Arizona school districts’ and charter schools’, and ADE’s discretionary , COVID-19 federal relief spending—in fiscal year 2022 and in total through June 30, 2022

Arizona school districts’ and charter schools’, and ADE’s discretionary, COVID-19 federal relief spending—in fiscal year 2022 and in total through June 30, 2022

This special report provides summary information and 4 interactive dashboards with Arizona school districts’ and charter schools’ (districts and charters) reported spending in fiscal year (FY) 2022 and in total through June 30, 2022, and planned future spending of allocated/awarded (awarded) COVID-19 federal relief monies (relief monies), as required by Laws 2021, Ch. 408, §54.

This special report also provides Arizona Department of Education (ADE)-reported spending in FY 2022 and in total through June 30, 2022, and planned future spending of the discretionary COVID-19 federal relief monies that it received, as required by the law. This information is included below the dashboards.

Summary

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 the dashboards 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
	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 $1.1 billion, or 48 percent, planned for future spending. In FY 2022, alone, districts and charters reported spending $568.3 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 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 almost $840.6 million, or 72 percent, in the classroom, which includes just over $741.4 million spent on classroom-related salaries and benefits and almost $99.3 million spent on other classroom-related costs. The remaining just over $335.1 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.
Districts and charters reported spending the majority of relief monies through June 30, 2022, in addition to their available State and local monies but some financial information that appears inconsistent raises questions
	Through June 30, 2022, districts and charters reported spending almost $1.8 billion, or 80 percent, of the total $2.2 billion relief monies they spent as being in addition to available State and local monies and $438.1 million, or 20 percent, as being instead of available State and local monies. However, some districts and charters reported some fund balance and relief monies spending information that appears inconsistent when comparing it to other self-reported financial information, which raises questions about the reliability of the information they reported (see the summary for the findings and recommendations below and Finding 3 in the “Findings and recommendations” section).
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 almost $1.8 billion districts and charters reported spending in addition to available State and local monies, almost $1.3 billion, or 74 percent, were 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
	Districts and charters reported spending just over $528.4 million on new salaries and benefits costs with $137.4 million, or 26 percent, spent for adding positions for other than student population growth and $176.0 million, or 33 percent, spent for extra duty pay to existing staff. Districts and charters also reported spending almost $861.4 million on all other new costs with almost $204.0 million, or 24 percent, spent for technology. See Dashboard C for additional reported spending details, including how districts and charters reported spending relief monies in addition to or instead of available State and local monies within each spending purpose shown.
Finding and recommendations
	Our report contains 3 findings and recommendations related to district and charter planned future relief monies spending, noncompliance with statutory relief monies spending reporting requirements, and district- and charter-reported relief monies spending information that appears inconsistent. Our first finding found that State-wide, districts and charters reported that they plan to spend $1.1 billion of remaining relief monies, which expire in 2024, for ongoing expenses to maintain operations. Therefore, we recommended that they develop plans for their operational needs supported by these monies. Our second finding found that numerous districts and charters failed to comply with statutory relief monies spending reporting requirements designed to ensure necessary data is available for this report and to increase financial transparency. For example, 5 districts and 2 charters failed to comply with relief monies spending reporting requirements by not submitting the FY 2022 COVID-19 reporting form, and we have identified them as noncompliant in this report. In addition, 113 districts and charters did not include their required accounting data in the COVID-19 reporting form or did not complete all required reporting in the reporting form to help ensure accurate, complete, and transparent reporting. See the “Report-wide footnotes” section on Dashboards B, C, and D 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 Finding 2 in the “Finding and recommendations” section for additional details about district and charter relief monies reporting noncompliance. Our third finding found that some districts and charters reported financial information in their FY 2022 COVID-19 reporting form 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. Specifically, 89 districts and charters reported fund balance information that appears inconsistent when compared to other self-reported financial information. We determined it would not be prudent to report the direction of their fund balance change since we could not determine the reliability of their information. Further, 158 districts and charters reported relief monies spending in addition to or instead of State and local monies that appears inconsistent with their reported fund balance increase or decrease. Therefore, we recommend that the Arizona Auditor General should follow up on this report after additional district and charter relief-monies-spending-related financial information through FY 2022 becomes available to provide more complete reporting and increase transparency of information available.

