A REPORT
TO THE

ARIZONA LEGISLATURE

Division of School Audits
Performance Audit

Payson Unified
School District

March • 2015
Report No. 15-204

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
Ann Orrico, Manager and Contact Person
Judy Fitzgerald, Team Leader
Gerrad Cawley
Phil Hanus

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

March 17, 2015
Members of the Arizona Legislature
The Honorable Doug Ducey, Governor
Governing Board
Payson Unified School District
Dr. Greg Wyman, Superintendent
Payson Unified School District
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Payson Unified
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 44 th STREET • SUITE 410 • PHOENIX, ARIZONA

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

Payson USD
Table 1:

Payson Unified
School District

REPORT HIGHLIGHTS
PERFORMANCE AUDIT

Our Conclusion
In fiscal year 2012, Payson
Unified School District’s
student achievement was
slightly higher than peer
district averages, and the
District’s operations were
reasonably efficient in
most areas. The District’s
administrative costs were
similar to the peer district
average, but the District
lacked adequate controls over
user access to its computer
network and systems. The
District’s plant operations
cost per square foot was
similar to the peer districts’
average, but its cost per
pupil was higher because
it operated more building
space per pupil. The District’s
transportation program costs
were higher than peer district
averages, but the program
was reasonably efficient,
with efficient bus routes and
proper fuel usage monitoring.
However, the District’s food
service program was less than
efficient, with a higher cost per
meal than the peer districts’
average because of higher
staffing costs and some food
service vendor contract terms
that were not favorable to
the District. As a result, the
District spent $24,590 of its
Maintenance and Operation
Fund monies to subsidize its
food service program.

2015
March • Report No. 15-204

Slightly higher student achievement and reasonably
efficient operations in most areas
Student achievement slightly higher
than peer districts’—In fiscal year 2012,
Payson USD’s student AIMS scores in
math were similar to peer districts’, and
its reading, writing, and science scores
were higher or slightly higher. Under the
Arizona Department of Education’s A-F
Letter Grade Accountability System,
the District received an overall letter
grade of C, as did most of its peer
districts, and its 81 percent high school
graduation rate was equal to the peer
districts’ 81 percent average and similar
to the state average of 77 percent.

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

Reading

Payson USD

Writing

Peer group

Science
State-wide

Reasonably efficient operations—In fiscal
Comparison of per pupil expenditures
year 2012, Payson USD’s operations were
by operational area
reasonably efficient in most areas. The Fiscal year 2012
Peer
District’s administrative cost per pupil was
Payson
group
similar to the peer districts’ average, and
USD
average
its plant operations costs were mixed with
$735
$748
Administration
a similar cost per square foot, but a higher
Plant operations
1,051
933
cost per pupil because the District operated
Food service
366
354
Transportation
395
369
more square footage per pupil than the
peer districts averaged. The District’s
transportation program costs were higher than peer district averages, but the program
was reasonably efficient, with efficient bus routes and proper monitoring of fuel usage.
However, the District’s food service program was less than efficient, with a higher cost
per meal because of higher staffing costs and vendor contract terms that were not
favorable to the District.

District needs to strengthen computer controls
In fiscal year 2012, Payson USD lacked adequate controls over its computer network
and systems, increasing the risk of unauthorized access to these critical systems. More
specifically, the District’s network password controls were weak, lacking adequate
complexity. Additionally 2 of the District’s 11 accounting system users had more access
to the accounting system than they needed to perform their job duties. Also, the District
lacked a timely process for ensuring that only current employees had access to critical
systems. We found three student information system user accounts that were linked
to employees or contracted service providers who no longer worked for the District.
Finally, although the District had a disaster recovery plan, the plan was missing some
key components. Having a complete and up-to-date disaster recovery plan would help

ensure continuous accessibility to sensitive and critical data in the event of a system or equipment failure or
interruption.
Recommendations
The District should:
Implement and enforce stronger password controls.
Modify employee access to its accounting system to ensure that an employee cannot initiate and complete
a transaction without independent review and approval.
Implement a process for promptly removing terminated employees’ network and system access.
Ensure that its disaster recovery plan is complete.

