Performance audit, Santa Cruz Valley Union High School District : report to the Arizona Legislature

              Performance Audit
Santa Cruz Valley
Union High
School District
Division of School Audits
Debra K. Davenport
Auditor General
April • 2012
Report No. 12-03
A REPORT
TO THE
ARIZONA LEGISLATURE
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and
five representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the
operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and
political subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state
agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Ross Ehrick, Director
Ann Orrico, Manager and Contact Person
Jennie Snedecor, Team Leader
Jay Rasband
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Representative Carl Seel, Chair
Representative Tom Chabin
Representative Justin Olson
Representative David Stevens
Representative Anna Tovar
Representative Andy Tobin (ex officio)
Senator Rick Murphy, Vice Chair
Senator Andy Biggs
Senator Rich Crandall
Senator Linda Lopez
Senator David Lujan
Senator Steve Pierce (ex officio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
April 30, 2012
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Governing Board
Santa Cruz Valley Union High School District
Ms. Charie Wallace, Superintendent
Santa Cruz Valley Union High School District
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Santa Cruz
Valley Union High School District, conducted pursuant to A.R.S. §41-1279.03. I am also
transmitting within this report a copy of the Report Highlights for this audit to provide a quick
summary for your convenience.
As outlined in its response, the District agrees with all of the findings and recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on May 1, 2012.
Sincerely,
Debbie Davenport
Auditor General
Student achievement much lower than
peer and state averages—In fiscal year
2010, Santa Cruz Valley UHSD’s student
AIMS scores were far below the peer
districts’ and state averages. In addition,
the District’s school did not meet
“Adequate Yearly Progress” for the federal
No Child Left Behind Act. Further, its 60
percent high school graduation rate was
much lower than the 75 percent peer
district average.
District’s operational efficiency mixed
with some costs higher and some costs
lower than peer districts’—In fiscal year
2010, Santa Cruz Valley UHSD spent 35
percent more per pupil on administration
than peer districts, in part because of a
sudden drop in student enrollment, but
also because the District hired a new
business manager and a certified public
accounting (CPA) firm to help correct poor
business practices. Despite higher
per-pupil costs, the District’s plant
operations functioned in a reasonably
efficient manner with lower costs per
square foot. Further, transportation costs
per mile were much lower than peer
districts’ primarily because the District did
not employ a transportation director.
However, the District’s food service costs
per meal were much higher than peer
districts’ because of overstaffing.
Declining enrollment contributed to
high costs—For several years prior to
fiscal year 2010, the District’s student
enrollment remained around 500 students.
However, in fiscal year 2010, the District’s
student enrollment suddenly dropped by
14 percent to 424 students. This decline in
enrollment increased the District’s
per-pupil administrative costs by $280.
Higher costs to improve poor business
practices—At the start of fiscal year 2010,
to help improve business office operations
and correct poor business practices cited
by its independent financial auditors, the
District hired an experienced business
manager at a salary that was 46 percent
higher than business managers in the peer
group typically earned. In addition, the
District also paid a CPA firm over $69,000
in fiscal year 2010 to perform work such as
reviewing monthly transactions and
providing payroll processing. The
combined costs of paying more for an
experienced business manager and
paying the CPA firm increased the District’s
per-pupil administrative costs by $221.
District had high administrative costs
REPORT Lower student achievement and mixed operational efficiency
HIGHLIGHTS
PERFORMANCE AUDIT
2012
April • Report No. 12-03
Our Conclusion
In fiscal year 2010, Santa
Cruz Valley Union High
School District’s student
achievement was far below
both the peer districts’ and
state averages, and its
operational efficiencies were
mixed with some costs
higher and some costs lower
than peer districts’. The
District’s administrative costs
were much higher than peer
districts’, in part because of
a sudden drop in student
enrollment, but also because
it paid a certified public
accounting firm to help
correct poor business
practices previously cited by
its independent financial
auditors. The District’s plant
operations and student
transportation program both
functioned in a reasonably
efficient manner, but its food
service per-meal costs were
much higher than peer
districts’ because the District
employed more food service
staff. Further, since fiscal
year 2005, the District has
shifted its spending from the
classroom to other
operational areas, primarily
administration and
instructional support
services.
Santa Cruz Valley
Union High
School District
Per Pupil
Santa Cruz
Valley UHSD
Peer Group
Average
Administration $1,956 $1,446
Plant operations 1,613 1,473
Food service 414 428
Transportation 326 468
Expenditures by Function
Fiscal Year 2010
Percentage of Students Who Met or
Exceeded State Standards (AIMS)
Fiscal Year 2010
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Math Reading Writing
Santa Cruz Valley UHSD Peer Group State-wide
Despite increased per-pupil spending,
classroom spending decreased considerably in
fiscal year 2010—Between fiscal years 2009 and
2010, Santa Cruz Valley UHSD’s total per-pupil
spending increased $206 while its classroom
per-pupil spending decreased $497. As a result, the
District’s percentage of resources directed into the
classroom dropped from an already low 44.2
percent in fiscal year 2009 to 38.1 percent in fiscal
year 2010. This reduction in classroom spending
can be attributed primarily to the state-wide
reduction in available Classroom Site Fund monies
and the District’s decision to increase class sizes.
District has shifted classroom spending to other
operational areas over past 5 years—The
District’s shift in spending away from the classroom
was also evident in the 5 years prior to fiscal year
2010. Between fiscal years 2005 and 2010, the
District’s total spending per pupil increased $690
while its classroom spending per pupil decreased
$771. As shown in the figure below, the additional
nonclassroom spending occurred primarily in
administration and instructional support.
