Districts and charters reported spending $2.2 billion, or almost half, of their relief monies through June 30, 2022

Districts and charters reported spending just over $2.2 billion, or 48 percent, of their nearly $4.6 billion allocated relief monies through June 30, 2022. See Dashboard A for additional total spending details and Dashboard B for spending by individual district or charter.

ADE had yet to spend/distribute almost $322 million, or 79 percent, of its discretionary relief monies as of June 30, 2022

ADE identified spending priorities for its discretionary relief monies, of which it had $321.7 million, or 79 percent, yet to spend/distribute as of June 30, 2022. See “ADE’s reported spending for FY 2022 and in total through June 30, 2022, and planned future spending” section below for more information on ADE’s spending and planned future spending.

Districts’ and charters’ reported largest portion of spending through June 30, 2022, and planned future spending of relief monies on maintaining operations

Maintaining operations	Technology	Other spending categories
New programs/curriculum	School facilities repairs

Districts and charters continued to report spending and planning to spend the largest portion of relief monies on maintaining operations, almost $1.2 billion, or 54 percent, spent through June 30, 2022, and almost $1.1 billion, or 45 percent, planned for future spending. In FY 2022 alone, districts and charters reported spending $572.5 million on maintaining operations. See Dashboards A and B for total spending details and Dashboard D for FY 2022 spending details, including by individual district and charter.  

Districts and charters reported most planned future spending of relief monies for maintaining operations for salaries and benefits; and most planned costs will be eliminated or phased out when these monies are no longer available

Of the almost $1.1 billion of remaining relief monies districts and charters reported planning to spend on maintaining operations, districts and charters reported detailed spending for over $1.0 billion, indicating they plan to spend nearly $512.5 million, or 50 percent, on classroom salaries and benefits; approximately $224.8 million, or 22 percent, on nonclassroom salaries and benefits; and the remaining $293.9 million, or 28 percent, on other classroom and nonclassroom spending to maintain operations.

Further, districts and charters reported over $603.3 million, or 59 percent, of planned spending would be for one-time costs or ongoing costs that would phase out and approximately $186.7 million, or 18 percent, of the planned spending would be for ongoing costs that will continue to be funded with alternative revenue sources when the relief monies are no longer available. Of the 276 districts and charters planning to support future maintaining operations spending from an alternative revenue source, 78 percent plan to use some State equalization assistance to fund at least a portion of their spending. The other most common revenue sources identified were existing fund balances, followed by other federal grants, and State grants. However, districts and charters reported that they did not evaluate $241.1 million, or 23 percent, of their planned spending, and they may need to phase out those costs if an alternative funding source cannot be identified before relief monies are no longer available.

See Dashboards A and B for total planned spending details, including by individual district and charter.

Districts and charters reported most relief monies spent to maintain operations through June 30, 2022, were spent on classroom and nonclassroom salaries and benefits

Of the almost $1.2 billion of relief monies districts and charters reported spending on maintaining operations through June 30, 2022, districts and charters reported spending nearly $855.6 million, or 72 percent, in the classroom, which includes over $754.4 million spent on classroom-related salaries and benefits and over $101.1 million spent on other classroom-related costs. The remaining over $340.5 million, or 28 percent, spent on maintaining operations was spent on nonclassroom salaries, benefits, and other costs.

See Dashboard A for the classroom and nonclassroom spending details for all spending categories, State-wide or by county or legislative district; and see Dashboard B for related details by individual district or charter.

State-wide district and charter ending fund balances have increased every year since FY 2018, including a $1.45  billion increase after FY 2020 when they first received relief monies

While some districts and charters have experienced decreasing fund balances, most districts and charters increased fund balances between FYs 2018 and 2022. State-wide ending fund balances increased over $1.45 billion, or approximately 40 percent, after FY 2020, the first-year districts and charters received relief monies. Specifically, since FY 2020 district fund balances increased over $1.14 billion, or 34 percent, and charter fund balances increased approximately $0.31 billion, or 115 percent.

Districts and charters reported spending the majority of relief monies through June 30, 2022, in addition to their available State and local monies but fund balance information appears to contradict and raises questions

Through June 30, 2022, districts and charters reported spending almost $1.7 billion, or 76 percent, of the total $2.2 billion relief monies they spent as being in addition to available State and local monies and just under $531.0 million, or 24 percent, as being instead of available State and local monies. However, 217 districts and charters reported relief monies spending that appears to contradict fund balance information, which raises questions about the reliability of the information they reported (see the summary of findings, recommendations, and followup below and the “Finding 3, recommendation, and followup” section for more details).

