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Uniform Expenditure Reporting System (UERS)

The Constitution required the Economic Estimates Commission (Commission) to establish for each community college district a base limit from actual expenditures of local revenues of fiscal year 1980. For community college districts created or consolidated after fiscal year 1980, the Commission determines the base limit as described in A.R.S. §41-563(B)(5).

Each year, the Commission calculates the constitutional expenditure limitation for all community college districts in accordance with A.R.S §41-563 by adjusting their base limits for changes in student population and inflation since the base year.

A.R.S. §15-1471 provides community college districts 2 voter-approved options to alter their expenditure limitation. These options include permanently adjusting the base limit used to calculate the expenditure limitation (permanent base adjustment) or a temporary modified expenditure limitation. See the voter-approved expenditure limitation FAQs for detailed information on these provisions.

No. The expenditure limitation applies only to budgeted expenditures of local revenues as defined by Arizona Constitution, Article IX, §21(4)(c). Generally, local revenues include all monies received by or for the account of the community college district; however; the Constitution excludes some monies such as grants and aid from the federal government, certain revenues received from the State, and tuition and fees from the local revenues definition. In addition, A.R.S. §15-1444 excludes monies received from the following sources after August 5, 2016, from the constitutional local revenues definition:

  • Auxiliary fees.
  • Entrepreneurial and commercial activities.
  • Research and development agreements, royalty agreements, development agreements, licensing agreements, and profit-sharing agreements.
  • Goods and services provided pursuant to a contract with a tribal government.
  • Grants and donations from the State of Arizona, other political subdivisions, tribal governments, or special taxing districts

For a detailed explanation of expenditures not subject to the limitation, see the instructions for UERS forms–Part II. In addition, see the Part II—exclusions and carryforwards FAQs for further information about calculating and tracking excludable revenue amounts.

In accordance with A.R.S. §41-1279.07(H), a community college district that exceeds its expenditure limitation without authorization will have the following amount of its Sate aid withheld based on the percentage of the excess expenditures:

1. If the excess expenditures are less than 5 percent of the limitation, the amount withheld is equal to the excess expenditures.

2. If the excess expenditures are between 5 percent and 10 percent of the limitation or are less than 5 percent of the limitation but it is at least the second consecutive instance of excess expenditures, the amount withheld is equal to 3 times the excess expenditures.

3. If the excess expenditures are equal to 10 percent or more of the limitation, the amount withheld is equal to 5 times the excess expenditures or one-third of its allocation of State aid, whichever is less.

Before State monies are withheld, the Arizona Auditor General must hold a hearing to determine if the community college district has exceeded the expenditure limitation without authorization. To ensure due process, community college district representatives are invited to attend and participate in this hearing. The State Treasurer withholds the penalty in the fiscal year following the Arizona Auditor General’s hearing. 

Part I—expenditure limitation amounts and adjustments to expenditures subject to the limitation

Community college districts can obtain constitutional expenditure limitations from the Arizona Department of Revenue’s Economic Estimates Commission (Commission) website. The Commission should notify districts of their actual expenditure limitations by April 1 for the following fiscal year.

Part II—exclusions and carryforwards

No. If a community college district uses nonlocal revenues (e.g., tuition and fees or investment earnings) to make debt service payments, it may not exclude both the debt service payment amount and the nonlocal revenue amount paid. A district may only exclude such expenditures as either the use of nonlocal monies on the appropriate line for the related revenue on the annual budgeted expenditure limitation report (ABELR)—Part II, or as a debt service expenditure on ABELR—part II, line B.1.

Carryforwards are nonlocal (excludable) revenues as defined by the Arizona Constitution, Article IX, §21, that remain unspent at fiscal year-end. A community college district may carry forward such amounts to subsequent fiscal years and claim exclusions when it spends those revenues. A district should specifically identify carryforwards in its accounting records by fund as to the exclusion’s nature, the carryforward amount, and the fiscal year in which it generated the carryforward.

