ESAs; audits; transparency portal; reporting

HB4113 - 572R - I Ver

REFERENCE TITLE:
ESAs; audits; transparency portal; reporting

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 4113

Introduced by

Representative
Hernandez L

AN
ACT

amending sections 15-2402 and 15-2403,
Arizona Revised Statutes; amending title 15, chapter 19, article 1, Arizona
Revised Statutes, by adding section 15-2407; amending section 41-1279.03,
Arizona Revised Statutes; relating to Arizona empowerment scholarship accounts.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 15-2402, Arizona Revised Statutes,
is amended to read:

START_STATUTE
15-2402.

Arizona empowerment scholarship accounts; funds

A. Arizona empowerment scholarship accounts are
established to provide options for the education of students in this state.

B. To enroll a qualified student for an Arizona
empowerment scholarship account, the parent of the qualified student must sign
an agreement to do all of the following:

1. Use a portion of the Arizona empowerment
scholarship account monies allocated annually to provide an education for the
qualified student in at least the subjects of reading, grammar, mathematics,
social studies and science, unless the Arizona empowerment scholarship account
is allocated monies according to a transfer schedule other than quarterly
transfers pursuant to section 15-2403, subsection G.

2. Not enroll the qualified student in a school
district or charter school and release the school district from all obligations
to educate the qualified student.� This paragraph does not:

(a) Relieve the school district or charter school
that the qualified student previously attended from the obligation to conduct
an evaluation pursuant to section 15-766.

(b) Require the qualified student to withdraw from
a
any
school district or charter
school before enrolling for an Arizona empowerment scholarship account if the
qualified student withdraws from the school district or charter school before
receiving any monies in the qualified student's Arizona empowerment scholarship
account.

(c) Prevent the qualified student from applying in
advance for an Arizona empowerment scholarship account to be funded beginning
the following school year, subject to section 15-2403, subsection H.

3. Not accept a scholarship from a school tuition
organization pursuant to title 43 concurrently with an Arizona empowerment
scholarship account for the qualified student in the same year a parent signs
the agreement pursuant to this section.

4. Use monies deposited in the qualified student's
Arizona empowerment scholarship account only for the following expenses of the
qualified student:

(a) Tuition or fees at a qualified school that
requires all teaching staff and
school
personnel who have
unsupervised contact with students to be fingerprinted.

(b) Textbooks required by a qualified school.

(c) If the qualified student meets any of the
criteria specified in section 15-2401, paragraph 7, subdivision (a), item
(i), (ii) or (iii) as determined by a school district or by an independent
third party pursuant to section 15-2403, subsection J, the qualified
student may use the following additional services:

(i) Educational therapies from a licensed or
accredited practitioner or provider, including and up to any amount not covered
by insurance if the expense is partially paid by a health insurance policy for
the qualified student.

(ii) A licensed or accredited paraprofessional or
educational aide.

(iii) Tuition for vocational and life skills
education approved by the department.

(iv) Associated goods and services that include
educational and psychological evaluations, assistive technology rentals and
braille translation goods and services approved by the department.

(d) Tutoring or teaching services provided by an
individual who is not subject to disciplinary action by the state board of
education for immoral or unprofessional conduct pursuant to section 15-505
or 15-534.04 or a facility that is accredited by a state, regional or
national accrediting organization. The department shall ensure
that
any individual who provides tutoring or teaching services
to one or more qualified students pursuant to this subdivision is not subject
to disciplinary action by the state board of education.� The department shall
also remove any individual who is subject to disciplinary action by the state
board of education from all platforms that the department provides to parents
and qualified students for the purchase of goods or educational services using
account monies.

(e) Curricula and supplementary materials.

(f) Tuition or fees for a nonpublic online learning
program.

(g) Fees for a nationally standardized norm-referenced
achievement test, an advanced placement examination or any exams related to
college or university admission.

(h) Tuition or fees at an eligible postsecondary
institution.

(i) Textbooks required by an eligible postsecondary
institution.

(j) Fees to manage the Arizona empowerment
scholarship account.