Districts’ and charters’ relief spending and planned future spending interactive dashboards

To access information, first choose which of the 4 dashboards you want to use (A, B, C, or D as described below) by selecting the applicable button along the top. Below those buttons, you can select different options to filter the data, such as by legislative district, county, or district or charter, as desired. Groups of districts and charters can be selected by legislative district or county on Dashboard A. Only one district or charter may be selected at a time on Dashboards B, C, and D. To enlarge a table or chart, choose the focus mode option at the item’s top right corner. For amounts that appear blank within Dashboards B, C, and D, the district or charter did not report the information as described in the applicable footnote(s) at the bottom of the dashboards.

Dashboard A—Total spending and Dashboard B—Total spending by district and charters provide total spending of relief monies through June 30, 2022

Total spending of available awards through June 30, 2022, gauge chart—Provides total spending of available awards through June 30, 2022, for the group selected on Dashboard A or for the individual district or charter selected on Dashboard B.
Total COVID-19 federal relief awards, spending, and amount remaining through June 30, 2022, (by legislative district) data table—Provides grant award and spending information in total for the selected group by legislative district on Dashboard A or for the individual district or charter selected on Dashboard B. You can expand the detail shown to the grant level using the plus-sign (+) to the left of the legislative district number on Dashboard A and the district or charter name on Dashboard B. You can further expand Dashboard A to the district and charter level using the plus sign (+) to the left of the grant name. See the “Grant allocation amounts, federal enabling acts, and allowable spending time frames” section below the dashboards for additional information about reported grant awards.
Total spending through June 30, 2022, by category and Planned future use of amount remaining, by category pie charts—Provide spending through June 30, 2022, and planned future spending, by category, for the group selected on Dashboard A or for the individual district or charter selected on Dashboard B. Hover over a pie section to see that category’s dollar amount and percentage. See the "District and charter spending category descriptions" below the dashboards for spending category descriptions.
Total COVID-19 federal relief classroom and nonclassroom spending through June 30, 2022, by category data table—Provides classroom and nonclassroom spending detail by category through June 30, 2022, for the group selected on Dashboard A or for the individual district or charter selected on Dashboard B. See the “District and charter spending descriptions” section below the dashboards for spending category and classroom and nonclassroom spending descriptions.

Dashboard C—Spending in addition to/instead of available State and local monies

COVID-19 federal relief spending through June 30, 2022, used in addition to or instead of available State and local monies pie chart.
Fund balance change between FY 2020 and FY 2022—Shows whether the district or charter reported an increasing or decreasing fund balance from FY 2020 to FY 2022.
Student Count bar graph—Shows the district’s or charter’s unweighted student counts in FYs 2018 through 2022. See “Scope, sources, and methodology” section below for additional information.
State and local revenues from formula funding—Shows student-count-generated formula funding for FYs 2018 through 2022. See “Scope, sources, and methodology” section below for additional information.
Spending detail for continuing and new costs in addition to and instead of available State and local monies through June 30, 2022—Provides total spending through June 30, 2022, for continuing or new costs, used in addition to or instead of available State and local monies with spending details within salaries and benefits and other spending types.

Dashboard D—FY 2022, spending by districts and charters

FY 2022 COVID-19 federal relief classroom and nonclassroom spending, by category data table—Provides FY 2022 classroom and nonclassroom spending detail by category, for the district or charter selected.
FY 2022 spending by category, type, and operational area pie charts—Provides FY 2022 spending by category, type, and operational area in 3 separate pie charts. Hover over a section in any pie to see the spending dollar amount and percentage. See the "District and charter spending descriptions" section below the dashboards for spending category, operational area, and type descriptions.

District and charter spending descriptions:

Spending by category:

Maintaining operations and continuity of educational services—Including payments to continue employing existing classroom and nonclassroom staff and payments for other planned operating costs.

