Student achievement higher than state and peer districts’ averages
In fiscal year 2010, 72 percent of the District’s students met
or exceeded state standards in math, 87 percent in reading,
and 81 percent in writing. As shown in Figure 1, these scores
were higher than the state and peer districts’ averages.
Further, seven of the District’s nine schools evaluated for
“Adequate Yearly Progress” (AYP) for the federal No Child
Left Behind Act met AYP. Prescott USD’s high school and
one elementary school failed to meet AYP because some
students did not demonstrate sufficient academic progress
and its fiscal year 2009 high school graduation rate was also
below the target rate. The District’s 85-percent high school
graduation rate in fiscal year 2010 was slightly higher than
the peer group average of 83 percent and also higher than
the state average of 78 percent.
District’s operational costs lower than peer districts’
As shown in Table 1 on page 2, in fiscal year 2010, Prescott USD operated with lower per-pupil costs
in administration, plant operations, food service, and transportation than its peer districts’. The
District’s fiscal year 2010 per-pupil spending of $6,261 was $835 less per pupil than its peer districts’
and one of the lowest per-pupil spending amounts in the State. Prescott USD had less money
available primarily because it (1) did not receive additional funding through voter-approved budget
overrides to increase its budget, (2) received less student transportation funding because it drove
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
Prescott USD
Peer Group
State-wide
page 2
State of Arizona
fewer miles, and (3) received less state funding related to student demographics because the
District had fewer students with special needs and fewer English language learners.
Much lower administrative costs—Prescott USD’s
administrative costs per pupil were 16 percent lower than peer
districts’ primarily because it paid some administrators lower
salaries. The District’s high-level administrators, such as the
superintendent, business manager, and principals, were paid less
despite similar or more years’ experience in their respective
positions when compared to the average pay of administrators at
the audited subset of peer districts.1 Other administrative positions,
such as technology and administrative support employees, were
also paid less than the average of the six audited peer districts.
However, this audit identified some administrative practices that
need strengthening (see Finding 2, page 7).
Much lower plant operations costs—Prescott USD’s
plant costs were 14 percent lower per square foot and 18
percent lower per student than peer districts’ primarily because
of lower salaries and lower energy costs. The District’s average
plant employee salary was about 14 percent lower than the peer
districts’ average, despite Prescott USD’s having highly skilled
employees such as certified heating and air conditioning
technicians and plumbers. Further, these specialized employees
helped the District to keep its plant costs low despite maintaining buildings that were, on
average, twice as old as the peer districts’ buildings. Prescott USD’s energy costs were also
much lower than peer districts’ likely because of energy efficiency upgrades made in fiscal
year 2005, including installation of more efficient lighting and an energy management system,
and increased energy monitoring efforts begun in fiscal year 2010.
Similar food service costs—Prescott USD’s $2.71 cost per meal was similar to the peer
district’s average of $2.66. However, the program’s revenues were not sufficient to cover its
costs, resulting in an operating loss of $22,000. To help eliminate this deficit, the District may
want to review its meal prices, which were about 15 percent lower than peer districts’.
Low transportation cost per mile—The District’s transportation costs per mile were 21
percent lower than the peer districts’ average—$2.67 compared to $3.40. The District’s lower
costs were primarily due to lower staffing and pay rates. For example, Prescott USD did not
staff any bus aides, while the six audited peer districts staffed six bus aides each, on average.
Further, Prescott USD’s average bus driver salary was about 15 percent lower, and its
transportation director was paid less, despite similar longevity in the position. Other performance
measures, such as cost per rider and bus capacity utilization, could not be calculated because
the District’s rider counts were inaccurate, largely due to its uncommon, hub-style student
transportation system with transfers similar to many public transportation systems that makes
it difficult to accurately track ridership. The District also needs to improve controls over its fuel
cards (see Finding 1, page 3).
1 Within the 11-district efficiency peer group, auditors compared staffing levels, salaries, and longevity among a 6-district subset that
was subject to performance audits for their fiscal year 2010 operations.