(k) Services provided by a public school, including
individual classes and extracurricular programs.

(l) Insurance or surety bond payments.

(m) Uniforms purchased from or through a qualified
school.

(n) If the qualified student meets the criteria
specified in section 15-2401, paragraph 7, subdivision (a), item (i),
(ii) or (iii) and if the qualified student is in the second year prior to the
final year of a contract executed pursuant to this article, costs associated
with an annual education plan conducted by an independent evaluation
team. The department shall prescribe minimum qualifications for
independent evaluation teams pursuant to this subdivision and factors that
teams must use to determine whether the qualified student shall be eligible to
continue to receive monies pursuant to this article through the school year in
which the qualified student reaches twenty-two years of
age. An independent evaluation team that provides an annual
education plan pursuant to this subdivision shall submit a written report that
summarizes the results of the evaluation to the parent of the qualified student
and to the department on or before July 31. The written report
submitted by the independent evaluation team is valid for one
year. If the department determines that the qualified student meets
the eligibility criteria prescribed in the annual education plan, the qualified
student is eligible to continue to receive monies pursuant to this article until
the qualified student reaches twenty-two years of age, subject to annual
review. A parent may appeal the department's decision pursuant to
title 41, chapter 6, article 10. As an addendum to a qualified
student's final-year contract, the department shall provide the following
written information to the parent of the qualified student:

(i) That the qualified student will not be eligible
to continue to receive monies pursuant to this article unless the results of an
annual education plan conducted pursuant to this subdivision demonstrate that
the qualified student meets the eligibility criteria prescribed in the annual
education plan.

(ii) That the parent is entitled to obtain an annual
education plan pursuant to this subdivision to determine whether the qualified
student meets the eligibility criteria prescribed in the annual education plan.

(iii) A list of independent evaluation teams that
meet the minimum qualifications prescribed by the department pursuant to this
subdivision.

(o) Public transportation services in this state,
including a commuter pass for the qualified student, or transportation network
services as defined in section 28-9551 between the qualified student's
residence and a qualified school in which the qualified student is enrolled.

(p) Computer hardware and technological devices
primarily used for an educational purpose. For the purposes of this
subdivision, "computer hardware and technological devices":

(i) Includes calculators, personal computers,
laptops, tablet devices, microscopes, telescopes and printers.

(ii) Does not include entertainment and other
primarily noneducational devices, including televisions, telephones, video game
consoles and accessories, and home theatre and audio equipment.

5. Not file an affidavit of intent to homeschool
pursuant to section 15-802, subsection B, paragraph 2 or 3.

6. Not use monies deposited in the qualified
student's account for any of the following:

(a) Computer hardware or other technological
devices, except as otherwise allowed under paragraph 4, subdivision (c) or (p)
of this subsection.

(b) Transportation of the pupil, except for
transportation services described in paragraph 4, subdivision (o) of this
subsection.

C. In exchange for the parent's agreement pursuant
to subsection B of this section, the department shall transfer from the monies
that would otherwise be allocated to a recipient's prior school district, or if
the child is currently eligible to attend a preschool program for children with
disabilities, a kindergarten program or any of grades one through twelve, the
monies that the department determines would otherwise be allocated to a
recipient's expected school district of attendance, to the treasurer for
deposit into an Arizona empowerment scholarship account an amount that is
equivalent to ninety percent of the sum of the base support level and
additional assistance prescribed in sections 15-185 and 15-943 for
that particular student if that student were attending a charter school.

D. The department of education empowerment
scholarship account fund is established consisting of monies appropriated by
the legislature. The department shall administer the
fund. Monies in the fund are subject to legislative
appropriation. Monies in the fund shall be used for the department's
costs in administering Arizona empowerment scholarship accounts under this
chapter. Monies in the fund are exempt from the provisions of
section 35-190 relating to lapsing of appropriations. If the
number of Arizona empowerment scholarship accounts significantly increases
after fiscal year 2020-2021, the department may request an increase in
the amount appropriated to the fund in any subsequent fiscal year in the budget
estimate submitted pursuant to section 35-113. The department
shall list monies in the fund as a separate line item in its budget estimate.

