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ARIZONA STATE LEGISLATURE
Fifty-first Legislature - Second Regular Session
SENATE EDUCATION AND HOUSE OF REPRESENTATIVES EDUCATION COMMITTEE OF REFERENCE FOR THE PERFORMANCE AUDIT AND SUNSET REVIEW OF THE ARIZONA STATE BOARD FOR CHARTER SCHOOLS
Minutes of Interim Meeting
House Hearing Room 3 -- 2:00 p.m. or upon recess or adjournment of Floor
Acting Co-Chairman Coleman called the meeting to order at 3:13 p.m. and attendance was noted by the secretary.
Senator Kimberly Yee, Co-Chairman Representative Paul Boyer
Senator David Bradley Representative Doug Coleman
Senator Chester Crandell Representative Catherine Miranda
Senator Al Melvin Representative Eric Meyer
Members Absent
Senator Leah Landrum Taylor Representative Doris Goodale, Co-Chairman
ARIZONA STATE BOARD FOR CHARTER SCHOOLS
Presentation by the Auditor General
Kori Minckler, Performance and Audit Manager, Auditor General's Office, gave a powerpoint presentation of the Arizona State Board for Charter Schools Performance Audit and Sunset Review issued in September 2013 (Attachment 1). In response to questions, she indicated that she believes the Arizona State Board for Charter Schools' (Board) website only contains information about charter schools and that charter schools are audited annually by a certified public accountant (CPA) who submits the report to the Board.
Debra K. Davenport, Auditor General, in response to questions, discussed audits performed on school districts, noting that audits are not performed on charter schools. When asked if performance audits should be conducted for charter schools, she replied that school districts use a chart of accounts and maintain accounting records as mandated by the Auditor General's Office so it is possible to compare school districts statewide and nationally. There are for-profit and not-for-profit charter schools that do not have uniform accounting procedures and reporting methods to facilitate comparisons. If it is the will of the Legislature to perform audits on charter schools, some hurdles relating to accounting and auditing will need to be overcome.
Senator Melvin indicated that he is from the private sector in the ocean shipping industry. He related an experience with an audit team of six people in Pakistan that was known about beforehand and lasted a week. It was used as a management tool, which he hopes is the case in state government when the Auditor General's Office audits entities. Ms. Davenport indicated that there were three people on this audit team and the audit lasted eight to nine months. Auditors not only look at accounting information but conduct research on other states' best practices and methods of doing business; the audits are much more in-depth than a financial audit. The agency and her office review the report thoroughly to ensure everyone agrees on the tone of and information contained in the report. Agencies are notified prior to an audit, and after a school district audit is performed, the report is emailed to all school districts for use as an information tool. Also, webcasts and seminars are provided for business managers in school districts around the state.
Senator Crandell asked about charter schools in other states and if it is possible to make comparisons. Ms. Davenport replied that the auditors did not find much uniformity among the states in relation to charter schools; there are many differences in charter school formations and organizations.
Senator Crandell noted the report mentioned that funding the Board can further enhance oversight and assure charter school accountability. He asked if a recommendation was made for additional funding to hire more people. Ms. Davenport replied that the auditors did not make a recommendation to seek more funding; in fact, that suggestion is rarely made to any agency because resources are limited. Auditors suggest instead that the agency prioritize current resources and find more efficient ways to operate so resources are freed up for a particular function the auditors find to be a higher priority.
Representative Meyer stated that some of the findings he has learned of pertain to credit card use and protecting financial data, but it sounds like those are only sent out to school districts, not to charter schools. Ms. Davenport said that is correct. The statutes are clear that the Auditor General's Office does not have any jurisdiction over charter schools, so they are not included in the mailing list.
Response by the Arizona State Board for Charter Schools
DeAnna Rowe, Executive Director, Arizona State Board for Charter Schools, introduced people in attendance who participated in the audit:
Ms. Rowe acknowledged the work of the audit team. She said over the course of the year in which the review was completed, the Board was in the process of implementing a variety of statutory mandates and developing a performance framework, which caused continuous changes. She stated that she has prepared remarks, but offered to answer questions since the meeting began later than planned.