New programs/curriculum to address learning loss and unique student needs—Including academic progress assessments, instructional delivery modifications, summer enrichment, after-school programs, etc.

Mental and medical health services and support for students and/or staff— Including counseling, COVID-19 testing, and vaccinations.

Personal protective equipment (PPE) and cleaning and sanitizing—Including face masks; plexiglass barriers and shields; cleaning and sanitizing supplies and equipment; contracted cleaning services; and additional cleaning personnel costs.

Technology-related spending—Including hardware, software, and connectivity equipment and fees.

School facility repairs, improvements, and additions—Including allowable inspection, testing, maintenance, and upgrade projects to existing facilities or renting new space.

Food service programs—Including staff, equipment, supplies, and transportation costs to deliver meals to students.

Miscellaneous—Including staff training and other allowable grant purposes.

Spending by operational area and type:
Districts and charters report financial transactions in accordance with a uniform chart of accounts. The Uniform System of Financial Records for Arizona School Districts and Uniform System of Financial Records for Arizona Charter Schools provide more detailed descriptions of the operational areas (function codes) and type (object codes) listed below:

Operational area includes the costs incurred in the day-to-day operations in these categories:

Classroom spending—includes instruction costs of activities that deal directly with the interaction between teachers and students, student support costs for activities that assess and improve the students’ well-being, and instruction support costs of activities that assist instructional staff with the content and process of providing learning experiences for students.
Administration—includes costs for activities associated with establishing and administering policy and operating the school, including Superintendents, principals, business managers, and clerical staff.
Plant operations—costs to repair and maintain facilities and equipment, including heating, cooling, lighting, and property insurance.
Transportation—costs related to maintaining buses and transporting students to and from school and school activities.
Other areas—includes food service, principal and interest payments on debt, other programs outside the scope of preschool through grade 12 education, and indirect costs.

Spending by type describes the goods and services purchased:

Salaries and benefits—payments made to or for the benefit of district and charter staff.
Purchased services—payments to individuals or firms that provide specialized skills or knowledge, including nonemployee teachers and other personnel.
Supplies—Payments for items that are consumed or deteriorated through use in teaching, operating the district, or constructing or repairing facilities.
Property—Payments to acquire land, buildings, and equipment.
Other—All other payments not included in other categories, including principal and interest on debt financed equipment.

Classroom and nonclassroom spending:

Classroom spending—Includes instruction costs of activities that deal directly with the interation between teachers and students, student support costs for activities that assess and improve the students' well-being, and instruction support costs of activities that assist instructional staff with the content and process of providing learning experiences for students.
Nonclassroom spending—Includes administration, plant operations, food service, and transportation costs.

ADE’s reported spending for FY 2022 and in total through June 30, 2022, and planned future spending

Between March 2020 and June 30, 2022, ADE received a total of $405.9 million in relief monies, of which $225.0 million was categorized as administrative and discretionary monies and $180.9 million was required set-aside monies for State-wide strategic projects and investments that support schools’ recovery needs and increase learning opportunities for students

ADE reported spending $84.2 million, or 21 percent, of its discretionary relief monies through June 30, 2022. Most of this spending, $37.7 million, or 45 percent, was provided to districts and charters for additional relief funding as allowed by the federal government. ADE reported that it plans to spend $73.7 million, or 23 percent of the $321.7 million total remaining amount, for the same purpose in future years. ADE’s reported spending through June 30, 2022, and planned future spending, by category, and goals and descriptions are provided below. ADE’s website contains additional spending details at https://www.azed.gov/esser-setaside and https://www.azed.gov/esser/american-rescue-plan.

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ADE’s reported spending through June 30, 2022, and planned future spending, by category, and goals and descriptions

Additional relief funding to public schools—Goal: Baseline levels of relief funding for all public schools.

Provide additional funds to ensure a baseline level of relief funding for public-school districts, nonprofit charters, and career and technical education districts.

Blue legend icon Spent/distributed in FYs 2020 & 2021, $11.4 million

Green Spent/distributed in FY 2022, $26.3 million

Planned future spending, $73.7 million

Student equity and achievement—Goal: Increase proficiency for all students and close achievement gaps.