E. The state treasurer empowerment scholarship
account fund is established consisting of monies appropriated by the
legislature. The state treasurer shall administer the fund.� Monies
in the fund shall be used for the state treasurer's costs in administering the
Arizona empowerment scholarship accounts under this chapter. If the
number of Arizona empowerment scholarship accounts significantly increases
after fiscal year 2020-2021, the state treasurer may request an increase
in the amount appropriated to the fund in any subsequent fiscal year in the
budget estimate submitted pursuant to section 35-113. Monies
in the fund are subject to legislative appropriation.� Monies in the fund are
exempt from the provisions of section 35-190 relating to lapsing of
appropriations. The state treasurer shall list monies in the fund as
a separate line item in its budget estimate.

F. A parent must renew the qualified student's
Arizona empowerment scholarship account on an annual basis. The
department of education shall verify that the parent's child is a qualified
student as defined in section 15-2401 or 15-2401.01 in the year for
which the parent seeks to renew the Arizona empowerment scholarship account.� This
subsection does not require the department to annually verify the child's
disability for the purpose of section 15-2401, paragraph 7, subdivision (a),
item (i), (ii) or (iii), if applicable.

G. Notwithstanding any changes to the student's
multidisciplinary evaluation team plan, a student who has previously qualified
for an Arizona empowerment scholarship account remains eligible to apply for
renewal until the student finishes high school.

H. If a parent does not renew the qualified
student's Arizona empowerment scholarship account for a period of three
academic years, the department shall notify the parent that the qualified
student's account will be closed in sixty calendar days. The
notification must be sent
through

by
certified
mail, email and telephone, if applicable.� The parent has sixty calendar days
to renew the qualified student's Arizona empowerment scholarship
account. If the parent chooses not to renew or does not respond
in

within
sixty calendar days, the
department shall close the account and any remaining monies shall be returned
to
the

this
state.

I. A signed agreement under this section constitutes
school attendance required by section 15-802.

J.
Notwithstanding section 15-2404,
a qualified school or a provider of services that receives monies from an
Arizona empowerment scholarship account pursuant to this article is subject to
the following requirements:

1.
A qualified school or a
provider of services purchased pursuant to subsection B, paragraph 4 of this
section may not share, refund or rebate any Arizona empowerment scholarship
account monies with the parent or qualified student in any manner.

2. A qualified school that receives
monies from an Arizona empowerment scholarship account pursuant to this article
shall comply with all of the following, consistent with the family educational
rights and privacy act of 1974 (p.l. 93-380; 88 stat. 571; 20 United States
Code section 1232
g
):

(
a
) The
reporting, follow-up and hearing participation requirements prescribed by
section 41-1279.03, subsection a, paragraph 11.

(
b
) The
financial reporting required pursuant to section 15-2403, subsection I,
paragraph 7.

(
c
) Any request
for information from the department or the state board of education for the
purpose of the financial transparency portal developed pursuant to section 15-2403,
subsection L, paragraph 3.

K. Notwithstanding subsection H of this section, on
the qualified student's graduation from a postsecondary institution or after
any period of four consecutive years after high school graduation in which the
student is not enrolled in an eligible postsecondary institution, but not
before this time as long as the account holder continues using a portion of
account monies for allowable expenses each year and is in good standing, the
qualified student's Arizona empowerment scholarship account shall be closed and
any remaining monies shall be returned to the state.

L. Monies received pursuant to this article do not
constitute taxable income to the parent of the qualified student.
END_STATUTE

Sec. 2. Section 15-2403, Arizona Revised
Statutes, is amended to read:

START_STATUTE
15-2403.

Arizona empowerment scholarship accounts; administration;
appeals; risk-based audits; rules; policy handbook

A. The treasurer may contract with private financial
management firms to manage Arizona empowerment scholarship accounts.

