A REPORT
TO THE

ARIZONA LEGISLATURE

Division of School Audits
Performance Audit

Osborn Elementary
School District

April • 2015
Report No. 15-205

Debra K. Davenport
Auditor General

The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five
representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and political
subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and
the programs they administer.

The Joint Legislative Audit Committee
Senator Judy Burges, Chair

Representative John Allen, Vice Chair

Senator Nancy Barto
Senator Lupe Contreras
Senator David Farnsworth
Senator Lynne Pancrazi
Senator Andy Biggs (ex officio)

Representative Gina Cobb
Representative Debbie McCune Davis
Representative Rebecca Rios
Representative Kelly Townsend
Representative David Gowan (ex officio)

Audit Staff
Ross Ehrick, Director
Vicki Hanson, Manager and Contact Person
Christine Medrano, Team Leader
Marsden Burton
Ben Gutierrez
Tammy Seilheimer

The Auditor General’s reports are available at:

www.azauditor.gov
Printed copies of our reports may be requested by contacting us at:

Office of the Auditor General

2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333

STATE OF ARIZONA
OFFICE OF THE

DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL

MELANIE M. CHESNEY

AUDITOR GENERAL

DEPUTY AUDITOR GENERAL

April 8, 2015

Members of the Arizona Legislature
The Honorable Doug Ducey, Governor
Governing Board
Osborn Elementary School District
Ms. Patricia Tate, Superintendent
Osborn Elementary School District
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Osborn
Elementary School District, conducted pursuant to A.R.S. §41-1279.03. I am also transmitting
within this report a copy of the Report Highlights for this audit to provide a quick summary for
your convenience.
As outlined in its response, the District agrees with all of the findings and recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
Sincerely,

Debbie Davenport
Auditor General

2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA

85018 • (602) 553-0333 • FAX (602) 553-0051

Osborn ESD
Table 1:
Osborn
Elementary
School District

REPORT HIGHLIGHTS
PERFORMANCE AUDIT

Our Conclusion
In fiscal year 2012, Osborn
Elementary School District’s
student achievement was
slightly higher than peer
districts’, and the District’s
efficiency in noninstructional
areas was mixed, with some
costs higher and some costs
lower than peer districts’.
The District’s administrative
cost per pupil was slightly
lower than the peer districts’
average, and its food service
program operated efficiently
with a lower cost per meal,
on average. However, the
District’s transportation
program operated less
efficiently, and although
the District made some
improvements to the program
in fiscal year 2013, better
oversight is still needed.
Further, the District’s plant
operations costs were much
higher than peer districts’,
primarily because the District
maintained a large amount
of excess building space,
even after closing a school at
the end of fiscal year 2011.
Lastly, the District needs
to strengthen some of its
computer controls.

2015
April • Report No. 15-205

Slightly higher student achievement and mixed operational
efficiencies
Student achievement slightly higher
than peer districts’—In fiscal year
2012, Osborn ESD’s student AIMS
scores were similar to, or slightly higher
than, the peer districts’ averages in the
four areas tested. Further, under the
Arizona Department of Education’s A-F
Letter Grade Accountability System,
Osborn ESD received an overall letter
grade of B for fiscal year 2012. Three of
the peer districts also received B letter
grades, while the other five received C
letter grades.

Percentage of students who met or
exceeded state standards (AIMS)
Fiscal year 2012
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Operational efficiencies mixed—In fiscal
efficiency in noninstructional areas was
mixed, with some costs higher and some
costs lower than peer districts’, on average.
The District’s administration and food service
program operated efficiently at costs that
were lower than peer districts’, on average.
However, the District’s plant operations and
transportation program were less efficient,
with higher costs than peer districts’, on
average.

Math

Reading

Osborn ESD

Writing

Peer group

Science
State-wide

year 2012, Osborn ESD’s operational
Comparison of per pupil expenditures
by operational area
Fiscal year 2012
Peer
Administration
Plant operations
Food service
Transportation

Osborn
ESD
$722
1,201
464
351

group
average
$796
811
523
271

Efficient practices kept food service costs low
In fiscal year 2012, Osborn ESD’s food service program operated efficiently with a cost
per meal that was 15 percent lower than peer districts’, on average. By maintaining a
low cost per meal, the District was able to use its food-service-generated monies to
cover all of its program costs and also pay for some indirect program costs, such as
electricity. The District achieved its lower cost per meal by implementing several effective
techniques and practices for controlling costs, such as fully using commodities,
effectively planning meals, and monitoring performance measures and staffing.

Transportation efficiency improved, but better oversight
still needed
In fiscal year 2012, Osborn ESD’s student transportation costs were 6 percent higher
per mile and 23 percent higher per rider than peer districts’, on average. These higher
costs increased the District’s need to subsidize its transportation program with more

than $350,000 that otherwise potentially could have been spent in the classroom. The District’s costs were
higher primarily because its bus routes were inefficient, and it did not use performance measures to help it
evaluate and monitor its program’s efficiency. In fiscal year 2013, the District made some changes to improve
its efficiency, but still needs better oversight. For example, although it did not affect its transportation funding,
the District overstated its mileage and riders for funding purposes. The District also lacked documentation to
demonstrate that it properly maintained its buses and used two unallowable vehicles to transport students to
and from school.
Recommendations
The District should:
Review its bus routes to improve route efficiency.
Develop and monitor performance measures such as cost per mile, cost per rider, and bus capacity usage.
Accurately calculate and report miles driven and riders transported.

