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ESA Families Vindicated in New Auditor General Report

April 16, 2020

April tk, 2020
By Matt Beienburg

Imagine a school where one out of every four things the teachers told students was wrong. Now imagine blaming the students for learning the material poorly, publicly shaming them for their confusion, and threatening to kick them out of their academic program for not performing the way you expect.

If that seems unjust, then perhaps you can sympathize a little better with the Arizona families who have tried to support their children’s education with help from the Empowerment Scholarship Account (ESA) program. Over the last few years, political activists and certain members of the media have portrayed these families as bad actors seeking to cheat the system, defraud taxpayers, and undermine the solvency of public education.

But a new report from the Arizona Office of the Auditor General should finally bury this narrative in the eyes of all but the most rabidly partisan. For those less inclined to pore over the full text, here are a few key takeaways:

1.) ESA parents have received wholly unreliable information when seeking clarity from the Arizona Department of Education (ADE) on ESA rules.

According to the Auditor General, “[ADE] program staff provided poor-quality information in 24% of calls” with ESA parents during 2019, such as an episode when “staff erroneously advised a customer that a specific tutoring service was not an allowable expense.” That means roughly one in four ESA parents who sought help understanding program rules came away equally, if not more, unclear about what they were or were not allowed to buy with ESA funds.

2.) ESA misspending has plummeted (from an already small number) as the media go missing.

Despite getting unhelpful or wrong answers from ADE staff almost 25% of the time, ESA families’ rate of misspending at unapproved merchants has fallen to 0.001%.

For the last several years, critics of the ESA program have been falling all over themselves decrying reported misspending in the program based on a 2018 Auditor General finding of “[m]ore than 900 successful [ESA] transactions at unapproved merchants totaling more than $700,000.” (In context, this meant that 99% of program funds were spent at approved merchants.)

But now, according to the same auditors, “Concerns with debit card administration have largely been addressed…Our review of all 168,020 approved transactions identified in the Department’s Program account transaction data between October 31, 2018 and October 30, 2019, found only 1 successful transaction at an unapproved merchant totaling $30.” (emphasis added). 

Media mentions of this new stat? Zero.

3.) Arizona legislators struck the right balance this year in addressing administrative needs while limiting bureaucratic bloat.

The Arizona Legislature increased ESA program staffing this spring to a level that meets (in fact exceeds) the Auditor General’s recommendation, while saving taxpayers roughly $2 million a year in unnecessary spending that ADE had called for.

According to the Auditor General’s analysis, a staff of 21 ESA employees would fully cover the ESA program workload during peak demand times next year. As it happens, the Legislature increased funding for the program’s administration to bring ESA staffing from 13 (current) to 26. At the same time, the Legislature abolished the program’s arbitrary administrative funding formula—which would have siphoned off about $4 million dollars into administrative coffers—and was instead able to fund the program’s total administration needs with just over $2 million.

4.) ADE staff have meant well, but Department policies and priorities made difficult situations even worse for families.

The Auditor General commended the Department’s program staff, who were “professional and courteous in more than 99% of [customer service] calls.” Likewise, the current administration impressively lowered the backlog of unreviewed expense reports from prior years, bringing the number down from 36,000 to 20,000. In aggressively prioritizing this objective, however, the Department seemingly lost sight of first serving families. For example, the Auditor General revealed that ADE’s protocols needlessly elevated expense reporting rules above parents’ needs and even common sense:

“The Department’s enforcement of its quarterly expense report deadline for parents/guardians who made no purchases during a quarter resulted in…inefficient use of Program staff’s time, and unnecessary burdens for parents/guardians… We identified 321 Program accounts that had no purchases during the first quarter of fiscal year 2020….[yet] award monies for the next quarter was delayed for 86 of the 321 Program accounts.”

As the auditors report, these delays caused more than mere inconveniences to families, as one delay, for example, “prevented a parent/guardian from using Program monies to make a private school tuition payment of nearly $700 for which the parent/guardian could not be reimbursed with Program award monies.”

5.) The Department’s breach of thousands of ESA families’ private data this January was part of a larger pattern

Auditors found that four out of 14 (nearly one-third) of sampled public record requests fulfilled by the Department in 2019 contained “improperly redacted personally identifiable information.”

6.) This audit should remind us that policy debates are generally more nuanced than social media suggests.

After years of ADE asking for the maximum amount of administrative funding allowed under the formula and arguing that its customer service failures are due to staffing shortages—not ill-will—the audit makes clear that many of the administrative failures of the Department predate the current administration and have been exacerbated by high turnover (57% per year) and stretched staff capacity.

At the same time, the audit makes clear that certain policies and priorities adopted by the Department (unaffected by funding levels) have needlessly—and in some cases, severely—aggravated families’ experience with the program. The audit findings likewise suggest that legislators’ apparent skepticism of cutting a blank check to program administrators regardless of behavior was not unreasonable. For example, the argument that inadequate administrative funding has been responsible for fraud seems at odds with the dramatic drop in purchases made at unauthorized vendors (from $700,000 in 2018 to $30 in 2019) which was achieved without a funding increase. And, as mentioned above, legislators have seemingly avoided wasting millions of dollars a year in extra bureaucracy above what the Auditor General has actually called for by abolishing the automatic administrative funding formula.

Hopefully the recently enacted program funding and reforms—coupled with the high-caliber work from the Auditor General—will help ensure a smoother, more successful program for the 7,600 students now benefitting from an ESA, as well as the thousands of families who will join in years to come.

Matt Beienburg is the Director of Education Policy at the Goldwater Institute.



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