Factors Impacting School District Administrative Costs

During the 44th Legislature, 1st Special Session, the Legislature passed Chapter 4, §16, requiring the Office of the Auditor General to help explain the factors impacting administrative costs for school districts identified by the Joint Legislative Budget Committee (JLBC) as having particularly high or low administrative costs per pupil. JLBC obtained the administrative cost data from school district Annual Financial Reports for fiscal year 1998-99 filed with the Arizona Department of Education, determined the administrative cost per pupil for each district in the State, and identified the districts with high and low costs.

Administrative costs are the costs associated with directing and managing a school district’s responsibilities, at both the district and school levels. These include costs, such as salaries, benefits, supplies, and purchased services for all activities related to directing and managing the operation of the district office, which includes the governing board, superintendent, and business offices; and the principal’s office.

Our Office determined that the inconsistent classification and allocation of districts’ administrative costs was the largest contributor to them being identified as high or low administrative cost districts. Additionally our analysis revealed that low average daily membership (ADM), more administrative employees than average, higher compensation than average due to longevity and a higher pay scale, and higher than expected purchased services were factors contributing to high administrative costs. We also determined that those districts with particularly low administrative costs assigned one employee to perform two or more duties, paid lower compensation than average due to turnover and a lower pay scale, or realized vacancy savings.