Spending
Prescott
USD
Peer
Group
Average
State
Average
Total per pupil $6,261 $7,096 $7,609
Classroom dollars 3,596 3,889 4,253
Nonclassroom
dollars
Administration 625 748 721
Plant operations 718 874 914
Food service 280 322 366
Transportation 247 396 342
Student support 582 578 581
Instructional
support 213 289 432
Table 1: Comparison of Per-Pupil
Expenditures by Function
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
Transportation program helps provide students school
choice but better controls and oversight over rider counts
and fuel cards needed
Prescott USD has a long-standing, very open school choice policy, allowing its students to attend
any of its schools. As a result, district officials estimated that about one-half of its elementary school
students attend a different school than they would with traditional school boundaries. To accommodate
its school choice policy, the District has developed an uncommon, hub-style student transportation
system with transfers similar to many public transportation systems. However, this system makes it
more difficult to track ridership, and the District over-reported its number of riders. The District also
needs to improve controls and oversight over its fuel cards.
Student transportation riders misreported
In order to provide transportation for its school choice policy, the District has set up a hub-system
with transfers similar to many public transportation systems, where some students need to change
buses at one or more schools to reach their final destination. For example, a typical Prescott USD
morning bus route will involve drivers picking up students at pick-up points before making stops at
several schools where some students are dropped off, some are picked up, and some stay on-board
for the next school. Based on cost-per-mile measures, the District’s transportation program appears
efficient with a cost per mile of $2.67, which is 21 percent lower than the peer districts’ average.
However, its cost per rider could not be determined because the District did not accurately count the
number of students transported. Specifically, the District double-counted some riders because they
rode more than one bus both to and from school each day. Rider counts are important because they
are an integral part of the State’s transportation funding formula and help evaluate the transportation
programs’ efficiency. Because the District could not determine an accurate number of riders, auditors
were unable to review the efficiency of the District’s uncommon transportation system. The District
should evaluate and implement methods for determining accurate rider counts.
page 4
State of Arizona
District needs to strengthen controls over fuel cards
Because Prescott USD does not own its own fuel tank, it provides fuel cards to bus drivers and
maintenance workers to obtain fuel from a local vendor’s site. In fiscal year 2010, district
employees charged a total of $209,000 on 75 fuel cards. Auditors noted several issues with fuel
card use.
Fuel cards not adequately secured—Fuel cards were kept in each bus, which remained
unlocked when not in use. Further, although the cards required user personal identification
numbers (PIN) to purchase fuel, instead of changing the PIN when an employee terminated
employment, the same PIN was assigned to a new employee. Because the PIN was not
changed, a terminated employee could potentially use the PIN or pass it along to unauthorized
users. The lack of security over the fuel cards and known PIN codes increased the District’s
risk of unauthorized fuel purchases.
Fuel purchase receipts missing—Although the District reviews bi-weekly billing statements
and requests that employees submit all fuel purchase receipts, district officials indicated and
auditors found that receipts were often missing. As a result, the District was often unable to
verify all of the vendor fuel charges. In one bi-weekly statement auditors reviewed, receipts for
8 of 133 fuel purchases were missing. To help ensure that all fuel purchases are appropriate,
the District should account for all purchases with receipts or other documentation and should
investigate any charges with missing receipts.
Vehicles fueled not identified, making monitoring difficult—The District receives
billing statements from the vendor identifying the PIN number used, odometer reading, date,
type and amount of fuel purchased, and cost. However, the statements do not identify the
vehicle fueled because this information is not input during the fuel purchase and the fuel cards
do not have a unique account number to identify the vehicle fueled. As a result, the District
was unable to review these statements to determine whether all fuel purchases were actually
for district vehicles or were appropriate based on transaction details. For instance, the District
was unable to calculate miles per gallon for each vehicle as a reasonableness test of the fuel
purchases.
Review of billings identified some unusual purchases—Because of these poor
controls, the fuel cards were susceptible to misuse. Therefore, auditors scanned seven of the
vendor’s bi-weekly billing statements to identify possible misuse. The following unusual
purchases were noted:
• One diesel bus fuel card was used to purchase premium unleaded fuel.
