Auditor General Comment to District Response

Aprea - Az Auditor General

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AUDITOR GENERAL COMMENTS
TO DISTRICT RESPONSE
Based on discussions with the District during the audit and at the draft report meeting
as well as follow-up research, the following auditor comments are provided to
address certain district responses to the report recommendations.
Chapter 1, Administration
Classification of Network Assistants and Technician—According to the
District’s job descriptions for its Network Assistants and Network Technician, the
goals for both positions are to provide support for the District’s computers and
related systems. Further, as recently as September 2003, the District’s Director of
Business Services described these positions as working with student computers,
instructional software, and the Internet. According to the Uniform Chart of Accounts
for school districts, employees performing these duties should be classified as
administrative. Further, the Fair Labor Standards Act (FLSA) is a federal law
governing wage and hour standards, not accounting. Therefore, as reported, the
District had 37 administrative positions in fiscal year 2002.
Chapter 4, Plant Operation and Maintenance
Repair and Maintenance Costs—As the report describes, Agua Fria’s high
Plant Operation and Maintenance costs were not attributed to electricity, but to its
higher repair and maintenance costs. When auditors properly reclassified costs
based on the Uniform Chart of Accounts for school districts, the District’s repair and
maintenance costs totaled $238,133, or more than three times the average for the
comparable districts. These higher costs were primarily associated with its chiller
contract.
While the District’s response indicates that the vendor estimates were validated, the
analysis provided for auditors’ review was prepared by persons associated with the
contract.
Office of the Auditor GeneralChapter 6, Classroom Dollars
Classification of Chiller Costs—As described in the report, through its chiller
contract, the District obtained repairs, maintenance, and upgrade of its existing
chiller equipment and installation and maintenance of a new chiller at the District’s
third campus. The contract provides for “title to all equipment and all additions or
upgrades to equipment” related to the contract to vest with the District upon
completion of the renewal term (year 10). Therefore, the costs of maintaining,
improving, and acquiring this equipment should be appropriately classified as repair,
maintenance, and capital costs and not as electricity.
Further, the contract does not provide for the vendor to deliver a “utility” to the District.
Rather the vendor used the District’s own assets, powered by district-purchased
electricity and natural gas, to cool and heat district-purchased water. The District’s
costs for electricity, natural gas, and water were appropriately coded as utilities, and
unlike the chiller contract, did not result in a capital asset for the District.
As it relates to excess utilities and the direct operational costs for which districts are
able to increase their budget limits and funding, A.R.S. §15-910 requires the Uniform
System of Financial Records to specify expenditure items allowable as excess utility
costs. As also required, the Arizona Department of Education and the Office of the
Auditor General prescribe budget forms and worksheets specifying the types of
expenditures that are considered direct operational costs for the calculation of
excess utility costs. The allowable expenditures do not include the costs of repairing,
maintaining, or acquiring equipment.
Although the District’s response describes the vendor as a “utility,” its contract does
not label the vendor as a utility. Further, the Agua Fria Cooling Systems, LLC is not
listed as a regulated utility or a certificated electric service provider by the Arizona
Corporation Commission. The Commission has jurisdiction over private and investor-
owned utilities, including regulating their rates and services.
Since this contract’s inception in fiscal year 2002, the District has improperly
classified its repair, maintenance, and capital costs associated with its chiller system
as utilities. The District should classify all of its transactions in accordance with the
Uniform Chart of Accounts, file a revised annual financial report reflecting the
corrected expenditure balances, and recalculate its budget limits.
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