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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
school districts; records; noncompliance; penalties
Purpose
Prescribes training requirements, school district superintendent penalties and bond and override election restrictions for a school district that fails to correct a uniform system of financial records (USFR) deficiency within specified timeframes.
Background
The Auditor General (OAG), in conjunction with the Arizona Department of
Education (ADE), must prescribe a USFR for school districts to use each fiscal
year. The USFR must:
1) provide for adjustment in consideration of existing capabilities available
at a reasonable cost to school districts; 2) allow schools to maintain
necessary records at a minimum cost; 3) prescribe guidelines applicable to
procurement practices; 4) prescribe methods for apportioning specified
revenues; 5) prescribe guidelines for apportioning pupil enrollment and
attendance; and 6) provide information to assist in determining equitable
distribution of state aid to schools. The OAG must inform any school district
that fails to establish and maintain the USFR, detail in writing the deficiencies
of the school district and provide the school district 90 days to correct the
deficiencies (A.R.S.
§ 15-271).
If the State Board of Education (SBE) determines that a school district is not in compliance with the USFR or has failed to correct a deficiency within 90 days after receiving notice from the OAG, the SBE must direct the Superintendent of Public Instruction to withhold up to 10 percent of the school district's state monies for each violation until the OAG reports that the school district is in compliance (A.R.S. § 15-272).
A school district governing board may, and on petition of 15 percent of
the school district electors must, hold elections for specified purposes,
including to decide whether: 1) school district bonds will be sold to raise
monies for specified purposes; and 2) to change the list of capital projects or
the purposes authorized by prior voter approval to issue bonds. Monies to
redeem bonds and pay interest are raised by assessing secondary property taxes
in the school district (A.R.S.
§ 15-491).
If a school district's proposed budget exceeds the statutory aggregate budget limit for the year, the governing board must order an override election to be held at least 90 days before the election. An override election may be held to exceed the revenue control limit or district additional assistance (DAA) and may be funded by assessing secondary property taxes or from revenues other than a property tax levy (A.R.S. § 15-481).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires, if a school district fails to correct a USFR deficiency within 90 days after receiving notice from the OAG, the SBE to:
a) consult with ADE to determine the amount of training and other interventions necessary or appropriate to assist the school district to achieve compliance; and
b) direct ADE to provide the prescribed training and interventions within 30 calendar days.
2. Specifies that the prescribed training and interventions must be provided to the school district's superintendent, business manager, chief financial officer and any other administrator or executive identified by the SBE or ADE.
3. Requires ADE to notify the SBE when the prescribed training and interventions are completed.
4. Allows ADE to contract with a third party to provide the prescribed training and interventions.
5. Requires a school district to pay for any costs incurred by ADE to provide the prescribed trainings and interventions.
6. Requires, if a school district fails to correct a USFR deficiency within 18 months after receiving notice from the OAG, the SBE to notify the school district governing board that the school district superintendent is ineligible to receive performance-based pay, including the portion of the school district superintendent's annual salary that is classified as performance pay.
7. Determines that a school district superintendent is ineligible to receive performance-based pay beginning on the first day of the 18th month after the school district receives notice from the OAG of the USFR deficiency and until such time as the OAG reports the school district's compliance with the USFR.
8. Prohibits, if a school district fails to correct a USFR deficiency within 18 months after receiving notice from the OAG, the governing board from doing the following until the school district has corrected any USFR deficiencies:
a) ordering a DAA override election; or
b) calling an election to decide whether to issue school district bonds or change the list of capital projects or purposes previously authorized by prior voter approval to issue bonds.
9. Deems a school district to have corrected any USFR deficiencies after the date on which the OAG reports that the school district is in compliance with the USFR.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date.
House Action
ED 2/10/26 DP 7-2-3-0
3rd Read 2/25/26 35-18-7
Prepared by Senate Research
March 23, 2026
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