HB 2167
Initials CH Page 1 House Engrossed
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature
First Regular Session
House: ED DPA 7-5-0-0
HB 2167: school districts; records; noncompliance; penalties
Sponsor: Representative Gress, LD 4
House Engrossed
Overview
Establishes training requirements, penalties and bond and override election restrictions for
a school district that fails to correct a deficiency in the Uniform System of Financial Records
(USFR) within specified timeframes. Modifies the School Financial Transparency Portal
(Transparency Portal) and creates the School Financial Transparency Portal Fund
(Transparency Portal Fund).
History
The Arizona Auditor General (OAG), in conjunction with the Arizona Department of
Education (ADE), establishes the USFR for all school districts to use each fiscal year. The
USFR prescribes the minimum internal control policies and procedures to be used by school
districts for accounting, financial reporting, budgeting, attendance reporting and other
compliance requirements (USFR).
The OAG must inform in writing a school district that fails to maintain the USFR of the
school district's deficiencies and give the school district 90 days to correct the deficiencies.
The OAG must also report to ADE and the State Board of Education (SBE) any school district
that fails to establish and maintain the USFR or fails to correct deficiencies within 90 days
after receiving notice of the deficiencies. SBE, on report from the OAG, must determine
whether school districts are maintaining the USFR. If SBE determines that a school district
is not in compliance or has failed to correct a deficiency within 90 days after receiving notice
from the OAG, SBE must direct the Superintendent of Public Instruction (SPI) to withhold
up to 10% of the school district's apportionment of state monies for each violation until the
OAG reports the school district complies with the USFR. During the withholding, the OAG
and ADE must assist the school district to achieve compliance (A.R.S. §§ 15-271 and 15-272).
A school district governing board (governing board) must order a district additional
assistance (DAA) override in order to adopt a budget that includes an amount for capital
purposes that exceeds the DAA budget limit. If the DAA override is approved by the voters,
a school district may assess secondary property taxes for capital projects (A.R.S. § 15-481).
A governing board may, or on petition of 15% of the school district's electors, call an election
to decide whether: 1) school district bonds should be issued and sold for prescribed capital
purposes; or 2) to change the list of capital projects or the purposes authorized by a previous
vote to issue bonds. If the question to issue bonds is approved by the voters, the school district
may assess secondary property taxes to redeem bonds and pay interest (A.R.S. § 15-491).
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note HB 2167
Initials CH Page 2 House Engrossed
Laws 2021, Chapter 404 directs the Arizona Department of Administration (ADOA) to
contract with a third party to develop a transparent and easily accessible Transparency
Portal. The Transparency Portal must include specified school level financial data for charter
schools, individual schools operated by a school district and school districts (A.R.S. § 15-747).
Provisions
Sanctions for USFR Noncompliance
1. Instructs SBE, if a school district fails to correct a deficiency in the USFR within 18
months after receiving notice from the OAG, to consult with ADE to determine the
amount of training and other interventions necessary or appropriate to assist the school
district to achieve compliance. (Sec. 1)
2. Directs SBE, if a school district fails to correct a deficiency in the USFR within 18 months
after receiving notice from the OAG, to direct ADE to:
a) provide the training and interventions to the school district within six months;
b) impose a civil penalty, beginning the 18th month, against the school district in an
amount equal to 1% of the school district's most recent general budget limit for each
month until the OAG reports the school district's compliance with the USFR; and
c) deposit the collected civil penalty monies in the Transparency Portal Fund. (Sec. 1)
3. Specifies the training must be provided to the school district superintendent, business
manager, chief financial officer and any other administrator or executive identified by
SBE or ADE. (Sec. 1)
4. Requires ADE to notify SBE when the training and interventions are completed. (Sec. 1)
5. Authorizes ADE to contract with a third party to provide the training and interventions
and requires the school district to pay for any costs incurred by ADE to provide the
training and interventions. (Sec. 1)
DAA Override and Bond Elections
6. Prohibits a governing board, if the school district fails to correct a deficiency in the USFR
within 90 days after receiving notice from the OAG, from doing the following until the
school district has corrected any deficiencies and complied with the USFR for at least 12
months:
a) ordering a DAA override election; or
b) calling an election to issue school district bonds or to change the list of capital projects
or the purposes authorized by a previous vote to issue bonds (Sec. 3, 4)
7. Specifies, for the purposes of the prohibition on ordering a DAA override or bond election,
the school district has corrected any deficiencies beginning the date that the OAG reports
that the school district is in compliance with the USFR. (Sec. 3, 4)
Transparency Portal and Transparency Portal Fund
8. Moves the Transparency Portal and all other requirements for the Transparency Portal
from ADOA to ADE. (Sec. 5)
9. Transfers all matters relating to the Transparency Portal from ADOA to ADE on the
general effective date, including:
a) contracts executed by ADOA;
b) rules adopted by ADOA; and
c) property, records, data, investigative findings and obligations. (Sec. 6)
10. Specifies the transfer of matters relating to the Transparency Portal maintain the same
status with ADE. (Sec. 6) HB 2167
Initials CH Page 3 House Engrossed
11. Establishes the Transparency Portal Fund and states that:
a) it consists of legislative appropriations and the civil penalty monies imposed on a
school district that fails to correct a deficiency in the USFR within 18 months of notice
from the OAG;
b) it is administered by ADE; and
c) monies are continuously appropriated and exempt from lapsing. (Sec. 5)
12. Authorizes ADE to use Transparency Portal Fund monies for the costs of the
Transparency Portal. (Sec. 5)
13. Transfers all remaining unspent and unencumbered appropriated monies of ADOA for
the Transparency Portal to the Transparency Portal Fund. (Sec. 6)
Miscellaneous
14. Makes technical changes. (Sec. 1, 3, 5)
15. Makes conforming changes. (Sec. 1, 2, 3, 4, 5)