Engaging and empowering Arizona students to reach their full potential and providing opportunities for equitable academic outcomes so all students have access to multiple pathways to achieve life-long success

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $170,000 (or $0.17 million)

Green Spent/distributed in FY 2022, $3.9 million

Planned future spending, $4.6 million

Educator recruitment and retention—Goal: Every student has access to qualified educators and leaders.

Inadequate retention and recruitment of teachers and other professionals providing specialized student support, such as school counselors, has led to a staffing shortage in schools. Highly effective teachers in the classroom are the biggest predictor of student success. Arizona must foster a robust, State-wide teaching profession where educators can grow and thrive professionally and personally.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $0

Green Spent/distributed in FY 2022, $18.2 million

Planned future spending, $14.8 million

Safe and healthy schools—Goal: All students will learn and grow in a safe and healthy environment.

Integral to every child’s education is their social-emotional wellbeing, of which mental and physical health and safety have a primary role. Schools need resources and information to sustain safe, healthy, supportive, and inclusive environments for students, families, and educators.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $20,000 (or $0.020 million)

Green Spent/distributed in FY 2022, $838,000 (or $0.838 million)

Planned future spending, $10.6 million

Serving the Arizona school community through the pandemic—Goal: Help schools and families address disruptions resulting from the emergency of the pandemic.

Schools also need support to help prepare for safe school openings, as well as future disruptions to health and access to learning.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $3 million

Green Spent/distributed in FY 2022, $1.4 million

Planned future spending, $14.8 million

Bridging the digital divide and providing access to digital resources—Goal: Bridge the digital divide and provide access to broadband.

Provide relief to meet immediate needs and address on-going needs and solutions that strengthen connectivity across Arizona and its school communities.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $2.5 million

Green Spent/distributed in FY 2022, $0

Planned future spending, $3.2 million

Postsecondary access and attainment—Goal: All students are prepared to access, and succeed in, post-secondary learning opportunities.

Post-secondary access and success is vital to ensuring all students reach their full potential.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $10,000 (or $0.10 million)

Green Spent/distributed in FY 2022, $1.2 million

Planned future spending, $0.9 million

Administration

Supporting ADE’s grant oversight operations.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $385,000 (or 0.385 million)

Green Spent/distributed in FY 2022, $925,000 (or $0.925 million)

Planned future spending, $18.8 million

Other and indirect costs—Goal: Other & Indirect Costs includes funds allocated for indirect cost recovery and State projects that are in process for finalization and/or public announcement.

Indirect costs represent the expenses of doing business that are not readily identified with a particular grant, contract, project function, or activity but are necessary for the general operation of the organization and the conduct of activities it performs. ADE recovers indirect costs on funds allocated for ESSER State Projects per ADE's U.S. Department of Education (USED) approved Indirect Cost rate agreement.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $465,000 (or $0.465 million)

Green Spent/distributed in FY 2022, $3.4 million

Planned future spending, $4.7 million

ESSER III required set-aside monies

Set-aside funds will be allocated in FY 2022 toward State-wide strategic projects and investments that will support schools' recovery needs and increase learning opportunities for students through 2024, primarily per a Request for Grant Proposal Application (RFGA) process based on the recommendations of the Equitable & Effective Schools Taskforce and ADE's ESSER III State Plan, approved by USED on 10/07/2021.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $0

Green Spent/distributed in FY 2022, $10 million

Planned future spending, $170.8 million

Other discretionary and administration

ADE’s set-aside funds for administration and other allowable grant activities from grants funded through various COVID-19 federal acts.

Blue legend icon

Spent/distributed in FYs 2020 & 2021, $0

Green Spent/distributed in FY 2022, $94,000 (or $0.094 million)

Planned future spending, $4.7 million

Findings and recommendations

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

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:

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.

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

Condition: Some districts and charters failed to report statutorily required financial information to ADE in their FY 2022 COVID-19 reporting form, which is the same data used for the relief spending special report. The types of financial information districts and charters failed to report and the numbers of districts and charters with each of these reporting noncompliance issues are described in the table below and can also be viewed by filtering for the applicable footnote in our report’s data file. The footnotes are also identified in Dashboards B, C, and D.

