Performance audit, Union Elementary School District

              Performance Audit
Union Elementary
School District
Division of School Audits
Debra K. Davenport
Auditor General
AUGUST • 2007
A REPORT
TO THE
ARIZONA LEGISLATURE
The 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
Senator Robert Blendu, Chair Representative John Nelson, Vice Chair
Senator Carolyn Allen Representative Tom Boone
Senator Pamela Gorman Representative Jack Brown
Senator Richard Miranda Representative Pete Rios
Senator Rebecca Rios Representative Steve Yarbrough
Senator Tim Bee (ex-officio) Representative Jim Weiers (ex-officio)
Audit Staff
Sharron Walker, Director
Ann Orrico, Manager and Contact Person
Gerrick Adams Ryan Miller
Leslie Coca-Udave David Winans
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
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
August 10, 2007
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Peter S. Davis, Receiver
Simon Consulting, LLC
Governing Board
Union Elementary School District
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Union
Elementary School District conducted pursuant to A.R.S. §41-1279.03. I am also transmitting
with 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 13, 2007.
Sincerely,
Debbie Davenport
Auditor General
The Office of the Auditor General has conducted a performance audit of the Union
Elementary School District pursuant to Arizona Revised Statutes §41-1279.03(A)(9).
This performance audit examines six aspects of the District’s operations:
administration, student transportation, plant operation and maintenance,
expenditures of sales taxes received under Proposition 301, the accuracy of district
records used to calculate the percentage of dollars spent in the classroom, and the
District’s English Language Learner (ELL) program.
Administration (see pages 7 through 11)
In fiscal year 2006, the District’s $671 per-pupil administration costs were 21 percent
lower than the $847 per-pupil average of similarly sized districts largely because it
employed fewer administrative positions. However, district officials did not control
costs, overspending the Maintenance and Operation (M&O) Fund budget in fiscal
years 2005 through 2007, including estimated overspending of approximately $1.2
million in fiscal year 2007. In May 2007, the District was unable to pay its employees,
and subsequent emergency legislation required that the District be placed into
receivership. While districts are typically given 2 years to recover overspending
through reduced budget limits, the legislation putting the District into receivership
also gives it 5 years to recover the amounts it overspent. In addition, the District did
not always follow required procurement rules. For example, over the course of 2 fiscal
years, the District used the services of four special needs transportation vendors
without proper procurement and written contracts. During fiscal years 2006 and
2007, the District paid these vendors a combined total of more than $497,000.
Student transportation (see pages 13 through 19)
In fiscal year 2006, the District spent 41 percent more per pupil on student
transportation, and its cost per mile was more than three times the average for
similar-sized districts. As a result, the District subsidized its transportation program
Office of the Auditor General
SUMMARY
page i
with $434,000 that potentially could otherwise have been spent in the classroom.
While it previously contracted for transportation services, in fiscal year 2007, the
District began operating the program in-house. This lowered its per-pupil costs by
about 15 percent; however, the District continued to subsidize the program by more
than $482,000. Outsourced special needs transportation was the largest component
of the District’s fiscal year 2007 transportation costs. The District paid two vendors
more than $257,000 to transport its special needs students to programs outside of
the District despite not having written contracts with either vendor. Without written
contracts, the District could not ensure that vendor billings were appropriate, and it
also could not ensure that the vendor met the State’s minimum safety standards and
that the District was properly protected from liability. The District’s current high
transportation costs, together with overspending its M&O budget, highlight the need
for monitoring its transportation program, including developing and monitoring
performance measures. The District also needs to implement required bus
preventive maintenance and random drug and alcohol testing for its drivers.
Plant operation and maintenance (see pages 21 through
26)
In fiscal year 2006, the District spent 41 percent more per square foot on plant
operation and maintenance costs than comparable districts. The District’s plant
operation costs accounted for 13.4 percent of its total current expenditures, which is
slightly higher than the comparison districts’ average and over 2 percent higher than
the state-wide average. Even though the District employed fewer plant-related
positions than the comparable districts, it had high overtime costs, which inflated its
salary and benefit costs. Further, the District had high water and energy costs and
lacked conservation plans to help control these costs. Telephone costs were also
high, largely because the District uses five T-1 lines to handle its phone and data
needs, while comparable districts used only one or two lines. In fiscal year 2007, the
District’s per-square-foot plant costs increased by approximately 6 percent, largely
due to hiring additional staff.
Proposition 301 monies (see pages 27 through 30)
In November 2000, voters passed Proposition 301, which increased the state-wide
sales tax to provide additional resources for education purposes. The District’s plan
for spending its Proposition 301 monies was incomplete in that it did not describe
how base pay and menu option monies were to be allocated. However, the District
spent its fiscal year 2006 Proposition 301 monies for purposes authorized under
statute. On average, each teacher and librarian received base pay increases of $939
State of Arizona
page ii
and performance pay of $1,532. Menu option monies paid to eligible employees who
participated in AIMS intervention activities averaged $1,194 each.
Classroom dollars (see pages 31 through 34)
Statute requires the Auditor General to determine the percentage of every dollar
Arizona school districts spend in the classroom. Therefore, auditors reviewed the
District’s recording of classroom and other expenditures to determine their accuracy.
After correction for classification errors, the District’s fiscal year 2006 classroom dollar
percentage increased from 50.1 percent to 50.3 percent, which is eight points below
the state average of 58.3 percent for the same fiscal year.
In addition, the District spent $6,256 per pupil, which was $916 lower than the
comparable districts averaged and almost $600 lower than the state average of
$6,833. The District spent fewer operating dollars than the comparable districts
because it received less federal and state program monies and transportation
revenues per pupil. Also, the District spent comparatively more per pupil on food
service because it had a high percentage (68 percent) of students who were eligible
for free or reduced price lunches, and it served more meals than the comparable
districts. However, the District spent less on student support services and instruction
support services than the state averages.
English Language Learner programs, costs, and funding
(see pages 35 through 39)
English Language Learners are students whose native language is not English and
who are not currently able to perform ordinary classroom work in English. During
fiscal year 2006, the District’s ELL program served 253 students and primarily
consisted of language instructional software and bilingual instructional aides to assist
students during language arts classes. In fiscal year 2007, the District served 401 ELL
students at a cost of approximately $128,900, and it received $132,000 in funding to
serve its ELL students, including additional state aid known as ELL B-weight monies,
and federal Title III monies. Statute requires the ELL Task Force to adopt models for
districts to provide 4 hours of English language acquisition for first-year ELL students.
Currently, the District’s fiscal year 2007 ELL program provided only 45 minutes of
language acquisition tutoring for students at the lowest levels of English proficiency.
Students who were more proficient were placed in mainstream classes and were
assisted by bilingual instructional aides during language arts classes.
Office of the Auditor General
page iii
State of Arizona
page iv
Office of the Auditor General
TABLE OF CONTENTS
continued
1
7
7
8
12
13
13
14
17
17
18
19
21
21
22
25
Introduction & Background
Chapter 1: Administration
What are administrative costs?
Administrative costs per pupil were lower than comparable
districts’
Recommendations
Chapter 2: Student transportation
Background
Student transportation costs were 41 percent higher than
comparable districts’
Performance measures were not established and monitored
Transportation revenue based on inaccurate data
Two required student transportation standards were not met
Recommendations
Chapter 3: Plant operation and maintenance
Background
District’s plant costs were higher than comparable districts’
Recommendations
page v
State of Arizona
TABLE OF CONTENTS
Chapter 4: Proposition 301 monies
Background
District’s Proposition 301 plan was incomplete, but its
expenditures were allowable
Recommendations
Chapter 5: Classroom dollars
District’s Classroom dollar percentage is far below the state and
national averages
Plant, food, and transportation spending is higher, while student
and instructional support spending is lower than average
Recommendations
Chapter 6: English Language Learner programs,
costs, and funding
Background
Types of ELL programs in Arizona
District’s ELL program
District’s ELL funding and costs
Recommendation
District Response
27
27
28
29
31
31
33
34
35
35
36
37
38
39
continued
page vi
Office of the Auditor General
TABLE OF CONTENTS
continued
2
37
8
9
10
14
16
22
Figures:
1 District Growth in Attending Students
Fiscal Years 2002 through 2007
(Unaudited)
2 ELL Requirements for School Districts and Charter Schools
House Bill 2064 Provisions
Tables:
1 Total and Per-Pupil Administrative Cost Comparison
Fiscal Year 2006 and Union ESD Estimated Costs
Fiscal Year 2007
(Unaudited)
2 District Staffing Level Comparison Fiscal Year 2006
and Union ESD Estimated Administrative Staff
Fiscal Year 2007
(Unaudited)
3 Union ESD Budgeted vs. Estimated Actual Maintenance and
Operation Fund Expenditures
Fiscal Year 2007
(Unaudited)
4 Students Transported, Route Mileage, and Costs
Fiscal Year 2006
(Unaudited)
5 Comparison of Per-Pupil Transportation Costs by Category
Fiscal Year 2006 and Union ESD Estimated Costs
Fiscal Year 2007
(Unaudited)
6 Plant Costs and Square Footage Comparison
Fiscal Year 2006
(Unaudited)
page vii
State of Arizona
TABLE OF CONTENTS
Tables (concl’d):
7 Comparison of Per-Square-Foot Costs by Category
Fiscal Year 2006 and Union ESD Estimated Costs
Fiscal Year 2007
(Unaudited)
8 Comparison of Expenditure Percentages and
Per-Pupil Expenditures by Function
Fiscal Year 2006
(Unaudited)
23
32
concluded
page viii
The Office of the Auditor General has conducted a performance audit of the Union
Elementary School District pursuant to A.R.S. §41-1279.03.A.9. This performance
audit examines six aspects of the District’s operations: administration, student
transportation, plant operation and maintenance, expenditures of sales taxes
received under Proposition 301, the accuracy of district records used to calculate the
percentage of dollars spent in the classroom, and the District’s English Language
Learner program.
The Union Elementary School District, located in southwest Phoenix,
served 1,062 students in pre-kindergarten through eighth grade in
fiscal year 2006. During that fiscal year, the District had two schools,
one elementary school serving students in pre-kindergarten through
fourth grade, and one middle school serving students in fifth through
eighth grade.
A 3-member board governs the District, and a superintendent and a
business manager manage it. In fiscal year 2006, the District employed
2 principals, and 1 planning principal for a third school that is
scheduled to open in August 2007. In addition, the District had
approximately 49 certified teachers, 5 instructional aides, and 32 other
employees, such as administrative staff, bus drivers, food service
workers, and custodians.
District programs and challenges
The District offers a wide range of instructional and extracurricular programs (see text
box), such as after-school tutoring, clubs, advanced and gifted courses, and
technology-based learning.
