Key Points:
- ESA program faces sharp backlash after spending on improper, luxury items
- Auditor General and ESA leadership start to consult on risk-based auditing
- Changes to department practices, jurisdiction of auditor general unclear
After months of inaction and some nudging from the Joint Legislative Audit Committee, Empowerment Scholarship Account program leaders and the Auditor General’s Office are starting to confer regarding risk-based auditing as required in state law.
The two offices are starting to meet amid a maelstrom over misspending by account holders. Reporting from 12 News found the department’s internal auditing procedure — which automatically processes any purchase under $2,000 with review afterward — allowed about $124 million to go out the door.
As part of the $124 million, there was a sweep of improper purchases on items like diamond rings, lingerie, appliances and high end furniture.
Though the Arizona Department of Education is meeting with the Auditor General’s Office, the extent of oversight and control the auditor general has over the auditing practices of the state Department of Education is still up in the air, as State Superintendent of Public Instruction Tom Horne noted state law only requires the department to “consult” with the office.
“The ordinary English meaning of consult is not to be dictated to. It means we speak to them and then we make the decision,” Horne said.
A provision enacted in the 2024 session required the “department, in consultation with the office of the auditor general, shall develop risk-based auditing procedures for audits.”
At a Joint Legislative Audit Committee on July 21, months after the law had taken effect, Auditor General Lindsey Perry noted that despite her office’s best efforts, there had yet to be consultation or collaboration on risk-based auditing, nor the decision to pass through all purchase requests under $2,000.
JLAC Chair Mark Finchem told the two offices to meet within the next two weeks.
About three weeks later, a spokesperson for the department confirmed ESA leadership had met with the auditor general to discuss risk-based auditing. The auditor general did not respond to a request for comment.
As for a continued approach to risk-based auditing, Doug Nick, spokesperson for the Department of Education, pointed out, though, that dollars are going out the door, and the department is clawing misspent funds back.
Since July 2023, the department has worked to collect about $622,000.
Approximately $170,000 has been repaid from 110 accounts, $133,000 has been swept from 32 accounts, and 49 accounts, totaling $182,000, have been referred to collections.
Additionally, about $64,000 is outstanding in repayment plans. The department has requested repayment for $73,000, but has yet to hear back from accountholders.
Still, state leaders are unhappy with the string of improper purchases and the approach to auditing.
Gov. Katie Hobbs said in a statement posted to X, “Arizona taxpayers should not have their hard-earned money wasted on diamond rings and lingerie.”
Attorney General Kris Mayes told 12 News she was considering litigation and further investigation into the program.
“The scandal could ultimately crater the entire program and that would be catastrophic for those families who really need it,” she said.
The program found an unlikely critic in the chair of the Republican Party, Arizona Gina Swoboda.
“I will concur that there are people that are taking advantage of that system,” Swoboda said. “Anytime you have a government program, it’s going to be susceptible to abuse, and when you expand it rapidly and you don’t staff up for it, or put guardrails in place, this is where we are now.”
Horne blamed it on a lack of staff to process purchase requests on the front end, and chiefly, the governor, for axing a budget item that would have provided the program with more full-time staff.
“The program has grown by 10 times, and we still have the same number of people we had at the beginning,” Horne said. “We can’t process it in a timely fashion. Our people, working really hard, can do 500 a day, and we get a thousand a day.”
As of July 18, 90,311 students are enrolled in the program. At the JLAC meeting, ESA Director John Ward estimated the program stands to reach a cost of $1 billion.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
