Arizona School District Procurement – When is a Competitive Bid Not Needed?

by James Shankland, CPA, Audit Manager

Posted on March 21, 2018

Arizona school districts are subject to a myriad of laws and regulations regarding procurement, which is the act of obtaining or procuring goods or services, often via a competitive bidding process. Effective procurement procedures are beneficial in several ways. They help protect public funds by reducing the risk of fraud, waste, and corruption. They represent cost savings for districts, allowing more money to be used for instructional purposes. And they promote a fair and equitable marketplace for vendors, which has a positive impact on the overall economy.

These rules and regulations stem from multiple sources, including the School District Procurement Rules (part of the Arizona Administrative Code), Uniform Guidance (issued by the U.S. Office of Management and Budget, applying only to expenditures made with federal dollars) and the Uniform System of Financial Records. As a result, it can sometimes be confusing to determine what types of purchases are subject to competitive purchasing requirements. Below are some notable items that are generally considered exempt.

  • Most purchases from student activities monies. Monies raised by student clubs, such as student council, are exempted from the School District Procurement Rules, due to the fact that they are not truly district monies, but rather monies held in trust by the district. However, this exemption does not apply to purchases in which a district employee acts as a vendor. Additionally, if district monies are co-mingled for a purchase, that would remove any sort of exemption.
  • Governing Board adopted textbooks. Previously only “common school” textbooks were exempt, however now all textbooks as defined in A.R.S. § 15.721(G) and 15.722(G) are exempt if purchased from the publisher.
  • Water, gas or electric utilities from a public service corporation. This exemption does not apply to energy cost savings contracts and guaranteed energy production contractors.
  • Contracts between a school district and other governments, such as an intergovernmental agreement.
  • Purchases of professional certifications, professional memberships, and conference registrations. Examples include membership fees paid to the Arizona School Boards Association and registration costs to attend conferences hosted by the Arizona Association of School Business Officials. Currently, conference hotels and airfare that meet the ADOA General Travel Principles and Policies are not exempt.
  • Agreements negotiated by legal counsel representing the school district in settlement of litigation or threatened litigation.
  • Purchases or leases of real estate. This does not include real estate broker services, which are not exempt.

Keep in mind that an item considered exempt by one set of rules may not be treated the same way by another. Additionally, there are different dollar thresholds in play for the different requirements, further complicating things. If in doubt, consider a call to HeinfeldMeech to discuss the matter further.