When Arizona school districts undergo a financial statement audit, a compliance review is also conducted. This review is meant to evaluate whether the school district is compliant or non-compliant with the Uniform System of Financial Records for school districts, commonly referred to as the USFR. The compliance review report is based primarily on the compliance questionnaire, the auditor’s report on internal control and compliance, management letter and financial statements; and it describes any non-compliance or internal control weakness.
The USFR Compliance Questionnaire consists of 20 different sections, which means that to be able to cover each section this blog would have to be much longer. Instead I will be briefing you on the procurement section and important things to remember.
School districts are required to follow rules based on the Arizona Procurement Code (A.R.S. Title 41, Ch. 23), the legislative guidance and authority around procurement. Among many other things these rules provide for increased public confidence in the procedures followed in public procurement while ensuring fair treatment to all who deal with the procurement system of this state.
Guidelines for Written Quotes
The guidelines below are what each district must follow, at minimum, for purchases that currently fall below the $100,000 threshold based on the June 2019 USFR guidance.
- Procurement authority may be designated to a district employee(s), in a public meeting. The delegation must specify employees title, activity/function authorized and any limits/restrictions. The delegation may include that the authority can approve contract awards up to a predetermined amount.
- For purchases costing between $10,000 and $100,000 the district should obtain written quotes from at least three vendors. For purchases that fall below $10,000 you must rotate vendors throughout the year unless you obtain three quotes each time.
- For purchase less than $10,000 competitive purchases is not required; except for purchases involving employees or board members. The district should also use judgment when awarding contracts as they should be advantageous to the district.
- When a quote is not obtained a district may follow the School District Procurement Rules or cooperative purchasing agreements, sole source procurements and emergency procurements for purchases that do not exceed the $100,000 threshold. The district can also choose to use General Services Administration contracts, when authorized by the governing board who determines that all criteria listed in A.R.S §15-213 apply.
These guidelines are just the tip of the iceberg not just for procurement, but for the USFR. The Federal thresholds are set to change over time for Districts spending federal grant money, and you should make sure you update your procurement thresholds to reflect Federal changes. One resource you can turn to when you are unsure and have a question is the USFR itself. The full copy of the questionnaire, which is available on the Arizona Auditor General’s website, explains each section in more detail than one blog could. If that doesn’t help don’t be afraid to ask your auditor, we may not know the answer, but we will work to help you get the information you are looking for.
Feel free to contact your Henry+Horne tax adviser with any questions.
Link to the Arizona Auditor General’s website: https://www.azauditor.gov/reports-publications/school-districts/manuals-memorandums