•
•
•
•

High food service costs led to program subsidy of more than $24,000
In fiscal year 2012, Payson USD’s $3.05 cost per meal was 19 percent higher than the peer districts’ average,
and its food service program was not self-supporting. To make up the difference between the program’s
revenues and high costs, the District had to subsidize the food service program with $24,590 of Maintenance
and Operation Fund monies that otherwise potentially could have been spent in the classroom
High salary and benefit costs and unfavorable contract terms—Payson USD’s food service program
costs were high primarily because of higher staffing costs and some vendor contract terms that were not
favorable to the District. At $1.41 per meal, the District’s salary and benefit cost was 22 percent higher than
the peer districts’ $1.16 average. The District had a cost reimbursement contract with a vendor to operate its
food service program. Since this type of contract provides less incentive to operate as efficiently as possible,
such as minimizing labor costs, the District should closely monitor its food service program costs through
the fiscal year to ensure they are necessary and reasonable. Further, not all contract terms were favorable to
the District. The contract required the District to pay vendor fees that were higher than the average fees paid
by peer districts that also outsourced their food service programs. In addition, in fiscal year 2012, the District
agreed to a contract renewal that no longer guaranteed profits to the District but rather only guaranteed that
the food service program would break even. The District’s fiscal year 2010 and fiscal year 2011 contracts with
the vendor guaranteed annual profits of $24,750.
District did not always enforce all contract terms—The District did not identify all of the refunds owed to
it by its food service vendor. For fiscal years 2010, 2011, and 2012, Payson USD received vendor refunds
totaling $29,142. In fiscal year 2013, the District began working with the vendor to determine whether this
was the full amount of refunds owed to it and together with the vendor, hired an independent Certified Public
Accounting firm to assist in that determination. The firm determined that the amount owed to the District by the
vendor was less than $2,500. However, we reviewed the District’s vendor contracts and food service program
revenues and expenses and compared them to the vendor refunds for the three fiscal years and calculated
that vendor refunds should have totaled $63,815. After we brought this issue to the District’s attention, the
District obtained the remaining $34,673 that it was contractually guaranteed to receive.
Recommendations
The District should:
Monitor food service costs throughout the fiscal year.
Consider rebidding its food service contract to get more favorable terms.
Enforce all terms of its food service contract.

•
•
•

Payson Unified
School District

A copy of the full report is available at:
www.azauditor.gov

REPORT HIGHLIGHTS

Contact person:

March 2015 • Report No. 15-204

Ann Orrico (602) 553-0333

PERFORMANCE AUDIT

TABLE OF CONTENTS
District Overview

1

Student achievement slightly higher than peer districts’

1

District’s operations were reasonably efficient in most areas

1

Finding 1: District needs to strengthen controls over computer
network and systems

3

Recommendations

4

Finding 2: High food service costs led to program subsidy of more
than $24,000

5

Food service program subsidy due to high costs and some unfavorable contract terms

5

District did not always enforce all terms of its vendor contract

6

Recommendations

6

Appendix
a-1

Objectives, Scope, and Methodology

District Response

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page i

TABLE OF CONTENTS
Table
1 Comparison of per pupil expenditures by operational area
Fiscal year 2012
(Unaudited)

2

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

1

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page ii

DISTRICT OVERVIEW
Payson Unified School District is a medium-large-sized district serving the city of Payson and
surrounding area in Gila County. In fiscal year 2012, the District served 2,374 kindergarten through
12th-grade students at its five schools. Since fiscal year 2007, the District’s student enrollment has
declined by 9 percent from almost 2,600 students in fiscal year 2007 to less than 2,400 students in
fiscal year 2012.
In fiscal year 2012, Payson USD’s student achievement was slightly higher than peer district and
state averages, and its operations were reasonably efficient in most nonclassroom areas.1
Specifically, the District’s administrative costs were similar to the peer districts’ average, and its plant
operations and transportation program were reasonably efficient. However, the District’s food service
program operated less efficiently with a higher cost per meal than the peer districts, on average.

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, 79 percent in reading, 56 percent in
writing, and 67 percent in science. As shown in
Figure 1, the District’s math scores were similar
to peer districts’, and its reading, writing, and
science scores were higher or slightly higher.
Under the Arizona Department of Education’s
A-F Letter Grade Accountability System, Payson
USD received an overall letter grade of C for
fiscal year 2012. Eight of the 15 peer districts
also received Cs, 5 received Bs, and 2 received
Ds. The District’s 81 percent high school
graduation rate in fiscal year 2012 was equal to
the peer districts’ 81 percent average and
similar to the state average of 77 percent.

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%

Payson USD
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 operations were reasonably efficient in most areas
As shown in Table 1, and based on auditors’ review of various performance measures, in fiscal year
2012, Payson USD operated in a reasonably efficient manner in most operational areas. The District
spent $859 more per pupil than its peer districts, on average, but most of the additional spending
was for instructional purposes. The District was able to spend more per pupil primarily because it
received more federal grants that provided monies for specific programs, such as programs to
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

Payson Unified School District • Report No. 15-204
Page 1

Payson USD
increase the number of education jobs and provide
additional physical education activities. In addition,
the District received and spent more Maintenance
and Operation Fund monies because, for example,
it received more budget override monies and
served a higher percentage of special needs
students than the peer districts, on average.

