Many of the below questions and answers are pertinent only to Arizona school districts; please contact your auditor or consultant for further clarification if needed.

Audit Services Fees for coding and Annual Financial Report (AFR) reporting:

Q: For our AFR, what portion of our audit fees should be charged to audit services associated with financial & compliance audits (object code 6350) and what portion should be charged to audits related to Federal programs (object code 6330)?

A: If a separate amount is indicated on the District’s contract for the audit of Federal programs, this amount should be used on the AFR.

If it is not indicated separately, the District will have to estimate the percentage to charge to the Federal programs for audit services. There are a couple methods for making this estimation. One way is to determine the percentage of federal expenditures to total expenditures and allocating that percentage of the audit fees to the federal program costs account code.

Alternatively, you can look at the expenditures of just those programs that were audited as major federal programs for the year to the total funds expended by the District and allocate the percentage of that calculation to the federal program costs account code.To determine which federal programs were audited for the year, you can look at the Summary of Auditors’ Results page within your single audit report.

Accessing older Attorney General Opinions:

Q: How can I obtain Attorney General’s Opinions that are older than the ones listed on the Attorney General’s web site?

A: All Attorney General’s Opinions are maintained by the Solicitor General’s Office of the Attorney General’s Office. The old Opinions not listed on the web site can be found at or by calling (602) 542-3333.

Using District Monies for Student Awards:

Q: Is there official guidance available regarding districts giving awards to individual students for meeting certain goals?

A: Districts should refer to Arizona Attorney General Opinion No. I87-123 and No. I90-072 which address this issue. The conclusion of these opinions is that the use of M&O funds or auxiliary operations funds to reward students who achieve perfect attendance is not permissible. Generally speaking, no awards can be provided for an activity (i.e., attendance) that is required by law. Rewards as special recognition of academic achievement (ex. honor roll) is acceptable provided the consideration paid for the award does not violate the constitutional prohibition against improper gifts of public funds. AG Opinion I91-003 also elaborates on this further.

Paying Coaches from Instruction Code

Q: Is it acceptable to pay coaches from the instruction code?

A: Yes, as they are ‘instructing’ the students on athletics, including after-school programs. However, the District should be aware of issues that may arise with paying an athletic director or other similar position from the instruction code, as those positions may be performing administrative duties.

Intergovernmental Agreements (IGA’s):

Q: The USFR Chart of Accounts lists fund 955 as the fund that accounts for revenues and expenditures associated with an Intergovernmental Agreement (IGA) when a district is the fiscal agent. Where should revenues and expenditures associated with an IGA be recorded when a district is NOT the fiscal agent?

A: Revenues and expenditures associated with an IGA when a district is not the fiscal agent should be recorded in a Special Projects Fund, depending on the funding source. The following funds should be used:

050 – accounts for city, town or county-funded projects
300-399 – accounts for other federally funded projects
465-499 – accounts for other state-funded projects

The accurate recording of these funds becomes particularly important since the expenditures of fund 955 are excluded from both operational and nonoperational spending in the Auditor General’s “Classroom Dollar” calculation.

Instructional Improvement Programs:

Q: ARS 15-979 E2 says Instructional Improvement Funds may be used for “instructional improvement programs including programs to develop minimum reading skills for students by the end of third grade”. Does this limit instructional programs to just reading programs?

A: No, the reading program reference in the statute is only given as an example.

Bank Accounts:

Q: Is collateral required for school districts’ deposits in bank accounts? (i.e. deposits not with the County Treasurer)

A: Although no specific ARS exists, we suggest the district adhere to ARS Section 35-323, to collateralize deposits in excess of $250,000.

Arizona statute requires a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102 percent of the public deposits less any applicable deposit insurance.

Student Awards:

Q: Can a district make awards to students who achieve perfect attendance?

A: No. According to Attorney General’s opinion I90-072, a school district governing board lacks the authority to make awards to individual students achieving perfect attendance because the laws do not authorize awards for compliance with mandatory school attendance laws. However, the AG’s opinion goes on to say that a governing board is not so limited in promoting academic achievement. Governing boards may make nominal awards as a special recognition of academic achievement, provided the amount is limited to its value as a token acknowledgement of the pupil’s accomplishment.

Educational Foundation:

Q: Can a district provide bookkeeping services for a district’s educational foundation?

A: No, a district cannot provide services to outside organizations free of charge, without violation of the Arizona gift of public monies clause.

Level of Effort – Special Education Cluster federal funds:

Q: A district wants to charge OT/PT and Speech Therapists’ salaries to the M&O Special Education program, instead of the IDEA federal grant, and teachers’ salaries to the IDEA federal grant instead of to the M&O Special Education program, where they were charged the previous year. Is this acceptable?

A: The requirement for maintenance of effort for the IDEA federal grant does not require a position by position review. As long as the district expends more in the current year on special education from local sources than in the previous year, the maintenance of effort test has been met.


Q: When developing depreciation policies, can a government have different useful lives for its buildings?

A: Yes. One should use all available historical information to develop its useful life policies to provide for more accurate external financial reporting and to assist management with developing maintenance plans. An example would be to utilize different useful lives for brick and mortar buildings as opposed to wood frame construction buildings.

Excess Monies in the Unemployment Insurance Fund:

Q: What can be done if a school district has accumulated excess monies in the unemployment insurance fund (Fund 575) over the past several years, to the point where some of the money in the fund will never be needed to pay annual claims?

A: According to the ARS 15-1104 and USFR III-59, when the Governing Board determines that monies accumulated are in excess of insurance needs, the excess can be transferred to M&O or Unrestricted Capital Outlay to reduce district taxes for the budget year.

Surplus Property:

Q: Can a school district donate all surplus property to a nonprofit organization?

A: No. A.R.S.15-342(18) only allows for the donation of surplus or outdated learning materials, educational equipment and furnishings to nonprofit community organizations where the governing board determines that the anticipated cost of selling the learning materials, educational equipment or furnishings equals or exceeds the estimated market value of the materials.

The content of this page is for general information purposes only and does not constitute advice. Heinfeld, Meech & Co., P.C. tries to provide content that is true and accurate as of the date of writing; however, we give no assurance or warranty regarding the accuracy, timeliness, or applicability of any of the contents.