Recommendation—The District should look for
ways to reduce nonclassroom spending and direct
more monies back into the classroom.
District reduced classroom spending and shifted monies to other
operational areas
Total Classroom Nonclassroom
2010 $9,650 $3,673 $5,977
2009 9,444 4,170 5,274
Difference $ 206 $ (497) $ 703
Comparison of Per-Pupil Expenditures
Fiscal Years 2009 and 2010
Percentage Change of Expenditures by
Operational Area
Fiscal Year 2010 Versus 2005
-11.5%
5.4%
1.1% 0.7%
-2.1%
0.9%
5.5%
-15%
-10%
-5%
0%
5%
10%
In fiscal year 2010, Santa Cruz Valley UHSD’s food
service program cost nearly $40,000 more to
operate than it generated in revenue. From fiscal
years 2006 through 2010, food service losses
totaled over $365,000. The District’s $3.83 cost per
meal was 26 percent higher than the peer districts’
average and 42 percent higher than the federal
National School Lunch Program reimbursement
rate. Costs were high because the District
employed more staff due to the way its cafeteria
operations were set up. The District’s cafeteria had
three separate service lines requiring at least one
employee each to operate. Seven similar districts
that have also recently received performance audits
typically operated only one service line in their high
schools.
Recommendation—The District should evaluate its
food service operations and determine if they can
be modified to reduce staffing levels.
Inefficient food service program loses money
Recommendation—If student enrollment continues
to decline, the District should review its
administrative staffing levels to see if they can be
reduced to reflect the shrinking student population
and save costs.
By the end of fiscal year 2011, the higher paid
business manager no longer worked at the District,
and the District’s business practices were
sufficiently corrected so it no longer needed the
CPA firm; therefore, it no longer incurred the
associated additional costs.
REPORT
HIGHLIGHTS
PERFORMANCE AUDIT
April 2012
A copy of the full report is available at:
www.azauditor.gov
Contact person:
Ann Orrico (602) 553-0333
Santa Cruz Valley
Union High
School District
TABLE OF CONTENTS
continued
page i
Office of the Auditor General
District Overview 1
Student achievement much lower than state and peer districts’ 1
District’s operational efficiency mixed with some costs higher and some costs lower
than peer districts’ 1
Finding 1: High administrative costs due to declining student enrollment
and costs to correct poor business practices 3
Loss of students increased per-pupil administrative costs 3
District incurred costs for correcting poor business practices 3
Recommendations 4
Finding 2: Inefficient food service program loses money 5
Higher staffing levels and management costs led to higher food service costs 5
Monitoring performance measures would help District better manage program 6
Recommendations 6
Finding 3: District reduced classroom spending and shifted monies
to other operational areas 7
Despite increased per-pupil spending, classroom spending decreased considerably 7
District shifted classroom spending to other operational areas 8
Recommendation 9
TABLE OF CONTENTS
page ii
State of Arizona
continued
Finding 4: Agreement with neighboring district has improved
transportation program oversight 11
District failed to perform regular preventative maintenance 11
District did not conduct random drug and alcohol tests 11
Program oversight improved through agreement with elementary school district 12
Recommendation 12
Other Findings 13
District did not accurately report its costs 13
Recommendation 13
Appendix
Objectives, Scope, and Methodology a-1
District Response
TABLE OF CONTENTS
page iii
Office of the Auditor General
concluded
Tables
1 Comparison of Per-Pupil Expenditures by Function
Fiscal Year 2010
(Unaudited) 2
2 Comparison of Per-Pupil Administrative Costs by Category
Fiscal Year 2010
(Unaudited) 3
3 Comparison of Cost Per Student, Cost Per Meal, Meals Per FTE, and Meals Per Student
Fiscal Year 2010
(Unaudited) 5
4 Comparison of Per-Pupil Expenditures by Function
Fiscal Years 2009 and 2010
(Unaudited) 7
Figures
1 Percentage of Students Who Met or Exceeded State Standards (AIMS)
Fiscal Year 2010
(Unaudited) 1
2 Percentage Change of Expenditures by Operational Area
Fiscal Year 2010 Versus 2005
(Unaudited) 8
page iv
State of Arizona
DISTRICT OVERVIEW
page 1
Office of the Auditor General
Santa Cruz Valley Union High School District is a small, rural district located 55 miles north of Tucson,
in Pinal County. In fiscal year 2010, the District operated one high school serving 424 students.
In fiscal year 2010, the District’s student achievement was far below both the peer districts’ and state
averages, and its operational efficiencies were mixed, with some costs higher and some costs lower.1
The District operated its student transportation program efficiently with costs that were lower than the
peer districts’ average, and the District’s plant operations also operated efficiently. However, the
District should take steps to improve the cost-efficiency of its food service program and find ways to
help reverse its 5-year trend of shifting spending out of the classroom.
Student achievement much lower than state and peer districts’
In fiscal year 2010, 33 percent of the District’s students met or exceeded state standards in math, 61
percent in reading, and 46 percent in writing. As shown in
Figure 1, these scores were far below the peer districts’
and state averages. In that same fiscal year, the District’s
school did not meet “Adequate Yearly Progress” (AYP) for
the federal No Child Left Behind Act (NCLB) because
some students did not demonstrate sufficient academic
progress and the school’s graduation rate was not
sufficient. Further, the District’s school has not met all AYP
objectives for at least 2 consecutive years and is in the
required NCLB school improvement process monitored
by the Arizona Department of Education. In addition, the
District’s fiscal year 2009 graduation rate of 60 percent
was much lower than both the 75 percent peer group
average and the 76 percent state average.
