Financial position – General Fund change in fund balance
For our analysis, we look at 3 different measures to determine a district’s financial position: change in fund balance, operating margin ratio, and operating reserve ratio. Each of the 3 measures analyzes components of a district’s General Fund revenues, expenditures, and ending balances to identify potential risk related to General Fund resources. Although each of these measures looks at similar financial data, they focus on different relationships in that data. We assessed each measure individually to ensure that concerns present in 1 or 2 of the measures were not overlooked based on less concerning results for another measure.
Beginning in FY 2020, districts received COVID-19 federal relief grants with less restricted allowable uses than most other federal or State grants. Some districts’ financial position measures may have improved when they used federal relief monies for allowable spending, including maintaining operations , that might have otherwise been paid from the General Fund, contributing to larger General Fund balances than they likely would have without these federal relief grants. In total, State-wide district General Fund balances continued to increase in FY 2022, increasing 32 percent since FY 2020. In FYs 2020 through 2022, nearly half of Arizona school districts reported using at least some of their federal relief monies for allowable grant purposes in place of available State and local monies (see the District, charter, and ADE COVID-19 spending special report).
What is this measure telling me, and why is it important?
This measure shows the 1-year percentage change in a district’s General Fund balance for each of the most recent 2 years. A negative ratio indicates a decline in fund balance due to spending exceeding revenues in that year. Declining fund balances indicate higher financial risk as less resources remain available for future needs.
Tell me more about change in fund balance.
If a district’s change in fund balance ratio was -25 percent, the fund balance decreased by 25 percent from the prior year. Some positive or negative changes in fund balance are planned, while others are the result of changes in revenues without corresponding changes in spending. As a result, planned negative shifts in fund balance may not always reflect higher financial risk. However, even districts with greater-than-average fund balances increase their financial risk through large single-year reductions in fund balance.
How were districts identified as high risk for this measure?
All districts with a 1-year General Fund balance decrease of 25 percent or more, for either of the most recent 2 years, were considered high risk for this measure. Additionally, districts with a negative fund balance in the most recent year were considered high risk for this measure even when their fund balance increased from the prior year.
How was this measure calculated?
The applicable years’ ending fund balances were used to calculate each 1-year change percentage.
General Fund amounts were obtained from districts' audited financial statements or unaudited annual financial reports (AFR) as indicated below. Districts that are not required by State law to receive an annual audit generally do not prepare annual financial statements. However, all school districts are required to prepare AFRs each year. To analyze similar data when AFR data was used, we looked at the funds most commonly included in districts’ general funds in financial statements. However, financial statement and AFR amounts may not be consistent for the same funds if auditors identify adjustments that are reflected in financial statement amounts to correct errors or meet governmental financial statement reporting requirements. To avoid distorting the measure ratios based on reporting inconsistencies between unaudited AFR data and audited financial statement data, we did not compare data across those sources.
- Fiscal year 2022: Amounts were obtained from unaudited district AFRs submitted to ADE as of December 19, 2022.
- Fiscal year 2021: Amounts were obtained from district-submitted audited financial statements, if available for both years. Otherwise, amounts were obtained from district AFRs submitted to ADE as of December 19, 2022.
Districts at high risk for this measure
|District||Among the highest-risk districts||County||FY 2021 to FY 2022||FY 2020 to FY 2021||Additional information|
|Agua Fria UHSD||Maricopa County||-67.5%||8.9%||No additional information|
|Aguila ESD||Maricopa County||88.3%||-50.6%||No additional information|
|Alpine ESD||Apache County||-33.1%||1.6%||No additional information|
|Antelope UHSD||Yuma County||57.2%||76.9%||FY 2022 fund balance amount was negative.|
|Apache Junction USD||Pinal County||-50.6%||29.0%||No additional information|
|Benson USD||Cochise County||-32.6%||26.6%||No additional information|
|Blue ESD||Greenlee County||-100.0%||-30.6%||No additional information|
|Buckeye UHSD||Maricopa County||-28.7%||-2.5%||No additional information|
|Congress ESD||Yavapai County||-100.0%||96.8%||No additional information|
|Cottonwood-Oak Creek ESD||Yavapai County||-33.7%||100.0%||No additional information|
|Flagstaff USD||Coconino County||-41.4%||-20.7%||No additional information|
|Gila Bend USD||Maricopa County||34.5%||-38.0%||No additional information|
|Hackberry ESD||Mohave County||100.0%||-83.5%||No additional information|
|Hayden-Winkelman USD||Gila County||-23.2%||100.0%||FY 2022 fund balance amount was negative.|
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|Maricopa County||21.5%||55.7%||FY 2022 fund balance amount was negative.|
|J.O. Combs USD||Pinal County||-13.4%||-43.7%||No additional information|
|Kingman USD||Mohave County||-56.9%||-23.1%||No additional information|
|Mingus UHSD||Yavapai County||-26.8%||51.6%||No additional information|
|Mobile ESD||Maricopa County||100.0%||-100.0%||No additional information|
|Nadaburg USD||Maricopa County||-100.0%||72.5%||No additional information|
|Osborn ESD||Maricopa County||-27.5%||100.0%||No additional information|
|Paloma ESD||Maricopa County||-53.6%||-40.4%||No additional information|
|Peach Springs USD||Mohave County||-58.6%||5.9%||No additional information|
|Pinon USD||Navajo County||-31.7%||-6.4%||No additional information|
|Saddle Mountain USD||Maricopa County||-54.2%||32.6%||No additional information|
|San Fernando ESD||Pima County||-31.8%||-100.0%||No additional information|
|Sentinel ESD||Maricopa County||-29.2%||23.2%||No additional information|
|Skull Valley ESD||Yavapai County||-36.6%||100.0%||No additional information|
|Solomon ESD||Graham County||-24.2%||-49.4%||No additional information|
|St. David USD||Cochise County||-47.7%||72.2%||No additional information|
|Tonto Basin ESD||Gila County||-100.0%||100.0%||No additional information|
|Wellton ESD||Yuma County||-55.9%||58.0%||No additional information|
|Yarnell ESD||Yavapai County||100.0%||-44.9%||No additional information|