Districts and charters reported spending relief monies through June 30, 2022, in addition to available State and local monies primarily for new costs

Of the $1.7 billion districts and charters reported spending in addition to available State and local monies, almost $1.3 billion, or 76 percent, was reported as spent on new costs that were not similar to costs districts and charters incurred prior to March 2020, the start of the COVID-19 pandemic. See below for the types of new costs districts and charters reported incurring.

Districts and charters reported incurring new costs after the start of the pandemic in March 2020, such as salaries and benefits costs including extra duty pay for existing staff and technology

Findings, recommendations, and followup

Our January 2023 report contained 3 findings and recommendations related to district and charter planned future relief monies spending, noncompliance with reporting requirements, and district- and charter-reported information that appears inconsistent. The follow-up implementation status of those recommendations is as follows:

Finding 1: Districts and charters plan to spend $1.1 billion of remaining COVID-19 federal relief monies that expire in 2024 for ongoing expenses to maintain operations; therefore, they need to develop plans for operational needs supported by these monies

November 2023 follow-up implementation status: Approximately 40 percent of districts and charters reported having a written plan for supporting operations once their federal relief monies planned for maintaining operations are no longer available; however, some districts and charters without a written plan were able to classify most reported planned maintaining operations spending into 3 categories: one-time costs, ongoing costs that will be phased out, and ongoing costs that will be supported from alternative funding sources.

Specifically, of the 593 districts and charters that reported maintaining operations planned spending, only 240 reported they had a written plan for meeting operational needs when these relief monies are no longer available after September 2024, while 350 reported they did not have a written plan. Additionally, 3 charters failed to respond to our repeated requests for plan information. See the “Finding 1, recommendation, and followup” section below and Dashboards A and B for additional details about the maintaining operations planned spending classifications.

Finding 2: Some districts and charters failed to report statutorily required financial information necessary for relief spending special report, limiting transparency and completeness of information for decision-makers, stakeholders, and public

November 2023 follow-up implementation status: Most districts and charters we previously cited for noncompliance with statutorily required reporting resubmitted reporting forms that corrected their noncompliance; however, some districts and charters did not correct their noncompliance, and some districts and charters did not submit required follow-up reporting.

Specifically, of the 21 districts and 64 charters that originally did not comply with the statutory reporting requirements:

• 12 districts and 48 charters resubmitted COVID-19 reporting forms that corrected their cited noncompliance item(s) by July 2023.
• 9 districts and 11 charters resubmitted COVID-19 reporting forms that corrected their noncompliance item(s) by November 2023.
• 5 charters did not correct their cited noncompliance item(s) and are referenced with the applicable footnote(s) in the dashboards.

Further, 3 charters did not submit required follow-up reporting. See the “Report-wide footnotes” section below for information on the specific reporting noncompliance; the data file for filtering instructions for how to generate a list of the noncompliant districts and charters by the specific nature of the noncompliance; and the “Finding 2, recommendation, and followup” section below for additional information.

Finding 3: Some districts and charters reported financial information that appears inconsistent when compared to other financial information, indicating they may have misreported information and limiting the availability of complete and transparent information on relief money spending impacts

November 2023 follow-up implementation status: Dashboard C includes fund balance information from audited financial statements or annual financial reports when financial statements were not available and shows that 217 districts and charters reported relief money spending in addition to or instead of State and local monies that appears to contradict their reported fund balance increase or decrease.   

Therefore, to increase transparency and provide decision-makers, other stakeholders, and the public more complete financial information, the Auditor General added additional fund balance/reserve reporting to district and charter FY 2023 annual financial reports and will add similar required reporting to FY 2025 budget forms. See the “Finding 3, recommendation, and followup” section below and Dashboard C for additional details about reported relief spending and fund balances.

Footnotes indicated in parentheses on specific district and charter names in Dashboards B, C, and D are described below. Bold numbers below identify footnotes related to districts and charters that did not comply with the described reporting requirements. See the "Finding 2, recommendation, and followup” section for summary information on district and charter reporting requirement noncompliance.