District’s operational efficiency mixed with some costs higher and
some costs lower than peer districts’
As shown in Table 1 on page 2, in fiscal year 2010, Santa Cruz Valley UHSD spent a similar amount
of money per pupil as peer districts overall, but spent $1,343, or 27 percent, less per pupil in the
1 Auditors developed two peer groups for comparative purposes. See page a-1 of this report’s Appendix for further explanation of the peer
groups.
Figure 1: Percentage of Students Who Met or
Exceeded State Standards (AIMS)
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010 test results
on Arizona’s Instrument to Measure Standards (AIMS).
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Math Reading Writing
Santa Cruz
Valley UHSD
Peer Group
State-wide
page 2
State of Arizona
classroom because the District operated
with higher per-pupil costs in
administration, plant operations, student
support, and instructional support.
Further, the District’s classroom spending
has dropped considerably since fiscal
year 2005 (see Finding 3, page 7).
Much higher administrative costs—
The District’s per-pupil administrative
costs were 35 percent higher than the
peer districts’ average for two reasons:
(1) an unexpected decline in its number
of students between fiscal years 2009
and 2010 and (2) costs incurred to
correct poor business practices
previously cited by its independent
financial auditors (see Finding 1, page
3).
Plant operations reasonably efficient—Although Santa Cruz Valley UHSD’s plant
operations costs were 10 percent higher than peer districts’ costs on a per-pupil basis, they
were 8 percent lower on a per-square-foot basis. The District’s plant costs were higher per
pupil because it operated and maintained 11 percent more square feet per pupil. This
additional square footage per pupil resulted from recent declines in student enrollment.
Food service program costs were high��Although Santa Cruz Valley UHSD’s food
service costs were similar to peer district costs on a per-pupil basis, its costs were 26 percent
higher on a per-meal basis—a reflection of employing more food service staff. The District’s
cost per pupil was similar to its peers only because it served fewer meals per student. Since
fiscal year 2006, the food service program has cost the District over $365,000 more than it
generated in revenues (see Finding 2, page 5).
Transportation program operates efficiently—In addition to the low per-pupil costs
shown earlier in Table 1, Santa Cruz Valley UHSD’s transportation program’s per-mile cost
was 36 percent lower than the peer districts’ average cost. The District’s costs were lower in
fiscal year 2010 because unlike most of the peer districts, Santa Cruz Valley UHSD did not
employ a transportation director, and most of the District’s transportation employees were
part-time and did not receive health benefits, such as medical, dental, and vision insurance.
Since fiscal year 2011, the District’s transportation program is being overseen by a neighboring
district through an intergovernmental agreement. As a result, some previously unmet state
requirements are now being addressed (see Finding 4, page 11).
Spending
Santa Cruz
Valley
UHSD
Peer
Group
Average
State
Average
Total per pupil $9,650 $9,887 $7,609
Classroom dollars 3,673 5,016 4,253
Nonclassroom
dollars
Administration 1,956 1,446 721
Plant operations 1,613 1,473 914
Food service 414 428 366
Transportation 326 468 342
Student support 851 625 581
Instructional
support 817 430 432
Table 1: Comparison of Per-Pupil
Expenditures by Function
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010
Arizona Department of Education student membership
data and district-reported accounting data.
page 3
Office of the Auditor General
FINDING 1
High administrative costs due to declining student
enrollment and costs to correct poor business practices
In fiscal year 2010, Santa Cruz Valley UHSD’s per-pupil administrative costs were 35 percent higher
than the peer district average for two main reasons. First, the District’s student enrollment dropped
suddenly in fiscal year 2010, which resulted in its per-pupil administrative costs increasing 17
percent. Second, during this same time, in an effort to correct poor business practices previously
cited by its financial auditors, the District hired a new business manager at a higher salary than most
of the peer districts’ business managers and paid a certified public accounting (CPA) firm more than
$69,000.
Loss of students increased per-pupil administrative costs
As shown in Table 2, Santa Cruz Valley UHSD’s $1,956 administrative cost per pupil was 35 percent
higher than the peer districts’ average in fiscal year 2010. One reason for the higher costs was a drop
in the number of students attending the District’s
school. Santa Cruz Valley UHSD’s student
enrollment remained fairly stable at around 500
students for several years prior to fiscal year
2010. However, in fiscal year 2010, student
enrollment dropped 14 percent to 424 students.
This decline in enrollment increased the District’s
administrative costs by $280 per pupil. The
enrollment decline continued in fiscal year 2011,
with student enrollment dropping to 404 students.
If this decline continues, the District will need to
review its administrative staffing levels and
determine if they can be modified to reflect the
shrinking student population and reduce costs.
District incurred costs for correcting poor business practices
In fiscal year 2010, the District hired a business manager at a higher-than-average salary and paid a
CPA firm to help correct poor business practices that had been previously cited by its independent
District Name
Salaries
and
Benefits
Purchased
Services
Supplies
and
Other Total
Santa Cruz Valley UHSD $1,478 $459 $19 $1,956
Average of the peer group $1,167 232 47 $1,446
Table 2: Comparison of Per-Pupil Administrative
Costs by Category
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010 Arizona Department
of Education student membership data and district-reported
accounting data.
page 4
State of Arizona
financial auditors. During fiscal year 2010, the Arizona State Board of Education was withholding
5 percent of the District’s equalization assistance monies until the District improved its business
practices. The costs for correcting these practices increased the District’s administrative costs
by $221 per pupil. Specifically:
•• District hired business manager at higher-than-average salary—In June 2009, the
District hired a new business manager with the specific mission of “cleaning up” the
District’s business office and correcting its poor business practices. Because of the tasks
facing the new business manager and his prior school district experience, he received a
salary that was 46 percent higher than business managers in the peer group typically
earned. The business manager’s additional pay increased fiscal year 2010 per-pupil
administrative costs by $57. As of July 1, 2011, this business manager no longer worked
for Santa Cruz Valley UHSD. Instead, the District had a business manager whose salary was
in line with the peer districts’ average salary for business managers.