To calculate exclusions and carryforwards, a community college district must establish revenue to expenditure flow assumptions to determine what revenues it spent and in what order. The flow assumptions the district uses for the ABELR should be consistent with the flow assumptions it uses for the financial statements.

In many cases, the flow assumptions a district uses in preparing the financial statements should be adequate to determine whether it spent local or nonlocal monies when preparing the ABELR. However, in some cases, revenues classified the same for financial statement purposes may include both local and nonlocal revenues. In that case, additional assumptions are necessary for the ABELR.

For example, the community college district may assume it spent local revenues first, thereby conserving unspent nonlocal (excludable) revenues for future years to maximize carryforwards. Alternatively, the community college district may assume that it spent nonlocal revenues first, thereby maximizing available exclusions in the current year. A community college district may still generate carryforwards under this alternative flow assumption if expenditures of nonlocal revenues are less than the nonlocal revenues received, but such carryforwards would be less than under the first assumption. Click here for examples of both methods’ impact.

No. Community college districts should consider current financial resources when evaluating whether carryforwards are reasonable. Although governmental fund balances represent current financial resources, they do not necessarily limit carryforward balances. Proprietary fund net position cannot be used to evaluate whether carryforward balances are appropriate or reasonable since it includes the effects of long-term assets, long-term liabilities, and deferred outflows/inflows that do not represent current financial resources.

When evaluating whether calculated carryforward balances are reasonable, community college districts should:

  • Determine current asset amounts that represent unspent excludable revenues such as unspent interest revenue included in cash balances or amounts due from the State (if the amounts were reported as a revenue when the receivable was recorded).
  • Reduce that amount for current liabilities that will be paid from those assets, as they were already recognized as expenditures in the current year.
  • Community college districts that use the consumption method of accounting for prepaid expenditures and inventory purchases in their proprietary or governmental funds may count these noncash amounts as carryforward, since the expenditures are not recognized until items are consumed.

    Any cash or receivables included in fund balance that represent local revenue (e.g., unspent property taxes or property taxes receivable) do not represent allowable carryforward balances.

No. The exclusion is available only in the year that the community college district actually spent the nonlocal revenues. A district may carry forward only nonlocal revenues that remain unspent at fiscal year-end. Further, if a district expends nonlocal revenues carried forward from a prior year but does not choose to exclude those revenues on the current year ABELR, the district must still reduce its carryforward balance by the amount spent.

Yes. Expenditures, exclusions, and carryforwards a community college district reports on the ABELR for federal grants should be consistent with what it reports on the SEFA as well as the final adopted budget. The district should report federal grant expenditures on the ABELR in the same period it reports them on the SEFA.  

Although districts often receive federal monies on a reimbursement basis, the reimbursement is dependent on the district having spent revenues in accordance with a federal program. Therefore, the monies that it spent contingent on receiving federal grant monies are a federal expenditure, which is disclosed on the SEFA. Also, other grant expenditures on the SEFA a district made from federal monies that it received in advance represent actual expenditures of those federal monies. In either case, the federal expenditures shown on the SEFA indicate that the district spent federal monies. Therefore, if the district reports the federal monies as expended on the SEFA, it may not report on the ABELR that those monies were not expended and carried forward to future years.

Total budgeted expenditures

A community college district’s expenditure limitation applies to its total budgeted expenditures for the year, less actual expenditures of excludable revenues as defined in Arizona Constitution, Article IX, §21, regardless of how much of the budget the district actually spent. Accordingly, a district may exceed its budgeted expenditure limitation even if the local revenues amount it actually spent was less than the expenditure limitation. Districts may revise their budgets downward to equal the year’s actual expenditures. Doing so may prevent a district from exceeding its budgeted expenditure limitation and decrease the excludable revenues amount that it must spend in order for total district expenditures to remain within the budgeted expenditure limitation.