•
•
•

District has taken action, but more needed to address high plant operations
costs
In fiscal year 2012, Osborn ESD’s plant operations cost per square foot was 19 percent higher than the
peer districts’ average, and its cost per pupil was 48 percent higher. The District’s costs were higher, in part,
because it had more school resource officers and spent more for repair and maintenance. The resource
officers were paid using grant monies earmarked for that purpose, and the District’s repair and maintenance
costs were higher likely because its buildings were older. However, a less justifiable reason for the District’s
higher plant operations costs was that it maintained a large amount of excess building space. To its credit, in
response to its declining enrollment and in an effort to reduce costs, the District closed one of its schools at
the end of fiscal year 2011. However, even after closing this school, the District’s remaining schools operated
at only 63 percent of their designed capacities.
Recommendation
The District should review the use of space at each of its schools and determine ways to further reduce
identified excess space.

Some computer controls need strengthening
The District needs to strengthen controls over a few IT areas to reduce the risk of errors, fraud, and misuse
of information. Auditors reviewed the District’s user access report for ten primary users with access to the
accounting system in fiscal year 2012 and identified three employees who had too much access to the
system. Additionally, the District’s accounting system had four generic accounts not assigned to specific
users, making it difficult or impossible to hold anyone accountable if inappropriate activity occurred while
using these accounts. Finally, the District needs to strengthen its password requirements for its network,
student information system, and accounting system.
Recommendations
The District should:

• Limit employees’ access to only those accounting system functions needed
responsibilities.
• Eliminate generic accounts or establish better controls over them.
• Implement stronger password requirements for its computer network and systems.
Osborn Elementary
School District

A copy of the full report is available at:
www.azauditor.gov
Contact person:
Vicki Hanson (602) 553-0333

to perform their job

REPORT HIGHLIGHTS

PERFORMANCE AUDIT

April 2015 • Report No. 15-205

TABLE OF CONTENTS
District Overview

1

Student achievement slightly higher than peer districts’

1

District’s operational costs mixed

1

Finding 1: Efficient practices kept food service costs low

3

Finding 2: Transportation efficiency improved, but better oversight still
needed

5

High costs increased need to subsidize transportation program

5

Student transportation mileage and riders misreported

6

District lacked bus maintenance documentation and used two unallowable vehicles
to transport some students

7

Recommendations

8

Finding 3: District has taken action, but more needed to address high
plant operations costs

District had more school resource officers and spent more on repair and maintenance

9
9

District closed a school but still had excess building space

10

Recommendation

11

Finding 4: Some computer controls need strengthening

13
13

Recommendations

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page i

TABLE OF CONTENTS
Other Findings

15

District incurred finance and late charges because of untimely payments

15

Recommendation

15

Appendix

a-1
a-1

Objectives, Scope, and Methodology

District Response
Tables
1 Comparison of per pupil expenditures by operational area
Fiscal year 2012
(Unaudited)

2

2 Comparison of transportation efficiency measures
Fiscal year 2012
(Unaudited)

5

3 Comparison of plant operations efficiency measures
Fiscal year 2012
(Unaudited)

9

4 Number of students, capacity, and percentage of capacity used by school
Fiscal year 2012
(Unaudited)

10

Figure
1 Percentage of students who met or exceeded state standards (AIMS)
Fiscal year 2012
(Unaudited)

1

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page ii

DISTRICT OVERVIEW
Osborn Elementary School District is a medium-large sized district located in central Phoenix. In fiscal
year 2012, the District served 2,788 students at its five schools: one kindergarden-through-3rd-grade
elementary school, one 4th-through-6th-grade elementary school, two kindergarden-through-6thgrade elementary schools, and one 7th-through-8th-grade middle school. Osborn ESD previously
operated six schools; however, in response to a 24 percent enrollment decline between fiscal years
2001 and 2011, the District closed one of its six schools after the completion of fiscal year 2011.
In fiscal year 2012, Osborn ESD’s student achievement was slightly higher than peer districts’, and
the District’s efficiency in noninstructional areas was mixed, with some costs higher and some costs
lower than peer districts’.1 Specifically, Osborn ESD operated with lower costs in administration and
food service, but higher costs in plant operations and transportation.

Student achievement slightly higher than peer districts’
In fiscal year 2012, 56 percent of the District’s
students met or exceeded state standards in
math, 67 percent in reading, 45 percent in
writing, and 50 percent in science. As shown in
Figure 1, these scores were similar to, or slightly
higher than, the peer districts’ averages.
Likewise, under the Arizona Department of
Education’s A-F Letter Grade Accountability
System, Osborn ESD received an overall letter
grade of B for fiscal year 2012. Three of the
eight peer districts also received B letter grades,
while the other five peer districts received C
letter grades.