•• District hired a CPA firm to improve business office operations—In fiscal year 2010, the
District also contracted with a CPA firm for consulting services to help correct its poor
business practices. The CPA firm performed many of the District’s business office duties.
For example, the CPA firm reviewed the District’s administrative policies and procedures
and internal controls and made modifications as necessary to improve them. The CPA firm
also reviewed monthly transactions, account balances, and procurements; and provided
the District’s payroll processing services, including performing payroll calculations,
producing payroll checks, and completing tax and other federally-required forms. The
District paid the CPA firm over $69,000 for these services, increasing the District’s fiscal year
2010 per-pupil administrative costs by $164. The District ended its relationship with the CPA
firm in fiscal year 2011. During fiscal year 2011, the District’s poor business practices were
sufficiently corrected so that the Arizona State Board of Education discontinued withholding
any of the District’s equalization assistance monies.
Although the CPA firm helped the District correct its poor business practices, the District
may have been able to obtain these services at a better price. However, the District did not
follow the required formal competitive procurement process as described in the School
District Procurement Rules before it contracted with CPA firm.1 The School District
Procurement Rules promote open and fair competition among vendors, which helps ensure
that districts receive the best possible value for the public monies they spend.
Recommendations
1. If student enrollment continues to decline, the District should review its administrative
staffing levels and determine if they can be modified to reflect the shrinking student
population and produce cost savings.
2. To help ensure it receives the best price for goods and services, the District should follow
School District Procurement Rules for purchases over the competitive sealed bid threshold.
1 Arizona Administrative Code R7-2-1061 et seq describes the formal procurement process school districts must follow when obtaining
services from certified public accountants.
page 5
Office of the Auditor General
FINDING 2
Inefficient food service program loses money
In fiscal year 2010, Santa Cruz Valley UHSD’s cost per meal
of $3.83 was 26 percent higher than the peer districts’
average of $3.04 (see Table 3) and 42 percent higher than
the federal National School Lunch Program’s (NSLP) $2.70
reimbursement rate for students qualifying for free lunches.
Costs were high because the District employed more food
service workers and paid its food service manager a higher
salary. As a result, the program cost nearly $40,000 more to
operate than it generated in revenues in fiscal year 2010. This
is a long-standing problem: since fiscal year 2006, the
District has lost over $365,000 on its food service program
operations. Reducing program staffing levels could help the
program cover its own costs.
Higher staffing levels and management costs led to higher food
service costs
Santa Cruz Valley UHSD’s higher per-meal cost is mainly reflective of its food service salary and
benefit costs, which were 58 percent higher per meal than the peer districts’ average. These higher
costs resulted from higher staffing levels and a higher salary for the District’s food service manager.
District employed more food service staff—The District employed 4.1 full-time equivalent
(FTE) food service positions, or one FTE for every 11,191 meals produced. The peer districts
employed an average of 3.5 food service FTEs or one FTE for every 18,421 meals served. The
District staffed its food service program so high because it operates three different service areas:
(1) a regular lunch line that offers hot meals that qualify for NSLP reimbursement; (2) a lunch cart
that serves prepared sandwiches and salads, which also qualify for NSLP reimbursement; and (3)
a snack bar that serves a la carte items such hamburgers, pizza, burritos, french fries, cookies,
and chips, which do not constitute an NSLP reimbursable meal. Each area must be staffed by at
least one food service worker. In addition, the District has workers operating two point-of-sale
terminals, and a student worker assists at the snack bar. Of the seven peer districts that have been
District Name
Cost Per
Meal
Meals Per
FTE
Santa Cruz Valley UHSD $3.83 11,191
Average of the peer group $3.04 18,421
Table 3: Comparison of Cost Per Student,
Cost Per Meal, Meals Per FTE,
and Meals Per Student
Fiscal Year 2010
(Unaudited)
Source: Auditor General staff analysis of fiscal year 2010
school district annual financial reports and
accounting data, and average daily membership
information obtained from the Arizona Department
of Education.
page 6
State of Arizona
recently audited, high school cafeterias typically had one service area offering two
NSLP-reimbursable meal choices. If the District were to streamline its operations and staff its
food service program on the same basis as peer districts, its costs would have been about
57 cents less per meal, making it closer to the peer district average but still about 7 percent
higher.
District paid food service manager higher salary—The District employed a full-time
manager to oversee its food service operations. Although most of the peer districts also
employed full-time food service managers, most districts paid them much less than the
District paid its food service manager. Specifically, Santa Cruz Valley UHSD’s food service
manager’s salary was about 66 percent higher than the food service managers for the peer
districts, on average, despite no considerable difference in years of experience. If the District
had paid its food service manager a salary similar to the peer districts, it would have saved 47
cents per meal.
Monitoring performance measures would help District better
manage program
The District’s higher per-meal costs emphasize the need to monitor food service operations.