For the 2005-2006 school year, the elementary school was labeled as “performing”
and the middle school was labeled as “failing to meet academic standards” through
the Arizona LEARNS program. Additionally, the elementary school met “Adequate
Yearly Progress” for the federal No Child Left Behind Act, while the middle school did
not.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
The District offers:
􀁺􇩔 Technology-based learning
􀁺􇩌 Life Skills program
􀁺􇩃 Cultural arts education
􀁺􇩏 On Track program for at-risk students
􀁺􇩗 Weekly after school tutoring
􀁺􇩁 Advanced and gifted courses
􀁺􇩅 English as a Second Language Program
􀁺􇩁 Accelerated Reader
􀁺􇩓 Spalding Phonics
􀁺􇩍 McGraw-Hill Reading
􀁺􇩃 Character Education
􀁺􇩁 After-school clubs
The District is located in what has been a high population growth area. As shown in
Figure 1, the number of students attending the District’s schools increased from
approximately 84 students in fiscal year 2002 to 1,062 in fiscal year 2006, an increase
of almost 1,200 percent. In fiscal year 2007, the District grew by more than 25 percent
to more than 1,340 students. To serve the increasing number of students, the District
opened its second school in August 2005 and is currently building a third school,
which is scheduled to open in August 2007. Further, the District is currently planning
to build a fourth school, which it plans to open in 2009.
The high growth rate has led to challenges for the District:
􀁺􇩋 Keeping expenditures within allowable limits. During fiscal years 2005 and 2006,
the District spent more monies than allowed by state law. In fiscal year 2006, the
year audited, the District overspent its Maintenance and Operation Fund (M&O)
budget, which totaled $4,550,489, by almost $969,000. These monies are used
to pay for the District’s day-to-day operating costs. In addition, the District’s
fiscal year 2006 expenditures exceeded its revenues by almost $165,000.
During fiscal year 2005, the District also overspent its M&O budget, but by a
much smaller amount—approximately $7,000. Because of its fiscal year 2007
overspending, the District was unable to pay its employees in late May 2007,
and the Legislature authorized a receiver to be appointed in June 2007. The
State Board of Education appointed the receiver who is to provide the Board
with a full review and investigation of the District’s financial affairs. The receiver
State of Arizona
page 2
84
196
361 449
1062
1341
0
200
400
600
800
1000
1200
1400
1600
2002 2003 2004 2005 2006 2007
Average Daily Membership
Fiscal Year
Figure 1: District Growth in Attending Students
Fiscal Years 2002 through 2007
(Unaudited)
Source: Auditor General staff analysis of average daily membership information obtained from the Arizona Department of
Education.
is also to provide a financial improvement plan and a
budget that details how the District will eliminate any
financial mismanagement and achieve solvency. The
adjacent text box lists some of the key statutory powers
and duties a receiver has. Chapter one provides further
information about the District’s overspending.
Further, district officials cite the following challenges:
􀁺􇩏 Obtaining enough teachers. To maintain reasonable
class sizes, which it defined as 27 students per teacher,
the District employed approximately 60 substitute
teachers, including 24 long-term substitutes, in fiscal
year 2006. This was less of an issue in fiscal year 2007,
when the District employed 15 substitute teachers, none
of whom were long-term.
􀁺􇩍 Meeting growing physical plant needs. Another challenge
the District identified is capital needs, such as furniture, playground equipment,
and constructing new buildings on existing campuses, as bonds are its only
funding source to meet these needs.1
􀁺􇩍 Meeting students’ various needs. In addition to the effects of rapid growth, the
District is located in an area where, based on Census Bureau data, 44 percent
of the population live at or below federal poverty guidelines. According to the
District, this has resulted in increased costs related to student healthcare, social
services, and special educational needs.
Scope and methodology
Based in part on their effect on classroom dollars, as reported in the Auditor
General’s annual reports, Arizona Public School Districts’ Dollars Spent in the
Classroom (Classroom Dollars report), this audit focused on three operational areas:
administration, student transportation, and plant operation and maintenance. 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 accurately it
accounted for dollars spent in the classroom. In addition, because of requirements
of A.R.S. §15-756.02, auditors reviewed the District’s English Language Learners
(ELL) program to review its compliance with program and accounting requirements.
In conducting this audit, auditors used a variety of methods, including examining
various records, such as available fiscal year 2006 summary accounting data for all
districts and the Union Elementary School District’s fiscal years 2006 and 2007
1 The School Facilities Board does not provide additional funding to districts whose square footage meets the state
minimum standards based on number of students.
Office of the Auditor General
page 3
Among others, a receiver’s powers
and duties include the following:
􀁺􇩏 Override any decisions of the school district’s
governing board and superintendent;
􀁺􇩓 Supervise the day-to-day activities of the district’s
staff;
􀁺􇩁 Appoint an independent public accountant to audit the
district’s accounts;
􀁺􇩒 Reorganize the district’s financial accounts,
management, and budgetary system;
􀁺􇩅 Establish school district fiscal guidelines and a
system of internal controls; and
􀁺􇩃 Cancel or renegotiate contracts, with the exception of
contracts with teachers who have been with the
district for more than 1 year.
Source: A.R.S. §15-103(F).
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. Additionally:
􀁺􇩔 To assess the District’s administrative costs’ accuracy, auditors evaluated
internal controls related to expenditure processing and tested the accuracy of
fiscal year 2006 expenditures. Auditors also reviewed personnel files and
interviewed district and school administrators about their duties, salaries, and
related costs, and compared these to similar districts’.
􀁺􇩔 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,
and bus routing. Auditors also reviewed fiscal year 2006 transportation costs
and compared them to similar districts’.
􀁺􇩔 To assess whether the District’s plant operation and maintenance function was
managed appropriately and functioned efficiently, auditors reviewed and
evaluated fiscal year 2006 plant operation and maintenance costs and district
building space, and compared these costs and capacities to similar districts’.
􀁺􇩔 To assess whether the District was in compliance with Proposition 301’s
Classroom Site Fund requirements, auditors reviewed fiscal year 2006
expenditures to determine whether they were appropriate, properly accounted
for, and remained within statutory limits. Auditors also reviewed the District’s
performance pay plan and analyzed how performance pay was being
distributed.
􀁺􇩔 To assess the accuracy of the District’s classroom dollars and other
expenditures, auditors reviewed accounting records to determine whether costs
were properly recorded.
􀁺􇩔 To assess the District’s compliance with ELL program and accounting
requirements, auditors reviewed and evaluated the District’s testing records for
students who had a primary home language other than English, interviewed
district personnel about the District’s ELL programs, and reviewed and
evaluated the District’s ELL-related revenues and costs.
􀁺􇩂 Because district operations changed significantly between fiscal years 2006 and
2007, auditors expanded the analysis of cost data to include fiscal year 2007. At
the time the audit was conducted, fiscal year 2007 was not complete. Auditors
used actual costs from the District’s preliminary accounting records through July
2007. However, fiscal year 2007 costs were not similarly developed for the
comparison districts as their records were not examined and any estimates
would have been more susceptible to error.
State of Arizona
page 4
The audit was conducted in accordance with government auditing standards.
Following are the main conclusions related to the audit objectives:
􀁺􇩁 Administration—The District’s fiscal year 2006 per-pupil administration costs of
$671 were 21 percent lower than the comparable districts’ average of $847
because it had fewer administrative staff. However, the District’s administration
overspent the Maintenance and Operation Fund budget, and in June 2007, the
Legislature ordered the District placed in receivership. To achieve solvency,
district officials need to take steps to control costs in all areas, including
administration.
􀁺􇩓 Student transportation—The District’s transportation costs for fiscal years 2006
and 2007 are substantially above the amount the District receives from the State
to operate the program. The District’s small size (approximately 6 square miles)
means that state reimbursement, which is made on a per-mile basis, will likely
continue to be much lower than costs. The District needs to carefully evaluate
spending, but it currently has no performance measures for doing so. The
District also needs to develop a documented preventive maintenance plan for
its buses, conduct random drug and alcohol testing for its bus drivers as
required by state standards, and take other steps to ensure billings for service
are correct.
􀁺􇩐 Plant operation and maintenance—The District’s fiscal year 2006 per-square-foot
plant cost of $6.95 was 41 percent higher than the comparable districts
averaged. Plant costs were high in all cost categories, but appear high primarily
because of the District’s failure to control plant employees’ overtime hours and
lack of energy and water conservation plans. Start-up costs, such as electricity
and telephone service deposits associated with the District’s second school,
also contributed to high plant costs. Fiscal year 2007 costs increased by $0.43
per square foot, mostly due to the addition of three full-time equivalent positions
and continued failure to control overtime costs and energy and water usage.
􀁺􇩐 Proposition 301 monies—The District did not have a comprehensive board-approved
plan for spending Classroom Site Fund monies during fiscal year
2006, but its expenditures were for purposes authorized under statute, and it
maintained appropriate documentation to support the expenditures.
􀁺􇩃 Classroom dollars—The District’s classroom dollar percentage for fiscal year
2006 was 50.3 percent, which is 8 percentage points below the state average of
58.3 percent. This low percentage heightens the importance of carefully
examining costs in all noninstructional areas.
􀁺􇩅 ELL—The District’s fiscal year 2007 Structured English Immersion (SEI) program
consisted of 45–minute language tutoring sessions. By statute, the ELL Task
Office of the Auditor General
page 5
Force models will require 4 hours of daily English language acquisition
instruction for first-year ELL students. During fiscal year 2007, the District
received approximately $132,000 in state and federal monies to fund its
programs, and it spent almost $129,000, primarily on salaries and benefits for
three bilingual instructional aides.
The Auditor General and her staff express their appreciation to the Union Elementary
School District’s board members, superintendent, and staff for their cooperation and
assistance throughout the audit.
State of Arizona
page 6
Administration
Union Elementary School District’s fiscal year 2006 and 2007
administrative costs were lower than those for other districts
of similar size, largely because of a lower administrative
staffing level. However, spending in other areas was not well
controlled, and district officials overspent the Maintenance
and Operation Fund budget in 3 successive years. In June
2007, the Legislature directed that the District be placed in
receivership. For the District to return to solvency, district
officials will need to take steps to control costs in all
noninstructional areas, including administration. An important
step in controlling costs will be to follow sound procurement
practices.
What are administrative costs?
Administrative costs are those associated with directing and
managing a school district’s responsibilities at both the
school and district level. At the school level, administrative
costs are primarily associated with the principal’s office. At the
district level, administrative costs are primarily associated with
the governing board, superintendent’s office, business office,
and central support services, such as planning, research, data processing, etc. For
purposes of this report, only current administrative costs, such as salaries, benefits,
supplies, and purchased services, were considered.1
1 Current expenditures are those incurred for the District’s day-to-day operation. 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.
Office of the Auditor General
CHAPTER 1
page 7
Administrative costs are monies spent
for the following items and activities:
􀁺􇩇 General administrative expenses are associated with
governing board’s and superintendent’s offices, such
as elections, staff relations, and secretarial, legal,
audit, and other services; the superintendent’s salary,
benefits, and office expenses; community, state, and
federal relations; and lobbying;
􀁺􇩓 School administration expenses such as salaries and
benefits for school principals and assistants who
supervise school operations, coordinate activities,
evaluate staff, etc., and for clerical support staff;
􀁺􇩂 Business support services such as budgeting and
payroll; purchasing, warehousing, and distributing
equipment, furniture, and supplies; and printing and
publishing; and
􀁺􇩃 Central support services such as planning, research,
development, and evaluation services; informing
students, staff, and the general public about
educational and administrative issues; recruiting,
placing, and training personnel; and data processing.
Source: Auditor General staff analysis of the USFR Chart of Accounts.
Administrative costs per pupil were lower than
comparable districts’
Using average daily membership counts and number of schools information
obtained from the Arizona Department of Education, auditors selected districts that
had a similar number of students and schools as Union Elementary School District.
