The auditor general says the state Department of Education needs to implement a comprehensive system of verifying that schools report accurate student attendance to ensure the state is providing proper funding.
“Although billions of dollars in aid are allocated to Arizona’s [schools] based on their attendance data, [the department] lacks a comprehensive process for verifying that the…attendance data statewide is accurate,” the audit says.
However, Superintendent of Public Instruction Tom Horne says the department has a system in place to make sure state aid is allocated appropriately.
School funding is determined by multiplying a school’s average daily membership (ADM) by specific weights that take into consideration the associated costs of teaching certain classifications of students, then multiplying that by a base support level determined by the Legislature.
“Since [school] funding relies heavily on ADM data, even a small error in statewide attendance data can have a multi-million-dollar impact,” the audit says.
In fiscal 2005, the state spent almost $5 billion on about 970,000 students in Arizona’s public and charter schools. If the ADM data were overstated or understated by 1 percent — about 9,700 students — the funding error would have been at least $49.9 million.
The auditor general states that limited audits performed by private accounting firms found that, for the 2004 fiscal year, 149 of the 158 school districts reviewed had at least one misreporting of ADM, totaling 681 such errors. For the same year, the accountants found 765 errors in the 235 charter schools reviewed.
From May 2002 to October 2005, the Department of Education’s audit resolution unit examined the ADM data supplied by 26 school districts or charter schools and found 13 overpayments. Although these audits focused only on about 30 students each, they identified $1.75 million in overpayments.
The auditor general’s report recommends that the department ensure a higher accuracy of ADM counts by seeking a statutory change to allow private accounting firms to determine the accuracy of attendance data, expand the number of audits the department conducts internally or some combination of the two.
Once that is completed, the report also recommends the department make payment adjustments based on the results.
Horne: Report is lacking
In response, Mr. Horne said he “does not believe that the auditor general… report fully acknowledges all aspects of [the department’s] efforts to ensure that student attendance data is accurate and monies are appropriately allocated” to schools.
The internal audit division, he says, has been approved for four additional auditors to verify the ADM data. He also touted the department’s use of the School Accountability Information System, or SAIS, a computer network that uploads attendance data into an automated program that is checked thoroughly for integrity.
Mr. Horne also said several other tools to help ensure attendance data accuracy are currently in development, including researching the viability of using statistical sampling for auditing schools with more than 500 students.
“If feasible,” he said, “this would more efficiently utilize audit resources, and further enhance statewide coverage.”
He expressed concern that putting a comprehensive verification system in place “may inappropriately imply a greater need for [department] involvement in day-to-day… student attendance reporting activities.”
Mr. Horne also rejected the report’s recommendation that the department expand the use of private accounting firms, which charge close to $100 an hour for their services, to include wider audits of ADM data.
“That billing rate combined with the number of additional hours needed to accurately assess student attendance data would be cost-prohibitive,” he said.
He also noted that, once effective audit procedures are in place, the department will request additional staff to make sure all school districts and charter schools are audited on a regular cycle.