(1) Not used. Districts and charters are no longer identified as noncompliant for failure to submit FY 2022 COVID-19 reporting form. All previously noncompliant districts and charters submitted the required forms during our follow-up process. See the "Finding 2, recommendation, and followup” section.

(2) The district or charter failed to comply with statutory COVID-19 federal relief spending reporting requirements and include or classify accounting data correctly to ensure complete, accurate, and transparent reporting. See the "Finding 2, recommendation, and followup” section.

(3) Not used. Districts and charters are no longer identified as noncompliant for failure to report ending fund balance information. We collected ending fund balance information for all districts and charters from audited financial statements or unaudited annual financial reports, when audited financial statements were not available. See the "Finding 2, recommendation, and followup” section.

(4) The district or charter reported total spending in detail that did not agree to its reported total award spending from all COVID-19 federal relief grants as shown on Dashboard B, “Total COVID-19 federal relief awards, spending, and amount remaining through June 30, 2022” table. For example, the total spending in that table did not agree to Dashboard B, “Total COVID-19 federal relief classroom and nonclassroom spending through June 30, 2022, by category” table and/or the Dashboard C, “COVID-19 federal relief spending detail for continuing and new costs in addition to or instead of available State and local monies through June 30, 2022” table.

(5) Based on our analysis of grant awards, the district or charter did not report award amount or spending for other grant allocations awarded by grantor agencies that we were able to confirm with grantors. Therefore, we increased the “Other award” amounts and as no spending was reported we adjusted planned future spending in “maintaining operations” to balance the award with spending and planned spending amounts. We adjusted category spending in “maintaining operations” or other allowable spending categories based on the grant requirements, as applicable, to align reported category spending to total reported award spending. For food service awards, we increased the food service category for nonclassroom other spending for the amount ADE provided.

(6) The district or charter did not consistently report detailed spending as “salaries and benefits” or “other” throughout the report. Therefore, spending by these types does not always agree between tables on Dashboards B, C, and D.

(7) The district or charter did not consistently report spending amounts in total throughout the report. Therefore, total spending does not agree between tables on Dashboards B and C.

(8) Not used. Districts and charters are no longer identified as reporting unreliable fund balance changes as we reported FYs 2018 through 2022 fund balance information for districts and charters from audited financial statements or unaudited annual financial reports (AFR) when audited financial statements were not available. See the “Sources, Scope, and Methodology” section below for more information.

(9) The district or charter closed; therefore, it did not submit a FY 2022 COVID-19 reporting form. We reported all award and spending information that was previously reported in our COVID-19 spending through June 30, 2021, report.

(10) Not used. Districts and charters are no longer identified as noncompliant for failure to complete the classroom and nonclassroom spending detail information in their FY 2022 COVID-19 reporting form. All previously noncompliant districts and charters submitted the required information during our follow-up process. See the "Finding 2, recommendation, and followup” section.

(11) Not used. Districts and charters are no longer identified as noncompliant for failing to complete statutorily required reporting of continuing and new cost spending detail in addition to or instead of available State and local monies in their FY 2022 COVID-19 reporting form. All previously noncompliant districts and charters submitted the required information during our follow-up process. See the "Finding 2, recommendation, and followup” section.

(12) The district or charter reported all or most of their FY 2022 COVID-19 federal relief spending was in addition to available State or local monies, but their reported fund balance increased, which appears to indicate some of their spending was instead of available State and local monies.

(13) The district or charter reported all their FY 2022 COVID-19 federal relief spending was instead of available State and local monies, but their reported fund balance decreased, which appears to indicate some of their spending was in addition to State and local monies.

(14) Not used. Districts are no longer identified as noncompliant for failure to submit their required FY 2022 financial statement audit. All districts submitted their required audits during our follow-up process. 

(15) The district or charter did not comply with statutory COVID-19 federal relief spending reporting requirements as it did not report additional details for planned future relief monies spending in the maintaining operations category reported on Dashboard B. See the "Finding 2, recommendation, and followup” section.

(16) The district or charter did not consistently report planned maintaining operations spending amounts. Therefore, total planned maintaining operations spending does not agree between tables on Dashboard B.