Some districts and charters failed to report statutorily required financial information
Financial information that districts/charters failed to report	Number of districts	Number of charters	Footnote
Failed to complete and submit their FY 2022 COVID-19 reporting form by the October 15, 2022, due date and still had not completed and submitted this required form by December 5, 2022, the final date we pulled data from ADE for this special report. Therefore, their FY 2022 spending is not included in this report.	5	2	(1)
Failed to include their accounting data or did not identify COVID-19 federal relief grants within the accounting data (3 districts and 6 charters) in their FY 2022 COVID-19 reporting form. The accounting data was required in the COVID-19 reporting form to allow the form’s formulas to directly pull reported spending by operational area and type from that data to increase reporting transparency.	9	59	(2)
Failed to report fund balance information in their FY 2022 COVID-19 reporting form.	6	17	(3)
Failed to report COVID-19 spending by category details for classroom and nonclassroom spending in their FY 2022 COVID-19 reporting form. Without this information, we could not report complete details for all COVID-19 spending categories.	8	9	(10)
Failed to report COVID-19 spending detail for continuing or new costs in addition to or instead of available State and local monies in their FY 2022 COVID-19 reporting form.	3	1	(11)

Source: Auditor General staff analysis of district- and charter-submitted FY 2022 COVID-19 reporting forms and ADE-provided school report card information.

Effect: Due to some districts and charters not reporting statutorily required information, this report does not include some financial information for nonreporting districts and charters, and some of our analyses do not include all districts and charters. Therefore, decision-makers, other stakeholders, and the public do not have complete and transparent information about FY 2022 relief spending or the relief spending through June 30, 2022, and decision-makers may not have complete or accurate financial information upon which to make decisions. For example:

Due to 5 districts and 2 charters not submitting their FY 2022 COVID-19 reporting form, we were not able to include FY 2022 relief spending for those districts and charters in this report. These districts’ and charters’ missing information makes the total reported FY 2022 relief spending by Arizona districts and charters and total reported relief spending by Arizona districts and charters from FY 2020 through FY 2022 lower than the actual amounts due to incomplete information.
Due to 9 districts and 59 charters not submitting their accounting data with their FY 2022 COVID-19 reporting form, we could not analyze any errors or discrepancies in reported amounts in their reporting form, if noted.

Cause: Districts and charters that failed to provide required financial information did not follow the instructions within the FY 2022 COVID-19 reporting form. The instructions detailed the information that was required to be reported, and the form also provided fields for requested data. In addition, we provided multiple ways for them to contact us if they had any questions about the required information, or ADE if they had questions about submitting the form. Finally, for those districts and charters that did not submit the required information by the initial due date, we provided a reminder email and more than a 1-month extension to submit the information.

Criteria: As required by Laws 2021, Ch. 408, §54, the Auditor General prescribed a FY 2022 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. Like other required annual financial reporting forms that the Auditor General prescribes in conjunction with ADE, the FY 2022 COVID-19 reporting form required districts and charters to include their accounting data in the form and specifically identify COVID-19 federal relief grants to allow the form’s formulas to directly pull reported spending by operational area and type from that data to increase reporting transparency.

Recommendation:

Districts and charters need to comply with all statutory financial reporting requirements and ensure that all required information is reported in the format and manner prescribed by the required deadline to ensure transparent reporting and the availability of complete and accurate financial information for decision-makers, other key stakeholders, and the public.

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

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:

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.

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^[1]These districts and charters are identified in the data file and Dashboards B, C, and D by footnote (8).

^[2] These districts and charters are identified in the data file and Dashboards B, C, and D by footnote (12).

^[3] These districts and charters are identified in the data file and Dashboards B, C, and D by footnote (13).