For example, District A had a budgeted expenditure limitation of $20 million, budgeted expenditures of $30 million, and actual expenditures of $20 million for the fiscal year—$5 million of which it made from excludable revenues. If the district does not revise its budget to equal actual expenditures, it will exceed its budgeted expenditure limitation for the year, as only $5 million of exclusions are available. By revising its budget to equal the year’s actual expenditures, the district would stay within its budgeted expenditure limitation as shown below:

  Original budget Revised budget​
Budgeted expenditures $​30 $20
Excludable revenues expended 5 5
Total expenditures subject to the expenditure limitation​ $25 $15
Expenditure limitation 20 20
Amount under (in excess of) the expenditure limitation ($5) 5


The UERS requires districts to report total budgeted expenditures from the final adopted budget on the annual budgeted expenditure limitation report (ABELR) but does not prescribe how districts should calculate amounts in the final adopted budget. If a district chooses to revise its budget based on actual audited expenses used for financial reporting, it should be aware that there are some differences between the basis of accounting districts used to prepare the budget and the basis used for financial reporting purposes in accordance with generally accepted accounting principles (GAAP) that may affect expenditures subject to the budgeted expenditure limitation. The budget basis is similar to the basis of accounting the UERS prescribes. For example, the budget typically includes the following uses of financial resources that are subject to the expenditure limitation; however, districts do not report these as expenses in the GAAP basis financial statements:

  • Principal payments on long-term debt.
  • Amounts paid for the acquisition of capital assets.
  • Cash outlays made in the current year but reported as expenses in the prior year for other postemployment benefits (OPEB) and claims paid but previously recognized as claims incurred but not reported (IBNR).
  • Employer pension contributions made in the current year.

Likewise, the following expenses districts report within the GAAP basis financial statements do not involve the use of current financial resources and are not typically included in the budget or subject to the expenditure limitation:

  • Depreciation expense.
  • Loss on disposal of capital assets.
  • Bad debt expense.
  • Pension expense.
  • The accrual of estimated future costs of OPEB and IBNR.

Therefore, if a district revises its budget at year-end to report actual expenses, it may wish to consider adjusting GAAP basis expenses to UERS basis expenditures when determining the revised budget amount to avoid misstating total expenditures that are subject to its budgeted expenditure limitation.

When revising the community college district’s budget to actual expenditures at year-end, the district governing board should approve a specific dollar amount for the revised budget by fund type or a detailed method that management should use to calculate the revised budget amount if the dollar amount is not yet available. The method should specify what amounts (e.g., audited expenses determined in accordance with generally accepted accounting principles) and what, if any, adjustments to those amounts management should make. See question #2 for adjustments the district may wish to make.

A general statement that the budget is reduced to actual expenditures does not provide adequate support for total budgeted expenditures reported on the ABELR. Auditors should be able to agree the total budgeted expenditures reported on the ABELR to specific amounts the governing board approved or recalculate the amount based on the governing-board-approved method.

Annual budgeted expenditure limitation report format

Although A.R.S. §41-1279.07 requires a reconciliation of total expenditures reported within the annual financial statements to total expenditures stated within the ABELR, a reconciliation is not possible. For cities, towns, and counties, the reconciliation allows those entities to align total expenditures reported in their financial statements in accordance with generally accepted accounting principles (GAAP), with expenditures subject to the entities’ expenditure limitation (e.g., subtracting depreciation expense and adding proprietary fund capital asset acquisitions). 

However, a community college district’s expenditure limitation applies to its total budgeted expenditures for the year, less actual expenditures of excludable revenues as defined in Arizona Constitution, Article IX, §21. The budgetary basis of accounting is similar to the basis of accounting the UERS prescribes because it typically includes the uses of financial resources that are subject to the expenditure limitation but are not reported as expenses in the GAAP-based financial statements (e.g., proprietary fund capital asset acquisitions and debt payments) and does not include transactions that do not use current financial resources and are not subject to the expenditure limitation (e.g., depreciation expense), making a reconciliation unnecessary. See Total Budgeted Expenditures FAQ 2 for additional information. 