• Seven purchases occurred between 10:00 p.m. and 5:00 a.m., including one at midnight
on a Sunday.
• On 11 occasions, a fuel card was used to purchase fuel more than one time per day.
Although there could be reasonable explanations for these purchases, these instances are red
flags for possible inappropriate purchases, and the District should develop procedures to review
and investigate such purchases when they occur. As part of its efforts to strengthen controls, the
page 5
Office of the Auditor General
District should work with its vendor to establish a system that will allow fueled vehicles to be identified
in the billing statements, such as requiring the bus or vehicle number to be entered when fueling.
Doing so will allow the District to monitor fuel efficiency, which will not only help the District identify
potential fraudulent purchases, but also help identify issues such as needed maintenance service.
Recommendations
1. The District should evaluate and implement methods for determining accurate student rider
counts for state funding purposes and also to help evaluate the efficiency of its transportation
program.
2. The District should better secure the fuel cards and change PIN numbers when a fuel card user
terminates employment.
3. The District should strengthen its controls and oversight over fuel card purchases, including
ensuring receipts are submitted for all purchases, reconciling fuel receipts to the billing
statements, investigating unusual purchases as soon as possible, and reviewing purchases for
reasonableness.
4. The District should work with its fuel vendor to ensure the vendor’s billing statements identify
each district vehicle fueled.
page 6
State of Arizona
page 7
Office of the Auditor General
FINDING 2
District lacks sufficient computer controls to adequately
protect sensitive information
Prescott USD needs to improve controls over several of its computer systems. Although no improper
transactions were detected in the sample auditors reviewed, these improvements are necessary to
help prevent fraud and abuse, protect sensitive information, and ensure continuity of operations in a
disaster.
Increased risk of unauthorized access to critical systems
Weak controls over user access to various information systems increases the risk of fraudulent
transactions, access to or manipulation of sensitive information, or other issues.
Broad access to accounting system increased risk of errors, fraud, and misuse
of sensitive information—Four business office employees and three technology employees
have access to all accounting system functions. Full access in the accounting system provides an
employee the ability to add new vendors, create and approve purchase orders, and pay vendors
without independent review. It also provides the ability to add new employees, set employee pay
rates, and process payroll payments. Auditors reviewed 30 of the District’s 1,000 employee files
and 30 of its 8,376 purchases for fiscal year 2010 and also scanned the detailed payroll records
of all employees and all purchases during the fiscal year for reasonableness and noted no
improper transactions. However, access beyond what is required for job duties exposes the
District to increased risk of errors, fraud, and misuse of information, such as processing false
invoices or adding and paying nonexistent vendors or employees.
Too many employees with administrator-level access are able to make changes
to computer network settings—Administrator-level access allows the user full control over
network settings, including the ability to add new users and modify the level of access users have
in the system. Typically, only one or two information technology (IT) employees have this type of
access. However, at Prescott USD, many employees have this access level, including employees
such as teachers or counselors, who are likely not as highly experienced with this level of access
as IT professionals. By allowing too many users to have this access level, the District increases its
risks of security breaches as administrator accounts are typically targeted by hackers because of
page 8
State of Arizona
their high-level privileges. A compromised administrator account could result in unauthorized
access to and loss of sensitive data or disruption of district operations. Further, because some
of the employees granted this level of access are likely less experienced, it increases the
potential for accidental changes to its network settings. The District should review and restrict
employee computer network access to only what is necessary for their job duties.
Weak password requirements—The District needs stronger password requirements for
its network, student information system, and accounting system. Although users develop their
own passwords, the District has not established complexity requirements—that is, passwords
do not need to be a minimum length or contain numbers or symbols. Further, users are not
prompted to periodically change passwords. Common practice requires passwords to be at
least eight characters, contain a combination of alphabetic and numeric characters, and be
changed every 90 days. These practices would decrease the risk of unauthorized persons
gaining access to the systems.
Unsecured wireless network access—Wireless access to the District’s network is not
secured. The District does not require users to have a username and password when they
wirelessly access the network. This lack of authentication allows someone with a wireless
device to access the Internet and the District’s printers attached to its network. Further,
allowing unauthorized users to access its network increases the risk of unauthorized access
to system applications and sensitive information.