Relief spending details

Districts and charters reported relief spending by category—We worked with ADE, other grantors, districts, and charters to develop the spending categories for district and charter total relief grant spending and planned future spending across all related grants. Although ESSER grants, in total, allow spending that could be classified in each of these categories, not all relief grants allow spending in each of the spending categories. For example, allowable uses of monies reported as Other grants, including Federal Emergency Management Agency grants and Small Business Administration Paycheck Protection Program monies, were more restricted and likely fit in only 1 of the spending categories. Dashboards A and B provide additional information about relief spending by category for classroom and nonclassroom purposes. Through FY 2022, districts and charters reported spending almost $1.2 billion, or 54 percent, of their COVID-19 monies on maintaining operations, including $925.8 million on salaries and benefits, with $741.4 million related to classroom personnel. See information below on district and charter "Spending for continuing and new costs” across all spending categories for reported spending to maintaining positions when student counts declined or to add positions.

Districts and charters reported spending relief monies for continuing and new costs—The COVID-19 federal relief packages provided school districts and charter schools money to support recovery needs and increase learning opportunities for students. Dashboard C includes individual district- and charter-reported spending for continuing costs, similar to costs incurred before the pandemic, and new costs. As shown in the pie chart below, from March 2020 through June 30, 2022, districts and charters in total reported spending just over $803.7 million, or 36 percent of their relief monies for continuing costs, including $527.1 million spent on salaries and benefits for maintaining teachers and other staff positions and $276.6 million spent on other Costs, such as curriculum and education programs and replacing technology devices. For the same period, districts and charters in total reported spending almost $1.4 billion, or 64 percent of their relief monies for new costs, including $528.5 million for salaries and benefits related to increasing the number of teachers or other staff positions and providing extra duty pay to existing staff and $861.3 million for other new costs related to technology, curriculum, and facility improvements.

pie

Districts and charters report spending relief monies in addition to or instead of available State and local monies—Relief grants generally allowed districts and charters to use grant monies in addition to or instead of State and local monies available for similar purposes, unlike most other federal grants, which generally require only spending in addition to State and local monies through nonsupplanting provisions. Along with the information on new and continuing spending described above, Dashboard C also includes individual district- and charter-reported relief spending in addition to and instead of available State and local monies. As shown in the pie chart below, through FY 2022, districts and charters reported spending almost $1.8 billion, or 80 percent, of their relief monies in addition to available State and local monies and just over $438 million, or 20 percent, instead of available State and local monies. In total 416 districts and charters reported spending some and 100 districts and charters reported spending all their relief monies through June 30, 2022, instead of spending available State or local monies for allowable costs of relief, prevention, and recovery. However, 223 districts and charters reported spending all their relief monies through June 30, 2022, in addition to spending available State or local monies for costs of relief, prevention, and recovery.

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Some districts and charters reported spending relief monies in addition to available State and local monies, which appears inconsistent with their reported fund balance increases—From FY 2018 through FY 2022, the years leading up to and through the pandemic, many districts and charters experienced changes in their available State and local revenues for various reasons, including COVID-19- and non-COVID-19-related changes in student counts, Legislature-approved per student formula funding increases, per student classroom site allocation increases, distance-learning-funding reductions, and operating changes related to transportation, food service, before- and after-school programs, or other school-sponsored activities and programs. Specifically, State-wide from FY 2018 to FY 2022, the per student base support level for districts and charters increased by $707 from $3,683 to $4,390. Over that same time period, the per student classroom site allocations for districts and charters increased by $347 from $386 to $733. From FY 2020 through FY 2022, 27 districts and 124 charters reported overall decreases in student counts and formula funding. Of the 539 districts and charters that reported reliable changes in their fund balance from FY 2020 through FY 2022, 459 districts and charters reported increasing their fund balances, indicating they were able to carry over monies from one year to the next year, and 80 districts and charters reported fund balance decreases. However, 77 districts and 75 charters that reported increasing fund balances also reported spending all their COVID-19 federal relief monies in addition to available State and local monies, which appears to indicate that more COVID-19 federal relief monies were spent instead of State and local monies.