Figure 1: Percentage of students who met or
exceeded state standards (AIMS)
Fiscal year 2012
(Unaudited)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Osborn ESD
Peer group
State-wide
Math

Source:

Reading

Writing

Science

Auditor General staff analysis of fiscal year 2012 test results on
Arizona’s Instrument to Measure Standards (AIMS).

District’s operational costs mixed
As shown in Table 1 on page 2 and based on auditors’ reviews of various performance measures,
in fiscal year 2012, Osborn ESD operated its administration and food service programs efficiently at
costs that were lower than its peer districts’ averages, but operated its plant operations and
transportation programs less efficiently, with costs that were higher. The District’s fiscal year 2012 per
pupil spending of $8,081 and classroom spending of $3,775 were both higher than peer districts’
spending, on average. The District was able to spend more per student than peer districts because
it received more state monies through the funding formula and more federal grant monies because
of its higher poverty level.
1 Auditors developed three peer groups for comparative purposes. See page a-1 of this report’s Appendix for further explanation of the peer groups.

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 1

Osborn ESD

Slightly lower administrative costs—Osborn
ESD’s $722 administrative cost per pupil was
slightly lower than the peer districts’ $796
average. The District spent less on administration
primarily because it paid some of its administrative
positions, such as its superintendent, principals,
assistant principals, and business staff, less than
the peer districts, on average. However, the
District needs to strengthen some of its
administrative and computer controls (see
Finding 4, page 13, and Other Findings, page
15).

Much higher plant operations costs
primarily because of excess space—

Table 1:

Comparison of per pupil

Table expenditures
1:
by operational area
Fiscal year 2012
(Unaudited)

Spending
Total per pupil
Classroom dollars
Nonclassroom
dollars
Administration
Plant operations
Food service
Transportation
Student support
Instruction
support

Osborn
ESD
$8,081

Peer
group
average
$6,968

State
average
$7,475

3,775

3,582

4,053

722
1,201
464
351
760

796
811
523
271
522

736
928
382
362
578

Osborn ESD’s $7.42 plant operations cost per
808
463
436
square foot was 19 percent higher than the peer
Source: Auditor General staff analysis of fiscal year 2012 Arizona
districts’ $6.25 average, and its $1,201 cost per
Department of Education student membership data and
district-reported accounting data.
pupil was 48 percent higher than the peer
districts’ $811 average. The District’s costs were
higher, in part, because it had more school resource officers and spent more on repair and
maintenance than its peer districts, on average. However, the District also maintained more
building space per student. Due to declining enrollment, and in an effort to reduce costs, the
District closed one of its schools at the end of fiscal year 2011. However, even after closing
this school, the District’s remaining five schools operated at only 63 percent of their designed
capacities. Therefore, the District should continue to review options to address its excess
space (see Finding 3, page 9).

Efficient food service program—The District’s food service program operated efficiently
with a $2.09 cost per meal that was 15 percent lower than the peer districts’ average. The
District achieved its lower cost per meal by implementing several effective techniques and
practices for controlling food and labor costs. By operating efficiently, the District was able to
use its food- service-generated monies to cover all of its program costs and also pay for some
indirect program costs, such as electricity (see Finding 1, page 3).

Higher transportation costs—In fiscal year 2012, Osborn ESD’s $5.13 cost per mile was 6
percent higher than the peer districts’ $4.84 average, and its $1,037 cost per rider was 23
percent higher than the peer districts’ $844 average. These higher costs increased the
District’s need to subsidize its transportation program with more than $350,000 that otherwise
potentially could have been spent in the classroom. The District’s costs were higher primarily
because its bus routes were inefficient, and it did not use performance measures to help it
evaluate and monitor the efficiency of its program. Additionally, although it did not affect its
transportation funding, the District overstated its mileage and riders for funding purposes,
lacked documentation to demonstrate that it properly maintained its buses, and used two
unallowable vehicles to transport students to and from school. Finally, the District should
consider requiring its van drivers to meet the same driver requirements as its school bus
drivers (see Finding 2, page 5).

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 2

FINDING 1
Efficient practices kept food service costs low
In fiscal year 2012, Osborn ESD’s food service program operated efficiently with a $2.09 cost per
meal that was 15 percent lower than the peer districts’ average of $2.45 per meal. By maintaining a
low cost per meal, the District was able to use its food-service-generated monies to cover all of its
program costs and also pay for some indirect program costs, such as electricity. The District
achieved its lower cost per meal by implementing several effective techniques and practices for
controlling food and labor costs. Specifically, the District:

•

Fully used commodities—The District helped keep its food costs low by fully using United
States Department of Agriculture (USDA) food commodities. Districts participating in the
National School Lunch Program can obtain USDA commodities by paying only a small shipping
charge. In fiscal year 2012, Osborn ESD saved about 22 cents per meal by using USDA
commodities.

•

Effectively planned meals—Prior to creating its menu for the school year, the District used its
menu planning software program to compare past menus’ food costs to current food costs. The
District then increased or decreased the number of times it included a food item on the
upcoming year’s menu depending on whether that item’s cost increased or decreased during
the year. The District also reviewed its menu on a weekly basis and made changes, when
needed, to incorporate any available commodities or limit the prominence of more expensive
items. In addition to helping to keep food costs low, this also allowed the District to use some
of its savings to purchase higher-quality food.