Accountants should follow the American Institute of Certified Public Accountants’ Statements on Standards for Attestation Engagements, AT-C §205, when examining and reporting on the ABELR.

The independent accountants’ report on the ABELR must express an opinion on whether the ABELR is presented in accordance with the UERS in all material respects. The UERS forms provide a sample of an independent accountants’ report containing an unqualified opinion for a community college district. If the accountants conclude that they cannot express an unqualified opinion on the ABELR, the accountants should disclose all the substantive reasons for the conclusion in an explanatory paragraph in the accountants’ report.

Filing requirements

A.R.S. §41-1279.07(C) requires community college districts to submit an annual budgeted expenditure limitation report (ABELR), an accountants’ report on the ABELR, and audited financial statements to us. The designated CFO must sign or include a digital e-signature on the ABELR—Part I.

A.R.S. §41-1279.07(E) requires community college district’s governing body (governing board) to annually designate a chief fiscal officer (CFO) to officially submit the ABELR on the governing body’s behalf.

We have developed a template Resolution that the governing board must use to document the CFO designation. The governing board may not delegate the responsibility of designating the CFO. Community college districts must attach the signed Resolution to our electronic CFO designation form for submittal. 

Click here to access the electronic CFO designation form and template Resolution.

A.R.S. §41-1279.07(E) requires community college districts to provide the Arizona Auditor General the name of the CFO designated to officially submit the current year’s ABELR by July 31 each year. The current year is the fiscal year the entity is operating in on July 31. If a new CFO is appointed midyear, community college districts s must submit an updated form and documentation.

ABELRs and audited financial statements are due 9 months after fiscal year-end (due March 31 for June 30 fiscal year-end) per A.R.S. §41-1279.07(C)A.R.S. §15-1473 colleges to post their audited financial statements on their official websites within 7 days of filing with the Office. The financial statements must be accessible on the website for at least 60 months.

Example of CFO designation and ABELR due dates: 

Reporting year CFO Designation due date ABELR and Fianacial Statements due date
FY 2020 July 31, 2019 March 31, 2021
FY 2021 July 31, 2020 March 31, 2022


A.R.S. §15-1473 requires a college that has not completed and filed the financial statements required pursuant to A.R.S. §41-1279.07 with the Arizona Auditor General by March 31 to post a Notice of Pending Financial Statements Filing Form on its website until the reports are complete. Further, if the reports are not completed and filed before the college adopts its budget in the subsequent fiscal year, the college must include the late reports form in the published budget. Any college that is required to complete the late reports form must also send a copy of the form to the Arizona Auditor General, Speaker of the Arizona House of Representatives, and President of the Arizona Senate.

A.R.S. §41-1279.07(H) states that a CFO who refuses to file the required ABELR with the Arizona Auditor General within the prescribed time period or who intentionally files erroneous reports is guilty of a class 1 misdemeanor. An erroneous report is one that contains a material misstatement. 

Voter-approved expenditure limitations

Permanent base adjustmentA.R.S. §15-1471 allows a community college district to permanently adjust its base limit with voter approval at a regularly scheduled election on the first Tuesday after the first Monday in November. The Economic Estimates Commission will use the adjustment to calculate the constitutional expenditure limitation beginning with the fiscal year immediately following the fiscal year that voters approve the permanent base adjustment. Permanent base adjustments apply to all future years; however, voters may adopt additional adjustments. 

Modified expenditure limitationA.R.S. §15-1471 allows a community college district to adopt a modified expenditure limitation with voter approval at a regularly scheduled election on the first Tuesday after the first Monday in November. The excess expenditures must be a specified percentage of the constitutional expenditure limitation. The modified expenditure limitation becomes effective beginning in the fiscal year immediately following approval and applies for a period of not less than 2 years, but no more than 7 years. After that time, the constitutional expenditure limitation becomes effective unless voters approve a new modified expenditure limitation.

A list of the statutory requirements for each proposal are available in the links below:

Permanent base adjustment

Modified expenditure limitations