However, the District has not established or monitored performance measures for its food
service program. Measures such as cost per meal or meals per labor hour can help the District
identify potential issues, such as whether it is properly staffed and whether its food service costs
are appropriate.
Recommendations
1. The District should evaluate its food service operations and determine if they can be
modified to reduce staffing levels and produce cost savings.
2. To aid in evaluating the efficiency of its food service program, the District should develop
and monitor performance measures such as cost per meal and meals per labor hour.
page 7
Office of the Auditor General
District reduced classroom spending and shifted monies
to other operational areas
In fiscal year 2010, Santa Cruz Valley UHSD’s nonclassroom spending increased from the prior year
by $703 per pupil while its classroom spending decreased by $497 per pupil. As a result, the
District’s percentage of resources directed into the classroom dropped from an already low 44.2
percent in fiscal year 2009 to 38.1 percent in fiscal year 2010. This shift away from classroom
spending was due primarily to a reduction of Classroom Site Fund (CSF) sales-tax monies and the
District’s decision to increase class sizes.1 The shift has also been evident over the last 5 years as
the District increased spending on administration and support services between fiscal years 2005
and 2010.
Despite increased per-pupil spending, classroom spending
decreased considerably
Despite an increase in total per-pupil spending,
between fiscal years 2009 and 2010, Santa Cruz
Valley UHSD reduced its per-pupil classroom
spending by 12 percent. As shown in Table 4, the
District’s total spending increased by $206 per pupil,
from $9,444 to $9,650. In the same period, the District
reduced classroom spending by $497 per pupil, from
$4,170 to $3,673.
The majority of the reduction in classroom spending
occurred because of the state-wide reduction in
available CSF monies and district’s decision to
increase class sizes. Specifically:
•• Reduction in CSF monies available—Compared to the prior year, Santa Cruz Valley UHSD
received considerably less CSF monies in fiscal year 2010. As a result, the District spent about
$99,000 less in CSF monies in fiscal year 2010. Because CSF monies are required to be spent
primarily in the classroom, a reduction in available CSF monies logically explains a portion of
1 In November 2000, voters passed Proposition 301, which increased the state-wide sales tax to provide additional resources for education
programs. Under statute, these monies, also known as Classroom Site Fund monies, may be spent only for specific purposes, primarily
increasing teacher pay.
FINDING 3
Total Classroom Nonclassroom
2010 $9,650 $3,673 $5,977
2009 9,444 4,170 5,274
Difference $ 206 $ (497) $ 703
Table 4: Comparison of Per-Pupil Expenditures
by Function
Fiscal Years 2009 and 2010
(Unaudited)
Source: Auditor General staff analysis of Arizona Department of
Education student membership data and district-reported
accounting data for fiscal years 2009 and 2010.
page 8
State of Arizona
the drop in Santa Cruz Valley UHSD classroom spending. Specifically, this reduction in CSF
spending accounts for $156 of the $497 per pupil drop in the District’s fiscal year 2010
classroom spending.
•• Increase in class size—While the number of students attending the District’s school
declined 14 percent between fiscal years 2009 and 2010, Santa Cruz Valley UHSD reduced
its number of classroom teachers by 25 percent, increasing average class sizes from 19.8
to 22.3 students. Since there were fewer teachers, the District spent considerably less on
teacher salaries and benefits. This reduction in the number of classroom teachers accounts
for $293 of the $497 per pupil drop in the District’s fiscal year 2010 classroom spending.
District shifted classroom spending to other operational areas
The District’s shift in spending away from the classroom was considerable between fiscal years
2009 and 2010, but also was evident in the 5 years prior to fiscal year 2010. In fiscal year 2005,
the District spent $4,444 per pupil in the classroom, or 49.6 percent of its available operating
dollars.1 However, in fiscal year 2010, despite a 5-year net increase in total per-pupil expenditures
of $690, or 8 percent, the District spent only $3,673 in the classroom, a net decrease of $771 per
pupil, or 17 percent. As a result, in fiscal year 2010, the District spent only 38.1 percent of its
available operating dollars in the classroom. As shown in Figure 2, at the same time the District’s
percentage spent on instruction decreased by more than 11 percentage points, the percentages
spent on administration, plant operations, food service, student support, and instructional
support increased.
1 Available operating dollars are those used to make current expenditures as described in footnote 1 on page a-1. Classroom spending
includes salaries and benefits of teachers and instructional aides, textbooks, and other classroom supplies.
Figure 2: Percentage Change of Expenditures by Operational Area
Fiscal Year 2010 Versus 2005
(Unaudited)
Source: Auditor General staff analysis of district-reported accounting data for fiscal years 2005 and 2010.
-11.5%
5.4%
1.1% 0.7%
-2.1%
0.9%
5.5%
-15%
-10%
-5%
0%
5%
10%
page 9
Office of the Auditor General
The most extensive shifts in nonclassroom spending between fiscal years 2005 and 2010 were as
follows:
•• Increased administrative costs—In fiscal year 2010, 20.3 percent of the District’s spending
was for administration, 5.4 percentage points more than 5 years earlier in fiscal year 2005.
Slightly more than half of this increase occurred in fiscal year 2010 because of the District’s
sudden drop in student enrollment and its additional costs incurred to correct poor business
practices (see Finding 1, page 3). However, this shift in spending from the classroom to
administration was also apparent in prior fiscal years.