As noted in the Auditor General’s November 2002 special study, Factors Affecting
School Districts’ Administrative Costs, district type does not appear to be a significant
factor influencing per-pupil administrative costs, and therefore district type was not a
primary factor in selecting comparable districts. The following tables use fiscal year
2006 cost information for the comparable districts because it is the most recent year
for which all comparable districts’ cost data was available. However, due to
significant changes in the District’s operations, both fiscal years 2006 and 2007 cost
data was analyzed for Union ESD.
As shown in Table 1, in fiscal year 2006, the District spent $671 per pupil on
administrative costs, which is 21 percent lower than the $847 per pupil averaged by
comparable districts. However, medium-sized districts such as Union and the
comparable districts, with student populations between 600 and 4,999, tend to have
higher administration costs than larger districts because they cannot gain the
economies of scale available to larger districts. On average, medium-sized districts
state-wide spent $873 per pupil on administration costs, while large districts with
5,000 to 19,999 students had average administration costs of only $592 per pupil.
State of Arizona
page 8
District Name
Total
Administrative
Costs
Number of
Students
Administrative
Cost
Per Pupil
Williams USD $835,048 710 $1,176
Morenci USD 832,682 968 860
Benson USD 817,052 991 824
Nadaburg ESD 570,266 694 822
Union ESD 712,372 1,062 671
Toltec ESD 641,465 1,156 555
Fiscal year 2006 average of
the comparable districts $739,303 904 $ 847
Fiscal year state-wide
average for medium-sized
districts $ 873
Fiscal year 2007 Union ESD
estimated administration
costs $935,514 1,341 $ 698
Table 1: Total and Per-Pupil Administrative Cost Comparison
Fiscal Year 2006 and Union ESD Estimated Costs
Fiscal Year 2007
(Unaudited)
Source: Auditor General staff analysis of district-reported fiscal year 2006 accounting data, district-reported preliminary
fiscal year 2007 accounting data as of July 31, 2007 and average daily membership information from the Arizona
Department of Education.
The District employed fewer administrative positions than the
comparable districts—Administrative salary and benefit costs were $236 per
pupil lower than the comparable districts’ average because the District employed
fewer administrative positions. As
shown in Table 2, the District
employed nine full-time equivalent
(FTE) administrative positions,
which were five fewer than the
comparable districts’ average in
fiscal year 2006.
In fiscal year 2006, the District was
still adjusting to the effects of
growth and employed a small
district-level administrative staff
consisting of the superintendent,
business manager, an office
manager, a 0.75 FTE technology
coordinator, and approximately 3.5
clerical FTEs. At the school level,
the District employed 2 principal
FTEs. During the first part of the
year, the District’s superintendent
also served as a part-time principal
for the middle school, which serves
grades five through eight. In
addition, the District did not employ
any assistant principals, while the
comparable districts averaged 1.3
assistant principals. Further, the District employed fewer clerical and computer-related
positions.
Failure to control costs leads to overspending—Although administrative
costs were reasonable, with high costs in many other areas, district officials
overspent the Maintenance and Operation (M&O) Fund budgets
in fiscal years 2005, 2006, and 2007. In late May 2007, the
District reached a point where it could not pay its employees.
Subsequently, the Legislature passed emergency legislation
requiring that the District be immediately placed in receivership.
To return the District to solvency, officials need to take steps to
control costs in all areas, including administration.
As other chapters in this report show, in fiscal year 2006, the District had high costs
in several noninstructional areas. For example, the District spent about 40 percent
Office of the Auditor General
page 9
Number of
District Name
Administrative
Staff1
Students Per
Administrative
Staff
Union ESD 9 119
Nadaburg ESD 8 87
Toltec ESD 13 86
Morenci USD 16 62
Benson USD 17 57
Williams USD 17 42
Fiscal year 2006 average of
the comparable districts 14 67
Fiscal year 2007 Union
ESD estimated
Administrative staff
14 96
Table 2: District Staffing Level Comparison Fiscal Year 2006
and Union ESD Estimated Administrative Staff
Fiscal Year 2007
(Unaudited)
1 The number of administrative staff shown is based on full-time equivalents (FTE).
For example, an employee working half-time in an administrative position would
be counted as 0.5 FTE.
Source: Auditor General staff analysis of fiscal year 2006 and fiscal year 2007 average daily membership
counts, fiscal year 2006 School District Employee Report from the Arizona Department of
Education, and fiscal year 2007 Union ESD administrative staff contracts.
District’s M&O Budget Overspending
Fiscal Year 2005 $ 6,998
Fiscal Year 2006 968,535
Fiscal Year 2007 Estimate 1,178,281
more than the comparable districts averaged in each of the following areas:
student transportation, plant operation and maintenance, and food service.
Although final results were not yet available, district officials continued
overspending in fiscal year 2007. Overall, as Table 3 shows, the District’s M&O
Fund expenditures are estimated to
exceed budgeted amounts by
approximately $1.2 million in fiscal
year 2007. For example, as shown in
Table 3, while the District is estimated
to spend about $947,000 on plant
operation and maintenance costs for
fiscal year 2007, it had budgeted only
about $562,000 in this area.
The District’s inability to keep
expenditures within its budget limits
emphasizes the need for it to take
stringent measures to control costs in
all areas. When a district overspends
its budget, the Arizona Department of
Education is required to reduce its
budget limits for the next 2 fiscal years
to recover the overspending.
The legislation requiring that a receiver be appointed also gives the District 5 fiscal
years rather than 2 to reduce its spending by the amounts it has overspent. Even
with the extended repayment period, the required repayments decrease the
District’s available budget limits and increase the probability of overspending
future budgets if significant changes are not made to the way that district officials
control costs.
Further adding to its inability to remain within statutory budget limits, the District
was also found to be out of compliance with requirements of the USFR, including
failure to follow required procurement rules, errors in student attendance reporting,
and errors in accounting for payroll, student activities, and other expenditures. As
a result of the continued noncompliance with the USFR, the State Board of
Education began withholding 5 percent of the District’s budget in March 2007 and
will continue to do so until the deficiencies are corrected. The District will receive
these withheld monies when the deficiencies have been corrected.
Improved procurement practices needed to help control costs—The
District has not always ensured that it obtained the best prices for the goods and
services it procured. Competitive procurement procedures are required to provide
assurance that public entities are getting goods and services for the best possible
State of Arizona
page 10
Function
Budgeted
Expenditures
Projected
Expenditures
Projected
Amount Over
Budget
Instruction $4,169,031 $4,419,477 $ 250,446
Administration 853,019 935,514 82,495
Plant operation and
maintenance 562,278 947,049 384,771
Food service 0 85,000 85,000
Transportation 392,520 719,779 327,259
Student support 363,994 394,074 30,080
Instructional support 188,392 206,622 18,230
Total $6,529,234 $7,707,515 $1,178,281
Table 3: Union ESD Budgeted vs. Estimated Actual Maintenance and
Operation Fund Expenditures
Fiscal Year 2007
(Unaudited)
Source: Auditor General staff analysis of preliminary district-reported fiscal year 2007 accounting data as of
July 31, 2007.
prices. In 9 of the 19 procurements reviewed, auditors found that the District did
not follow required procurement rules detailed in the Uniform System of Financial
Records (USFR) for school districts. Specifically:
􀁺􇩉 In fiscal year 2006, the District used two special needs transportation vendors,
paying them a total of $240,557. However, the District did not procure these
services through the required request for proposal (RFP) process and did not
establish written contracts for their services.
􀁺􇩉 In fiscal year 2007, the District used two new special needs transportation
vendors, paying them more than $257,000 during the fiscal year. However, as
with the fiscal year 2006 vendors, the District did not go through the
procurement process and did not require written contracts. In April 2007, 8
months after it began using these vendors’ services, the District issued an
RFP and awarded a contract to one of the two vendors for the remainder of
fiscal year 2007 and fiscal year 2008. Chapter 2 provides more information on
the special needs transportation vendors and their effects on the District’s
transportation costs.
􀁺􇩔 The District failed to document the reasons for choosing its fiscal year 2006
regular education transportation vendor rather than the vendor that submitted
the lowest bid. Specifically, the awarded vendor’s bid for one bus for 1 day
ranged from $221 to $238 over a 5-year period, while the other vendor’s rate
remained at $220 per bus per day for the 5-year period. The District paid the
successful transportation vendor more than $316,000.
􀁺􇩉 In four instances in which the District made purchases through purchasing
cooperatives or contracts of other school districts, it failed to conduct required
due-diligence activities. Due-diligence activities, which include reviewing the
procurement documentation from the cooperative or other school district that
awarded the contract, are to ensure that the process conformed to the USFR
purchasing rules that the District is required to follow.
Competitive procurement procedures provide assurance that public entities are
getting the needed goods and services for the best possible prices.
Recommendations
1. The District’s administration should take any necessary steps to control costs in
all noninstructional areas, including administration, to avoid overspending its
M&O Fund budget.
2. The District should ensure that it follows competitive purchasing rules when
purchasing goods and services.
Office of the Auditor General
page 11
State of Arizona
page 12
Student transportation
The District subsidized its student transportation program by approximately $434,000
in fiscal year 2006 and $482,000 in fiscal year 2007. In fiscal year 2006, the District
contracted the majority of its transportation program. While costs were 41 percent
higher than the comparable districts’, the vendor’s quality of service was
poor. For fiscal year 2007, the District moved most of its transportation
program in-house, reducing costs somewhat. However, its compact size
(approximately 6 square miles) makes it unlikely that state reimbursement,
which is given on a per-mile basis, will be sufficient to match the current
level of expenditures. Consequently, the District needs to closely evaluate
program operations for efficiency and economy. The District has not
established performance measures or cost analyses that would help with
this effort. The District also needs to take other steps to strengthen the
program, including establishing better controls over spending for special
needs transportation and adhering to state standards for a documented
preventive maintenance program and for random drug and alcohol testing
for drivers.
Background
In fiscal year 2006, the District operated its student transportation program
primarily through a transportation vendor it had been using since fiscal year
2003. At that time, the District used the vendor to provide only a few routes, but due
to rapid growth in the student population, the vendor was providing eight routes by
fiscal year 2006. In addition, the District used its own employees and six buses to
provide an additional four routes. The District also paid two vendors to provide
special needs transportation services. Using monies from a voter-approved bond
initiative, the District purchased six additional buses and in fiscal year 2007 began
operating its own transportation program. While the District provides some special
needs transportation, it also pays two new vendors to transport special needs
students served by programs outside of the District.
Office of the Auditor General
CHAPTER 2
page 13
Riders*
Bus drivers 6
Regular routes 12
Special-needs routes 23
Average daily route miles 487
Total route miles 87,724
Total noncapital
expenditures $673,997
*
n/a
Not available because the District's
records were insufficient to validate
its reported number of riders.
Transportation Facts for
Fiscal Year 2006
Student transportation costs were 41 percent higher than
comparable districts’
In fiscal year 2006, the District spent 10.2 percent of its current dollars on student
transportation, 3.9 percentage points higher than the comparable districts averaged.
As Table 4 shows, the District’s $635 per-student cost was 41 percent higher than the
comparable districts’
average of $451. On a
per-mile basis, the
difference between the
District’s costs and the
costs in comparable
districts was even
starker—$7.68 per mile
versus an average of
$2.50 per mile for the
comparable districts.
This higher cost
primarily related to the
cost of vendor-provided
transportation services.