Inadequate procedures for removing access to critical applications—The
District is not following its procedures to ensure that only current employees have access to
critical systems. Using reports of fiscal years 2010 and 2011 terminated employees and
system users, auditors found 4 of 188 user accounts in the student information system and 1
of 57 user accounts in the accounting system that were linked to employees who no longer
worked for the District. To reduce the risk of unauthorized access, the District should promptly
remove accounts when a user is no longer employed by the District.
Lack of disaster recovery plan could result in interrupted service
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
a system or equipment failure or interruption. In addition, the District should test its disaster
recovery plan periodically and make modifications to correct any problems and to ensure its
effectiveness.
page 9
Office of the Auditor General
Recommendations
1. The District should limit employees’ access to only those accounting system functions needed
to perform their work.
2. The District should review and reduce the number of users with administrator-level access to
its network.
3. The District should implement and enforce password requirements related to password length,
complexity, and expiration.
4. The District should secure wireless access to its network and require a username and
password for login.
5. The District should implement and enforce policies to ensure that terminated employees have
their IT system access promptly removed.
6. The District should create a formal disaster recovery plan and test it periodically to identify and
remedy deficiencies.
page 10
State of Arizona
OTHER FINDINGS
page 11
Office of the Auditor General
In addition to the two main findings presented in this report, auditors identified the following less
significant areas of concern that require district action. These additional findings and their related
recommendations are as follows:
1. District did not accurately report its costs
Prescott USD did not consistently classify its fiscal year 2010 expenditures in accordance with the
Uniform Chart of Accounts for school districts. As a result, its annual financial report did not accurately
reflect its costs, including both classroom and nonclassroom expenditures. Auditors identified
classification errors totaling approximately $3 million of the District’s total $33.8 million in current
spending. The dollar amounts shown in the tables and used for analysis in this report reflect the
necessary adjustments.
Recommendation
The District should classify all transactions in accordance with the Uniform Chart of Accounts for
school districts.
2. Inadequate recordkeeping of some
special purpose funds
In fiscal year 2010, Prescott USD did not properly track
revenues and expenditures of auxiliary operations and
extracurricular activities fees tax credits (see textbox). As
a result, it could not be determined if certain monies with
a restricted use were spent for an allowable purpose. For
example, as required by statute, extracurricular tax credit
monies may be used only to support extracurricular
activities or character education programs. The District
maintained an auxiliary operations bank account that
also included extracurricular tax credits, but it failed to
maintain detailed records of the account to distinguish
the source of the monies that would identify if they were
Types of special revenue and fiduciary monies
• Auxiliary Operations are monies related to
bookstore operations, athletic activities, and
miscellaneous district-related operations, such as
soda machines.
• Extracurricular Activities Fees Tax Credit monies
are earmarked by tax payers to support a
school’s extracurricular activities.
• Gifts and Donations are monies earmarked by
donors and should be recorded separately to
ensure compliance with donors’ intentions.
• Student Activities monies are raised by the
students (e.g. student organizations, clubs, and
school plays) and should be spent in a way that
benefits students after approval by students.
Source: Auditor General staff analysis of the Uniform System of
Financial Records (USFR), USFR Chart of Accounts, and
A.R.S. §§15-1121 and 43-1089.
page 12
State of Arizona
spent for allowable purposes. As a result, the District could not show that these restricted monies
were used for allowable purposes.
Further, although the District maintained a separate account for gifts and donations and student
activities monies, in some instances, these monies were commingled into the auxiliary operations
account, and the District could not show that all of these monies were used for allowable purposes.
Also, the District’s records for the auxiliary operations account included only broad categories of
expenditure classifications and lacked the necessary cost classification details used for
expenditure reporting purposes. As a result, the District had to estimate amounts when reporting
expenditures in its Annual Financial Report, and some of these estimations appeared incorrect.
However, the District’s records lacked sufficient detail for auditors or the District to determine the
proper expenditure amounts.