•• Instructional support services per-pupil spending tripled partly for increased teacher
training—Between fiscal years 2005 and 2010, the District increased the percentage spent on
instructional support services from 3.0 to 8.5 percent.1 The District increased spending in this
area primarily to provide more teacher training as part of its efforts to improve teacher quality. In
addition, as mentioned in the District Overview on page 1, the District was going through a
required school improvement process, which typically includes increased teacher training
efforts. The District’s training efforts included paying teachers to attend additional training
beyond their normal contract days and providing an academic coach and peer evaluator to help
teachers improve their teaching skills.
Rather than reducing only classroom spending, the District should consider reductions across all
areas, especially areas such as administration and food service, that are consistently higher than
peer averages. District officials stated that they believed they had made spending cuts to most
nonclassroom areas since fiscal year 2008, but as Table 4 on page 7 and Figure 2 on page 8
indicate, expenditures in nonclassroom areas are continuing to grow as classroom expenditures
shrink.
Recommendation
The District should look for ways to reduce nonclassroom spending, especially in administration and
food service, to allow it to direct more of its monies back into the classroom.
1 Effective July 1, 2007, the Uniform Chart of Accounts for School Districts provided clarification in how some expenditures should be coded.
These clarifications account for some of the increase in instructional support services.
page 10
State of Arizona
page 11
Office of the Auditor General
Agreement with neighboring district has improved
transportation program oversight
Although the District’s transportation program operated efficiently, auditors identified several
instances in which a lack of program oversight resulted in its not meeting state requirements.
Specifically, in fiscal year 2010, the District did not ensure that bus preventative maintenance was
performed as required, and the District did not ensure that random drug and alcohol testing was
performed for its bus drivers. To help improve the oversight of its transportation program, in fiscal
year 2011, the District entered into an Intergovernmental Agreement (IGA) with a nearby elementary
school district to operate its student transportation program. Through this IGA, the District��s
transportation program is receiving the necessary oversight.
District failed to perform regular preventative maintenance
According to the State’s Minimum Standards for School Buses and School Bus Drivers (Minimum
Standards), districts must demonstrate that their school buses receive systematic preventative
maintenance and inspections. Preventative maintenance and inspections includes items such as
periodic oil changes, tire and brake inspections, and inspections of safety signals and emergency
exits. These standards are designed to help ensure the safety and welfare of school bus passengers,
as well as extend the useful life of buses. However, in fiscal year 2010, Santa Cruz Valley UHSD did
not systemically conduct preventative maintenance activities on a regular basis. According to district
officials, bus maintenance was performed more as a reaction to problems with the buses rather than
as a preventative measure. Auditors reviewed records for the District’s seven buses and found that
six of the seven buses went more than a year between oil changes and preventative maintenance
inspections.
District did not conduct random drug and alcohol tests
According to the State’s Minimum Standards, districts are required to ensure that drivers are tested
annually for drug usage and randomly throughout the school year for drug and alcohol usage. For
random tests, Minimum Standards require testing 50 percent of all drivers for drug use and 10
percent of all drivers for alcohol use. Although district officials ensured that each driver received an
FINDING 4
page 12
State of Arizona
annual drug test, they did not have a process in place to ensure the required random testing of
bus drivers. As a result, none of its drivers were randomly tested for drug and alcohol use in fiscal
years 2010 and 2011.
Program oversight improved through agreement with elementary
school district
In fiscal year 2010, Santa Cruz Valley UHSD operated its transportation program without the
direct oversight of a transportation director or supervisor. As demonstrated earlier, without proper
oversight, the District was not following all required state Minimum Standards. Recognizing that
the program needed better oversight, the District entered into an IGA with a nearby elementary
school district in October 2010 to operate Santa Cruz Valley UHSD’s transportation program.
Under the IGA, the elementary school district is responsible for all transportation employee
supervision and training, reporting, and maintenance of the District’s school buses. In return for
the oversight responsibilities performed in fiscal year 2011, the District paid the elementary
school district $25,000. In addition, the District continues to employ its own bus drivers and pay
for the repair and maintenance costs of its own buses. The elementary school district provides
the use of its buses and drivers, if needed, at an additional cost.
Although the IGA increases the District’s transportation costs, the much needed oversight has
helped ensure that the program meets all Minimum Standards. For example, the elementary
school district has ensured that each of Santa Cruz Valley UHSD’s buses receive preventative
maintenance inspections at least twice each year. However, because the IGA has been in effect
for only a short time, Santa Cruz Valley UHSD should continue to work with the elementary
school district to ensure that the agreement meets both districts’ needs. Also, the District should
ensure that it monitors the agreement’s requirements to ensure that both districts are fulfilling
their responsibilities.
Recommendation
The District should continue to oversee the IGA with the elementary school district that operates
its transportation program to ensure that each district’s responsibilities are carried out in the
appropriate manner, including compliance with state requirements for preventative maintenance
for buses and random drug and alcohol testing for bus drivers.
OTHER FINDINGS
page 13
Office of the Auditor General
In addition to the four main findings presented in this report, auditors identified one other, less
significant area of concern that requires district action.
District did not accurately report its costs
Santa Cruz Valley UHSD did not consistently classify its fiscal year 2010 expenditures in accordance
with the Uniform Chart of Accounts for school districts. As a result, its annual financial report did not
accurately reflect its costs, including both classroom and nonclassroom expenditures. Auditors
identified errors totaling almost $264,000 of the District’s total $4 million in current spending.1 When
corrected, these changes increased the District’s reported instructional expenditures by 2 percentage
points. The dollar amounts shown in the tables in this report reflect the necessary adjustments.
Recommendation
The District should classify all transactions in accordance with the Uniform Chart of Accounts for
school districts.
