The Arizona Department of Education prioritized appeasing voucher school parents angry about payment backlogs over implementing a new oversight law, a report from the Arizona Auditor General shows. 

In response to the report, the Education Department defended its practices, saying its lack of action to claw back money paid for unallowable purchases, like a $1,000 generator, didn’t equal a failure of program administration. 

The law, which went into effect in September 2024, required the Education Department to consult with the Arizona Auditor General’s Office to create risk-based auditing processes for the school voucher program. Last year during a Joint Legislative Audit Committee meeting, John Ward, the executive director of the ESA program, said that wasn’t a priority.

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In a report released last week, the auditor general found the Department of Education’s oversight of the voucher program, formally called Empowerment Scholarship Accounts, to be lacking. Auditors described a risk-based auditing process from ADE that was haphazard, continually changing and that lacked concrete instructions for employees. 

Those processes resulted in automatic approval of explicitly unallowed purchases for things like amusement park and airline tickets, hotel stays and meals, according to the audit report. 

“Throughout our test work, Program management described to us different variations of their audit methodology with varying numbers of transactions selected and criteria used to select transactions for audit, but none of the variations use a comprehensive risk-assessment methodology,” Arizona Auditor General Lindsey Perry wrote in the report. 

After consulting with members of the ESA Handbook Committee in fall 2024, ADE began automatically approving all purchases under $2,000 to clear a backlog of 89,000 purchases that frustrated parents. Superintendent of Public Instruction Tom Horne promised that the automatically approved purchases would be subjected to risk-based auditing, therefore ensuring there wouldn’t be any fraud. 

The Auditor General’s Office found that, between December 2024 and January 2026, the Education Department automatically processed almost 2.3 million transactions below $2,000 worth more than $654 million. 

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Nearly a year after the law requiring risk-based audits went into effect, and six months after the automatic approval of sub-$2,000 purchases was put in place, the Education Department still hadn’t consulted with the auditor general. Instead, it implemented its own risk-based auditing practices without the auditor general’s input. 

Further, auditors found that even when the Department of Education audits identified purchases of non-educational items, it sometimes took no action to claw back the money that it already paid. 

The Department of Education disagreed with nearly all of the auditor general’s findings. 

“The auditor general’s recommendation implies that all auto-processed orders under $2,000 are not eligible for audit,” the Department of Education wrote in its response to the audit. “All orders submitted to the ESA program under $2,000 that are auto-processed are included in the pool of orders that can be chosen for audit.”

Perry responded that her office’s findings shouldn’t be interpreted that way, and that “the deficiencies we found indicate that the Program’s internal controls are not designed or working as intended.”

In its response, the Department of Education accused Perry of overstepping her authority by evaluating “policy choices rather than compliance.” Perry said that was incorrect. 

About the program

The ESA program was created in 2012 to provide vouchers for students with disabilities and was expanded to include students attending failing schools, children in foster care and the kids of military members. 

The program served about 12,000 students before then-Governor Doug Ducey and the Republican-led Arizona Legislature implemented a universal expansion in 2022. The program is now available to all of the state’s roughly one million K-12 students, and has an enrollment of more than 100,000 students at an annual cost of about $1 billion.

The program works by giving the parents of participating students a debit card that can be used to pay for various educational costs, reimbursing the parents for those costs or allowing parents to make purchases through the ClassWallet virtual marketplace. The costs can include private or parochial school tuition, tutoring, homeschooling supplies — and even savings for college tuition.

Since the universal expansion was implemented, it has been contentious. Republican lawmakers and supporters of school choice say they should get taxpayer funding no matter where their children attend school. Democratic legislators and public school advocates say the program lacks accountability, serves as an entitlement program for wealthy families who were already sending their kids to private school and siphons much needed money away from public schools. 

Auditor general v. Department of Education

As part of the state budget approved in 2024, the Arizona Legislature required the ESA program to work with the auditor general to create risk-based auditing procedures. The goal of that law, which went into effect in September 2024, is to ensure that students and parents who use the program comply with rules on how the money is used.

In July 2025, Perry shared her frustration with the lawmakers on the Joint Legislative Audit Committee that the Education Department had blown off her office’s repeated requests — over months — to meet with ESA administrators and create the audit processes. 

“Ten months after the law’s effective date and eight months after the department purportedly implemented a risk-based auditing process, the department still has not met with my team to develop those risk-based auditing procedures or consult with my office as required,” Perry said at the time.

Ward told JLAC that complying with the new law was not a priority. 

“Our main responsibility is to get students who want to be on this program on the program, to review their purchases, and to provide customer service as they call in and need support,” he said. “So, that is our core mission. That’s what we’re focused on. It’s very difficult with this very small staff to do much more than daily operations.”

Instead of consulting with the auditor general, Ward focused on ESA handbook negotiations with parents who objected to purchase limits, such as a $4,000 annual cap on musical instruments and $2,500 for physical education. The new handbook, without purchase limits, was approved in June 2025. A month later, Ward had still not reached out to Perry to consult on auditing procedures. 