B. The department shall conduct or contract for
annual audits of Arizona empowerment scholarship accounts to ensure compliance
with section 15-2402, subsection B, paragraph 4. The
department shall also conduct or contract for random, quarterly and annual
audits of Arizona empowerment scholarship accounts as needed to ensure
compliance with section 15-2402, subsection B, paragraph 4. The
department, in consultation with the office of the auditor general, shall
develop risk-based auditing procedures for audits conducted pursuant to
this subsection.

C. The department shall annually review a sample of
Arizona empowerment scholarship accounts, selected at random, to determine
whether the parent or qualified student is in compliance with the terms of the
contract, applicable laws, rules and orders relating to the Arizona empowerment
scholarship accounts program. The Arizona empowerment scholarship
account of a parent or qualified student who is in good standing may be
randomly selected pursuant to this subsection only one time during any five-year
period. The department may remove any parent or qualified student
from eligibility for an Arizona empowerment scholarship account if the parent
or qualified student fails to comply with the terms of the contract or
applicable laws, rules or orders or knowingly misuses monies or knowingly fails
to comply with the terms of the contract with intent to defraud and shall
notify the treasurer. The department shall notify the treasurer to
suspend the account of a parent or qualified student and shall notify the parent
or qualified student in writing that the account has been suspended and that no
further transactions will be allowed or disbursements made. The
notification shall specify the reason for the suspension and state that the
parent or qualified student has fifteen days, not including weekends, to
respond and take corrective action. If the parent or qualified
student refuses or fails to contact the department, furnish any information or
make any report that may be required for reinstatement within the fifteen-day
period, the department may remove the parent or qualified student pursuant to
this subsection.

D. A parent may appeal to the state board of
education any administrative decision the department makes pursuant to this
article, including determinations of allowable expenses, removal from the
program or enrollment eligibility. The department shall notify the
parent in writing that the parent may appeal any administrative decision under
this article and the process by which the parent may appeal at the same time
the department notifies the parent of an administrative decision under this
article. The state board of education shall establish an appeals
process, and the department shall post this information on the department's
website in the same location as the policy handbook developed pursuant to
subsection K of this section.

E. A parent may represent himself or herself or
designate a representative, not necessarily an attorney, before any appeals
hearing held pursuant to this section. Any designated representative
who is not an attorney admitted to practice may not charge for any services
rendered in connection with the hearing. The fact that a
representative participated in the hearing or assisted the account holder is
not grounds for reversing any administrative decision or order if the evidence
supporting the decision or order is substantial, reliable and probative.

F. The state board of education may refer cases of
substantial misuse of monies to the attorney general for the purpose of
collection or for the purpose of a criminal investigation if the state board of
education obtains evidence of fraudulent use of an account.

G. The department shall make quarterly transfers of
the amount calculated pursuant to section 15-2402, subsection C to the
treasurer for deposit in the Arizona empowerment scholarship account of each
qualified student, except the department may make transfers according to
another transfer schedule if the department determines a transfer schedule other
than quarterly transfers is necessary to operate the Arizona empowerment
scholarship account.

H. The department shall accept applications between
July 1 and June 30 of each year. The department shall issue an award
letter to eligible applicants within thirty days after receipt of a completed
application and all required documentation. If an eligible applicant
completes an application in advance for an Arizona empowerment scholarship
account to be funded beginning on a later date, the department may enroll the
eligible applicant on the later date, except that the department may not enroll
the applicant more than two fiscal quarters after the fiscal quarter in which
the application is completed or on a date that is after March 31 and before
July 1. If an eligible applicant completes an application after
March 31 and before July 1, the department shall enroll the applicant on or
after July 1. The department shall enroll all other eligible
applicants when the department issues an award letter pursuant to this
subsection. This subsection does not allow a qualified student to
receive monies in an Arizona empowerment scholarship account while the
qualified student is enrolled in a school district or charter school.� On or
before September 1 and November 1 of each year, the department shall furnish to
the joint legislative budget committee and the governor's office of strategic
planning and budgeting an estimate of the amount required to fund Arizona
empowerment scholarship accounts for the following fiscal year. The
department shall include in its budget request for the following fiscal year
the amount estimated pursuant to section 15-2402, subsection C for each
qualified student.