Because of these higher
expenditures, the District
subsidized its
transportation program
with about $434,000 that
could have potentially
been spent in the classroom. In fiscal year 2006, the District received state
transportation aid totaling approximately $240,000, but spent almost $674,000 to
operate the program.
Fiscal year 2006 vendor-provided services were high cost and poor
quality—Although the District’s per-pupil transportation costs were significantly
higher than the comparable districts’ average, the service it received from its
vendor was often poor. In fiscal years 2004 and 2005, when the vendor provided
fewer routes, the District was satisfied with its services. However, in fiscal year
2006, with the increased number of routes, the District experienced numerous
problems with the vendor. According to the District, vendor buses often arrived late
for scheduled routes, and on several occasions, never arrived at all. In these
instances, the District would use its own buses and drivers to pick up the students,
which resulted in students arriving late to school or home.
State of Arizona
page 14
District Name
Average
Daily
Membership1
Total
Route
Miles
Total
Noncapital
Expenditures
Cost
Per
Student
Cost
Per
Mile
Nadaburg ESD 694 242,448 $619,992 $893 $2.56
Union ESD 1,062 87,724 673,997 635 7.68
Williams USD 710 164,000 295,937 417 1.80
Benson USD 991 164,908 400,374 404 2.43
Toltec ESD 1,156 148,733 329,822 285 2.22
Morenci USD 968 70,628 246,852 255 3.50
Average of the
comparable districts 904 158,143 $378,595 $451 $2.50
Table 4: Students Transported, Route Mileage, and Costs
Fiscal Year 2006
(Unaudited)
1 Records were not sufficient to validate Union ESD’s reported number of riders; therefore, average daily
membership is used for analysis.
Source: Auditor General staff analysis of district-reported fiscal year 2006 accounting data, and district mileage reports and average daily
membership information provided by the Arizona Department of Education.
Fiscal year 2007 costs decreased, but were still high—To operate its
own transportation service, the District purchased six more buses, added six more
bus drivers, and hired a transportation manager to oversee the program. These
changes decreased per-pupil costs to $537, about 15 percent lower than fiscal
year 2006 costs. Despite the lower per-pupil costs, the District was still spending
about $720,000 in transportation operating costs, about three times more than the
$237,700 in state transportation aid.
Compact size requires efficient operations—It may be unlikely the District
can generate enough transportation revenue to cover the related operating costs.
The state transportation funding formula is largely based on route miles driven, and
the District’s compact geographic size results in fewer route miles. Specifically, the
District covers approximately 6 square miles, while the comparable districts’
averaged 432 square miles and ranged from 94 to 1000 square miles. As a result,
the District drives fewer miles and receives less transportation funding than
districts that serve a similar number of students. The comparable districts reported
driving 70,419 more miles on average than the District in fiscal year 2006, as
shown in Table 4, and they received an average of $310,000 more in transportation
funding. Because of its compact size, the District must manage its transportation
operations efficiently to minimize its transportation subsidy.
Outsourced special needs transportation was the largest
component of fiscal year 2007 costs—As shown in Table 5 (see page
16), when analyzed by category, purchased services was the largest component
of fiscal year 2007 transportation costs. These purchased service costs are
primarily associated with the District’s two special needs transportation vendors.
During fiscal year 2007, the District lacked sufficient equipment and personnel to
provide all special needs transportation, so it used the two vendors to transport
approximately 30 special needs students, all of whom were transported to
programs outside of the District, which increases costs. But other management
factors also increased the District’s special needs transportation costs.
Specifically:
􀁺􇩄 District officials did not properly procure the services of its 2 fiscal year 2007
special needs transportation vendors. According to the District, the parents of
some special needs students were not happy with the prior year’s
transportation vendors. Therefore, the parents of one special needs student
formed a special needs transportation company to provide services for the
District. In addition, a former substitute teacher, employed by the District in
fiscal year 2006, formed a second special needs transportation company to
serve the District. The District began using these new special needs
transportation vendors without going through the procurement process. As a
result, the District did not ensure that it was obtaining special needs
transportation services at the best possible prices. Further, one of these two
vendors is not in good standing with the Arizona Corporation Commission.
Office of the Auditor General
page 15
􀁺􇩄 District officials did not have written contracts with either of these two
companies. Without a written contract, district officials put the District at
financial risk. They had no basis for determining if vendor billings were
appropriate prior to payment. Vendor invoices did not provide enough
information for the District to assess whether the billings were even reasonable
or based on services actually provided as the invoices simply consisted of the
names of the students, the billing period, and amounts for each. During fiscal
year 2007, the District paid these two vendors approximately $257,400.
􀁺􇩗 Without written contracts, district officials were also not adequately ensuring
that its students would be transported by drivers who follow proper safety
standards and have been adequately trained and in equipment meeting state
and federal safety requirements.
􀁼􇱄 Drivers—To protect student safety, the Arizona Department of Public
Safety’s Minimum Requirements for School Buses and School Bus Drivers
(Minimum Standards) requires that school bus drivers possess a
commercial driver’s license, pass a fingerprint background check, be
annually and randomly tested for drug and alcohol use, pass annual
medical examinations, and participate in driving trainings, as well as CPR
and first aid trainings. However, the District did not require the vendors to
provide proof that their drivers had met these safety requirements.
􀁼􇱖 Vans—The two vendors transported students using vans with capacities
ranging from 7 to 15 passengers. Because these vans do not meet the
State of Arizona
page 16
District Name Salaries Benefits
Purchased
Services
Supplies
and Other Total
Nadaburg ESD $471 $146 $56 $221 $894
Union ESD 49 17 548 21 635
Williams USD 240 58 26 93 417
Benson USD 221 61 25 97 404
Toltec ESD 252 33 285
Morenci USD 102 21 30 102 255
Average of the
comparable districts $207 $57 $78 $109 $451
Fiscal year 2007 Union
ESD estimated costs $200 $71 $206 $60 $537
Table 5: Comparison of Per-Pupil Transportation Costs by Category
Fiscal Year 2006 and Union ESD Estimated Costs
Fiscal Year 2007
(Unaudited)
Source: Auditor General staff analysis of district-reported fiscal year 2006 accounting data, district-provided preliminary fiscal year 2007
accounting data and route mileage records, auditor estimates of remaining 2007 route mileage, and district mileage reports and
average daily membership information provided by the Arizona Department of Education.
Minimum Standard’s definition of a school bus, they are not required to
receive annual safety inspections from the Department of Public Safety
and meet safety requirements. While the State does not regulate these
vans, federal safety standards impose on manufacturers and dealers a
number of requirements for 11- to 16-passenger vans that will be used
for transporting students. However, the District did not maintain records
showing whether the vendors’ vans met appropriate federal and state
safety requirements.
Further, transportation vendor contracts typically spell out driver safety and
training and vehicle requirements, as well as vendor liability insurance
requirements. It does not appear that the District was protected from liability
as there was no requirement for the vendors to adequately insure their
operations.
Performance measures were not established and
monitored
The District’s current high costs and low capacity for generating sufficient
transportation revenues highlight the need for monitoring its transportation
operations. Measures such as cost per mile and cost per rider can help the District
identify areas for improvement. However, the District has not established and
monitored performance measures for the transportation program. Further, the District
did not collect and maintain the data necessary to adequately monitor program
operations. For example, although the drivers’ daily logs show the number of
students transported each day, the District did not summarize these counts by route
to monitor its bus capacity utilization and determine if route adjustments were
needed. Bus capacity utilization rates, which compare the number of actual riders to
the bus capacity, can help identify routes with low ridership that may be combined
with other routes, or buses that are overcrowded. To further assist in evaluating route
efficiency, the District needs detailed documentation of its bus routes, such as
streets, estimated times, and bus stops. The District could not provide auditors with
clear and consistent route information for fiscal year 2006. As a result of insufficient
data collection, the District is unable to evaluate the efficiency of its program and
proactively identify operational issues that may need to be addressed.
Transportation revenue based on inaccurate data
Funding for school district transportation programs is based on the numbers of riders
and route miles reported to the Arizona Department of Education (ADE). In reporting
Office of the Auditor General
page 17
its fiscal year 2006 route miles, the District used monthly mileage summaries
provided by its vendors. Auditors compared the odometer readings and number of
riders on the drivers’ daily logs from the regular education vendor and found that the
monthly summaries overstated route mileage by approximately 14,700 miles, or 17
percent. The tables in this report were adjusted to reflect the correct route mileage.
The number of eligible riders reported by the District also appeared to be overstated.
For example, a review of the vendor’s driver logs showed that rider counts for some
routes were as high as 105 students for buses with an 84-passenger maximum
capacity.1
If the District made significant errors in reporting the number of eligible riders
transported, this could potentially affect its transportation funding by changing its
funding rate. However, without reliable rider data, it was not possible to determine
what the appropriate revenue amount would have been.
For fiscal year 2007, the District was using its own drivers’ daily logs to report mileage
and riders. Based on auditors’ review of these logs, it appeared that the District was
accurately capturing the route mileage driven and the number of riders transported.
Two required student transportation standards were not
met
While many of the District’s student transportation policies and procedures were
consistent with the Minimum Standards, it did not meet these standards in two areas.
Specifically:
􀁺􇩐 Preventive Maintenance—According to the Minimum Standards, districts must
be able to demonstrate that their school buses received periodic preventive
maintenance services. While many other districts keep a manual or
computerized log of the dates each bus receives maintenance and the type of
maintenance performed, Union Elementary did not have a documented
preventative maintenance program. Although district staff indicated that
preventative maintenance work was performed by a nearby school district, that
school district was unable to provide documentation that maintenance had
been performed in fiscal year 2006. Similarly, the District did not prepare
documentation that it was performing preventive maintenance during fiscal year
2007.
􀁺􇩒 Random drug and alcohol testing—The Minimum Standards also require
districts to conduct drug and alcohol testing both annually for all drivers and
randomly throughout the school year. Specifically, 50 percent of all drivers
should be randomly tested for drug use and 10 percent should be randomly
1 Tables in this report were adjusted to reflect the corrections in route mileage. Because of anomalies in the reported
number of riders, auditors used the District’s average daily membership.
State of Arizona
page 18
tested for alcohol use. While district officials ensured that each driver received
annual drug and alcohol testing, they did not ensure the required testing of
randomly selected bus drivers.
Recommendations
1. The District should ensure that it properly procures any contracted
transportation services. Further, the District should establish and maintain written
contracts with the special needs transportation vendors and require detailed
invoices so that it can ensure that it is being correctly billed for the services
provided.
2. The District should develop and monitor performance measures such as cost
per mile, cost per rider, and bus capacity utilization.
3. The District should ensure that drivers continue to record the miles driven and
riders transported, and use this information to accurately report to the ADE.
4. The District should ensure that vehicle preventive maintenance and random
drug and alcohol tests for bus drivers are conducted and documented as
specified in the Minimum Standards.
Office of the Auditor General
page 19
State of Arizona
page 20
Plant operation and maintenance
In fiscal year 2006, Union ESD spent 13.4 percent of its total current
dollars on plant operation and maintenance costs, slightly more than
the 12.5 percent average spent by comparison districts, and 2.2
percentage points more than the 11.2 percent spent by districts across
the State. However, the District’s $6.95 per-square-foot plant cost was
41 percent higher than the comparable districts averaged. These
higher costs appear to result from the amount of overtime paid to its
plant employees, as well as high energy, water, and telephone costs.