The two entities only began discussions about the risk-based audit procedures after the July 21 JLAC meeting when Chairman Mark Finchem, R-Prescott, said he expected them to meet on the subject within two weeks. 

The audit

The Auditor General’s Office ultimately found that, although the Education Department’s ESA audits “consider some elements of risk, the Program does not utilize a comprehensive risk-based audit approach.”

In September 2025, ESA program managers told state auditors that they reviewed 25% of the automatically approved under-$2,000 purchases on a weekly basis, but chose the audited purchases randomly instead of based on any risk factors. In January 2026, the Education Department told the auditor general that it was reviewing 30% of those purchases each week and that it had used one risk factor to determine which kinds of purchases to audit. 

But auditors found that ESA employees did not adhere to the 30% weekly threshold. When the Auditor General’s Office looked at five weeks of ESA audits in October 2025, it found that some categories of payments that should have been included were not, and that between 6.5% and 23.9% of the automatically approved purchases were audited.

Ward responded by saying the 30% review mark was only a goal. 

“The ESA program selecting 30 percent of orders for audit is not a statutory or regulatory requirement,” Ward wrote in response to the auditor general’s findings. “Rather, it was an internal goal previously established based on the transaction volume and staffing levels at that time.” 

Additionally, the ESA program failed to document its procedures for obtaining, selecting and auditing transactions, according to state auditors. 

Ward blamed inadequate funding from the GOP-controlled legislature for the lack of documented auditing procedures for employees to follow. 

“When the ESA program is provided adequate funding to expand its operations, formally documenting all its current policies and procedures will be one of its priorities,” Ward wrote in his response to the auditor general. “The program currently does not have resources to immediately complete this priority of documenting and consolidating its current policies and procedures in a manual.”

Ward added that the lack of a risk-based auditing manual for employees to reference was “not a failure of program administration” but a consequence of administrative funding that was not scaled in proportion to the ESA program’s rapid growth. 

The Auditor General’s Office recommended a lengthy list of ways that managers of the ESA could improve its risk-based auditing process. 

“Our Office has also previously recommended to the Program the need to implement internal controls to prevent and detect fraud within the program; however, the Program has not implemented this recommendation,” Perry wrote. 

Ward responded that the Auditor General’s Office lacked understanding of the ESA program’s risk-based auditing processes and that it had already implemented many of the auditor general’s recommendations.

The Auditor General’s Office responded that the ESA program had not provided evidence that it had implemented those recommendations.

“ADE appears to misunderstand that much of the information and terminology reported in this finding is taken directly from Program and ADE documentation and Program staff,” the auditor general wrote in the report. 

What’s the point?

When the Auditor General’s Office reviewed 15 purchases identified through the Education Department’s own audits that were either unallowable or lacking documentation, managers didn’t review the audit results or take timely action in 14 of those instances.

In one instance, an ESA parent used the ClassWallet Marketplace to purchase a $1,099 generator in October 2025. An ESA auditor flagged the purchase as unallowable two weeks later, but as of January 2026, managers hadn’t reviewed the transaction or taken any action. The ESA managers only suspended the account after the Auditor General’s Office brought it to their attention. 

Other transactions flagged by ESA employees as unallowable that management never took action on included $1,666 for planter boxes and $1,400 for gym equipment.

The Auditor General’s Office reviewed 65 transactions from July 2023 through October 2025, and found that ESA program employees failed to identify overpayments or missing documentation that could indicate misuse of taxpayer money in 25 of them — nearly 40% of the transactions that auditors reviewed. 

“In addition, because administrative rule only allows for the Program to audit account activity from the last 2 fiscal years, including the current fiscal year, untimely reviews may result in monies for unallowable purchases not being recoverable,” Perry wrote. 

Ward answered that the delay in taking action on unallowable purchases was not a failure. 

“The audit report presents examples of orders that were unallowable or missing required documentation that were not acted upon by ADE for months,” he wrote. “Apparently, this is supposed to demonstrate some material level of operational failure by ADE. It is not.” 

The Education Department can act on the unallowable orders any time within the two-year timeframe and still be in compliance with the law, Ward wrote. The Auditor General’s Office reported that the timeframe had already expired for some of the unallowed expenses. 

Doug Nick, a spokesman for Horne and the Department of Education, declined to answer the Arizona Mirror’s specific questions about the audit report. 

“The Auditor General’s report completely demolishes the myth about misspending in the ESA program,” Horne said in an emailed statement. “The potential is miniscule and far less than other government programs. With a budget of a billion dollars, the Auditor General found approximately $86,000 – that is 0.0086 percent – of potential ESA dollars at risk. That compares with findings at multiple state agencies involving hundreds of millions of dollars in errors or misspending. The ESA program is being operated appropriately and has been falsely and unfairly attacked by its critics.”