Scottsdale Schools audit brings attention to district inefficiencies

The Scottsdale Unified School District Governing Board now meets at Coronando High School. (Independent Newsmedia/Terrance Thornton)

The Scottsdale Unified School District Governing Board now meets at Coronando High School. (Independent Newsmedia/Terrance Thornton)

While the Scottsdale Unified School District was on instructional pace with comparable Arizona educational entities in fiscal year 2012 — its administrative costs, transportation system efficiency and financial reporting practices were not, according to a May 14 Arizona Office of the Auditor General performance audit.

The district, from fiscal year 2004 to 2009 reported millions of dollars in electricity costs as in-classroom instructional spending, which is in violation of the Uniform Chart of Accounts. In fiscal year 2012 alone the district falsely reported $5.5 million of in-classroom spending, the audit shows.

In addition, the audit reveals while Scottsdale Schools plant operations were at a lower cost per square foot to its peer districts in fiscal year 2012 its cost per pupil was 8 percent higher, which resulted in the district spending fewer dollars in the classroom.

In fiscal year 2012, Scottsdale Schools was an “A” district, according to the Arizona Department of Education A-F Letter Grade Accountability System.

During that same period of time Scottsdale Schools did operate an efficient food service program, which was provided at a lower cost than its peer districts, the audit shows. But administrative costs per pupil were 11 percent more, which equates to $687 per pupil compared to the $620 peer group average while transportation costs were significantly higher, the audit shows.

During that year SUSD was operating four of its 31 SUSD bus routes with seven or fewer riders, the audit states.

This snapshot in time reveals Scottsdale Schools operated its administrative organization and facility management less efficiently than its peers while instructional achievement remained in-line with its fellow public school systems, the Auditor General conclusion states.

“As part of that study, we collect accounting records and other information within districts within in Arizona,” said Arizona Auditor General Audit Manager Mike Quinlan in a May 19 phone interview. “In that report we put all of the districts into peer districts and its within that we identify a couple of comparable districts. The primary one we look at are operational peer districts.”

SUSD’s peer districts include the Mesa Unified School District and Phoenix Union High School District, according to the fiscal year 2014 Auditor General District Spending Report, which is presented annually to the Arizona Legislature.

Since 2003, the Auditor General’s office has been empowered by the Arizona Legislature to conduct random performance audits of Arizona school districts, Mr. Quinlan says.

“They are randomly selected each year,” he said of the 15 school districts picked annually for the performance audit that typically spans months of data collecting. “We are at the district a few days here and a few days there over the course of several months. Since we started doing this in 2003 we have always had great relationships with school districts and Scottsdale was no exception.”

While Mr. Quinlan agrees public school districts are facing similar issues, low building capacity coupled with high transportation and administrative costs point to a dip in enrollment numbers.

“I think that the district would agree that with the capacity being so low those factors are  due to the loss of enrollment,” he said. “We don’t grade these audits. I would say that this report is similar in the number of issues that we do find in school districts. I think we have identified some areas for the district to work on — or at least bring to their attention — and offer some comparable decisions.”

‘I’m profoundly disappointed’

Both Scottsdale Unified School District Governing Board members Pam Kirby and Bonnie Sneed agreed to speak on the record about the Auditor General’s performance review audit.

Pam Kirby

Pam Kirby

“The findings and recommendations from the 2012 Auditor General performance audit cross major non-classroom areas over many years: Financial, computer systems, transportation and plant operations,” Ms. Kirby said of being asked her overall impression of what the audit showed. “At best, it’s pervasive sloppy management. Worst case, it is intentional misrepresentation of our financial (situation) given the miscoding of over $8 million in expenses, $5.5 of which falsely increased reported instructional spending. Either way, it’s a reflection of a lack of leadership.”

Ms. Kirby says the audit highlights the district’s real issues.

“It’s painfully clear we are not dealing with our most acute issues that are directly correlated: Declining enrollment and excess capacity,” she explained. “Continuing to ignore these issues and the related administrative overhead results in straining our classrooms, our sites, and those directly serving our students — pushing these areas to their breaking point.”

Ms. Kirby says its time for a new approach at Scottsdale Schools.