Although some of these 2006 costs included one-time costs, the District’s fiscal year
2007 plant operation and maintenance costs still remain high primarily because it has
added additional employees and continues to incur costs related to overtime hours
worked.
Background
In August 2006, the District opened a second school to accommodate its increasing
student population, which grew from approximately 450 students in fiscal year 2005
to 1,062 students in fiscal year 2006. The new school serves students in grades
kindergarten through 5, while the original school serves middle school students in
grades 6 through 8. The District’s student population continued to grow in fiscal year
2007 to more than 1,340 students. In August 2007, the District will open its third
school serving grades kindergarten through 6. The District has plans to build a fourth
school, with a predicted opening in 2009.
Office of the Auditor General
CHAPTER 3
page 21
What are plant operation and
maintenance costs?
Salaries, benefits, and other costs for
heating and cooling, equipment repair,
groundskeeping, and security.
Source: Auditor General staff analysis of the USFR
Chart of Accounts.
District’s plant costs were higher than comparable
districts’
Despite having fewer square feet, as shown in Table 6, the District’s $6.95 per-square-
foot plant operation and maintenance costs were 41 percent higher than the
comparable districts’ average of $4.93, and 21 percent higher than the average of all
medium-size school districts in the State.
Higher salary and benefit costs due to overtime—The District’s 128,277
square footage was approximately 24 percent less than the comparable districts
averaged. While the District employed 9 plant-related full-time equivalent positions,
one less than the comparable districts averaged, its employees maintained 9
percent less square footage per employee. Further, district employees work
overtime on a regular basis. As a result, the District’s $1.99 per square foot salary
costs were 21 percent higher than the comparable districts’ average, and its $0.64
per square foot benefit costs were 33 percent higher, as shown in Table 7 (see
page 23). The District’s higher plant-related payroll costs related primarily to the
amount of overtime worked by its plant employees, as overtime pay accounted for
$0.29 per square foot. Specifically, during fiscal year 2006, the 16 individual
employees who make up these 9 FTEs worked a total of 1,878 hours of overtime,
State of Arizona
page 22
Plant Costs
District Total
Per
Student
Per
Square
Foot
Total Gross
Square
Footage
Square
Footage
Per Student
Union ESD $891,026 $839 $6.95 128,277 121
Nadaburg ESD 614,771 886 6.09 100,941 145
Benson USD 986,288 995 5.33 185,089 187
Williams USD 723,836 1,019 5.00 144,634 204
Toltec ESD 767,319 664 4.79 160,312 139
Morenci USD 894,967 925 3.46 258,418 267
Average of the
comparable districts $797,436 $898 $4.93 169,879 188
State-wide average of
medium-sized school
districts $948 $5.76
Table 6: Plant Costs and Square Footage Comparison
Fiscal Year 2006
(Unaudited)
Source: Auditor General staff analysis of district-reported fiscal year 2006 accounting data and average daily membership information obtained
from the Arizona Department of Education, and fiscal year 2006 gross square footage information obtained from the Arizona School
Facilities Board.
paid at one and a-half times each employee’s normal hourly rate, which equated
to $36,700. One maintenance worker earned approximately $11,600 in overtime
pay during fiscal year 2006, which increased his annual pay for the year by 35
percent, to more than $44,400. According to district officials, during that fiscal year,
they did not enforce a policy to limit overtime hours worked. Further, some plant
employees earned overtime by working as school bus drivers in addition to their
regular work hours. However, these costs were not classified as transportation
costs, and it is not feasible to now estimate the amount of misclassified salary and
benefits.
Higher purchased service costs—As shown in Table 7, the District’s $2.06 per
square foot purchased service costs were 75 percent higher than the comparable
districts’ average of $1.18. Purchased service costs were high for several reasons.
Specifically:
􀁺􇩃 Custodial services—During fiscal year 2006, the District paid about $40,000
for contracted custodial services for about 4 months, a cost of $0.31 per
square foot. The District did not follow proper procurement procedures when
contracting with the custodial services vendor and then was not satisfied with
the services provided. Therefore, the District severed its contract with the
vendor and decided to perform custodial services in-house. None of the
comparable districts contracted for custodial services.
􀁺􇩗 Water and sewage—The District’s $0.27 per square foot water costs were 35
percent higher than the comparable districts’ average. While the District does
not have a formal water conservation plan, it does make some efforts to
Office of the Auditor General
page 23
District Name Salaries Benefits
Purchased
Services
Supplies
and Other Total
Union ESD $1.99 $0.64 $2.06 $2.26 $6.95
Nadaburg ESD 2.17 0.69 1.07 2.16 6.09
Benson USD 1.69 0.34 1.64 1.66 5.33
Williams USD 1.80 0.48 1.22 1.50 5.00
Toltec ESD 1.32 0.49 1.26 1.72 4.79
Morenci USD 1.28 0.39 0.69 1.10 3.46
Average of the
comparable districts $1.64 $0.48 $1.18 $1.63 $4.93
Fiscal year 2007 Union
ESD estimated costs $2.70 $0.98 $1.72 $1.98 $7.38
Table 7: Comparison of Per-Square-Foot Costs by Category
Fiscal Year 2006 and Union ESD Estimated Costs
Fiscal Year 2007
(Unaudited)
Source: Auditor General staff analysis of district-reported fiscal year 2006 accounting data, district-provided preliminary fiscal year
2007 accounting data, and gross square footage information obtained from the Arizona School Facilities Board and the
districts.
conserve water. The elementary school has desert landscaping, but its fields
are watered using a sprinkler system. To conserve, the District does not
operate the sprinkler system during the winter. The middle school’s fields are
watered using less expensive flood irrigation. Despite these efforts, the
District’s water usage has increased. For example, the middle school showed
increases of more than 600 gallons per day during October 2005 compared
to October 2004, although the number of students at that school remained
approximately the same.
􀁺􇩔 Telephone costs—The District’s $0.52 per square foot telephone costs were
476 percent higher than the comparable districts averaged. The high
telephone costs were primarily due to the fact that the District chose to have
five T-1 lines to handle its phone and data needs. According to the District, the
five T-1 lines are necessary because its teachers use technology, such as the
Internet, while teaching. By contrast, the comparable districts that responded
to the survey each operate using one or two T-1 lines.1
The District’s telephone costs are also higher because it placed phones and
phone lines in each classroom, while the comparable districts typically had
phones only in district offices, or if phones were in the classrooms, they were
accessed through a central switchboard rather than individual lines. Further,
although the District states that several phone and data lines are needed for
instruction purposes, it did not allocate any of its telephone costs to the
classroom, which could have lowered its plant-related telephone costs. Finally,
the costs of establishing service for the phone and data lines for the new
school contributed to the District’s higher-than-average telephone costs.
Higher supply costs—The District’s $2.26 per square foot supply costs were 39
percent higher than the comparable districts’ average of $1.63. Supply costs were
high for two reasons:
􀁺􇩅 Energy costs—Although its facilities are smaller than all but one of the
comparable districts, the District spent $1.55 per square foot, or 35 percent
more, on energy costs than the comparable districts average of $1.16 per
square foot in fiscal year 2006. Energy costs increased primarily because of a
$37,250 deposit that the District had to pay when establishing service for its
new elementary school. If it had not had to pay this fee, the District’s energy
costs would have been about 9 percent higher than the comparable districts’
averaged. Another reason for the high energy costs is that the District has no
formal energy conservation plan, and the practices it does have are not
applied consistently. For example, at its middle school, the District has an
energy management system that allows room temperatures to be changed
only within a 2-degree range. However, the new elementary school does not
have an energy management system.
State of Arizona
page 24
1 Four of the five comparable districts responded to the survey.
Further, according to the District, many of its buildings, including its newest
school, are not energy efficient. For example, the new school was built with
classroom doors that open directly to the outside, allowing hot air into air-conditioned
rooms when doors are opened. Another inefficient building is the
middle school gymnasium, which has a metal roof.
􀁺􇩇 General supply costs—The District’s fiscal year 2006 $0.71 per square foot
general supply costs were 61 percent higher than the comparable districts’
average of $0.44. These costs include items such as cleaning, plumbing, and
construction supplies. According to the District, its fiscal year 2006 costs were
high primarily because of the growth in student population and the fact that
additional supplies needed to be purchased for the new school that opened
in August 2006.
Fiscal year 2007 plant costs remain high—As shown in Table 7 (see page
23), the District’s fiscal year 2007 plant operation and maintenance costs per
square foot increased by $0.43, or approximately 6 percent. Once again, the
District’s costs were higher in all categories than the comparable districts
averaged. While some higher costs in fiscal year 2006 were attributable to the set-up
costs necessary to open a new school, this was not true in fiscal year 2007.
While the District’s fiscal year 2007 purchased services and supply costs, including
energy costs, decreased, its salary and benefit costs increased. Although the
amount of square feet to be maintained did not increase from fiscal year 2006 to
2007, the District added the equivalent of three full-time positions. Specifically, the
District added a facilities director, a second facilities manager, and several other
part-time positions, including additional custodians and maintenance workers.
Further, the District continued to pay for employees to work overtime hours with
little apparent effort to control these costs by coordinating maintenance and
school bus schedules. These factors heighten the need to develop cost-saving
measures.
Recommendations
1. To avoid continued overspending of its Maintenance and Operation Fund
budget, the District should review its staffing levels and the amount of overtime
worked by staff to:
a. Determine whether the number of plant operation and maintenance
positions can be reduced, and
b. Identify ways to reduce or eliminate the amount of overtime worked by plant
employees, such as by coordinating maintenance and school bus
schedules.
Office of the Auditor General
page 25
2. To reduce its water expenditures, the District should monitor water usage at
each of its schools and work to isolate high usage areas and identify steps it can
take to reduce usage.
3. To reduce its electricity expenditures, the District should develop a district-wide
energy conservation plan, which could include monitoring energy usage at each
of its schools and identifying ways to lower energy usage based on each site’s
particular facilities and equipment. Further, the district should educate staff and
students about energy conservation and encourage them to help reduce the
District’s energy use.
4. The District should evaluate its phone and data needs as it plans to add another
school in August 2007 and determine how to balance these needs with
maintaining lower costs.
State of Arizona
page 26
Proposition 301 monies
In November 2000, voters passed Proposition 301, which increased the state-wide
sales tax to provide additional resources for education programs. The District did not
develop a comprehensive plan for spending its Proposition 301 monies and the plan
was not submitted to the Governing Board for approval. However, its fiscal year 2006
expenditures were for purposes authorized under statute, and it maintained
documentation supporting eligible employees’ achievement of performance
measures. The District spent its Proposition 301 monies on salaries and related
benefits, a portion of which was designated as paying for AIMS intervention activities.
Background
In approving Proposition 301, voters increased the state-wide sales tax by six-tenths
of 1 percent for 20 years. Under statute, after allocations for ten state-wide
educational purposes, such as school facilities revenue bonds and university
technology and research initiatives, the remainder of the revenue goes to the state
Classroom Site Fund for distribution to school districts and charter schools. These
monies may be spent only in specific proportions for three main purposes: teacher
base pay increases, teacher performance pay, and certain menu options, such as
reducing class size, providing dropout prevention programs, and making additional
increases in teacher pay.
During fiscal year 2006, the District received a total of $186,028 in Proposition 301
monies and distributed $173,096 to employees. Unspent Proposition 301 monies
remain in the District Classroom Site Fund for future years.