Districts and charters plan to spend $1.1 billion of remaining COVID-19 federal relief monies that expire in 2024 for ongoing expenses to maintain operations; therefore, they need to develop plans for operational needs supported by these monies 

Condition—Less than 2 years remain until the $1.1 billion of remaining one-time COVID-19 federal relief monies (relief monies) that districts and charters State-wide plan to spend for ongoing expenses to maintain operations will expire. Specifically, State-wide, districts and charters reported that they plan to spend $1.1 billion, or nearly half, of their remaining relief monies awarded to them as of June 30, 2022, and expiring September 30, 2024, for maintaining operations. This category—maintaining operations—includes payments to continue employing existing classroom and nonclassroom staff and payments for other planned operating costs rather than for other costs of staff, programs, services, or equipment in response to the COVID-19 pandemic.  

This is a substantial amount of remaining relief monies that districts and charters State-wide reported they plan to spend for maintaining operations and for some districts or charters comprises a significant amount of their annual operating monies. State-wide, the total $1.1 billion of remaining relief monies that districts and charters plan to spend for maintaining operations is just over 14.5 percent of FY 2022 State-wide formula funding, and 94 districts and 143 charters reported at least that percentage of planned spending of relief monies for maintaining operations as compared to their FY 2022 formula funding. For example, among those 94 districts, Phoenix Union High School District reported planning to spend over $102.6 million of its remaining relief monies to maintain operations, or nearly 53 percent of its FY 2022 formula funding. Further, Heber-Overgaard Unified School District reported planning to spend nearly $22.8 million of its remaining relief monies to maintain operations, or more than 576 percent of its FY 2022 formula funding. Among those 143 charter schools, ASU Preparatory Academy Digital reported planning to spend nearly $11.7 million of its remaining relief monies to maintain operations, or more than 41 percent of its FY 2022 formula funding. Further, Edkey, Inc.–Sequoia Ranch School reported planning to spend nearly $2.3 million of its remaining relief monies to maintain operations, or more than 263 percent of its FY 2022 formula funding.   

Effect—Districts and charters that plan to spend a large portion of their remaining relief monies to maintain operations could face critical operational spending decisions when their one-time relief monies are no longer available as of September 30, 2024. For example, districts and charters reported spending $925 million in relief monies for salaries and benefits, almost 79 percent of their total spent for maintaining operations through June 30, 2022. If they use their remaining relief monies for maintaining operations similarly—largely on salaries and benefits—these districts and charters could have to reduce the number of classroom and nonclassroom staff positions based on reduced available funding to support those positions when the one-time relief monies expire.   

Cause—As allowed by federal laws, districts and charters State-wide plan to spend a significant amount of their remaining relief monies to maintain operations rather than for other allowable costs due to the COVID-19 pandemic. The largest source of these monies is the ESSER III grant, which allows the monies to be spent no later than September 30, 2024.    

Criteria—Pursuant to federal laws, the relief monies awarded to Arizona districts and charters have various dates by which the monies must be spent, but generally the latest date by which monies can be spent is September 30, 2024. Districts and charters are allowed to spend the monies on continuing (or costs similar to those incurred before the pandemic) and new costs of COVID-19 relief, prevention, and recovery, including maintaining operations and continuity of educational services; new programs/curriculum to address learning loss and unique student needs; mental and medical health services and support for students and/or staff; personal protective equipment (PPE) and cleaning and sanitizing; technology-related spending; school facility repairs, improvements, and additions; food service programs; and staff training.  

Recommendation

1. Districts and charters that have planned to spend a large portion of their remaining relief monies for maintaining operations should accurately monitor, track, and record their relief spending and develop a plan detailing the actions they will take in anticipation of the September 30, 2024, deadline for using these one-time monies and the impacts on their continuing operations, such as identifying the sources of revenues to replace these monies or phasing out these expenditures to ensure they can operate within their available resources. 

November 2023 follow-up implementation status: Approximately 40 percent of districts and charters reported having a written plan for supporting operations once their federal relief monies planned for maintaining operations are no longer available; however, some districts and charters without a written plan were able to classify most reported planned maintaining operations spending into 3 categories: one-time costs, ongoing costs that will be phased out, and ongoing costs that will be supported from alternative funding sources

Development of a written plan and evaluation of planned spending—As shown in the pie chart below, of the 593 districts and charters that reported maintaining operations planned spending:

• 94 districts and 146 charters (240 total) reported having a written plan for supporting operations once their federal relief monies planned for maintaining operations are no longer available after September 2024. Of those:

  • Only 58 districts and 91 charters (149 total) fully evaluated their planned spending and identified all planned maintaining operations spending as either one-time costs, ongoing costs they plan to phase out, or ongoing costs with an identified alternative funding the source.