Further, 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. We also determined that 26 districts’ and 63 charters’ reported fund balance changes from FY 2020 to FY 2022 appeared inconsistent when compared with revenue and expenditure information reported in the district’s or charter’s Annual Financial Report. Further, 54 districts and charters failed to comply with statutory requirements and submit fund balance data or were closed and did not submit the FY 2022 COVID-19 reporting form. See Finding 3 in the “Findings and recommendations” section above and “Scope, sources, and methodology” section below for more information.

Grant allocation amounts, federal enabling acts, and allowable spending time frames

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 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 nearly $370 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 $2 million to spend that may need to be returned to the grantor.

Other grants—Various other federal, State, and local governments have provided $443.9 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

Grant	Federal enabling act	Allocation amount	Spent to date	Allowable spending end date
ESSER I	CARES Act	$ 265,535,564	$ 261,471,856	9/30/2022
ESSER II	CRRSA Act	1,093,412,442	815,599,350	9/30/2023
ESSER III	ARP Act	2,385,622,070	465,267,167	9/30/2024
ESSER grants total		$ 3,744,570,076	$ 1,542,338,373
CRF/ESG	CARES Act	369,236,647	367,153,777	12/30/2020
Other grants	Various acts	443,933,270	304,504,954	Various dates
Total grants		$4,557,739,993	$2,213,997,104

Grant application, award, and payment process

As shown below, districts and charters must apply for their grant allocations to be eligible to receive reimbursement for allowable grant spending.

Grant payment cycle
Application submitted and allocation awarded	Grant award spent	Report on award spending submitted	Award recipient reimbursed

Grant recipient or subrecipient applies for grant, after which federal grant allocation is awarded.	Once awarded grant allocation, recipient is authorized to spend grant monies for allowable purposes.	Grant recipient is required to report spending to awarding agency during or after the fiscal year spent.	If awarding agency approves reported spending, grant recipient is reimbursed.

Grant monitoring

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.

Scope, sources, and methodology

We compiled 237 districts’ and 445 charters’ reported spending by operational area and type of purchase, and spending and planned future spending by category from their FY 2022 COVID-19 reporting forms we developed and required districts and charters to complete and submit to ADE. The 237 districts included transporting districts, career and technical education districts, and accommodation districts and the 445 charters operated in FYs 2020, 2021, and/or 2022, based on our analysis of ADE-provided school report card information and district and charter report submissions. For the 1 district and 23 charters that closed any time after FY 2020 and did not file a FY 2022 COVID-19 reporting form, we reported all available data. Despite being provided several reminders and extensions of the report submission deadlines, 5 districts and 2 charters failed to comply with the statutory COVID-19 federal relief spending reporting submission requirements, as noted by their name with footnote (1). As a result, total spending through FY 2022 does not include spending for these districts and charters. Data used in the dashboards is included in this data file.

We reported information from the following sources:

District/Charter name—Our analysis of ADE-provided district and charter names used in its school report card website. We added a location to the end of some charter names to distinctly identify charters with otherwise identical names operated under separate charter contracts and also indicated the fiscal year closed, if applicable.

County—Our analysis of ADE-provided county data. For district boundaries encompassing more than 1 county, the county in which the district office resides is presented.

Number of schools—Our analysis of ADE-provided school report card information, including online schools and preschools.

Legislative district(s)—The Arizona Independent Redistricting Commission adopted new legislative district boundaries on January 21, 2022. We used these new boundaries when determining each district’s and charter’s legislative district for this report. For charter schools, we assigned the legislative district where each charter school was located based on ADE-provided addresses. For school districts, we assigned the legislative district(s) based on our analysis of school and legislative district boundaries using 2020 Census Block data from the U.S. Census Bureau.

Student count—ADE-provided, district- and charter-reported FYs 2018 through 2022 unweighted student counts, rounded to the nearest whole number. For the district and charters that have closed since FY 2020 and did not submit FY 2022 reports, we did not report student count information.

State and local revenues from formula funding—ADE-provided student-count-generated formula funding amounts. Districts and charters receive State and local monies from formula funding by weighting certain student types in the student count and multiplying that weighted student count by a base amount. Formula funding changes also include State-wide-approved base amount increases during the years reported and changes in the types of students served.