•

Monitored meal demand to limit waste—Osborn ESD’s schools each prepared daily
production records that identified the number of meals planned, prepared, served, and left over
by menu option. The District used these daily production records to determine the appropriate
amount of food items to order and the number of meals to prepare each time specific meal
options were served. This helped to limit food and production costs by making only what was
needed and limiting waste. Additionally, the District limited waste by preparing food in batches
and assembling meals just prior to serving so that separate ingredients could be put back into
storage if not needed.

•

Monitored performance measures and staffing—The District calculated and monitored its
food cost per meal as well as its meals per labor hour in order to ensure it operated a
cost-efficient program. Most staff worked part-time for 5 or 6 hours a day depending on the
number of meals served at the site and observations by the food service director. Additionally,
food service employees were cross-trained so that they could complete whatever tasks were
necessary. This also decreased the District’s need to hire substitute workers.

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 3

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 4

FINDING 2
Transportation efficiency improved, but better oversight
still needed
In fiscal year 2012, Osborn ESD’s student transportation costs were 6 percent higher per mile and
23 percent higher per rider than peer districts’, on average. These higher costs increased the
District’s need to subsidize its transportation program with more than $350,000 that otherwise
potentially could have been spent in the classroom. The District’s costs were higher primarily
because its bus routes were inefficient, and it did not use performance measures to help it evaluate
and monitor the efficiency of its program. Additionally, the District overstated its mileage and riders
for funding purposes, lacked documentation to demonstrate that it properly maintained its buses,
and used two unallowable vehicles to transport students to and from school. Finally, the District
should consider requiring its van drivers to meet the same driver requirements as its school bus
drivers. In fiscal year 2013, the District made some changes to improve its efficiency, but better
oversight is still needed.

High costs increased need to subsidize transportation program
As shown in Table 2, in fiscal year 2012, Osborn ESD’s $5.13 cost per mile was 6 percent higher than
the peer districts’ average of $4.84, and its $1,037
Table 2: Comparison of transportation
cost per rider was 23 percent higher than the peer
efficiency measures
districts’ average of $844. These higher costs
Fiscal year 2012
contributed to the District’s need to subsidize its
(Unaudited)
transportation program with $356,000 that otherwise
Osborn
Peer group
potentially could have been spent in the classroom.
Efficiency measures
ESD
average
Cost per mile
$5.13
$4.84
The District’s costs were higher primarily because
Cost per rider
$1,037
$844
its bus routes were inefficient, and it did not use
Miles per rider
202
179
performance measures to help it evaluate and
Source: Auditor General staff analysis of fiscal year 2012 Arizona
monitor the efficiency of its program. However, the
Department of Education district transportation reports and
District began making changes during fiscal year
district-reported accounting data.
2013 to address its higher costs.

Inefficient bus routes—In fiscal year 2012, Osborn ESD bus routes filled buses to only 64 percent
of bus capacity, on average, and many routes filled buses to less than 50 percent of bus capacity.
Districts with efficient bus routes typically operate routes that fill buses to 75 percent or more of
bus capacity. However, in fiscal year 2013, the District changed its schools’ start times, and the
transportation department took this opportunity to reorganize its bus routes. Consequently, the
District was able to eliminate seven regular education bus routes and two driver positions. Auditors
determined that these changes increased the District’s bus capacity utilization by 14 percentage
points to 78 percent. However, there were still nine bus routes that were less than 75 percent full.
Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 5

Therefore, the District should continue to review its bus routes to determine whether further
changes can be made to improve route efficiency.

Performance measures not established and monitored—The

District did not
establish and monitor performance measures to help it evaluate its transportation program’s
efficiency. The District’s high costs and subsidy of its program emphasize the need for such
monitoring. Measures such as cost per mile, cost per rider, miles per gallon, and bus capacity
utilization can help the District identify areas for improvement. With such measures, the District
can better evaluate the efficiency of its program and proactively identify operational issues.

Student transportation mileage and riders misreported
Districts receive transportation funding based on a formula that uses primarily the number of
route miles traveled and secondarily the number of eligible students transported. Auditors
determined that the District overstated its 2012 miles and riders for funding purposes; however,
these errors did not affect the District’s transportation funding.

Overstated mileage—In fiscal year 2012, the District over reported the number of daily route
miles traveled for funding purposes. For state transportation funding, school districts are
required to report actual miles driven during the first 100 days to transport students to and
from school. However, the District incorrectly reported the number of miles traveled to transport
homeless students because it reported an inflated estimate of mileage rather than actual
mileage traveled during the first 100 days. This error resulted in the District overstating its route
mileage by approximately 13,000 miles, or 6.5 percent. Additionally, although not included as
daily route miles, the District overstated its other route miles, such as those traveled for field
trips and other student activities. The District overstated its other route miles by approximately
4,000 miles, or 57 percent. Neither of these errors affected the transportation funding the
District received because the District was already receiving funding based on higher miles
reported in a prior year, and transportation funding is not decreased for year-to-year decreases
in mileage. However, to help ensure it is properly funded in the future and to ensure it is
meeting state reporting requirements, the District should correctly report the actual number of
miles traveled.