I. The state board of education may adopt rules and
policies necessary to administer Arizona empowerment scholarship accounts,
including rules and policies:

1. For establishing an appeals process pursuant to
subsection D of this section.

2. For conducting or contracting for examinations of
the use of account monies, consistent with subsection L of this section.

3. For conducting or contracting for random,
quarterly and annual reviews of accounts.

4. For establishing or contracting for the
establishment of an online anonymous fraud reporting service.

5. For establishing an anonymous telephone hotline
for fraud reporting.

6. That require a surety bond or insurance for
account holders.

7. Establishing minimum financial
performance requirements for qualified schools that accept payment from a
parent or qualified student pursuant to this chapter and prescribing financial
reporting requirements for each qualified school.� the performance and
reporting requirements must do all of the following:

(
a
) Require the
same data points that are collected from school districts and charter schools
pursuant to annual financial and compliance audits and financial statement
audits required under section 15-914.

(
b
) Require any
data or information necessary to evaluate all of the following:

(
i
) The
qualified school's financial ability to continue operating.

(
ii
) Whether
the qualified school is in financial default.

(
iii
) Whether
the qualified school's operating costs exceed its available resources.

(
iv
) Whether
the qualified school is able to pay debt principal, interest payments and
facility costs that become due.

(
v
) The
percentage change of the qualified school's student count each year.

(
c
) Summarize
the qualified school's financial performance, including whether the qualified
school meets the minimum financial performance requirements adopted pursuant to
this paragraph.

J. The department shall contract with an independent
third party for the purposes of determining whether a qualified student is
eligible to receive educational therapies or services pursuant to section 15-2402,
subsection B, paragraph 4, subdivision (c).� If during any period on or after
January 1, 2023 the department fails to ensure that a contract with an
independent third party is in effect, during that period:

1. The county school superintendent of each county
may approve a list of independent third parties within the county whose
evaluation may be used to determine whether a qualified student who resides
within the county is eligible to receive educational therapies or services
pursuant to section 15-2402, subsection B, paragraph 4, subdivision (c).

2. If the county school superintendent of a county
does not provide a list of approved independent third parties within ninety
days after the beginning of any period during which the department does not
have a contract with an independent third party in effect as described in this
subsection, the parent of a qualified student who resides within the county has
the right to obtain an independent educational evaluation from a qualified
examiner to determine whether the qualified student is eligible to receive
educational therapies or services pursuant to section 15-2402,
subsection B, paragraph 4, subdivision (c). The expense for an
educational evaluation undertaken pursuant to this paragraph shall be provided
by the school district within which the qualified student resides and that
serves the grade level of the qualified student. For the purposes of
this paragraph, "qualified examiner" means a licensed physician,
psychiatrist or psychologist.

K. On or before July 1 of each year, the department
shall develop an applicant and participant handbook
that includes

and post the handbook on the department's
website. The handbook developed pursuant to this subsection shall:

1. Include
information
relating to policies and processes of Arizona empowerment scholarship
accounts.
The policy handbook shall

2. include a statement that knowingly
obtaining an Arizona empowerment scholarship account for a qualified student by
means of false or fraudulent pretenses, representations, promises or material
omissions is a violation of section 13-2310 and that a violation of
section 13-2310 is a class 2 felony.

3.
Comply with the rules
adopted by the state board of education pursuant to this section.
The department shall post the handbook on the department's website.

L. The department shall:

1. Establish and maintain an online database of
allowable and disallowed categories of expenses and provide a link to the
database on the department's website.

2. Allow the use of account monies to reimburse the
parent of a qualified student or a qualified student for the purchase of a good
or educational service that is an allowable expense pursuant to section 15-2402,
subsection B.

3. develop a financial transparency
portal that includes all information reported pursuant to subsection I,
paragraph 7 of this section. The department may contract with a
third party to develop and maintain the portal.

