School district in receivership

Children in the Peach Springs Unified School District are attending classes, although district operations are far from normal.

The district went into receivership Monday, following a meeting of the state Board of Education, Executive Director Vince Yanez said. Members of the PSUSD Governing Board met last week and agreed to the decision, he added.

"We had received allegations previously of financial mismanagement," Yanez said. "What ultimately led to the board's action was the realization the district had prior-year over-expenditures that far exceeded the legal definition of insolvency.

"At the beginning of this year, the district essentially had no cash on hand and requested a cash advance from the Department of Education. Those cash advances are issued at the discretion of the superintendent of public instruction."

"Superintendent (Tom) Horne recognized the seriousness of the situation and that the district is out of compliance with the Uniform System of Financial Records, the standard accounting principle for all districts, and said he would not issue the advance unless it was placed into receivership, so there is assurance the money is used properly."

Veriti Consulting of Phoenix was appointed the receiver.

That firm also is the receiver for the Saddle Mountain Unified School District that went into receivership June 25, Yanez said.

The district governing board will continue to hold meetings to conduct business. However, Veriti personnel probably will attend all such meetings to ensure finances are managed according to a plan they prepare.

"Veriti is responsible for all district operations," Yanez said.

"An immediate requirement the firm must meet is a full investigation of finances and to present a plan to the state board within 120 days. They must create a plan that details how the district will financially recover."

Veriti has been successful in its role as a receiver in the past in working with a local governing board to resolve financial problems, he said.

How long may a district remain in receivership?

"That's hard to say as there are elements of law that must be met," Yanez said. "The district must be able to pay all its debts as they come due and be in compliance with the USFR, so there's no timeframe. We want it done as soon as possible."

One major debt to resolve is a $1,081,000 line of credit the district received from Chase Bank.

Receivership will have a significant impact on taxpayers in the PSUSD.

Mohave County supervisors approved a $4 primary property tax rate for the district during their meeting Aug. 20. It was the figure requested by district officials, but less than the $8.03 amount recommended by Mike File, Mohave County school superintendent.

"As far as what the tax rate may be I can only relate what happened in Colorado City," File said. "That district had about $3 million in debt, whereas Peach Springs has about $1.5 million.

"Colorado City went from a $4 primary rate before receivership up to $22 afterward, so the impact on Peach Springs could be dramatic. The receiver sets the rate of what is needed and the governing board there approves it."

The Colorado City Unified School District was expected to be in receivership for three years when it entered it in January 2006. It came out of receivership this past March after 14 months, File said. There are about 105 students attending classes in the PSUSD. Steve Condict, the new superintendent, has trimmed staff from 45 to 14 people, File said.

"I think receivership in Peach Springs will take less than a year with Steve Condict's involvement and the plan he has," File said. "They have a pretty sharp group up there, and now it's a matter of getting revenues from grants and other sources into the district."