Office of the Auditor General
CHAPTER 4
page 27
District’s Proposition 301 plan was incomplete, but its
expenditures were allowable
The District’s Proposition 301 plan specified how the District would spend its
performance pay monies but not how it would spend base pay and menu option
monies. The plan, drawn up by a team consisting of the superintendent, a principal,
and two teachers, also did not identify the positions eligible to receive Proposition
301 monies or the amounts that eligible employees could potentially receive. Further,
the District’s plan was not approved by the governing board as required by A.R.S.
§15-977(B).
While its plan was incomplete, the District’s expenditure of these monies was for
purposes authorized under the statute. The District spent Proposition 301 monies as
follows:
Base Pay—While the plan did not specifically identify the eligible positions or
amounts, district officials stated that teachers and librarians were eligible to receive
up to $1,100 each in base pay increases. On average, 43 teachers and 2 librarians
earned $939 each, which was prorated for part-time employment and paid in two
installments in November and June of the fiscal year. Six other teachers received
base pay increases from the District’s menu monies.
Performance Pay—Each teacher and librarian meeting all performance pay
requirements could earn up to $1,700. To be eligible to receive performance pay
monies, the employee had to participate in at least one of two projects.
􀁺􇩍 Mentoring Project (41 percent of performance pay)—To earn $700, an eligible
employee had to mentor one or more students, as assigned by the
superintendent, for a total of 35 hours during the school year.
􀁺􇩁 Approved Special Project (59 percent of performance pay)—Eligible
employees could earn $1,000 by selecting a project approved by the
superintendent. Projects included coordinating English Language Learners’
testing or sponsoring student clubs, such as the writing club and art club. To
receive the performance pay, an eligible employee had to provide the
superintendent with documentation of least 50 hours of work toward the
project.
On average, 45 teachers and 2 librarians each earned $1,532 in performance pay.
State of Arizona
page 28
Menu Options—Statute allows school districts to choose among six different
options for allocating the menu monies, including:
􀁺􇩁 AIMS intervention programs
􀁺􇩃 Class size reduction
􀁺􇩄 Dropout prevention programs
􀁺􇩔 Teacher compensation increases
􀁺􇩔 Teacher development
􀁺􇩔 Teacher liability insurance premiums
A.R.S. §15-977 specifies that these monies cannot be used for administration.
Further, beginning in 2004, the Legislature also specified that Classroom Site Fund
monies spent for AIMS intervention, class size reduction, and dropout prevention
can be spent only on instruction, except that they cannot be spent for athletics.
The District stated that it used its menu monies for AIMS intervention activities and
base pay increases. Specifically, eligible employees were compensated for
performing AIMS intervention activities, such as test score data disaggregation
and curriculum mapping. Additionally, according to the District, several teachers
also participated in summer programs that targeted students who performed
poorly on the AIMS test. Other eligible employees attended summer AIMS-related
trainings and were compensated for their time. In total, 26 eligible employees
participated in AIMS intervention activities, earning an average of $1,194 each in
menu monies.
The District also spent about $2,600 of its menu monies on base pay increases for
which it did not have sufficient Base Pay monies. Because of student population
growth during fiscal year 2006, the District increased its number of teachers.
However, it had previously allocated its Proposition 301 monies based on the
number of teachers in the prior fiscal year. Therefore, the District used menu
monies to pay all or a portion of the base pay increases for six teachers.
Recommendations
1. The District should ensure that its Proposition 301 plan also addresses how it
intends to spend base pay and menu option monies. Specifically, the plan
should list the positions eligible for and the expected amount of any pay
Office of the Auditor General
page 29
increases, and it should identify which of the six allowable menu options are
being addressed.
2. The District should ensure that it follows all of the provisions of A.R.S. §15-977
regarding performance-based compensation systems, including having the
governing board adopt its Proposition 301 plan at a public meeting.
State of Arizona
page 30
Classroom dollars
A.R.S. §41-1279.03(A)(9) requires the Auditor General to determine the percentage
of every dollar Arizona school districts spend in the classroom. Because of this
requirement, auditors reviewed the District’s recording of classroom and other
expenditures to determine their accuracy. The District’s fiscal year 2006 classroom
dollar percentage of 50.3 percent is well below the state average for the same fiscal
year, 58.3 percent. The District’s spending on administration, plant operation and
maintenance, student transportation, and food service were higher than the state-wide
averages. Reducing spending in these nonclassroom areas could potentially
help the District spend more money in the classroom.
District’s classroom dollar percentage is far below the
state and national averages
The District’s fiscal year 2006 classroom dollar percentage of 50.3 percent is 8
percentage points below the state average for that fiscal year of 58.3 percent, and
11.2 percentage points below the national average. In reporting its percentages, the
District made minor accounting errors totaling approximately $228,000. For example:
􀁺􇩔 The District classified a public announcement system as an administrative
operating cost rather than a capital cost. Correcting this error resulted in the
District’s administration costs being reduced by $80,000.
􀁺􇩁 Approximately $58,000 in salary costs for attendance clerks were misclassified
as school administration. Instead, these positions should have been classified
as student support services based on the nature of their duties. Correcting this
error reduced the District’s administrative costs.
Office of the Auditor General
CHAPTER 5
page 31
􀁺􇩁 Approximately $30,000 in teacher development costs were misclassified as
student support services rather than instructional support services. Correcting
this error reduced the District’s student support service costs.
Adjustments for these and other errors decreased the District’s administrative cost
percentage from 12.3 percent to 10.7 percent and increased the classroom
percentage from 50.1 percent to 50.3 percent.
Per-pupil spending is lower than state and national amounts—As also
shown in Table 8, the District’s per-pupil spending is lower than the state and
national averages. This lower spending coupled with the lower percentage of
dollars going into the classroom resulted in the District’s spending only $3,140 per
pupil in the classroom versus the state average of $3,981 and national average of
$5,274. The District’s 50.3 percent spent in the classroom was also lower than the
comparable districts’ average of 57.9 percent. The District’s lower per-pupil
spending is related to several factors. Specifically, the District received less in the
following areas:
􀁺􇩆 Federal and state program monies—During fiscal year 2006, the District
received only $175 per pupil in federal and state program monies, while the
comparable districts, on average, received $824 per pupil. The District
State of Arizona
page 32
Union ESD
Comparable
Districts’ Average State Average 2006
National 5-Year
Average
Spending Percent
Per-Pupil
Expenditures Percent
Per-Pupil
Expenditures Percent
Per-Pupil
Expenditures Percent
Per-Pupil
Expenditures
Total Per-Pupil $6,256 $7,172 $6,833 $8,576
Classroom dollars 50.3% $3,140 57.9% $4,156 58.3% $3,981 61.5% $5,274
Nonclassroom dollars
Administration 10.7 671 11.8 847 9.4 643 11.0 943
Plant operations 13.4 839 12.5 898 11.2 768 9.6 823
Food service 7.2 448 4.5 321 4.7 323 3.9 334
Transportation 10.2 635 6.3 451 4.2 291 4.0 343
Student support 4.6 292 5.2 373 7.2 490 5.1 438
Instructional support 3.6 231 1.8 126 4.8 327 4.7 403
Other 0.0 0.0 0.2 10 0.2 18
Table 8: Comparison of Expenditure Percentages and
Per-Pupil Expenditures by Function
Fiscal Year 2006
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2006 School District Annual Financial Reports provided by the Arizona Department of Education, summary accounting data
provided by individual school districts, and National Center for Education Statistics' (NCES) annual report, Digest of Education Statistics and fiscal years 2000 through 2004
NCES Common Core of Data [http://nces.ed.go/ccd/].
received less federal Title I grant money, which is distributed to school districts
primarily based on the number of district students living at or below the
poverty rate, although the District had a higher poverty rate in fiscal year 2006
than the comparable districts averaged. However, these monies are based on
the number of students in the prior fiscal year. In fiscal year 2005, the District
had approximately 600 fewer students than in fiscal year 2006. Further,
according to the District, in fiscal year 2006, it used a vendor to identify and
apply for appropriate grants, including federal and state grants. While this
vendor applied for grant monies, such as Title 1 monies, it did not seek out
and apply for competitively awarded federal and state grant monies.
􀁺􇩔 Transportation—The District also received less per student in transportation
funding. The state transportation funding formula is based on district-reported
miles and riders, with more miles resulting in higher funding. However, at 6
square miles, the District is very compact and more than 400 square miles
smaller than the comparable districts’ average size. In addition, the District
drove more than 70,000 route miles less than the average route miles for the
comparable districts. The comparable districts’ additional transportation
funding averaged about $382 on a per-pupil basis.
Plant, food, and transportation spending is higher, while
student and instructional support spending is lower than
average
The District spent higher percentages for plant operation and maintenance, food
service, and transportation costs than the state averages and the comparison
districts’ averages. As discussed in the transportation and plant operation and
maintenance chapters of this report, it appears feasible for the District to make
operational improvements that will allow more dollars to be directed to the
classroom. It is especially important for the District to reduce costs in these
nonclassroom areas because the District has overspent its budget limits during the
past 2 fiscal years. Therefore, lowering costs in these areas will not only help the
District move more monies into the classroom, but also keep its spending within
statutory budget limits.
Food service—Arizona districts, on average, spent 4.7 percent of their total current
expenditures on their food service programs, but Union Elementary spent 7.2
percent in fiscal year 2006. Also, the District spent $448 per pupil, which was 40
percent more per pupil than the comparable districts’ average of $321. One
reason the District incurred higher costs relates to more students eating school
meals. Specifically, during fiscal year 2006, the District served approximately
226,000 lunch-equivalent meals while the comparable districts, on average,
Office of the Auditor General
page 33
served about 118,000 meals. The high number of meals served appears related to
a high National School Lunch Program eligibility percentage. The District reported
68 percent of its students eligible for a free or reduced-price lunch in fiscal year
2006, while the comparable districts’ reported eligibility averaged 53 percent.
Student support services—The District’s student support services expenditures
were 2.6 percentage points below the state average and 0.6 percentage points
below the comparable districts’ average. The District’s lower costs appear to relate
to its having fewer student support services employees, such as counselors and
psychologists. Specifically, the District employed three student support-related full-time
equivalent positions (FTE), while the comparable districts employed an
average of five FTE. As a result, the District spent 37 percent less on student
support salary and benefit costs than the comparable districts.
Instructional support services—The District also spent less on instructional
support services, including teacher training, curriculum development, and library
services, spending 1.2 percentage points less than the state average. However,
the District spent almost 2 percentage points more than the comparable districts’
average of 1.8 percent. The District employed four instructional support FTE, while
the comparable districts employed an average of two FTE. Therefore, the District
had higher instructional support salary and benefit costs. Further, the District spent
more on related purchased services, including teacher development activities, and
purchased almost $109,000 worth of library books for its elementary school that
opened in August 2006.
Recommendations
1. The District should classify all transactions in accordance with the Uniform Chart
of Accounts for school districts.
2. The District should review its noninstructional spending to determine if savings
can be achieved and some of these monies can be redirected to the classroom.
3. The District should review available programs and try to gain additional federal
and state program monies to supplement funding available for its classrooms.