  • The remaining 36 districts and 55 charters (91 total) did not fully evaluate their planned spending and reported that they plan to use federal relief monies for some costs that may need to be phased out if an alternative funding source cannot be identified before relief monies expire.

• 123 districts and 227 charters (350 total) reported not having a written plan for supporting operations once their federal relief monies planned for maintaining operations are no longer available. Of those:

  • 55 districts and 81 charters (136 total) had evaluated their planned spending enough to report amounts of one-time and ongoing costs that will be eliminated and ongoing costs that will be supported from alternative funding sources, indicating they have at least an informal plan for supporting operations after September 2024.

  • 68 districts and 146 charters (214 total) reported they had not fully evaluated their planned spending, and some or all planned maintaining operations spending may need to be phased out if an alternative funding source cannot be identified before relief monies expire.

• 3 charters failed to respond to our repeated requests for plan information and are identified as noncompliant with that reporting requirement in the Finding 2 followup below.

Districts and charters that have not developed plans for supporting operations or evaluated all ongoing costs may have to make difficult and ill-timed decisions such as eliminating classroom or nonclassroom staff positions to continue operating within available revenues when these one-time relief monies are no longer available. Alternatively, districts and charters that plan ahead to support costs from other identified sources or communicate the need to phase out other costs before relief monies are no longer available can reduce the negative impact on their future operations. 

Future maintaining operations spending plan details—As shown in the pie chart below, districts and charters classified most reported planned maintaining operations spending as one-time, ongoing costs that will be phased out, and ongoing costs that will be supported from alternative funding sources. Specifically, districts and charters reported $603.3 million, or 57 percent, of planned spending would be for one-time costs or ongoing costs that would phase out and approximately $186.7 million, or 18 percent, of the planned spending would be for ongoing costs that will continue to be funded with alternative revenue sources when the relief monies are no longer available. Of the 276 districts and charters planning to support future maintaining operations spending from an alternative revenue source, 78 percent plan to use some State equalization assistance to fund at least a portion of their spending. The other most common revenue sources identified were existing fund balances, followed by other federal grants, and State grants. However, districts and charters reported that they did not evaluate over $241.1 million, or 23 percent, of their planned spending, and they may need to phase out those costs if an alternative funding source cannot be identified before relief monies are no longer available.

See additional information about the reported planned maintaining operations spending State-wide and by district and charter in Dashboards A and B, respectively.

Some districts and charters reported financial information that appears inconsistent when compared to other financial information, indicating they may have misreported information and limiting the availability of complete and transparent information on relief money spending impacts  

 Condition—Some districts and charters reported financial information on their FY 2022 COVID-19 reporting form that appears inconsistent when compared to other financial information they also reported. Specifically:

• For 26 districts and 63 charters, their reported fund balance information on their FY 2022 COVID-19 reporting form appears inconsistent compared to other district-/charter-reported information.1 We compared all district-/charter-reported changes in fund balances from FY 2020 to FY 2022 to FYs 2021 and 2022 district-/charter-reported revenues and expenditures to identify inconsistent changes in fund balance. For example, we noted districts or charters that reported a fund balance decrease from FY 2020 to FY 2022 although they reported revenues that exceeded expenditures in FYs 2021 and 2022.  

• Some districts’ and charters’ reported spending of relief monies in addition to or instead of available State and local monies did not appear consistent with their reported fund balance increase or decrease on their COVID-19 reporting form. On one extreme, 77 districts and 75 charters reported they spent all their relief monies in addition to available State and local monies.2  However, they reported a fund balance increase, which appears to indicate they spent at least some relief monies instead of available State and local monies. For example:

  • Gilbert Unified School District reported it had spent all $41.5 million of relief monies expended through June 30, 2022, in addition to available State and local monies even though it reported using $30.4 million for continuing costs, like those incurred before the start of the COVID-19 pandemic, including $24.7 million for salaries and benefits costs. The District also reported a fund balance increase.

  • Portable Practical Education Preparation, Inc. (PPEP, Inc.) (Arizona Insight Academy) charter school reported it had spent all $4.8 million of relief monies expended through June 30, 2022, in addition to available State and local monies even though it reported using nearly all of that for continuing costs, and only reported $2.0 million spent for salaries and benefits related to maintaining positions with student count declines. The Charter also reported a fund balance increase. 