In response to a question about
financial oversight, Ms. Rowe stated that in fiscal year
(FY) 2013, in addition to other internal control issues requiring corrective
actions, the Board added a requirement for charter schools whose audits
identified material weaknesses or significant deficiencies involving the
failure to perform bank reconciliations and failure to adequately safeguard
cash, and incorporated those into the review of annual financial audits. One
staff member reviews the almost 400 annual financial audits and legal
compliance questions, identifies which findings rise to the level of a
corrective action plan, assigns corrective action plans to the charter holders
and follows up. The auditors would like the Board to do a better job and have
more frequent financial reporting, so the FY 2015 budget proposal includes a
request for an additional staff member; however, the Governor's budget proposal
includes two additional staff, not for that area, but for academic oversight
and renewal processes. She clarified that the audits are conducted by an independent
audit company and that staff sometimes goes out to ensure implementation of the
corrective action plans.
Representative Meyer remarked that the websites of school districts, ADE and the Auditor General's Office contain performance audits, so it is possible to see how much is spent on administration, transportation, etc., and asked if that exists for charter schools. Ms. Rowe replied that she is only aware that charter schools are required to submit an annual financial report to the State Superintendent of Public Schools, which is included in the Superintendent's annual financial report and is available online. She acknowledged that some individuals may have a particular interest in that type of information and noted that SB1244 - auditor general; charter schools, may cover this, but the Board is not set to take a position on the bill.
Representative Meyer asked about revising policies and procedures to require corrective action plans for additional internal control findings and implementing a comprehensive operational framework. Ms. Rowe said items that rise to a level requiring a corrective action plan are presented to the charter school as an audit finding and the charter school is required to respond with an appropriate corrective action plan. When a plan is presented and it appears that appropriate steps have been taken to minimize the deficiencies or weaknesses, the charter school receives a letter from the Board stating it will continue to monitor those processes and check to see that those deficiencies do not occur in the next annual report. Regarding the operational framework, it is in draft form with plans for completion in April 2014. The Board is scheduled to have rules prepared in accordance with the operational framework ready at the same time, and those would be implemented thereafter.
In response to further questions, Ms. Rowe said if a charter school has a website, it must contain information about Board meetings, but there is no requirement for charter schools to have a website. The Board has a web interface called ASBCS Online that was designed as a tool to collect information about charter schools. It has developed into an interface that is used for new applicants to submit an application. The Board intends to make information more accessible to the public as recommended by the auditors.
Representative Meyer said it would be helpful for parents to be able to access websites and obtain more information such as whether there is space for more students in the charter school.
Senator Crandell noted that there are several types of charter schools in Arizona and asked which are under the Board's jurisdiction. Ms. Rowe responded that 406 charter school contracts are overseen by the Board; mostly nonprofit entities. There are more than 30 for-profit entities currently operating charter schools. A few charter schools are operated by the Maricopa Community College School District and a few are operated by tribal entities. The Board does not have jurisdiction over charter schools that are converted from traditional public schools. When school districts sponsor a charter school, there should have been an application, a contract and a mechanism for the school district to provide oversight in a manner similar to the Board's requirements for managing its portfolio of schools.
Senator Crandell noted that those charter schools do not fall under the Board or the school board and do not have to follow either board's rules. Ms. Rowe said she has not reviewed the contracts that were formulated so she cannot say what party has oversight or what processes are involved.
Public Testimony
Acting Co-Chairman Coleman announced the names of those who signed up in support of the Arizona State Board for Charter Schools but did not speak:
Gary Bae, K-12, Inc.; The Leona Group Arizona, LLC
Tom Dorn, representing self
Kathryn Senseman, representing self
Discussion and Recommendations by the Committee of Reference
Co-Chairman Yee moved that the Committee of Reference recommend to the full Legislature that the Arizona State Board for Charter Schools be continued for 10 years and authorize staff to draft conforming legislation. The motion carried.
Without objection, the meeting adjourned at 4:05 p.m.
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Linda Taylor, Committee Secretary
February 7, 2014
(Original minutes, attachments and audio on file in the Chief Clerk’s Office; video archives available at http://www.azleg.gov)
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COR – SENATE ED AND HOUSE ED
January 30, 2014
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