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Maricopa County School Superintendent Steve Watson’s hair isn’t the only mess on his hands.

The Maricopa County Board of Supervisors has uncovered financial mismanagement at the Accommodation School District that required the Board to approve millions in taxpayer money to ensure people and creditors get paid.

The Accommodation District is solely under the management oversight of the elected Maricopa County School Superintendent Steve Watson.

Watson, nor any member of his staff appeared at the Board of Supervisor’s meeting.

By law, Watson alone may choose to operate an accommodation school district and serve as its single-member governing Board. State statute does not require the Board of Supervisors to fund an accommodation school district.

While the District’s budget for fiscal year 2022 appears to be balanced on paper, it includes revenues of approximately $2 million for which the District had no source. Despite insufficient resources, the District continued to spend throughout the year, including spending against a line of credit for which they did not have collateral. Today the Board of Supervisors approved up to $2.05 million to repay this line of credit, which expires on June 30th.

June 30, 2022 Board of Supervisors Agenda

Superintendent of Schools

2. BUDGET ADJUSTMENT FOR MARICOPA COUNTY ACCOMMODATION SCHOOL

1. Approve a fund transfer in an amount not to exceed $2,048,020 from the General Fund (100) to the Schools Transportation Fund (780).

2. Pursuant to A.R.S. § 42‐17106(B), approve the following transfers of revenue and expenditure authority in FY 2022:

a. Decrease the Non Departmental (D470) General Fund (100) Operating (OPER) Contingency (4711) in the lines “Schools – Accommodation School Subsidy Contingency” for an amount not to exceed $2,048,020

b. Increase Non Departmental (D470) General Fund (100) Operating (OPER) Other Programs (4712) in a new line, “Schools Accommodation Schools Subsidy Transfer”, in an amount not-to-exceed $2,048,020

c. Increase the County School Superintendent (D370) Schools Transportation Fund (780) Operating (OPER) revenue and expenditure appropriation by an amount not-to-exceed $2,048,020

d. Adjust the Eliminations (D980) Eliminations Fund (900) revenue and expenditure appropriations by an amount not-to-exceed -$2,048,020.

Approval of this action will have a net zero impact on the overall County budget and does not alter the budget constraining expenditures of local revenues duly adopted by the Board pursuant to A.R.S 42‐17105.

This adjustment is necessary to provide the funding for the Maricopa County Accommodation School pursuant to 15-1001.A.5, “For necessary expenses for the establishment and conduct of accommodation schools pursuant to section 15-308.”

3.BUDGET ADJUSTMENT FOR COUNTY SCHOOL SUPERINTENDENT COMMUNICATION FUND

Pursuant to A.R.S. 42-17106(B), approve the following FY 2022 Budget Adjustments:

1. Increase the revenue and expenditure authority in the County School Superintendent (D370) School Superintendent’s Communications Fund (782) Operating (OPER) in the amount of $419,330.

2. Decrease the revenue and expenditure authority in Non Departmental (D470) Non Departmental Grants Fund (249) Operating (OPER) in the amount of $419,330.

Approval of this action will have a net zero impact on the overall County budget and does not alter the budget constraining expenditures of local revenues duly adopted by the Board pursuant to A.R.S 42‐17105. (C-37-22-027-X-00)

“In essence, the Accommodation School District spent money they didn’t have,” said Bill Gates, Chairman of the Board of Supervisors, District 3.  “Even worse, after we confronted them about it, they took out another line of credit for which they had no collateral.”

According to the Board, the overspending in the Accommodation District is not the only financial issue the Board has uncovered related to the County School Superintendent. State and county audits to date have found:

  • In multiple instances, CSS deposited revenues into special revenue funds but recorded related expenses out of the general and other funds.  This violates the “matching principle” required by County policy and Generally Accepted Accounting Principles (GAAP).
  • For at least six years, and in multiple instances, the CSS budget was not executed as presented to the Board.
  • CSS did not have documentation for how almost $1.7 million in federal grant money was spent and may be required to repay this amount to the federal government.

BOARD’S ROLE

While the Office of the School Superintendent operates independently as a separate elected office, it is funded through the county budget approved by the Board of Supervisors.

“Board members expect budgets and business plans that deliver results to improve the lives of residents.  While the Accommodation School District is allowed by Arizona law, it is not required, and the cost per student is not supported by any quantitative results shared with the Board,” said Gates.  “We will do everything we can to support quality education for all students in Maricopa County, but we cannot turn a blind eye to clear mismanagement of taxpayer money.”

On Thursday, the Board of Supervisors approved the funding to ensure the current year’s line of credit with Chase Bank is repaid.  Moving forward, it will be the County School Superintendent’s responsibility to ensure that the District is financially solvent and able to cover its expenses, including payments to teachers and vendors.

In addition, county leadership informed the County Treasurer that CSS misrepresented its financial situation to secure a new line of credit for the fiscal year beginning July 1.  The Board expects that line of credit to be cancelled.

The state Auditor General will present her findings about CSS finances to the Board of Supervisors in a public presentation next month.



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