Earlier this month, Arizona Superintendent of Schools Tom Horne issued a new directive to staff in his office overseeing the state’s Empowerment Scholarship Account program, which empowers families of more than 83,000 Arizona kids to direct their education in the ways that best meet their needs.
Horne recently announced that the department would no longer manually review every ESA purchase up to $2,000 and instead adopt risk-based auditing. Transactions over $2,000 would still receive line-by-line approval from state staff.
Following the announcement, Aiden Fleming, deputy director of policy operations with yes. every kid. foundation., sent a letter to Superintendent Horne commending this decision, noting that it will “strengthen the program’s integrity and ensure it continues to deliver for Arizona families.”
Importantly, Fleming noted that the Arizona Legislature required the department by law to use risk-based auditing in 2024, passing the following language: “The department, in consultation with the Office of the Auditor General, shall develop risk-based auditing procedures for audits conducted pursuant to this subsection.”
In any education savings account (ESA) program, efficiency is key. Families have had to wait up to several months to receive reimbursement for their kids’ educational expenses through the program. This issue risks stripping ESAs of one of their main benefits for families: the flexibility to craft one’s own education.
The shift to risk-based auditing for the vast majority of ESA transactions can solve this issue. And, in addition to being required by law, it just makes sense. Risk-based auditing is considered a best practice in financial oversight. One would be hard-pressed to find a large government program which does not use risk-based auditing.
The letter also highlights a quote from a 2016 report by the state Auditor General which recommended that the department “[should continue] strengthening its spending review process, such as continuing to develop a risk-based approach for prioritizing its spending reviews and using all available tools to detect misspending.” Risk-based auditing is the most effective and compliant path for managing Arizona’s ESA program. As more Arizona families choose this option, the program should scale to meet demand.
As outlined in the ESA Implementation Roadmap, larger programs might inherently carry more risk, but risk-based auditing is a way to more efficiently target administrative oversight efforts without diverting resources from other important aspects of program delivery. The current audit approach, which reviews every expense manually, exceeds standard best practices to the point of inefficiency.
As McKinsey, an international business consulting firm, noted in a 2022 report, “a fundamental tension exists between controlling fraud and optimizing the customer experience, because tighter fraud and customer protection controls often add friction to the customer experience.”
Considering that the 1% rate of improper payments documented in Arizona’s ESA program is much lower than other programs, it is unfortunate that families’ educational needs would be sacrificed for a misplaced sense of oversight. Implementing smarter practices and trusting families improves efficiency and reduces delays for kids.
“We support Superintendent Horne’s proactive measures to streamline oversight and serve families better. Arizona is leading the way by ensuring ESA programs are accessible, effective, and fiscally responsible,” Fleming said. “We encourage policymakers, media, and stakeholders to recognize the importance of this balanced approach as a model for empowering families nationwide.”
This recent move by Superintendent Horne shows commitment both to the integrity of the ESA program and to the needs of Arizona families seeking to customize their kids’ education. Read more about the different ways to approach expense management in ESA programs in Chapter 5 of the ESA Implementation Roadmap from yes. every kid. foundation.
Read Aiden’s letter to Superintendent Horne below.