Similar administrative costs—In

fiscal year
2012, Payson USD’s $735 administrative cost
per pupil was similar to the peer districts’ average.
However, auditors identified some computer
network and systems controls that need
strengthening (see Finding 1, page 3).

Plant operations reasonably efficient—

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

Payson
USD
$7,866

Peer
group
average
$7,007

State
average
$7,475

4,359

3,682

4,053

735
1,051
366
395
606

748
933
354
369
540

736
928
382
362
578

354

381

436

Payson USD’s plant operations cost per square
Source: Auditor General staff analysis of fiscal year 2012 Arizona
foot of $5.62 was similar to the peer districts’
Department of Education student membership data and
district-reported accounting data.
average, but its cost per pupil was 13 percent
higher primarily because it operated 8 percent
more square footage per pupil than the peer districts averaged. To its credit, in recent years
the District has taken action to help reduce its plant operations costs. For example, recognizing
that it had declining student enrollment and schools with excess building capacity, the District
closed one of its elementary schools at the end of fiscal year 2011. Additionally, in fiscal years
2010 and 2011, the District installed solar power systems at four of its schools in an effort to
reduce electricity costs. However, the installation of these systems has not yet resulted in a
decrease in the District’s electricity costs. In fact, these systems would have resulted in a
financial loss for the District, except that the District’s solar power system vendor is contractually
obligated to refund the District for any increase in electricity costs caused by the use of its
solar power systems. As a result, in fiscal years 2011 and 2012, the solar power system
vendor refunded $46,400 and $40,185, respectively, to the District for the higher electricity
costs it paid as a result of its solar power system contract.

Food service program costs were high—Although the District’s food service cost per
pupil was similar to the peer districts’ average, its $3.05 cost per meal was 19 percent higher
than the $2.56 peer district average. The District’s cost per meal was higher, in part, because
of high staffing costs and some contract terms with a vendor to operate its food service
program that were not favorable to the District. As a result, the District subsidized its food
service program with almost $24,600 that otherwise potentially could have been spent in the
classroom (see Finding 2, page 5).

Transportation program reasonably efficient despite higher costs—Although
Payson USD’s $2.90 cost per mile was 28 percent higher than the peer districts’ average and
its $1,093 cost per rider was 17 percent higher, auditors found the program to be reasonably
efficient. The District operated efficient bus routes, filling most routes to an average of 83
percent of seat capacity, and auditors did not identify any routes that could be eliminated or
combined to improve efficiency. Further, the District employed other efficient practices, such
as employing part-time drivers and monitoring fuel usage.
Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page 2

FINDING 1
District needs to strengthen controls over computer
network and systems
In fiscal year 2012, Payson USD lacked adequate controls over its computer network and systems.
Although no improper transactions were detected in the payroll and purchasing transactions auditors
reviewed, improvements are necessary to help prevent errors and fraud, protect sensitive information,
and ensure continuity of operations in a disaster. Specifically:

•

Weak password requirements—The District’s password requirements for access to its
network need strengthening. Although the District required passwords to be at least eight
characters in length, it had not established adequate password complexity requirements—that
is, passwords did not need to contain numbers or symbols. In the absence of these requirements,
employees could create easily deciphered passwords. Common security practice requires
passwords to be at least eight characters and contain a combination of alphabetic and numeric
characters. This practice would decrease the risk of unauthorized persons gaining access to the
District’s network.

•

Broad access to accounting system—Auditors reviewed the District’s user access report for
all 11 users with access to the accounting system and found that 2 district users had more
access to the accounting system than they needed to perform their job duties. One of these
employees had full system access, which gives the ability to perform all accounting system
functions without an independent review and approval. No improper transactions were detected
in the 30 fiscal year 2012 employee payroll and personnel records and the 30 accounts payable
transactions auditors reviewed. However, granting employees system access beyond what is
required to fulfill their job responsibilities, especially full system access, exposes the District to
increased risk of errors, fraud, and misuse of sensitive information, such as processing false
invoices or adding nonexistent vendors or employees. The District should review and further
restrict its employees’ access to the computerized accounting system to ensure no single
employee has the ability to initiate and complete a transaction without independent review and
approval.