Recommendation
The District should maintain detailed accounting records of revenues and expenditures for
special purpose funds and classify expenditures in accordance with the USFR Chart of Accounts.
3. Classroom Site Funds not paid in accordance with District’s
performance pay plan
The District did not consistently follow its performance pay plan for evaluating and paying
employees. Specifically:
• Inconsistent review of employees’ performance goals—Under the District’s performance
pay plan, employees develop their own goals for obtaining the additional pay. The plan
states that principals must approve the goals and later review the evidence that the goals
were accomplished. Auditors selected 5 of 320 employees earning performance pay in
fiscal year 2010 and found that 3 of the 5 employees’ performance pay evaluations did not
contain evidence that the principal approved the goal or verified the goal was met, although
the employee was awarded the full amount of performance pay.
• Several part-time employees were overpaid performance pay—The District did not
reduce some employee’s performance pay proportionately with their part-time status as
required by its performance pay plan. Auditors found that 7 of 320 employees earning
performance pay in fiscal year 2010 were over-paid about $200 to $1,600 each because
their part-time status was not correctly calculated.
Recommendation
The District should ensure that performance pay is awarded in accordance with its approved
plan.
APPENDIX
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Office of the Auditor General
Objectives, Scope, and Methodology
The Office of the Auditor General has conducted a performance audit of the Prescott 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 Prescott 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 Prescott 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 Prescott
USD and the ten other unified and union high school districts that also served between 2,000 and
7,999 students and were located in cities and suburbs. Within this operational peer group, auditors
developed a subset of six districts that were subject to a performance audit for their fiscal year 2010
operations. Auditors compared the more detailed accounting, staffing level, and longevity data that
was available for these districts. 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. Prescott USD’s student
achievement peer group includes Prescott USD and the nine other unified districts that also served
student populations with poverty rates between 11 and 17 percent. Additionally:
• 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, bus capacity usage, and vendor fuel
card billing statements and receipts. Auditors also reviewed fiscal year 2010 transportation
costs and compared them to 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.
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State of Arizona
• 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 systems, 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 the District’s financial accounting data, auditors evaluated the District’s internal
controls related to expenditure processing and reviewed transactions for proper account
classification and reasonableness. Auditors also evaluated other internal controls that were
considered significant to the audit objectives.
• 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 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.
• 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, staffing levels, and longevity, comparing
these to peer districts’.
• 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’. Auditors also reviewed fiscal years 2005 through
2010 electricity usage and costs, reviewed vendor reports, and interviewed vendor
representatives regarding the District’s energy-related upgrades.
• 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.
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 Prescott Unified School
District’s board members, superintendent, and staff for their cooperation and assistance
throughout the audit.
DISTRICT RESPONSE
DISTRICT RESPONSE
May 25, 2012
Debra Davenport
Auditor General State of Arizona
2910 North 44th Street, Suite 410
Phoenix, AZ 85018
RE: Response to Prescott Unified School District’s Performance Audit
Dear Ms. Davenport,
Prescott Unified School District respectfully submits its response to the Performance Audit of fiscal year
2010‐11. The Performance Audit listed two main findings and three less significant areas of concern.
Attached is the response to each of the findings and recommendations, and the District’s plan
to implement the recommendations.
The Prescott Unified School District is committed to operating efficiently, effective stewardship of
taxpayer funds and strives to direct dollars to the classroom. The District appreciated the
professionalism of the audit team. We value the data and findings presented in the final report.
If you have any questions regarding any of the responses contained in the attachment, please do not
hesitate to contact us.
Sincerely,
Dave Smucker
Superintendent
Finding 1: Transportation program helps provide students school choice but better controls and
oversight over rider counts and fuel cards needed.
The District agrees with this finding and will implement the recommendations.
Recommendation 1‐ The District should evaluate and implement methods for determining accurate
student rider counts for state funding purposes and also to help evaluate the efficiency of its
transportation program.