We compared reported grant awards to data obtained from grantor agencies described below:

ESSER I, II, and III—ADE-reported ESSER allocations and awards.

GEER—ADE-reported Acceleration Academies Grant provided from Governor’s Emergency Education Relief (GEER) grants and Arizona Governor’s Office-reported other GEER grants.

CRF/ESG—Arizona Governor’s Office-reported CRF/ESG awards.

Other COVID-19 grants—includes award amounts and spending from the following grantors:

DEMA—Arizona Department of Emergency and Military Affairs (DEMA)-reported Federal Emergency Management Agency Public Assistance Program Grant and Express Pay payments.

National School Lunch Program and Emergency Operational Cost Reimbursement Program—ADE’s Health and Nutrition Services Division-reported district and charter food service program cost reimbursements for March through September 2020, and emergency operational cost reimbursements from relief monies. Districts and charters report these reimbursements within their food service programs and may be reported inconsistently in relief spending detail by category and use.

Paycheck Protection Program (PPP)—Small Business Administration PPP loan forgiveness data as of June 30, 2022.

ARP school and community grants—ADE-reported programs using ADE’s ESSER III set-aside monies.

Education Plus-Up Grant Program—Arizona Governor’s Office-reported program using Coronavirus State and Local Fiscal Recovery Funds established by the ARP Act.

100 Day In-Person Reimbursement—Arizona Governor’s Office-reported program using Coronavirus State and Local Fiscal Recovery Funds established by ARP.

In our FY 2022 COVID-19 reporting form, we required districts and charters to report FY 2022 spending by operational area, type, grant, and category. We also required districts and charters to report total spending through June 30, 2022, with detailed amounts spent for salaries and benefits and other costs in separate tables by category and in total for amounts spent in addition to or instead of available State and local monies for classroom and nonclassroom purposes. Although some districts and charters did not consistently classify spending as salaries and benefits or other spending when reporting amounts in these different tables, total reported spending across the tables was substantially the same. Districts and charters that reported inconsistent information are identified with a footnote as described in the “Report-wide footnotes” section on Dashboards B, C, and D, and the “District and charter spending descriptions” section above.

To report whether relief monies were used by school districts and charters in addition to or in place of available State and local monies, we provided districts and charters with a FY 2022 COVID-19 reporting form that included detailed instructions for obtaining and reporting to us information related to changes in student count, formula funding, and fund balance from various sources, including the districts’ or charters’ financial statements or the applicable year’s Annual Financial Report (AFR). For a sample, we could not agree the district’s or charter’s reported FYs 2020 and 2021 fund balances to their audited financial statements. Therefore, we compared districts’ and charters’ reported FYs 2020 through 2022 fund balance change to AFR revenue and expenditure data to determine if the reported change in fund balance from FYs 2020 to 2022 appeared reasonable. Using the districts’ and charters’ reported information in the FY 2022 COVID reporting form and in the AFRs, we evaluated whether each district’s and charter’s reported increase or decrease in its fund balance between FYs 2020 and 2022 was reasonable and, if so, indicate the direction of each district’s and charter’s fund balance change with an arrow in Dashboard C. However, 26 districts’ and 63 charters’ reported fund balance information appeared inconsistent when compared to other self-reported financial information and we were could not determine whether their reported fund balance increase or decrease was reliable so they are indicated by “Appears inconsistent.” For example, our analysis of AFR data showed for some of these districts and charters that their revenues exceeded expenditures in FYs 2021 and 2022; however, the district or charter reported a fund balance decrease from FY 2020 to FY 2022. We further considered if the fund balance change was consistent with the district’s or charter’s reported use of COVID-19 federal relief monies in addition to or instead of available State and local monies as individually described on Dashboard C and as addressed in Finding 3 in the “Findings and recommendations” section above.

We compiled ADE’s use and planned future spending of discretionary relief monies and reported them by category with the goals and descriptions ADE provided.

Our FY 2021 district, charter, and ADE relief spending special report is available on our website at Arizona Auditor General.

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