Overstated riders—In fiscal year 2012, the District also over-reported its number of riders by
about 120 riders, or 11 percent. Auditors determined that most of this error was caused by the
District double-counting its special needs riders. Transportation funding is primarily based on
miles driven, but the number of riders is also a factor in determining the per mile rate that
districts receive. Although the District’s inaccurate reporting of riders in fiscal year 2012 did not
affect its transportation funding, the District should ensure it is meeting state reporting
requirements by reporting the actual number of students transported. Having accurate rider
counts will enable the District to calculate and use rider-based performance measures, such
as cost per rider and bus capacity utilization, to evaluate its routes and program efficiency and
make informed program decisions.

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 6

District lacked bus maintenance documentation and used two
unallowable vehicles to transport some students
In fiscal year 2012, the District lacked documentation to demonstrate that it properly maintained its
buses, and it used two unallowable vehicles that did not meet safety requirements. Additionally,
although not required, the District should consider requiring its van drivers, especially those who
transport students to and from school, to meet the same requirements as school bus drivers.

District lacked documentation to demonstrate it maintained its buses—According
to the State’s Minimum Standards for School Buses and School Bus Drivers (Minimum Standards)
administered by the Department of Public Safety (DPS), districts must demonstrate that their
school buses receive systematic preventative maintenance and inspections including periodic oil
changes, tire and brake inspections, and inspections of safety signals and emergency exits.
Following the Minimum Standards helps to ensure the safety and welfare of students and can help
extend buses’ useful lives. Auditors reviewed maintenance files for 10 of the District’s 22 buses
and found that 8 of the 10 buses may have exceeded the District’s 6,000-mile preventative
maintenance schedule without being serviced. Specifically, 3 of the buses did not have
documentation showing that they were serviced in fiscal year 2012, and the other 5 buses were
serviced after the 6,000-mile policy. These lapses ranged from 444 miles to over 9,000 miles.
Additionally, the District did not document what was inspected and/or repaired or the work that
was performed at each service. Without this documentation, the District cannot demonstrate that
it is properly maintaining its school buses according to the Minimum Standards.

District used two unallowable vehicles to transport students—Auditors found that the
District used two 15-passenger vans to transport students to and from school. The National
Highway Traffic Safety Administration and DPS have cautioned school districts against using
15-passenger vans because of safety issues. These vans are more prone to rollover accidents and
rarely have certain safety features, such as emergency exits and traffic control signals, which
school buses are required to have. In fact, federal law prohibits a school from purchasing or
leasing a new 15-passenger van if it will be used to transport students to or from school or related
events unless the van complies with the federal motor vehicle safety standards of school buses.1
According to DPS, Osborn ESD’s 15-passenger vans did not meet these standards. DPS also
noted that the vans had been modified to increase the roof height to accommodate wheelchair
access. This raised each van’s center of gravity and, logically, further increased its already higher
risk of rollover. Because the vans did not meet all of the school bus requirements and presented
safety issues, the District should not have used them to transport students. According to district
officials, the District discontinued using these vans for transporting students immediately after
auditors notified them of these concerns.

District should consider requiring its van drivers to meet the same requirements
as its school bus drivers—To help ensure student safety, the Minimum Standards require
that bus drivers be properly certified and receive physical examinations, drug and alcohol tests,
refresher training, and CPR and first aid certification. However, these requirements pertain only to
individuals who drive school buses. In addition to the 15-passenger vans discussed above, in
fiscal year 2012, Osborn ESD also used smaller, allowable vans to transport students to and from
1 49 U.S. Code §30112(a)(2)

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 7

school on its daily routes. Because a school bus was not used, the District was not required
to have its van drivers meet the requirements that a bus driver must meet. Even though not
required by the State, the District had its van drivers obtain CPR and first aid certification.
However, to help ensure student safety and potentially decrease district liability, the District
should consider requiring its van drivers to meet all bus driver certification requirements,
especially requirements such as having annual physical examinations and drug and alcohol
testing.

Recommendations
1.

The District should continue to review its bus routes to determine if it can make additional
changes to improve route efficiency.

2.

The District should develop and monitor performance measures such as cost per mile,
cost per rider, and bus capacity usage.

3.

The District should accurately calculate and report to the Arizona Department of Education
the miles driven and riders transported for state funding purposes.

4.

The District should ensure that it conducts bus preventative maintenance in a systematic
and timely manner and documents it in accordance with district policy and the State’s
Minimum Standards.

5.

The District should consider requiring that its van drivers meet the same requirements as
bus drivers, which are specified in the State’s Minimum Standards.