1 Current expenditures are those incurred for the District’s day-to-day operation. For further explanation, see Appendix page a-1.
page 14
State of Arizona
APPENDIX
page a-1
Office of the Auditor General
Objectives, Scope, and Methodology
The Office of the Auditor General has conducted a performance audit of the Santa Cruz Valley Union
High School District pursuant to A.R.S. §41-1279.03(A)(9). Based in part on their effect on classroom
dollars, as previously reported in the Auditor General’s annual report, Arizona School District
Spending (Classroom Dollars report), this audit focused on the District’s efficiency and effectiveness
in four operational areas: administration, plant operations and maintenance, food service, and
student transportation. To evaluate costs in each of these areas, only current expenditures, primarily
for fiscal year 2010, were considered.1 Further, because of the underlying law initiating these
performance audits, auditors also reviewed the District’s use of Proposition 301 sales tax monies and
how it accounted for dollars spent in the classroom.
In conducting this audit, auditors used a variety of methods, including examining various records,
such as available fiscal year 2010 summary accounting data for all districts and Santa Cruz Valley
UHSD’s fiscal year 2010 detailed accounting data, contracts, and other district documents; reviewing
district policies, procedures, and related internal controls; reviewing applicable statutes; and
interviewing district administrators and staff.
To analyze Santa Cruz Valley UHSD’s operational efficiency, auditors selected a group of peer
districts based on their similarities in district size, type, and location. This operational peer group
includes Santa Cruz Valley UHSD and the 17 other high school and unified school districts that also
served between 200 and 599 students and were located in town/rural areas.2 To compare districts’
academic indicators, auditors developed a separate student achievement peer group using poverty
as the primary factor, because poverty has been shown to be strongly related to student achievement.
Auditors also used secondary factors such as district type, size, and location to further refine these
groups. Santa Cruz Valley UHSD’s student achievement peer group includes Santa Cruz Valley
UHSD and the three other union high school districts that also served student populations with
poverty rates of less than 20 percent. Additionally:
•• To assess the District’s student achievement, auditors reviewed the Arizona’s Instrument to
Measure Standards (AIMS) passing rates, “Adequate Yearly Progress” for the federal No Child
Left Behind Act, and high school graduation rates. AIMS passing rates were compared to the
state-wide average and the average of the student achievement peer districts.
•• To assess whether the District’s administration effectively and efficiently managed district
operations, auditors evaluated administrative procedures and controls at the district and school
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.
2 The operational peer group excludes two districts that each received such high levels of additional funding that they skewed the peer-spending
averages.
page a-2
State of Arizona
level, including reviewing personnel files and other pertinent documents, and interviewing
district and school administrators about their duties. Auditors also reviewed and evaluated
fiscal year 2010 administration costs and compared these to peer districts’. To further
evaluate staffing levels, auditors surveyed the peer districts to obtain salary and full-time
equivalent position information.
•• To assess whether the District’s food service program was managed appropriately and
functioned efficiently, auditors reviewed fiscal year 2010 food service revenues and expenditures,
including labor and food costs, and compared costs to peer districts’, reviewed the Arizona
Department of Education’s food service monitoring reports, and observed food service
operations. For a more detailed review of the program’s salary and benefit costs, auditors
examined the full-time equivalent positions and salary costs of seven similar school districts
from the peer group that have also recently undergone performance audits.
•• To assess the District’s financial accounting data, auditors evaluated the District’s internal
controls related to expenditure processing and reviewed transactions for proper account
classification and reasonableness. Auditors also evaluated other internal controls that were
considered significant to the audit objectives. After adjusting transactions for proper
account classification, auditors reviewed fiscal year 2010 spending and prior years’
spending trends across functional spending areas.
•• 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 capacity usage. Auditors also reviewed
fiscal year 2010 transportation costs and compared them to peer districts’. Further, auditors
reviewed an intergovernmental agreement between Santa Cruz Valley UHSD and the nearby
elementary school district that began operating the District’s transportation program in fiscal
year 2011.
•• To assess whether the District’s plant operations and maintenance function was managed
appropriately and functioned efficiently, auditors reviewed and evaluated fiscal year 2010
plant operations and maintenance costs and district building space, and compared these
costs and capacities to peer districts’.
•• To assess whether the District was in compliance with Proposition 301’s Classroom Site
Fund requirements, auditors reviewed fiscal year 2010 expenditures to determine whether
they were 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. No issues of noncompliance were identified.
•• To assess the District’s computer information systems and network, auditors evaluated
certain controls over its logical and physical security, including user access to sensitive data
and critical systems, and the security of servers that house the data and systems. Auditors
also evaluated certain district policies over the system such as data sensitivity, backup, and
recovery. No significant issues were identified.
page a-3
Office of the Auditor General
We conducted this performance audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
The Auditor General and her staff express their appreciation to the Santa Cruz Valley Union High
School District’s board members, superintendent, and staff for their cooperation and assistance
throughout the audit.
page a-4
State of Arizona
DISTRICT RESPONSE
DISTRICT RESPONSE
SANTA CRUZ VALLEY UNION HIGH SCHOOL DISTRICT #840
OFFICE OF THE SUPERINTENDENT
900 N. Main Street
Eloy, AZ 85131
520‐466‐2237 cwallace@scvuhs.org 520‐251‐2176
April 23, 2012
Debra Davenport, CPA
Arizona Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
Re: Response to Santa Cruz Valley Union High School District FY 2010 Performance Audit
Dear Ms. Davenport:
Santa Cruz Valley Union High School District respectfully submits our written response to the
performance audit conducted by the Arizona Auditor General for FY 2010. The audit indicated 4 main
findings plus 1 less significant area of concern.