On the other extreme, 1 district and 5 charters reported they spent all their relief monies instead of available State and local monies and reported a fund balance decrease, which appears to indicate they spent at least some of their relief monies in addition to available State and local monies.³ For example:

• Coconino County Regional Accommodation School District reported it spent all $163,900 of relief monies expended through June 30, 2022, instead of State and local monies even though it reported that spending was entirely for new costs, including $87,600 for salaries and benefits. The District also reported a fund balance decrease.

• The French American School of Arizona reported it had spent all $301,800 of relief monies expended through June 30, 2022, instead of available State and local monies even though it reported all that spending was entirely for new costs, including $189,300 on salaries and benefits. The Charter also reported a fund balance decrease.

Effect—Without knowing whether the 89 districts’ and charters’ change in fund balance that appears inconsistent is reliable, we determined it would not be prudent to report the change in fund balance in this report for these districts and charters. Thus, stakeholders do not have access to this information to help determine the impact of relief monies on these 89 districts’ and charters’ fund balance changes or to evaluate to what extent these districts and charters accurately reported how they spent relief monies in addition to or instead of available State and local monies.   

Further, for 158 districts and charters that appeared to report consistent change in fund balance information but reported relief spending for continuing and new costs entirely as in addition to or instead of available State and local monies that did not appear consistent with that fund balance change, stakeholders may not have reliable information to show the use of relief monies along with State-approved formula funding.  

Cause—Districts’ and charters’ financial information appearing inconsistent with other self-reported financial information indicates that they may have misreported information in their COVID-19 reporting form or they did not follow the reporting form’s instructions.

Criteria—As required by Laws 2021, Ch. 408, §54, the Auditor General prescribed a COVID-19 reporting form to facilitate districts’ and charters’ compilation and reporting of spending and planned spending of relief monies. That law required districts and charters to cooperate with and provide information and records to the Auditor General in a format prescribed by the Auditor General to facilitate the required reporting.

Based on information included in our first report on districts’ and charters’ relief monies spending through FY 2021, we included additional reporting requirements in the FY 2022 COVID-19 reporting form, including total district and charter fund balances for FYs 2018 through 2022 to show changes in fund balance resulting from all operations during those years including the use of relief monies since FY 2020 and total relief monies spent for continuing and new costs that were either spent in addition to or instead of available State and local monies to show the use of relief monies along with State-approved formula funding.

Recommendation

3. The Arizona Auditor General should follow up on this report and recommendations after additional district and charter relief-monies-related financial information through FY 2022 becomes available to provide more complete reporting and increase transparency of information available.

November 2023 followup implementation status: 217 districts and charters reported relief spending as in addition to or instead of State and local monies that appears to contradict their fund balance information; therefore, additional reporting on fund balances/reserves will be added to district and charter annual financial reports and budget forms to increase transparency

We obtained FYs 2018 through 2022 fund balance information for districts and charters from audited financial statements or unaudited annual financial reports (AFR) when audited financial statements were not available, to compare to district and charter reported relief spending as in addition to or instead of State and local monies. Overall, 121 districts and 83 charters reported they spent all or most of their relief monies in addition to available State and local monies, which appears to contradict their reported fund balance increase and indicates that some/more of the relief money was spent instead of available State and local monies.¹ Further, 1 district and 12 charters reported they spent all of their relief monies instead of available State and local monies while decreasing fund balance, which indicates that some of the relief money was spent in addition to available State and local monies.² See Dashboard C for fund balance and reported spending analysis by individual district and charter.

We provided the fund balance information to the districts and charters during our follow-up process, and only 66 updated their reported amounts for spending in addition to or instead of available State and local monies. While 51 of those districts and charters reported updated amounts that were consistent with their fund balance change, 15 of those districts and charters reported amounts that still appeared to contradict their fund balance information. For example:

• In our January 1 report, Gilbert Unified School District reported $41.5 million of relief monies expended through June 30, 2022, as in addition to available State and local monies. The District submitted a revised FY 2022 COVID-19 reporting form and reported spending $24.2 million in addition to available State and local monies and $17.3 million instead of State and local monies. However, its $66.2 million fund balance increase between FYs 2020 and 2022 indicates more spending may have been used instead of available State and local monies, contributing to the District’s over 72 percent fund balance increase.