•

Inadequate procedures for removing access to critical systems—The District lacked a
timely process for ensuring that only current employees had access to critical systems. Auditors
found three student information system user accounts that were linked to employees or
contracted service providers who no longer worked for the District. At least one of these
individuals had not worked for the District for nearly 1 year. To reduce the risk of unauthorized
access, the District should implement procedures to ensure the prompt removal of access
when a user is no longer employed by the District.

•

Incomplete disaster recovery plan—The District had a disaster recovery plan, but it was
missing some key components. The District’s plan did not contain important information
regarding staff roles and responsibilities during system or equipment failure or interruption.
Further, the plan did not include detailed processes for restoring the information technology (IT)
Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page 3

system in the event of a disaster. The plan also did not include testing key elements,
including the District’s ability to restore electronic data files from the backup tapes for many
of its systems, which could result in the loss of sensitive and critical data. A comprehensive
disaster recovery plan would help ensure continued operations in the case of a system or
equipment failure or interruption. Additionally, disaster recovery plans should be tested
periodically and modifications made to correct any problems and to ensure their
effectiveness.

Recommendations
1.

The District should implement and enforce stronger password controls by requiring its
employees to use more complex passwords.

2.

The District should review employee access to the accounting system and modify access
to ensure that an employee cannot initiate and complete a transaction without independent
review and approval and that employees have only the access necessary to meet their job
responsibilities.

3.

The District should develop and implement a formal process to ensure that terminated
employees have their IT network and systems access promptly removed.

4.

The District should review its formal disaster recovery plan to ensure that it is complete and
test it periodically to identify and remedy deficiencies.

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page 4

FINDING 2
High food service costs led to program subsidy of more
than $24,000
In fiscal year 2012, Payson USD’s food service program was not self-supporting, requiring the District
to subsidize the program with $24,590 of Maintenance and Operation Fund monies that otherwise
potentially could have been spent in the classroom. The District’s food service program was not selfsupporting, in part, because high labor costs and some vendor contract terms that were not
favorable to the District led to per meal costs that were 19 percent higher than the peer districts’
average. In addition, the District did not always enforce all contract terms by ensuring that its vendor
refunded all monies owed to the District based on contract guarantees. To bring its costs more in line
with peer districts’ and reduce or eliminate the need for a program subsidy, the District should
monitor program costs and consider rebidding the contract to obtain more favorable terms. In
addition, the District should ensure that it receives the appropriate amount of vendor refunds each
year.

Food service program subsidy due to high costs and some
unfavorable contract terms
Payson USD’s fiscal year 2012 food service costs were much higher per meal than peer districts’,
on average. The District’s $3.05 cost per meal was 19 percent higher than the peer districts’ $2.56
average and 33 percent higher than the average reimbursement rate it received from the National
School Lunch Program, which provided almost 80 percent of the District’s food service revenues in
fiscal year 2012. To make up the difference between the program’s revenues and high costs, the
District had to subsidize the food service program with $24,590 of Maintenance and Operation Fund
monies that otherwise potentially could have been spent in the classroom.

District had high salary and benefit costs—At $1.41 per meal, the District’s salary and
benefit cost was 22 percent higher than the peer districts’ $1.16 average. The District had a cost
reimbursement contract with its vendor, and under that type of contract, there is less incentive to
operate as efficiently as possible, such as minimizing labor costs, because the contract requires
the District to reimburse the vendor for all costs, including staffing related costs.1 Therefore, the
District should closely monitor food service program costs throughout the fiscal year to ensure
they are necessary and reasonable.

Not all contract terms were favorable to the District—The District’s food service vendor
contract contained some terms that were not favorable to the District and contributed to the food
service program’s higher costs and the need for a program subsidy. More specifically, the contract
1 These costs did not include the costs associated with one full-time district employee who served as a liaison between the District and the

vendor.

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page 5

required the District to pay vendor fees that were higher than the average fees paid by peer
districts that also outsourced their food service programs. In addition, in fiscal year 2012, the
District agreed to a contract renewal that no longer guaranteed profits to the District but
rather guaranteed only that the food service program would break even. Specifically:

•

Higher vendor fees—The District’s higher food service costs were attributable, in part,
to higher vendor fees. The vendor’s combined administrative and management fees
accounted for 28 cents of the District’s per meal costs. For the ten peer districts that also
outsourced their food service programs, vendor fees averaged only 13 cents per meal.