On behalf of the District, I would like to thank the audit team for their professional and courteous
manner in which they conducted the audit.
Sincerely,
Charie Wallace, Superintendent
Santa Cruz Valley Union High School District #840
Performance Audit Responses
Finding 1: High administrative costs due to declining student enrollment and costs to correct poor
business practices
Recommendation:
1. If student enrollment continues to decline, the District should review its administrative staffing levels
and determine if they can be modified to reflect the shrinking student population and produce cost
savings.
Response: The District agrees with and has implemented the recommendation. The District has since
reduced the business office administrative cost by $111,000.00.
Beginning July 1, 2012, The District restructured the Business Office at a savings of over $42,000. The
new Business Manager was hired at a salary that is more in line with our peer districts. The Financial
Supervisor position was eliminated and the new Business Manger has assumed those duties and
responsibilities. The District removed the outsourcing of payroll and hired a part‐time payroll clerk.
The District abolished the outside consulting group, lowering the administrative costs by an additional
$69,000, as they were no longer needed once the district became compliant with the Auditor General in
June 2010. The State Board of Education released the 5% equalization assistance monies that were
being withheld since 2006.
Recommendation:
2. To help ensure it receives the best price for goods and services, the District should follow School
District Procurement Rules for purchases over the competitive sealed bid threshold.
Response: The District agrees with and has implemented the recommendation. The current District
employees are aware of all the procurement rules and Request for Proposal procedures. This should not
happen again.
Finding 2: Inefficient food service program loses money
Recommendation:
1. The District should evaluate its food service operations and determine if they can be modified to
reduce staffing levels and produce cost savings.
Response: The District agrees with and has begun implementation on the recommendation.
The District agrees, in FY10 the food service program was running at a deficit. Our expenses were higher
than our revenues. However, in FY11 our Food Service Director has made great strides and has begun to
turn our food service program around. We are now reducing the food service deficit. For many years,
the Food Service account operated with a deficit. In fact, from 2005 to 2006, the deficit increased over
$100,000. In 2008, under the direction of new administration, an experienced Food Service Director
was hired. She had a proven track record of successfully managing a food service program in a
neighboring school district and pulled that district out of a deficit. Her first month of employment, and
thereafter, she has shown a monthly profit comparing food costs to revenue.
The snack bar or al a carte produces an average of $200.00 per day which has helped to reduce the
deficit. Number of meals has increased, even though the student population has decreased, due to
student satisfaction. In 2011, the Universal Breakfast program, a division of the National School Lunch
Program, was introduced. Santa Cruz was the first high school in the state to institute it. Breakfast
participation has increased from an average 40 students per day to an average of 125 per day.
The District has committed to repay $40,000 per year towards the debt. However, due to the small
student population, the profits from the food service funds are not enough to overcome the hefty
deficit. The District is assisting food service by contributing the difference in profit from the
Maintenance and Operation budget following USFR guidelines. In fiscal year 2011, the District paid
down the debt going from a deficit of $305,747 to $265,708. Fiscal year 2012, food service started
showing a profit and the District will continue paying down the debt.
In FY 2012, the district decreased the food service personnel from 4.1 full‐time equivalents (FTE) to 3.3
FTE.
2. To aid in evaluating the efficiency of its food service program, the District should develop and monitor
performance measures such as cost per meal and meals per labor hour.
Response: The District agrees with and has begun implementation on the recommendation. The Food
Service Director does a cost per meal and meals per labor hour in her board report to the
Superintendent and Governing Board each month.
Finding 3: District reduced classroom spending and shifted monies to other operational areas
Recommendation: The District should look for ways to reduce nonclassroom spending, especially in
administration and food service, to allow it to direct more of its monies back into the classroom.
Response: The District agrees with and has begun implementation on the recommendation. In fiscal
year 2011, the District increased its Classroom Site Funds spending by $47,801. The District also revised
the 301 Plan to make goals more attainable while still keeping the integrity and intent of the law. The
District is now utilizing solar power along with energy efficient equipment which should lower our plant
operations costs. The school is still in school improvement which will require the continuation of
teacher training. The District has no plans to decrease our instructional support services. As previously
stated in finding 1, the administrative costs have already been decreased. Currently, the District is
evaluating the number of administrative positions and costs.
Finding 4: Agreement with neighboring district has improved transportation program oversight
Recommendation: The District should continue to oversee the IGA with the elementary school district
that operates its transportation program to ensure that each district’s responsibilities are carried out in
the appropriate manner, including compliance with state requirements for preventative maintenance
for buses and random drug and alcohol testing for bus drivers.
Response: The District appreciates the recognition of the improvement on our transportation program
oversight. The District agrees with and has begun implementation on the recommendation. The
Business Manager will amend the IGA to include the responsibility of the drug & alcohol testing as the
responsibility on the neighboring district in order to comply with the State’s Minimum Standards for
School Buses and School Bus Drivers.
The District has an agreement with a vendor to do monthly maintenance on the District’s bus fleet. The
Transportation Director of the neighboring school includes necessary information pertaining to the
maintenance in his monthly report to the Superintendent and Governing Board.
Other Findings: In addition to the four main findings presented in this report, auditors identified one
other, less significant area of concern that requires district action.
Recommendation: The District should classify all transactions in accordance with the Uniform Chart of
Accounts for school districts.
Response: The District agrees with and has begun implementation on the recommendation. The new
Business Manager is well versed with the Chart of Accounts and is the person who codes all purchase
orders as well as all payroll positions.