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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
AMENDED
school districts; funds; financial reports
Purpose
Requires each school district governing board (governing board) to establish an additional monies fund as outlined. Repeals the requirement for a governing board to deposit specified grants or gifts into a separate bank account if not deposited with the county treasurer and directs each governing board to close the bank account and transfer remaining monies to the school district's additional monies fund. Sets August 15 as the date by which the Office of the Auditor General (OAG) and the Arizona Department of Education (ADE) must prescribe the format of the annual financial report (AFR) and summary form of the AFR.
Background
A governing board must deposit monies the school district receives as gifts, grants and devises with the county treasurer, who must credit the deposits as designated in the Uniform System of Financial Records (USFR). Unless inconsistent with the terms of the gifts, grants and devises given, any balance remaining after expenditures have been made for the monies' intended purposes must be used to reduce school district taxes for the budget year. If a school district receives a grant or gift that is less than $1,500 and designated for use by a teacher for instructional purposes and the governing board does not deposit the grant or gift with the county treasurer, the governing board must deposit the grant or gift in a separate bank account. A separate record must be maintained for each grant or gift deposited in the bank account and disbursements from the bank account must be by check, signed by two school district employees appointed by the governing board and be authorized by the teacher designated to use the grant or gift as provided in the USFR. If any of the monies are not spent before the end of the fiscal year in which the gift or grant was accepted, the balance of the monies must remain in the bank account until needed for instructional purposes as designated by the teacher, or determined by the grantor (A.R.S. § 15-341 and 15-1224).
A county treasurer must credit a school district's deposits of unemployment compensation monies to the school district's unemployment compensation fund. A school district's unemployment compensation fund is a continuing fund not subject to reversion, except that any monies in the fund determined as specified to be in excess of insurance needs must be used for reduction of school district taxes for the budget year (A.R.S. § 15-1104).
A governing board must annually publish, by November 15, an AFR for the prior fiscal year. The OAG, in conjunction with ADE, must prescribe the AFR format to be used by school districts and summary form of the AFR to be used by governing boards. The AFR must contain budgeted and actual expenditures for the previous fiscal year, including detailed information for: 1) the bond building fund; 2) the unrestricted capital fund; 3) the adjacent ways fund; 4) the deficiencies correction fund; and 5) the new school facilities fund. The Superintendent of Public Instruction (SPI) compiles all school district AFRs for the SPI's Annual Report, which is annually reported to the Governor and the Legislature by January 15 (A.R.S. §§ 15-255 and 15-904).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
School District Fund Modifications
1. Requires each governing board to establish an additional monies fund, consisting of monies transferred from the school district's unemployment compensation fund and monies the school district receives as gifts, grants and devices.
2. Determines that monies in a school district's additional monies fund are not subject to reversion.
3. Allows a school district to use additional monies fund monies for any lawful purpose.
4. Prohibits a school district from transferring monies from the school district's maintenance and operations fund or unrestricted capital outlay fund into the school district's additional monies fund.
5. Repeals the requirement for a governing board to deposit, in a separate bank account, grants or gifts that are less than $1,500 and designated for use by a teacher for instructional purposes if the governing board does not deposit the grant or gift with the county treasurer.
6. Directs each governing board to close the bank account opened to receive the outlined grants and gifts and transfer any remaining monies to the school district's additional monies fund.
7. Allows a governing board to transfer monies received as gifts, grants and devices to the school district's additional monies fund, if not inconsistent with the terms of the gifts, grants and devices.
8. Allows a governing board to transfer any monies in the school district's unemployment compensation fund that are determined to be in excess of insurance needs to the school district's additional monies fund.
Miscellaneous
9. Sets August 15 as the date by which the OAG, in conjunction with ADE, must prescribe the:
a) format of the AFR to be used by school districts; and
b) summary form of the AFR for use by governing boards.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date.
Amendments Adopted by the Committee of the Whole
1. Requires each governing board to establish an additional monies fund as outlined.
2. Determines that monies in a school district's additional monies fund are not subject to reversion.
3. Allows a governing board to use additional monies fund monies for any lawful purpose.
4. Prohibits a school district from transferring monies from the school district's maintenance and operations fund or unrestricted capital outlay fund into the additional monies fund.
5. Transfers monies remaining in each school district's separate bank account established for the purposes of receiving grants and gifts to the school district's additional monies fund, rather than to the county treasurer for deposit as designated in the USFR.
6. Allows a governing board to transfer monies received as gifts, grants and devices to the school district's additional monies fund, if not inconsistent with the terms of the gifts, grants and devices.
7. Allows a governing board to transfer any monies in the school district's unemployment compensation fund that are determined to be in excess of insurance needs to the school district's additional monies fund.
8. Makes technical and conforming changes.
Senate Action
ED 2/18/26 DP 6-0-1
Prepared by Senate Research
March 4, 2026
MH/KP/hk