M. Except for cases in which the attorney general
determines that a parent or account holder has committed fraud, any expenditure
from an Arizona empowerment scholarship account for a purchase that the
department determines is not an allowable expense pursuant to section 15-2402
and that is subsequently repaid by the parent or account holder shall be
credited back to the Arizona empowerment scholarship account balance within
thirty days after the receipt of payment.

N. If, in response to an appeal of an administrative
decision made by the department, the state board of education issues a stay of
an Arizona empowerment scholarship account suspension pursuant to rules adopted
by the board, the department may not withhold funding or contract renewal for
the account holder because of the appealed administrative decision during the
stay unless directed by the board to do so.
END_STATUTE

Sec. 3. Title 15, chapter 19, article 1,
Arizona Revised Statutes, is amended by adding section 15-2407, to read:

START_STATUTE
15-2407.

Joint legislative audit committee; committees of reference;
program review; reports; auditor general; audit; definitions

A. On or before July 1, 2034 and at least
every ten years thereafter, the joint legislative audit committee shall conduct
a review of the Arizona empowerment scholarship accounts
program. The joint legislative audit committee shall direct the
appropriate legislative committees of reference established pursuant to section
41-2954 to which the department is assigned to complete a program review
of the Arizona empowerment scholarship accounts program at least seventeen
months before the deadline for the program review prescribed by this subsection.

B. The committees of reference shall
undertake the program review in the scope and detail the committees of
reference deem appropriate and shall address whether there is a need for the
program in this state and, if so, assess the degree to which the original
objectives of the program have been achieved expressed in terms of the
performance, impact or accomplishments of the program and of the situation the
program was intended to address.

C. The committees of reference shall
complete the draft program review report not later than eleven months before
the deadline for the program review prescribed by this
section. Before the draft program review report is submitted, the
department shall be given an OPPORTUNITY to review, within forty calendar days,
the draft program review report and submit written comments or a rebuttal to be
included in the preliminary program review report.

D. The committees of reference shall
submit the preliminary program review report to the governor, to each member of
the joint legislative audit committee, to each member of the committees of
reference to which the department is assigned and to the department on or
before October 1 of the year before the scheduled deadline for the program
review prescribed by this section.

E. The joint legislative audit
committee shall direct the auditor general to conduct a program performance
audit to determine one or more of the following:

1. Whether the department is managing
the program in an economical and efficient manner.

2. Causes of inefficiencies or
uneconomical practices in the program, including inadequacies in management
information systems, internal and administrative procedures, organizational
structure, use of resources, allocation of personnel, purchasing policies and
equipment.

3. Whether the desired results of the
program are being achieved.

4. Whether the objectives of the
program as established by the legislature are being met.

F. The auditor general shall conduct
the program performance audit in a manner that is consistent with the
performance audit procedures prescribed in title 41, chapter 7, article 10.1
and

shall submit the program performance audit to the
governor, to each member of the joint legislative audit committee, to the
committees of reference to which the department is assigned and to the
department on or before October 1 of the year before the scheduled deadline for
the program review prescribed by this section.

G. After receipt of the program
performance audit, the committees of reference shall hold at least one public
hearing to receive testimony from the public and from the officials of the
department. The committees of reference may hold additional public
hearings for the purposes provided in section 41-2954, subsection C as
applicable to the program.

H. In determining whether to continue
or terminate the program, each committee of reference shall consider the
information provided in the preliminary program review report and the program
performance audit and the factors provided in section 41-2954, subsection
D as applicable to the program.

I. The joint legislative audit
committee may direct the auditor general or the committees of reference to
conduct a follow-up review of the program to determine how the department
has performed its statutory functions or corrected deficiencies relating to the
program before program review, or both.

J. For the purposes of this section:

1. "Committee of reference"
has the same meaning prescribed in section 41-2952.

2. "Program" means the
Arizona empowerment scholarship accounts program.