Arizona Office of the Auditor General

Osborn Elementary School District • Report No. 15-205
Page 8

FINDING 3
District has taken action, but more needed to address
high plant operations costs
In fiscal year 2012, Osborn ESD’s plant operations cost per square foot was 19 percent higher than
the peer districts’ average, and its cost per pupil was 48 percent higher. The District’s plant operations
costs were higher, in part, because it had more school resource officers and spent more on repair
and maintenance than its peer districts, on average. The District determined the resource officers
were necessary to help ensure student safety, and they were paid using grant monies earmarked for
that purpose. The District’s repair and maintenance costs were higher likely because its buildings
were older than the peer districts’. However, a less justifiable reason for the District’s high plant
operations costs was that it maintained a large amount of excess building space with 24 percent
more square footage per pupil than the peer districts’, on average. To its credit, in response to its
declining enrollment and in an effort to reduce costs, the District closed one of its schools at the end
of fiscal year 2011. However, even after closing this
school, the District’s remaining schools operated at Table 3: Comparison of plant operations
efficiency measures
only 63 percent of their designed capacities.
Fiscal year 2012
Maintaining this excess space required the District to
(Unaudited)
spend more of its available operating dollars on plant
Osborn
Peer group
operations, leaving it less money to spend in the
Efficiency measures
ESD
average
classroom.1 Therefore, the District should continue to
Cost per square foot
$7.42
$6.25
Cost per pupil
$1,201
$811
review options to address its excess space.
Total square feet
Square feet per pupil

District had more school resource
officers and spent more on repair
and maintenance

Source:

451,163
162

560,010
131

Auditor General staff analysis of fiscal year 2012 Arizona
School Facilities Board square footage information, Arizona
Department of Education student membership data, and
district-reported accounting data.

Osborn ESD had higher plant operations costs than peer districts averaged, in part, because it had
more school resource officers. In fiscal year 2012, Osborn ESD had a school resource officer at each
of its four campuses.2 Three of the five peer districts that were also audited for fiscal year 2012 did
not have any school resource officers in fiscal year 2012, one of the districts had one resource officer,
and the other had two resource officers. To make school resource officers available at its schools,
the District took advantage of a grant that provided about $310,000 for this purpose. Only five of the
fifteen other peer districts received this grant in fiscal year 2012, and all but one received substantially
less grant monies than Osborn ESD.

1 Operational spending includes costs incurred for the District’s day-to-day operations. For further explanation, see Appendix page a-1.
2 Two of the District’s schools share a campus.

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Osborn Elementary School District • Report No. 15-205
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Osborn ESD’s plant operations costs were also higher than peer districts’, on average, because
it spent more for repair and maintenance of buildings and equipment. In fiscal year 2012, Osborn
ESD spent $0.30, or 81 percent, more per square foot for repair and maintenance. The District’s
repair and maintenance costs were likely higher, in part, because of its older buildings, which
were about 8 years older, on average, than the peer districts’ buildings. Auditors observed the
District’s facilities and grounds and found them to be well maintained and determined that the
District was following its preventative maintenance plans and checklists. Additionally, the Arizona
School Facilities Board (SFB) performed a preventative maintenance inspection in March 2012
and found that the District had “one of the finest proactive maintenance departments the SFB
has inspected.”1

District closed a school but still had excess building space
During fiscal year 2011, due to declining enrollment, Osborn ESD considered whether to close
one of its then six schools. The District had been experiencing a steady decline in enrollment,
from 3,807 students in fiscal year 2001 to 2,908 students in fiscal year 2011. In May 2011, the
District made the decision to close Montecito Elementary School, which served students in
grades kindergarten through 6. District officials estimated that the closure saved them
approximately $377,000. Osborn ESD used a “soft closure” approach when closing the school
for fiscal year 2012, meaning that the building was to be maintained at a minimum level of
readiness for future use if enrollment increased. Therefore, the District still incurred some
operations and maintenance costs related to this school building, such as costs to heat and
cool, insure, and maintain it. District officials stated that they hoped the District’s enrollment
would increase and the school would eventually be reopened. However, between fiscal years
2011 and 2014, the District’s enrollment declined by an additional 151 students.
Despite the closure of one of its schools, Osborn ESD still had excess space, which contributed
to its higher costs. As shown
Table 4: Number of students, capacity, and percentage of
in Table 4, in fiscal year 2012,
capacity used by school
the District operated its
Fiscal year 2012
schools at only 63 percent of
(Unaudited)
Percentage
their designed capacities,
of capacity
Number of Designed
resulting in it maintaining 162
School name
students
used
capacity
square feet of building space
Clarendon Elementary School
442
643
69%
Encanto Elementary School
573
877
65
per pupil, 24 percent more
Longview Elementary School
662
1,092
61
than the peer districts’ average
Osborn Middle School
566
1,029
55
of 131 square feet. Maintaining
Solano Elementary School
533
751
71
1
more building space per
Total
2,776
4,392
63%
student was costly to the
1 Number of students does not include 12 students for whom the District pays tuition to other
District since the majority of its
schools.
Source: Auditor General staff analysis of fiscal year 2012 Arizona Department of Education student
funding is based on its number
membership data and fiscal year 2012 Arizona School Facilities Board building capacity
of students, not the amount of
information.
its square footage. Therefore,

1 Arizona School Facilities Board. (n.d.). Preventative Maintenance Inspection of Osborn Elementary School District. Retrieved from

https://sfb.az.gov/sfb-programs/preventive-maintenance/inspection-reports.

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Osborn Elementary School District • Report No. 15-205
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the District should continue to evaluate its enrollment and how it can reduce its excess building
space.