“Our community is not inclined to financially invest or send their children to a school district that continues to preserve administrative overhead at the expense of the classroom,” she said. “It is an unsustainable and unhealthy approach to managing a public school district. SUSD will only be a better place because of the audit if the Governing Board chooses to act swiftly and decisively.”

Ms. Kirby says the audit shows an egregious misrepresentation of district finances.

“I’m profoundly disappointed that at the same time SUSD administration recommended teacher pay freezes, class size increases, teacher reductions, elimination of elementary specials, and three override ballot initiatives, the auditor identified over $7 million in efficiency opportunities, as compared to our peer districts,” she said.

“I’m offended by the egregious miscoding of expenses which falsely increased our reported classroom expenditures over many years, as recently as 2014. Bottom line, I’m struggling with how to move forward with our current leadership.”

Ms. Sneed, who serves as the board president says declining enrollment has presented challenges to SUSD leadership.

“The Governing Board, administration, and school leaders have recognized the challenges associated with declining enrollment as it relates to our budget for a number of years,” she said in a May 20 written response to e-mailed questions.

“Although our cost per square footage for building operations is more efficient than our peers, our cost per student increases when enrollment decreases. There are always different approaches to make these corrections, and we have already implemented some of those creative solutions, which should reflect in the next yearly report.”

Ms. Sneed says she has spoken with the Auditor General’s Office and has been assured the working relationship between the two entities remains positive.

“After speaking with the office of the Auditor General, I understand that these issues are similar in many school districts across the state, and that 15 to 20 districts are chosen at random each year for a closer look than is possible with the yearly Auditor General’s published report,” she said.

“I was reassured that our administration was cooperative and professional in every way and that the auditors did not detect resistance or obfuscation at any time. I was assured that there was nothing alarming or unusual within the findings, given the challenges facing public school districts, and that nothing triggered any sort of further special investigation by the Auditor General’s Office.”

Scottsdale Unified School District Superintendent Dr. David Peterson, right, speaks during a May 13 community conversation as Scottsdale resident, Nancy Cantor, middle, reacts to what she is hearing. (File Photo)

Scottsdale Unified School District Superintendent Dr. David Peterson, right, speaks during a May 13 community conversation as Scottsdale resident, Nancy Cantor, middle, reacts to what she is hearing. (File Photo)

Comparable trends emerging

Scottsdale Schools Superintendent Dr. David Person says he believes the issues facing SUSD are similar to other public school entities but does not attribute the audit recommendations to a loss in enrollment.

Dr. David Peterson

Dr. David Peterson

“Yes, we believe that the audit shows similar issues that all districts encounter,” he said in a May 19 written response to e-mailed questions. “As you stated above, the Auditor General’s Office stated the items are pretty typical of what they see statewide. The items are operational and were identified as occurring three years ago and a lot of processes and changes were implemented though the process on the audit to address identified items and achieve savings.”

The Auditor General performance audit was released publicly Thursday, May 14 and was conducted over the last several months, according to Mr. Quinlan.

High administrative costs can be attributed to the assistant principal positions at the elementary school level, Dr. Peterson says.

“The report stated that despite having some higher costs, SUSD spent $99 more per pupil in the classroom than peer districts,” he said. “The Auditor General explained that, in the report, the utilization of assistant principals at our elementary schools was a large part of this. Also, efficiencies and reductions were made in FY13 and FY14 that closed this amount by 50 percent.”

The issue of millions of dollars being inaccurately reported revealed by the audit boils down to a difference of opinion, Dr. Peterson contends.

“Some costs were coded based on the duties of the position, but were looked at based on the title, and there was a difference of opinion,” he said. “One of the items was an error and when discovered, it was corrected.”

Dr. Peterson says the district has improved operations since the time this audit examined.

“The audit had three findings with several recommendations. Based on all of the areas that a school district is responsible for, this is not a bad audit. I believe the Auditor General’s Office would confirm that,” he said.

“Scottsdale Schools is always looking to improve. It should be noted that this review was done for operations from three years ago, and we have made many improvements since that time. We work hard to make sure our data reporting is accurate.”

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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