State of Arizona Office of the Auditor General



Factors Affecting School Districts' Administrative Costs (November 2002)




The Office of the Auditor General has conducted an analysis of Arizona school districts’ administrative costs. The analysis was conducted pursuant to Laws 2002, Chapter 330 §50, which required the Joint Legislative Budget Committee and the Office of the Auditor General to analyze why certain Arizona school districts have particularly high or particularly low administrative costs. The law required our Office to pay particular attention to districts with changing administrative costs. These districts had particularly high or particularly low costs in either fiscal year 1999 or 2001, but not both.

Administrative costs are those associated with directing and managing a school district’s responsibilities. They include salaries, benefits, purchased services, and supplies associated with the governing board, superintendent, principal, and business offices. For its portion of the study, JLBC analyzed those administrative costs associated with district regular and special education programs that are paid from the Maintenance and Operations Fund. Although these costs constitute the largest portion of districts’ administrative costs, there are some additional administrative expenses associated with other programs and funds. For our analysis, we included these additional expenses in keeping with the expenditure categories the U.S. Department of Education’s National Center for Education Statistics (NCES) uses in its reports. This allowed us to identify any significant administrative costs occurring in these other categories and to develop data that can be compared to national data on administrative costs. For example, NCES statistics show that since 1994, districts nationwide have spent approximately 11 percent of their day-to-day operating monies on administration. On a state-wide basis, spending by Arizona school districts was in line with the national average, at 10.8 percent in fiscal year 2001.

The average 10.8 percent administrative cost equates to approximately $560 per pupil for the 206 districts state-wide for which data was available. On average, the additional administrative costs from NCES expenditure categories represented approximately $65 of this amount.

Factors affecting selected districts’
administrative costs
(see pages 5 through 13)

We analyzed costs in 20 districts with particularly high or particularly low administrative costs in fiscal year 2001, and in 14 districts with changing costs. Several key factors affected costs in these districts, some of which are more subject to district control than others. The primary factor affecting per-pupil administrative costs in any one year is the number of students. Most districts with particularly high costs had fewer than 600 students, while most districts with particularly low costs had more than 5,000 students. Size is such a significant factor because larger districts can spread costs across more students. Changes in the number of students also played a significant role in several districts with changing costs; however, this is largely outside district control.

ther factors that are more within district control include salary and staffing levels, benefit costs, and purchased services. Districts with the highest costs tended to be above average in these categories relative to comparably sized districts, while the lowest-cost districts tended to be below their peers. In addition, we found that some districts had made changes to how they accounted for some costs or had accounting or other data errors that affected whether their costs appeared particularly high or particularly low.

Other factors associated with
administrative costs state-wide
(see pages 15 through 16)

In addition to the analysis required by the session law, we also reviewed available accounting data for 206 districts to determine what factors, other than the number of students, salaries, and other expenses, may affect administrative costs state-wide. We found that smaller schools, rural or isolated locations, and/or significant amounts of federal impact aid are associated with higher administrative costs. In addition, districts with higher per-pupil administrative costs have two other conditions in common. These districts typically spend a lower percentage of each dollar they receive on instruction and, while we are unable to explain why, are more likely to have a large fund balance.

District-by-district administrative costs
(see pages 17 through 24)

This report also provides a summary overview of districts’ total and per-pupil administrative costs. Costs associated with operating regular and special education programs for each district are included, along with information about additional administrative costs that are identified when the NCES cost categories are considered, and when all remaining funds and programs are considered.

Read full report in Acrobat PDF format




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