Response: The District has developed a process to determine the number of student riders. To
implement this process, a seating chart for all student riders on each bus will be prepared. We will
count the first students getting on the bus. At each transfer school after that, we will ask if this is the
first bus they have been on today. On the seating chart, we will mark students that are the original
students. All transfer students will be marked as a transfer for that particular bus.
Recommendation 2 – The District should better secure the fuel cards and change PIN numbers when a
fuel card user terminates employment.
Response: All fuel cards will be stored in a locked cabinet. Every driver will be required to sign for the
fuel card. We will be working with the fuel vendor on changing PIN numbers. We would like to put a
cap on the mileage for each bus. This would ensure that if the mileage is not correct the card will not be
able to be used. When we complete this review with the vendor we will contact the Arizona Auditor
General with our new procedures.
Recommendation 3 – The District should strengthen its controls and oversight over fuel card purchases,
including ensuring receipts are submitted for all purchases, reconciling fuel receipts to the billing
statements, investigating unusual purchases as soon as possible, and reviewing purchases for
reasonableness.
Response: The District will ensure that all receipts are submitted and reconcile those receipts with the
monthly statements. We will also investigate all unusual purchases and review them for
reasonableness.
Recommendation 4 – The District should work with its fuel vendor to ensure the vendor’s billing
statements identify each district vehicle fueled.
Response: The District is working with their fuel vendor to have individual PIN numbers for each bus and
use the odometer readings to identify each bus.
Finding 2: District lacks sufficient computer controls to adequately protect sensitive information.
The District agrees with this finding and will implement the recommendations.
Recommendation 1 – The District should limit employees’ access to only those accounting system
functions needed to perform their work.
Response: The District has further restricted the access to our accounting system. We have scheduled
quarterly reviews of the accounting system access with the Information Technology Department and the
Chief Financial Officer.
Recommendation 2 – The District should review and reduce the number of users with administrator‐level
access to its network.
Response: The District has reduced the number of employees with Administrator Level Access. We have
scheduled a quarterly review of the Administrators and are working to further define the level of access.
Our goal is to limit the access, and level thereof, to only those users required to have access based on
their job function.
Recommendation 3 – The District should implement and enforce password requirements related to
password length, complexity and expiration.
Response: The District is changing many Information Technology procedures. We will be requiring more
secure passwords and passwords to be changed on a regular basis. This will be rolled out in the early
school year of 2012‐13 with other Information Technology initiatives.
Recommendation 4 – The District should secure wireless access to its network and require a username
and password for login.
Response: All unsecured wireless network devices have been secured. The District is researching a
different wireless solution that will allow for much better control of security, including authentication to
Active Directory, before allowing a connection.
Recommendation 5 – The District should implement and enforce policies to ensure that terminated
employees have their IT system access promptly removed.
The District is evaluating software to automate the creation and deletion of all necessary Information
Technology related accounts upon hiring and termination. This automation will be a part of new
Information Technology procedures to be established to ensure network integrity and security.
Recommendation 6 – The District should create a formal disaster recovery plan and test it periodically to
identify and remedy deficiencies.
The District will be working on restructuring our back up plan and disaster recovery procedures over the
summer of 2012. We are working towards a redundant plan that includes offsite backups and quick
disaster recovery.
Other Finding 1: District did not accurately report its costs
Recommendation: The District should classify all transactions in accordance with the Uniform Chart of
Accounts for school districts.
Response: The Districts concurs with the finding and will properly classify expenditures according to the
Uniform Chart of Accounts for school districts.
Other finding 2: Inadequate recordkeeping of some special purpose funds.
Recommendation: The District should maintain detailed accounting records of revenues and
expenditures for special purpose funds and classify expenditures in accordance with the USFR Chart of
Accounts.
Response: The District concurs with the finding and has implemented the proper software accounting
system to classify expenditures in accordance with the USFR Chart of Accounts.
Other finding 3: Classroom Site Funds not paid in accordance with District’s performance pay plan.
Recommendation: The District should ensure that performance pay is awarded in accordance with its
approved plan.
Response: The District concurs with the finding and will ensure that goals are approved and verified by
the principal. Also the District will ensure that part‐time employees will not be paid as full time
employees in regards to performance pay.