• In our January 1 report, The French American School of Arizona reported it had spent all $301,800 of relief monies expended through June 30, 2022, instead of available State and local monies. The School continued to report 100 percent of its relief monies spending as being instead of State and local monies. However, its fund balance decreased over $8,900 between FYs 2020 and 2022, indicating at least some may have been used in addition to available State and local monies.

Some districts and charters indicated their changes in fund balance were not solely related to spending relief monies in addition to or instead of State and local monies. Some alternative reasons for fund balance changes districts and charters described include:

• Decrease in regular school spending due to instructing students remotely.

• Changes in student enrollment and funding.

• Planned savings to build capital reserves for construction projects.

• Receiving property tax lawsuit settlement revenues that hadn’t yet been paid to the taxpayer.

While spending pattern and student enrollment changes will affect overall revenues a district or charter has available for spending in a given year, fund balance increases related to these changes still indicate the district or charter spent at least some of its COVID-19 relief monies instead of available State and local monies, contributing to those fund balance increases.

Therefore, to increase transparency and provide decision-makers, other stakeholders, and the public more complete financial information, the Auditor General added required reporting on the amount and planned use of fund balance reserves to district and charter FY 2023 annual financial report forms. The forms also provide space to report information about existing district and charter fund balance policies that address the necessary level of fund balance to maintain, the reasons for maintaining that level, and how it plans to spend any reserves held in excess of that level, when applicable. The fund balance policy information is optional for districts and charters to report in FY 2023 to allow enough time to engage in a stakeholder feedback process to clarify the reserve balance policy questions during FY 2024. We will add similar required reporting to FY 2025 budget forms.

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^[1] These districts and charters are identified in the data file and Dashboards B, C, and D by footnote (12).

^[2] These districts and charters are identified in the data file and Dashboards B, C, and D by footnote (13).

ESSER grants—Districts and charters reported more than $3.7 billion allocated in Elementary and Secondary School Emergency Relief (ESSER) grants from ADE through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, and American Rescue Plan (ARP) Act. As required by the federal acts, ADE allocated 90 percent of ESSER monies proportionately to districts and charters based on federal Title I, Part A, eligibility. Title I, Part A, of the Elementary and Secondary Education Act, as amended by the Every Student Succeeds Act, provides financial assistance to districts and charters with high numbers or high percentages of children from low-income families to help ensure that all children meet challenging State academic standards. ADE reported using its discretion over the 10 percent remaining ESSER monies to allocate amounts to non-Title I districts, including career and technical education districts and nonprofit, non-Title I charters.

CRF/ESG grants—The Arizona Governor’s Office determined districts’ and charters’ Coronavirus Relief Fund Enrollment Stability Grant (CRF/ESG) allocations based on enrollment losses between FY 2020 and the FY 2021 40th-day student counts and awarded districts and charters over $369 million in November 2020. CRF/ESG monies were required to be used no later than December 2020. However, some districts and charters reported spending less than their CRF/ESG grant award, resulting in reported remaining amounts of nearly $2 million to spend that may need to be returned to the grantor.

Other grants—Various other federal, State, and local governments have provided $447 million to districts and charters from monies specified in the federal acts related to the COVID-19 pandemic, with allowed spending from March 2020 through various end dates.

Districts and charters spent $2.2 billion of almost $4.6 billion of relief monies awarded through June 30, 2022

Grantor agencies are responsible for communicating federal allowable spending guidance, approving grant applications, and monitoring districts’ and charters’ spending for allowable use. Specifically, ADE provides guidance and monitoring for ESSER grants, which in total represented the largest portion of the relief monies allocated to districts and charters through June 30, 2022, by reviewing and approving grant application and reimbursement requests, and monitoring district and charter strategies, and outcomes of their ESSER-funded activities. Grantor agencies are also responsible for federally required reporting and reviewing related findings in grant recipients’ audit reports. Under federal and State law, most districts and all charters are required to have independent auditors perform annual financial and compliance audits. Arizona Revised Statutes §15-914 describes districts’ and charters’ audit requirements. Further, districts and charters that expend more than $750,000 in federal monies in a fiscal year are subject to federal single audit. As part of the State of Arizona’s FY 2021 annual single audit, auditors reviewed various programs ADE oversees, including the ESSER grants. See the State of Arizona’s FY 2021 Single Audit Report findings related to ADE’s federal reporting responsibilities.