State of Arizona
page 34
English Language Learner programs, costs, and
funding
The District has only recently developed an ELL program, and the program is not in
full compliance with state statutes. The District did not begin English language
proficiency testing until fiscal year 2005, and it did not begin receiving funding for ELL
programs until fiscal year 2007. Although it did not receive any funding during fiscal
year 2006, the District provided English language instructional software and a
bilingual instructional aide in its language arts classes. Fiscal year 2007 ELL
programs consisted of Structured English Immersion (SEI) and mainstream classes.
For its SEI program, the District provided 45–minute language acquisition sessions
for students classified at pre-emergent, emergent, and basic levels of language
proficiency. The District will need to make substantial changes in the future, as statute
now requires the ELL Task Force to develop models including 4 hours of daily English
language acquisition instruction for first-year ELL students. In fiscal year 2007, the
District received approximately $132,000 in state and federal monies to fund its ELL
programs, and it spent approximately $128,900, primarily on salaries and benefits for
three bilingual instructional aides.
Background
English Language Learners are students whose native language is not English and
who are not currently able to perform ordinary classroom work in English. ELL
students are identified through a state-adopted language proficiency test. School
districts and charter schools are required to administer this test to students if the
primary language spoken in the student’s home is other than English, and then re-test
annually those students identified as ELL. School districts must then report the
test results to the ADE.
By reporting their numbers of ELL students, districts are eligible for additional monies
for ELL programs through the State’s school-funding formula, the federal Title III
Office of the Auditor General
CHAPTER 6
page 35
program, and other sources. In addition, effective in September 2006, HB 2064
established the SEI and Compensatory Instruction (CI) funds and programs. Among
other things, this law established an English Language Learner Task Force to develop
and adopt research-based, cost-efficient SEI program models and establish
procedures for determining the models’ incremental costs—that is, the costs
incurred that are in addition to those associated with teaching English fluent
students. The law also requires the Office of the Auditor General to biennially audit
the State’s ELL program, review ELL requirements in school district performance
audits, and conduct financial audits of the SEI and CI budget requests of school
districts selected for monitoring by ADE.
Types of ELL programs in Arizona
During fiscal year 2006, school districts and charters offered ELL programs that are
described in statute as Structured or sheltered English Immersion, Bilingual, and
Mainstream.1
􀁺􇩓 Structured English Immersion, or sheltered English immersion, is an English
language acquisition process providing nearly all classroom instruction in
English, but using a curriculum designed for children who are learning the
language.
􀁺􇩂 Bilingual education/native language instruction is a language acquisition
process providing most or all of the instruction, textbooks, and teaching
materials in the child’s native language. Many Bilingual programs were
eliminated after Proposition 203 was approved in November 2000.2 However,
some districts still maintain these programs for parents who sign waivers to
formally request that their child be placed in a Bilingual program.
􀁺􇩍 Mainstream programs place ELL students in regular classrooms along with
English fluent students when the student is close to becoming English proficient
or when there are not enough ELL students to create a separate SEI class.
Generally, ELL students in Mainstream classrooms receive the same instruction
as English fluent students, but receive additional support, such as small group
lessons or assistance from an instructional aide.
Effective in fiscal year 2007, ELL compensatory instruction programs are defined as
programs that are in addition to normal classroom instruction, such as individual or
small group instruction, extended-day classes, summer school or intersession, and
that are limited to improving the English proficiency of current ELL students and
those who have been reclassified within the previous 2 years.
1 These programs are described in A.R.S. §15-751.
2 In November 2000, voters passed Proposition 203, requiring that schools use English to teach English acquisition and
that all students must be placed in English classrooms. The new law required that schools use SEI programs and
eliminate the use of Bilingual programs unless approved by parents with signed waivers.
State of Arizona
page 36
District’s ELL program
The District first began testing its students with a primary
home language other than English for language proficiency in
fiscal year 2005. District officials indicated that they were not
aware of the testing requirement before then. The District did
not receive subsequent-year state funding for the 253 ELL
students identified in fiscal year 2005 testing because it
missed the deadline for reporting ELL test scores to the ADE.
During fiscal year 2006, the annual testing again identified 253
ELL students. The District assigned a bilingual instructional
aide to provide classroom assistance to pre-emergent and
emergent ELL students in kindergarten and first grade.
Students at the basic and intermediate ELL levels were
placed in Mainstream classrooms and had the assistance of
Bilingual instructional aides during their language arts
classes.
Office of the Auditor General
page 37
School districts and charter schools are required to:
• Assess the English proficiency of new students when it is indicated that the
primary language spoken in the home is other than English. In addition,
students already identified as ELL must be tested annually.
• Monitor former ELL students who have been reclassified as English
proficient and re-test their language proficiency annually for 2 years.
School districts and charter schools with ELL students can:
• Submit a CI budget request to the ADE and use these monies as specified
to supplement existing programs.
• Adopt an SEI model and submit an SEI budget request to the ADE, then
use the monies as specified to supplement existing programs.
Figure 2: ELL Requirements for School Districts and Charter Schools
House Bill 2064 Provisions
Source: Auditor General staff analysis of Laws 2006, 2nd Regular Session, Chapter 4 (HB 2064).
Levels of English Language
Proficiency:
-e Student does not understand enough
language to perform in English.
Student understands and can speak a few
isolated English words.
Student may understand slower speech, and
speak, read, and write simple words and phrases, but
often makes mistakes.
Student can understand familiar topics
and is somewhat fluent in English, but has difficulty
with academic conversations.
Student can read and understand texts
and conversations at a normal speed, and can speak
and write fluently with minor errors.
Source: Arizona Department of Education.
During fiscal year 2007, the ELL program served 401 students using SEI and
Mainstream classrooms. Specifically:
􀁺􇩓 SEI—This portion of the program provided 45 minutes of language acquisition
tutoring in pull-out sessions for students classified as pre-emergent, emergent,
and basic levels of language proficiency, regardless of grade level. “Pull-out”
sessions remove students from the regular classrooms for specialized
instruction. However, according to the District, at times these tutoring sessions
focused on helping ELL students complete homework or coursework for other
classes, such as math and science.
􀁺􇩍 Mainstream—Students classified as having intermediate language proficiency
remained in their regular classrooms. These students received support from
bilingual instructional aides during their language arts classes. These
instructional aides primarily interpreted the teacher’s instructions and helped the
ELL students understand assignments.
To carry out its ELL program, the District employed three full-time ELL aides and a
part-time program coordinator. The District also ensured that all of its teachers
obtained the state-required SEI certification. The District has not provided a
compensatory instruction program, but has applied for CI Fund monies to implement
such a program in fiscal year 2008.1
As it implements the new statutory requirement to provide first-year ELL students with
4 hours of English language acquisition, the District will need to substantially expand
its language development instruction.2 In June 2007, the ELL Task Force issued a
draft SEI model describing the required content for the 4 hours of language
acquisition. Once the ELL Task Force has finally adopted such a model, the District
will be required to adopt it.
District’s ELL funding and costs
The District did not receive any ELL-specific funding in fiscal year 2006 as it did not
report its identified ELL students in a timely manner. Costs for that fiscal year included
about $4,000 for Rosetta Stone™ English language instructional software and an
estimated $32,720 in salary costs. Staffing included one FTE bilingual instructional
aide to administer ELL testing and assist ELL students in language arts classes. The
District stated that the software and instructional aide were provided for ELL students
only. Because it was not required, the District did not record any ELL costs in its
accounting records in this fiscal year.
1 CI programs in this context are sessions outside the normal classroom, such as summer school or after school tutoring,
specifically directed at language acquisition and development.
2 A.R.S. §15-756.01(C) requires the ELL Task Force to develop models that include a minimum of 4 hours per day of
English language development for the first year that a student is classified as an English language learner. These models
were to be adopted by September 1, 2006, but are still in draft form as of August 1, 2007.
State of Arizona
page 38
During fiscal year 2007, the District began recording ELL program costs, including
salaries and benefits for three bilingual instructional aides, classroom supplies, and
ELL-related training. These costs, which totaled about $128,900, appear to be
incremental costs as the supplies and training are ELL-specific, and the aides, the
only ones in the classrooms, are supposed to assist ELL students only. The District
received almost $132,000 in ELL-related funding, including $92,202 in additional
state aid known as ELL B weight monies, $34,731 in federal Title III monies, and
$5,000 in SEI training reimbursement funding.
Recommendation
1. Once the ELL Task Force has adopted SEI models, the District should ensure it
appropriately modifies its ELL programs and instruction methods. In particular,
the District should comply with the requirement to provide 4 hours of English
language acquisition in an ELL student’s first year.
Office of the Auditor General
page 39
State of Arizona
page 40
Office of the Auditor General
DISTRICT RESPONSE
State of Arizona
Page 1 of 11
August 3, 2007
Ms. Debbie Davenport
Auditor General
2910 N. 44th Street Suite 410
Phoenix, AZ. 85018
Re: Response to the Performance Audit Fiscal Year 2005-2006
Dear Ms. Davenport:
Enclosed you will find the District’s response to the Fiscal Year 2006 Performance Audit
conducted by your staff during the period of February through May 2007. We view our
response as a work in progress, but feel it is important to share with you many changes
that have already occurred and a preliminary action plan for financial success. It is with
great appreciation we receive the report as it is seen as an essential piece of the puzzle to
Union Elementary’s goal of restoring financial solvency and efficiency to better serve its
constituents. The report details and recommendations have already been extremely
helpful and have been used to establish baseline data for the areas reviewed.
After meeting with your staff and gaining invaluable insight and recommendations for
improvement it is evident that the Union Elementary School District has many challenges
ahead of it. We also know that change is a slow process and often has the obstacle of the
unknown. We are very grateful to have your report and its details to be able to begin the
process of sustained, academic and financial improvement and all but eliminating that
often difficult obstacle.
As we go through this process we look forward to the visits from your office and the
ongoing dialogue and assistance to improve the Union Elementary School District.
Sincerely,
Peter Davis Bill Christensen
Simon Consulting Tolleson Elementary School District #17
As Receiver Interim Superintendent
For Union Elementary School District For Union Elementary School District
Page 2 of 11
Overview of Current District Situation
As noted by your staff the district has faced significant challenges over the past three
years related to student growth and financial hardship. The district has overspent its
Maintenance and Operations (M&O) budget consistently the past three years totaling
nearly $3 million creating a significant deficit in the Fiscal Year 2008 budget. It is also
important to note that in May of 2007 the district was unable to pay its employees
resulting in the Legislature authorizing a financial Receiver in June of 2007 and
approving a deferred repayment of debt over 5 fiscal years plus accrued interest.
Since the inception of the Receiver’s authorities in late June, several personnel changes
have occurred resulting in immediate and measurable improvements. In early July the
Superintendent and Business Manager resigned, an Intergovernmental Agreement was
approved with Tolleson Elementary School District #17 to provide administrative and
financial consulting for operations, the school year start date pushed back to August 13,
2007 and all immediate purchasing contracts terminated until a complete analysis and
determination of necessity could be done.
These initial key steps have allowed the Receiver and the Tolleson Elementary School
District Superintendent the opportunity to analyze the situation of the district and begin
making changes to the current practices with the goal of improving financial and
academic success.