Recommendation
In light of the District’s high plant costs, low building capacity usage, and continued decline in
student enrollment, the District should consider selling or leasing Montecito Elementary School and
should review the use of space at each of its other schools to determine ways to further reduce
excess space.

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Arizona Office of the Auditor General

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FINDING 4
Some computer controls need strengthening
Osborn ESD had well-documented IT policies and procedures, kept passwords confidential and
required that they be changed periodically, promptly removed terminated employees’ access to the
network and systems, and monitored system activity. However, the District needs to strengthen
controls over a few IT areas to reduce the risk of errors, fraud, and misuse of information. Specifically:

•

Broad access to accounting system—Auditors reviewed the District’s user access report for
ten primary users with access to the accounting system in fiscal year 2012 and identified three
employees who had the ability to add new vendors, create and approve purchase orders, and
pay vendors without an independent review. They also had the ability to add new employees,
set employee pay rates, and process payroll payments. Although no improper transactions
were detected in the samples of payroll and accounts payable transactions auditors reviewed,
such broad access exposed the District to a greater risk of errors, fraud, and misuse, such as
processing false invoices or adding and paying nonexistent vendors or employees. Additionally,
the District had four generic accounts with this same access that were not assigned to specific
users. District officials believed that the District’s software vendor set up and used these
accounts when providing technical support. Establishing generic accounts creates additional
risk because generic accounts make it difficult or impossible for the District to hold anyone
accountable if inappropriate activity were conducted while using these accounts. The District
should eliminate these accounts or establish controls over them, such as disabling them when
not receiving vendor support.

•

Passwords need strengthening—The District needs stronger password requirements for its
network, student information system, and accounting system. Common practice requires
passwords to be at least eight characters in length and contain a combination of alphabetic and
numeric characters. In contrast, the District requires passwords to be only six characters and
does not require them to contain numbers and symbols. Strengthening these requirements
would decrease the risk of unauthorized persons gaining access to the network and systems.

Recommendations
1.

The District should limit employees’ access to only those accounting system functions needed
to perform their job responsibilities and ensure that no employees are able to complete a
transaction without an independent review.

2.

The District should eliminate its generic accounting system accounts or establish better
controls over them, such as disabling them when not receiving vendor support.

3.

The District should implement stronger password requirements for its computer network and
systems related to password length and complexity.
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Arizona Office of the Auditor General

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OTHER FINDINGS
In addition to the four main findings presented in this report, auditors identified one other less
significant area of concern that requires district action.

District incurred finance and late charges because of untimely
payments
In the process of reviewing the District’s fiscal year 2012 accounts payable transactions and other
documentation, auditors determined that the District had to pay a $15,000 penalty to the U.S.
Treasury because it filed one quarter’s payroll tax forms late. Additionally, the District paid over $2,600
in finance charges and late fees to utilities, credit card companies, and other vendors during fiscal
year 2012 because it did not make timely payments. In order to avoid late fees and charges, the
Uniform System of Financial Records for Arizona School Districts states that credit card payments and
payments for blanket purchase orders for items or services purchased on a recurring basis from the
same vendor, such as electricity, should be made promptly.

Recommendation
The District should ensure that it submits all required forms and makes all payments in a timely
manner to avoid finance charges, late fees, and penalties.

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Osborn Elementary School District • Report No. 15-205

Arizona Office of the Auditor General

APPENDIX
Objectives, Scope, and Methodology
The Office of the Auditor General has conducted a performance audit of the Osborn Elementary
School District pursuant to Arizona Revised Statutes §41-1279.03(A)(9). Based in part on their effect
on classroom dollars, as previously reported in the Office of the Auditor General’s annual report,
Arizona School District Spending (Classroom Dollars report), this audit focused on the District’s
efficiency and effectiveness in four operational areas: administration, plant operations and
maintenance, food service, and student transportation. To evaluate costs in each of these areas, only
operational spending, primarily for fiscal year 2012, was considered.1 Further, because of the
underlying law initiating these performance audits, auditors also reviewed the District’s use of
Proposition 301 sales tax monies and how it accounted for dollars spent in the classroom.
In conducting this audit, auditors used a variety of methods, including examining various records,
such as available fiscal year 2012 summary accounting data for all districts and Osborn ESD’s fiscal
year 2012 detailed accounting data, contracts, and other district documents; reviewing district
policies, procedures, and related internal controls; reviewing applicable statutes; and interviewing
district administrators and staff.
To compare districts’ academic indicators, auditors developed a student achievement peer group
using poverty as the primary factor because poverty has been shown to be associated with student
achievement. Auditors also used secondary factors such as district type and location to further refine
these groups. Osborn ESD’s student achievement peer group includes Osborn ESD and the eight
other elementary school districts that also served student populations with poverty rates greater than
37 percent in cities and suburbs. Auditors compared Osborn ESD’s student AIMS scores to those
of its peer group averages. The same grade levels were included to make the AIMS score
comparisons between Osborn ESD and its peer group. AIMS scores were calculated using test
results of the grade levels primarily tested, including grade levels 3 through 8. Generally, auditors
considered Osborn ESD’s student AIMS scores to be similar if they were within 5 percentage points
of peer averages, slightly higher/lower if they were within 6 to 10 percentage points of peer averages,
higher/lower if they were within 11 to 15 percentage points of peer averages, and much higher/lower
if they were more than 15 percentage points higher/lower than peer averages. In determining the
District’s overall student achievement level, auditors considered the differences in AIMS scores
between Osborn ESD and its peers, as well as the District’s Arizona Department of Educationassigned letter grade.2
To analyze Osborn ESD’s operational efficiency in administration, plant operations, and food service,
auditors selected a group of peer districts based on their similarities in district size, type, and
location. This operational peer group includes Osborn ESD and 15 other elementary school districts
1 Operational spending includes costs incurred for the District’s day-to-day operations. It excludes costs associated with repaying debt,