•

Contract went from guaranteed profit to break-even—The District’s vendor contracts
for fiscal years 2010 and 2011 each included guaranteed annual profits of $24,750.
Therefore, if the food service program operated at a loss, the vendor was obligated to
refund the District the amount of the food service program loss plus an additional $24,750.
However, when the District renewed its contract for fiscal year 2012, it allowed the vendor
to remove the guaranteed profit and instead guarantee only that the food service program
would break even.

District did not always enforce all terms of its vendor contract
The District did not identify all of the refunds that its food service vendor owed to it. For fiscal
years 2010, 2011, and 2012, Payson USD received vendor refunds totaling $29,142. In fiscal
year 2013, the District began working with the vendor to determine whether this was the full
amount of refunds owed to it and, together with the vendor, hired an independent Certified Public
Accounting firm to assist in that determination. The firm determined that the amount the vendor
owed to the District was less than $2,500. However, Auditor General staff reviewed the District’s
vendor contracts and food service program revenues and expenses and compared them to the
vendor refunds for the three fiscal years and calculated that vendor refunds should have totaled
$63,815. After auditors brought this issue to the District’s attention, the District obtained the
remaining $34,673 that it was contractually guaranteed to receive.

Recommendations
1.

The District should monitor food service costs throughout the fiscal year to help ensure
they are necessary and reasonable.

2.

The District should consider rebidding its food service contract to obtain more favorable
terms, including lower vendor fees and guaranteed profits.

3.

The District should enforce all terms of the food service management contract, including
ensuring that it receives the appropriate refunds at the end of each contract year.

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page 6

APPENDIX
Objectives, Scope, and Methodology
The Office of the Auditor General has conducted a performance audit of the Payson Unified 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 Payson USD’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. Payson USD’s student achievement peer group includes Payson USD and the 15
other unified districts that also served student populations with poverty rates between 27 and 36
percent in towns and rural areas. Auditors compared Payson USD’s student AIMS scores and
graduation rate to those of its peer group averages. The same grade levels were included to make
the AIMS score comparisons between Payson USD and its peer group. AIMS scores were calculated
using test results of the grade levels primarily tested, including grade levels 3 through 8 and 10 for
math, reading, and writing, and grade levels 3 through 12 for science. Generally, auditors considered
Payson USD’s student AIMS scores and graduation rate 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 Payson USD and its peers, as well as the District’s graduation rate and Arizona
Department of Education-assigned letter grade.2
To analyze Payson USD’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
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.

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page a-1

location. This operational peer group includes Payson USD and 18 other unified school districts
that also served between 2,000 and 7,999 students and were located in towns and rural areas.
A separate transportation peer group was selected based primarily on the miles per rider that
districts travel and secondarily on their similarities in location. This transportation peer group
includes Payson USD and nine other districts that traveled between 337 and 420 miles per rider
and were located in towns and rural areas. Auditors compared Payson USD’s costs to its peer
group averages. Generally, auditors considered Payson USD’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 Payson USD’s nonclassroom operational areas, auditors also considered
other factors that affect costs and operational efficiency such as square footage per student,
meal participation rates, and bus capacity utilization, as well as auditor observations and any
unique or unusual challenges the District had. Additionally:

•

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 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-of-sale system reports; and observed food service operations. Auditors also reviewed
all documents related to the District’s contract with a food service management company
to operate its food service program, including the original fiscal year 2010 contract, contract
renewals for fiscal years 2011 and 2012, and vendor refunds for fiscal years 2010, 2011,
and 2012.

•

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’.

•

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’. To analyze the District’s solar power
system contract and its effect on electricity costs, auditors reviewed solar power bills;
interviewed district staff; obtained information related to the District’s electric utility usage,
costs, and rate plants; and reviewed 28 solar contracts from other Arizona school districts.

•

To assess whether the District managed its transportation program appropriately and
whether it functioned efficiently, auditors reviewed and evaluated required transportation
reports, driver files, bus routing, bus capacity usage, and bus maintenance and safety

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page a-2

records. Auditors also reviewed fiscal year 2012 transportation costs and compared them to
peer districts’ average costs.

•

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.

•

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 451 individuals who
received payments through the District’s payroll system in fiscal year 2012 and reviewed
supporting documentation for 30 of the 7,688 accounts payable transactions in fiscal year 2012.
No improper transactions were identified. Auditors also evaluated other internal controls that
were considered significant to the audit objectives and reviewed fiscal year 2012 spending and
prior years’ spending trends across operational areas.

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 Payson USD’s board members,
superintendent, and staff for their cooperation and assistance throughout the audit.

Arizona Office of the Auditor General

Payson Unified School District • Report No. 15-204
Page a-3

DISTRICT RESPONSE

DISTRICT RESPONSE