Intergovernmental Agreement
As noted above, in July of 2007 the Tolleson Elementary School District and the Union
Elementary School District Governing Boards approved an Intergovernmental Agreement
(IGA) allowing the Tolleson Elementary School District Superintendent and
Administrative Staff the authority to work with the financial Receiver with the goal of
Page 3 of 11
reaching financial solvency and academic improvement. The goal of the Tolleson
Elementary School District Administrative Team is to not only provide effective student
focused leadership, but to utilize the efficiency and economy of scale of procurement,
transportation, warehousing, special education, and support operations for both school
districts. It is believed that by blending the administrative teams, both districts will
become more efficient and therefore Union Elementary will be able to reduce
administrative costs, transportation costs, and utilize research and proven academic
programs from the Tolleson Elementary School District.
Chapter 1: Administration
We are very pleased with the positive staffing levels noted in your report related
to administrative costs. The district will continue to look for efficiencies and look to
reduce administrative costs with the goal of returning more dollars to the classroom.
Recommendation 1: (Chapter 1)
The District’s administration should take any necessary steps to control costs in
all non-instructional areas, including administration, to avoid overspending its M&O
Fund budget.
Response:
We agree with the recommendation and steps have already been taken to control
spending. The Tolleson Elementary staff and the financial Receiver staff have
implemented line item budgeting and remote requisitions that are budget controlled. This
small step alone will work toward the goal of eliminating department over-expenditures
by providing all administrative staff with a more efficient tool that monitors district
spending. The Administrative Team will also provide each department with line item
budgets that will allow site and department administrators further control over spending
related to their needs. In addition, the Receiver has implemented controls that require the
Receiver’s approval for any expenditure over $5,000.
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Recommendation 2: (Chapter 1)
The District should ensure that it follows competitive purchasing rules when
purchasing goods and services.
Response:
We agree with the recommendation and are taking steps to ensure proper
procurement processes are followed. Currently all contracts, practices, procedures, and
forms are being reviewed for compliance with Arizona Procurement Code and USFR
requirements. The Administrative Team expects to see tremendous improvement in this
area. In addition, the Receiver has implemented controls that require proper
documentation before obtaining the receiver’s approval for expenditures above a $5,000
threshold.
Chapter 2: Student Transportation
We realize that student transportation is an area of concern for the district. In
analyzing contracts, procedures, and safety protocols we also recognize the challenges in
this department. We also believe that this department was an area for significant over-expenditures
as noted by your data and by the necessity to supplement this department
financially by almost $434,000 last year. The goal is to eliminate or drastically reduce
transportation costs as recommended in the performance audit and to reduce the
supplementing of the program.
Recommendation 1: (Chapter 2)
The District should ensure that it properly procures any contracted transportation
services. Further, the District should establish and maintain written contracts with the
special needs transportation vendors and require detailed invoices so that it can ensure
that it is being correctly billed for the services provided.
Response:
We also noted a large challenge with the transportation contracts and verbally
terminated all contracts on July 30, 2007 with the recommendation to the Governing
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Board for formal termination in August. At this time we are no longer using the
contracts, and we are reviewing and auditing prior year billings for discrepancies. The
services that were being provided by the contracted companies will now be provided by
Union Elementary and Tolleson Elementary staff utilizing the IGA to cut costs for both
districts. The measurable savings for the district will be close to $250,000.
Recommendation 2: (Chapter 2)
The District should develop and monitor performance measures such as cost per
mile, cost per rider, and bus capacity utilization.
Response:
We concur with this recommendation and will immediately implement a protocol
that monitors these benchmarks on a monthly basis. We recognize that current levels of
spending are not within comparable district norms and will use these benchmarks when
creating new school year bus routes, determination of riders, and bus stops.
Recommendation 3: (Chapter 2)
The District should ensure that drivers continue to record the miles driven and
riders transported, and use this information to accurately report to ADE.
Response:
We have evaluated current mileage tracking procedures and have found them to
be inadequate. Starting this school year we will implement procedures that are used by
Tolleson Elementary School District that have been audited and considered compliant.
The increase in route reporting accuracy will assist in ensuring proper mileage to cost
ratios are maintained and proper staffing levels maintained. The IGA will allow both
districts to implement one system and share staffing, procedures, and protocols to
increase the efficiency of both districts.
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Recommendation 4: (Chapter 2)
The District should ensure that vehicle preventative maintenance and random
drug and alcohol tests for bus drivers are conducted and documented as specified in the
Minimum Standards.
Response:
We have audited the driver and vehicle files and concur with the
recommendation. Currently, driver and vehicle documentation does not meet the
Minimum Standards as specified. To correct the deficiencies, Union Elementary drivers
and vehicles will be supervised, serviced, and trained by Tolleson Elementary
Transportation Administration utilizing the IGA. All deficiencies related to driver
minimum standards and vehicle records will be corrected by December 2007.
Chapter 3: Plant Operation and Maintenance
We realize that plant operation and maintenance costs are extremely high and plan
to significantly reduce the cost per square foot in fiscal year 2008. The report notes
overtime and high energy costs as a direct cause of the high expenditures per square foot
and we agree. Currently, very few measures to control overtime or use of facilities were
in place, resulting in no control over staff hours.
Recommendation 1: (Chapter 3)
To avoid continued overspending of its Maintenance and Operation Fund budget,
the District should review its staffing levels and the amount of overtime worked by staff
to:
a) Determine whether the number of plant operation and maintenance positions
can be reduced, and
b) Identify ways to reduce or eliminate the amount of overtime worked by plant
employees, such as by coordinating maintenance and school bus schedules.
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Response:
We concur with these recommendations and have already identified staff
positions and hours to be cut this fiscal year. This department along with student
transportation will be the focus of cuts to ensure the district does not overspend this fiscal
year. Currently, the third school will open, but custodial positions have been cut from 9
full-time staff to 7 and a reduction of 12 months to 10 months worked for all staff. In
addition, 4 of the staff members’ hours will be cut from 8 to 6 per day. These reductions
in staff and hours are expected to bring the cost square per footage closer to the
comparable districts and reduce plant staff costs by approximately $150,000. Secondly,
measures have been put in place to hold supervisors and hourly staff to overtime
approval. At this time no overtime has been approved, however, staff overtime costs
have continued. We are now disciplining and holding specific employees accountable in
accordance with state law and district policy.
Recommendation 2: (Chapter 3)
To reduce its water expenditures, the District should monitor water usage at each
of its schools and work to isolate high usage areas and identify steps it can take to reduce
usage.
Response
We agree with the recommendation and will begin to monitor monthly water
usage by site. Every effort will be made to identify high usage areas and address the
needs. In some cases, faucets and sprinklers can be switched to low-flow heads. The
district has also equipped the new school with room motion sensors to eliminate wasted
electricity in unoccupied rooms. We will also evaluate the grounds and seek ways to
eliminate costs associated with watering landscaping.
Recommendation 3: (Chapter 3)
To reduce its electricity expenditures, the District should develop a district-wide
energy conservation plan, which could include monitoring energy usage at each of its
schools and identifying ways to lower energy usage based on each site’s particular
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facilities and equipment. Further, the district should educate staff and students about
energy conservation and encourage them to help reduce the District’s energy use.
Response
We agree with the recommendation and will look to begin staff and student
energy conservation programs this school year. Second, monthly tracking tools will be
implemented to measure monthly usage and identify problem areas and establish energy
benchmarks by school.
Chapter 4: Proposition 301 monies
We have analyzed the current plan and agree with the report’s findings.
Currently, the district is not effectively budgeting or utilizing its Proposition 301 monies
to improve student achievement. In the beginning of the next school year, a Union
Elementary School District Prop 301 committee will be established to work with the
Tolleson Elementary School District staff and Prop 301 committee, utilizing the IGA, and
establish a written and comprehensive Prop 301 plan. This plan will encompass all of the
9 recommended points by the Performance Pay Task Force and will be submitted for
Governing Board approval as soon as it is ready. No Classroom Site Fund monies will be
distributed until a Governing Board approved plan can be adopted.
Recommendation 1: (Chapter 4)
The district should ensure that its Proposition 301 plan also addresses how it
intends to spend base pay and menu option monies. Specifically, the plan should list the
positions eligible for and the expected amount of any pay increases, and it should identify
which of the six allowable menu options are being addressed.
Response
As indicated above, a Prop 301 committee made up of stakeholders will explore
options for Classroom Site Fund monies, with the focus on improving instruction. The
committee will make very specific recommendations to the Governing Board and
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effectively meet as many of the Performance Pay Task Force’s recommended areas as
possible.
Recommendation 2: (Chapter 4)
The District should ensure that it follows all of the provisions of A.R.S. 15-977
regarding performance based compensation systems, including having the Governing
Board adopt its Proposition 301 plan at a public meeting.
Response
We will ensure that all of the requirements are met and properly approved by the
Governing Board prior to any monies being released to staff.
Chapter 5: Classroom Dollars
We agree with the report and, as with all school districts, the focus must be on
returning as many dollars to the classroom as possible. At this time it is difficult to create
a goal for the district, but we are focused on increasing the percentage for fiscal year
2008.
Recommendation 1: (Chapter 5)
The District should classify all transactions in accordance with the Uniform Chart
of Accounts for school districts.
Response
We concur with the recommendation and will implement procedures to ensure the
proper identification of district expenses.
Recommendation 2: (Chapter 5)
The District should review its non-instructional spending to determine if savings
can be achieved and some of these monies can be redirected to the classroom.
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Response
We agree with the recommendation and have already begun to address positions
that can be eliminated or reduced with the goal to reallocate these non-instructional
dollars as instructional dollars. At this time approximately $250,000 has been identified
and will be cut or returned to the instructional portion of the budget as the district
continues to grow. The process of reallocating dollars is an ongoing process and
procedures will be put into place to increase classroom dollar spending.
Recommendation 3: (Chapter 5)
The District should review available programs and try to gain additional federal
and state program monies to supplement funding available for its classrooms.
Response
We agree with this recommendation and are already in the process of creating
budgets to effectively utilize grant funding to improve student achievement. In addition
to the financial problems the district has had it is also struggling academically with
Adequate Yearly Progress (AYP) and AZ Learns with a failing school. It is the intent to
utilize federal and state grants to supplement the instructional support program and start
to focus classroom efforts on sustained academic improvement.
Chapter 6: English Language Learner programs, costs, and funding
We thank staff for providing valuable information about the district’s ELL
program and expenditures. We have just started analyzing procedures, reporting, and
testing protocols and have seen similar challenges as noted in the report. We are very
committed to improving this academic program and are monitoring the ELL Task Force
and the Flores Lawsuit. Like all districts with similar demographics, the ELL program is
difficult to implement based on the current funding sources. However, the district will be
committed to making every attempt to comply with whatever model the Task Force
approves. Currently the district is not effectively testing and identifying ELL students
and therefore having a difficult time transitioning students to English Fluency. It is also
important to recognize that financial problems will stretch the district’s budget to be able
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to hire additional staff for just this program. It is the intent to continue to analyze the
current program and look at current staff qualifications and implement an effective ELL
program.
Recommendation 1: (Chapter 6)
Once the ELL Task Force has adopted SEI models, the District should ensure it
appropriately modifies its ELL programs and instruction methods. In particular, the
District should comply with the requirement to provide 4 hours of English language
acquisition in an ELL student’s first year.
Response
We agree the district’s ELL program needs substantial change and are looking to
improving the model and number of students that are exited. We don’t necessarily
support the 4 hour English language requirement that is being proposed by the Task
Force because of its unproven success rate. Nonetheless we are committed to improving
academic progress of all students and therefore will do whatever it takes to improve the
program and comply with ADE requirements.