capital outlay (such as purchasing land, buildings, and equipment), and programs such as adult education and community service that are
outside the scope of preschool through grade 12 education.

2 The Arizona Department of Education’s A-F Letter Grade Accountability System assigns letter grades based primarily on academic growth

and the number of students passing AIMS.

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that also served between 1,600 and 7,000 students and were located in cities and suburbs. To
analyze Osborn ESD’s operational efficiency in transportation, auditors selected a group of peer
districts based on their similarities in miles per rider and location. This transportation peer group
includes Osborn ESD and the 13 other districts that also traveled between 141 and 230 miles
per rider and were located in cities and suburbs. Auditors compared Osborn ESD’s costs to its
peer group averages. Generally, auditors considered Osborn ESD’s costs to be similar if they
were within 5 percent of peer averages, slightly higher/lower if they were within 6 to 10 percent
of peer averages, higher/lower if they were within 11 to 15 percent of peer averages, and much
higher/lower if they were more than 15 percent higher/lower than peer averages. However, in
determining the overall efficiency of Osborn ESD’s nonclassroom operational areas, auditors
also considered other factors that affect costs and operational efficiency such as staffing levels,
square footage per student, and bus capacity utilization, as well as auditor observations and any
unique or unusual challenges the District had. Additionally:

•

To assess whether the District managed its food service program appropriately and whether
it functioned efficiently, auditors reviewed fiscal year 2012 food service revenues and
expenditures, including labor and food costs; compared costs to peer districts’; reviewed
the Arizona Department of Education’s food-service-monitoring reports; reviewed point-ofsale system reports; and observed food service operations.

•

To assess whether the District managed its transportation program appropriately and
whether it functioned efficiently, auditors reviewed and evaluated required transportation
reports, bus routing, and bus capacity usage. Auditors also reviewed driver files for 12 of
the District’s 28 bus and van drivers for fiscal years 2012 and 2013, reviewed bus
maintenance and safety records for 10 of the District’s 22 buses, and reviewed whether all
of the District’s vehicles met safety requirements. Auditors also reviewed fiscal year 2012
transportation costs and compared them to peer districts’.

•

To assess whether the District managed its plant operations and maintenance function
appropriately and whether it functioned efficiently, auditors reviewed and evaluated fiscal
year 2012 plant operations and maintenance costs and district building space, and
compared these costs and capacities to peer districts’. Auditors also compared the number
of school resource officers at Osborn ESD to the number at the five peer districts that were
also audited for fiscal year 2012.

•

To assess the District’s computer information systems and network, auditors evaluated
certain controls over its logical and physical security, including user access to sensitive data
and critical systems, and the security of servers that house the data and systems. Auditors
also evaluated certain district policies over the system such as data sensitivity, backup, and
recovery.

•

To assess the District’s financial accounting data, auditors evaluated the District’s internal
controls related to expenditure processing and scanned all fiscal year 2012 payroll and
accounts payable transactions for proper account classification and reasonableness.
Additionally, auditors reviewed detailed payroll and personnel records for 30 of the 513
individuals who received payments in fiscal year 2012 through the District’s payroll system
and reviewed supporting documentation for 30 of the 7,990 fiscal year 2012 accounts
payable transactions. No improper transactions were identified. Auditors also evaluated
other internal controls that they considered significant to the audit objectives and reviewed
fiscal year 2012 spending and prior years’ spending trends across operational areas.
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Page a-2

•

To assess whether the District’s administration effectively and efficiently managed district
operations, auditors evaluated administrative procedures and controls at the district and school
level, including reviewing personnel files and other pertinent documents and interviewing district
and school administrators about their duties. Auditors also reviewed and evaluated fiscal year
2012 administration costs and compared these to peer districts’. Additionally, auditors compared
Osborn ESD’s administrative staffing levels and salaries to those of the five peer districts that
were also audited for fiscal year 2012.

•

To assess whether the District was in compliance with Proposition 301’s Classroom Site Fund
requirements, auditors reviewed fiscal year 2012 expenditures to determine whether they were
appropriate and if the District properly accounted for them. No issues of noncompliance were
identified.

We conducted this performance audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
The Auditor General and her staff express their appreciation to the Osborn Elementary School
District’s board members, superintendent, and staff for their cooperation and assistance throughout
the audit.

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DISTRICT RESPONSE

DISTRICT RESPONSE