3. "Program review" means a
systematic evaluation by the committees of reference under the supervision of
the joint legislative audit committee, with the assistance of the department,
joint legislative budget committee, auditor general and support staff, to
determine whether the merits of the program justify the program's continuation
rather than termination or the program's continuation at a level less than or
greater than the existing level.

END_STATUTE

Sec. 4. Section 41-1279.03, Arizona Revised
Statutes, is amended to read:

START_STATUTE
41-1279.03.

Powers and duties

A. The auditor general shall:

1. Prepare an audit plan for approval by the
committee and report to the committee the results of each audit and
investigation and other reviews conducted by the auditor general.

2. Conduct or cause to be conducted annual financial
and compliance audits of financial transactions and accounts kept by or for all
state agencies subject to the federal single audit requirements.� The audits
shall be conducted in accordance with generally accepted governmental auditing
standards and accordingly shall include tests of the accounting records and
other auditing procedures as may be considered necessary in the circumstances.�
The audits shall include the issuance of suitable reports as required by the
federal single audit requirements so that the legislature, the federal
government and others will be informed as to the adequacy of financial
statements of this state in compliance with generally accepted accounting
principles and to determine whether this state has complied with laws and
regulations that may have a material effect on the financial statements and on
major federal assistance programs.

3. Perform procedural reviews for all state agencies
at times determined by the auditor general. These reviews may
include evaluation of administrative and accounting internal controls and
reports on these reviews.

4. Perform special research requests, special audits
and related assignments as designated by the committee and conduct performance
audits, special audits, special research requests and investigations of any
state agency, whether created by the constitution or otherwise, as may be
requested by the committee.

5. Annually on or before the fourth Monday of
December, prepare a written report to the governor and to the committee that
contains a summary of activities for the previous fiscal year.

6. In the fifth year and in each fifth year
thereafter in which a transportation excise tax is in effect in a county as
provided in section 42-6106 or 42-6107, conduct a performance audit
that:

(a) Reviews past expenditures and future planned
expenditures of the transportation excise revenues and determines the impact of
the expenditures in solving transportation problems within the county and, for
a transportation excise tax in effect in a county as provided in section 42-6107,
determines whether the expenditures of the transportation excise revenues
comply with section 28-6392, subsection B.

(b) Reviews projects completed to date and projects
to be completed during the remaining years in which a transportation excise tax
is in effect.� Within six months after each review period, the auditor general
shall present a report to the speaker of the house of representatives and the
president of the senate detailing findings and making recommendations.

(c) Reviews, determines, reports and makes
recommendations to the speaker of the house of representatives and the
president of the senate whether the distribution of Arizona highway user
revenues complies with title 28, chapter 18, article 2.

7. If requested by the committee, conduct
performance audits of counties and incorporated cities and towns receiving
Arizona highway user revenue fund monies pursuant to title 28, chapter 18,
article 2 to determine whether the monies are being spent as provided in
section 28-6533, subsection B.

8. Perform special audits designated pursuant to law
if the auditor general determines that there are adequate monies appropriated
for the auditor general to complete the audit. If the auditor
general determines the appropriated monies are inadequate, the auditor general
shall notify the
joint legislative audit
committee.�
Based on information provided by the auditor general, for any legislative
measure that requires the auditor general to perform a special audit, the joint
legislative budget committee staff shall notify all the members of the
legislature as soon as practicable of the cost to conduct the special audit.

9. Establish a schoolwide audit team in the office
of the auditor general to conduct performance audits and monitor school
districts to determine the percentage of every dollar spent in the classroom by
the school district. Each school district shall prominently post on
its website home page a copy of its profile pages that displays the percentage
of every dollar spent in the classroom by that school district from the most
recent status report issued by the auditor general pursuant to this
paragraph. The auditor general shall determine, through random
selection, the school districts to be audited each year, subject to review by
the joint legislative audit committee. A school district that is
subject to an audit pursuant to this paragraph shall notify the auditor general
in writing whether the school district agrees or disagrees with the findings of
the audit and whether the school district will implement the recommendations,
implement modifications to the recommendations or refuse to implement the
recommendations. The school district shall submit to the auditor
general a written status report on the implementation of the audit
recommendations at the request of the auditor general, within the two-year
period following the issuance of an audit conducted pursuant to this
paragraph. The auditor general shall review the school district's
progress toward implementing the recommendations of the audit and provide
status reports of the reviews to the joint legislative audit committee during
this two-year period. The auditor general may review a school
district's progress beyond this two-year period for recommendations that
have not yet been implemented by the school district.� The school district
shall participate in any hearing scheduled during this review period by the
joint legislative audit committee or by any other legislative committee
designated by the joint legislative audit committee.

