The District’s weighted student count has declined 15.3 percent since fiscal year (FY) 2018, impacting its student-count-generated revenues and budget limits. While the District increased its small school budget adjustment over those years to help offset the revenue losses, the District’s primary property tax rate has been frozen since FY 2015, limiting the revenue generated by its small school adjustment. As a result, its annual budget capacity has been partially unfunded for several years, leaving its FY 2021 operating and capital budget limit reserves more than $59,000 and $25,000 unfunded, respectively. Although the District reduced its spending to be within available revenues in FY 2021, it reported a FY 2020 $14,000 deficit General Fund balance. If the District returns to spending based on budget capacity rather than available cash resources, it may incur a General Fund deficit again in the future. The District reported using over $60,000 from COVID-19 federal relief monies to maintain its operations in FY 2021. The District further reported it plans to spend 26.4 percent, or $180,000, of its remaining relief monies to maintain operations. As these are one-time monies, to avoid future financial risk and ensure it will be able to spend within its available cash resources and budget capacity when these relief monies are no longer available, the District should plan how it will adjust its spending in areas where its remaining monies are used. We first notified the District in October 2021 that it is one of the highest-risk districts based on the most recent financial and student count data. We will continue periodic meetings with the District throughout 2022 to discuss the actions it has taken or is evaluating to lessen its financial risk.
District response:
The District has faced financial challenges over the past several years. The challenges have become more difficult during the past three years due to a significant reduction in enrollment caused by the COVID Pandemic that resulted in the loss of jobs and relocation of families from the area. It is believed that enrollment has now stabilized.
The financial risk analysis conducted by the Arizona Auditor General for FY 2020, FY2021 indicates the District had an FY20 deficit General Fund balance and unfunded FY2021 operating and capital budget limit reserves (fund balance less than budget balance).
The District acknowledges it must address these findings. The District's Risk Mitigation Plan has a corrective action plan for SY 2020 and SY 2021. It also reduces the FY 2022 and future budgets while closely monitoring spending.
The District's Risk Mitigation Plan focuses on initially using the ESSER I, II, and Ill grant funds to transition and maintain its educational programs. This use, offsetting the deficits, was discussed the with the Arizona Department of Education which pre- approved this course of action. The district will use this period to determine priorities, study efficiencies, and be prepared to operate within a reduced budget based on projected revenues.
The plan entails:
FY 2020: $69,535. This amount will be charged to the ESSER grant.
FY 2021: $85,535. This amount will be transferred to the ESSER grant.
FY 2022: $133,135. The District will reduce the current Maintenance and Operations budget by this amount as follows.
Currently, three certified teachers are partially paid from grant funding with the remainder paid from Maintenance and Operations. The SY 2021-2022 Maintenance and Operation portion will be charged to the ESSER grants in the amount of $115,144. The table below indicates how the salaries will be pro-rated.
TEACHER
M&O PORTION
GRANT PORTION
NAME OF GRANT
Teacher1
$39,731.00
$22,000.00
FIRST THINGS FIRST
Teacher2
$31,217.00
$15,375.14
TITLE I
Teacher3
$44,196.00
$2,996.00
SEI
TOTAL
$115,114.00
$40,371.14
Note:M&O PORTION WILL BE PAID FROM ESSER I, II, and III funding
A certified teacher resigned and a replacement teacher was hired for a savings of $16,195.
FY 2023. The SY 2022-2023 and future budgets will be prepared based on projected revenue as follows. The District will:
No longer have a bus payment to pay from Fund 610, Unrestricted Capital. Savings: $30,000
Closely monitor the FY 2022 ADM so it can project staffing needs and other expenditures for SY 2022-2023.
Project SY 2022-2023 ADM in February 2022. This will allow the District to efficiently plan for the FY 2023 school year.
Research how educational programs can be provided at a more economical cost without sacrificing program quality.
Establish priorities so that if there is a need to reduce the budget, cost-savings can be realized immediately.
It will be standard practice to identify revenue projections, cost-savings, and priorities when preparing future budgets.
County—Our analysis of Arizona Department of Education (ADE)-provided county data. For district boundaries encompassing more than 1 county, the county in which the district office resides is presented.
Operational peer group—District groups based on size, type, and location used in our Annual School District Spending Report.
Legislative districts—Our analysis of school district and legislative district boundaries.
Students attending—Our analysis of ADE-provided, school-district-reported attending ADM counts. ADM numbers are rounded to the nearest whole number.
Number of schools—Our analysis of ADE’s attending average daily membership (ADM) reports and School Facilities Board district-wide building reports.
Desegregation—Additional local and State monies for districts, which are allowed by law to increase their expenditure budgets and levy monies without voter approval to comply with a court order or administrative agreement with the U.S. Department of Education’s Office for Civil Rights.
Federal impact aid—Federal monies provided to districts that have been impacted by the presence of tax-exempt federal lands or the enrollment of students living on federal lands, such as military bases and reservations.
Small school adjustment—Additional local and State monies for small districts, which are allowed by law to increase their expenditure budgets and levy monies without voter approval if their student enrollment is within the following prescribed numbers:
Grades K-8 with 125 or fewer students.
Grades 9-12 with 100 or fewer students.
Voter-approved budget overrides—Additional local monies districts may levy through voter-approved increases to district expenditure budgets.
Source: Desegregation, small school adjustment, and voter-approved budget override amounts - FY 2020 ADE BUDG75 report. Federal Impact Aid amounts - FY 2020 district submitted, unaudited annual financial reports.
School district financial risk analysisDecember 2020