10. Annually review per diem compensation and
reimbursement of expenses for employees of this state and members of a state
board, commission, council or advisory committee by judgmentally selecting
samples and evaluating the propriety of per diem compensation and expense
reimbursements.

11. Establish an audit team in the
office of the auditor general to conduct audits and monitor qualified schools
to determine the percentage of Arizona empowerment scholarship account monies
that are spent in the classroom by the qualified school. Notwithstanding
any other law, a qualified school that accepts a payment from a parent or
qualified student pursuant to title 15, chapter 19 shall prominently post on
the qualified school's website home page a copy of the qualified school's
profile pages that displays the percentage of Arizona empowerment scholarship
account monies spent in the classroom by that qualified school from the most
recent status report issued by the auditor general pursuant to this
paragraph. The auditor general shall determine, through random
selection, the qualified schools to be audited each year, subject to review by
the joint legislative audit committee.� A qualified school that is subject to
an audit pursuant to this paragraph shall notify the auditor general in writing
whether the qualified school agrees or disagrees with the findings and
recommendations of the audit and whether the qualified school will implement
the findings and recommendations, implement modifications to the findings and
recommendations or refuse to implement the findings and recommendations.� The
qualified school shall submit to the auditor general a written status report on
the implementation of the audit findings and recommendations every six months
for two years after the completion of an audit conducted pursuant to this
paragraph. The auditor general shall review the qualified school's
progress toward implementing the findings and recommendations of the audit
every six months after receiving the qualified school's status report for two
years. The auditor general may review a qualified school's progress
beyond this two-year period for recommendations that have not yet been
implemented by the qualified school. The auditor general shall
provide a status report of these reviews to the joint legislative audit committee.�
The qualified school shall participate in any hearing scheduled during this
review period by the joint legislative audit committee or by any other
legislative committee designated by the joint legislative audit committee.� For
the purposes of this paragraph, "qualified school" has the same
meaning prescribed in section 15-2401.

B. The auditor general may:

1. Subject to approval by the committee, adopt rules
necessary to administer the duties of the office.

2. Hire consultants to conduct the studies required
by subsection A, paragraphs 6 and 7 of this section.

C. If approved by the committee, the auditor general
may charge a reasonable fee for the cost of performing audits or providing
accounting services for auditing federal funds, special audits or special
services requested by political subdivisions of this state. Monies
collected pursuant to this subsection shall be deposited in the audit services
revolving fund.

D. The department of transportation, the county
treasurer, the county transportation excise tax recipients
,

and
the board of supervisors of a county that has approved
a county transportation excise tax as provided in section 42-6106 or 42-6107
and the governing bodies of counties, cities and towns receiving Arizona
highway user revenue fund monies shall cooperate with and provide necessary
information to the auditor general or the auditor general's consultant.

E. The department of transportation or the county
transportation excise tax recipients shall reimburse the auditor general as
follows, and the auditor general shall deposit the reimbursed monies in the
audit services revolving fund:

1. For the cost of conducting the studies or hiring
a consultant to conduct the studies required by subsection A, paragraph 6,
subdivisions (a) and (b) of this section, from monies collected pursuant to a
county transportation excise tax levied pursuant to section 42-6106 or 42-6107.

2. For the cost of conducting the studies or hiring
a consultant pursuant to subsection A, paragraph 6, subdivision (c) and
paragraph 7 of this section, from the Arizona highway user revenue fund.
END_STATUTE