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

Section 1. Section 15-213, Arizona Revised Statutes, is amended to read:

START_STATUTE15-213. Procurement practices of school districts and charter schools; definitions

A. The state board of education shall adopt rules prescribing procurement practices for all school districts in this state as follows:

1. The state board shall submit to the auditor general proposed rules consistent with the procurement practices prescribed in title 41, chapter 23, modifying the provisions for public notice of invitation for bids, requests for proposals and requests for qualifications to allow a governing board to give public notice of the invitation for bids, requests for proposals and requests for qualifications by publication in the official newspaper of the county as defined prescribed in section 11‑255, modifying the provisions relating to disposal of materials to comply with section 15‑342, paragraph 18, providing for governing board delegation of procurement authority and modifying as necessary other provisions that the state board determines are not appropriate for school districts. The rules shall include provisions specifying that school districts are not required to engage in competitive bidding in order to make the decision to participate in programs pursuant to section 15‑382 and that a program authorized by section 15‑382 is not required to engage in competitive bidding for the services necessary to administer the program or for purchase of insurance or reinsurance. The rules shall include provisions specifying that school districts are not required to engage in competitive bidding in order to place a pupil in a private school that provides special education services if such placement is prescribed in the pupil's individualized education program and the private school has been approved by the department of education division of special education pursuant to section 15‑765, subsection D. This placement is not subject to rules adopted by the state board of education before November 24, 2009 pursuant to this section.� The rules for procurement of construction projects shall include provisions specifying that surety bonds furnished as bid security and performance and payment bonds shall be executed and furnished as required by title 34, chapter 2 or 6, as applicable.� The rules shall specify the total cost of a procurement that is subject to invitations for bids, requests for proposals and requests for clarification, using the aggregate dollar amount limits for procurements prescribed in section 41‑2535.

2. The state board of education shall adopt rules for procurements involving construction not exceeding one hundred fifty thousand dollars, which shall be known as the simplified school construction procurement program.� At a minimum, the rules for a simplified construction procurement program shall require that:

(a) A list be maintained by each county school superintendent of persons who desire to receive solicitations to bid on construction projects to which additions shall be permitted throughout the year.

(b) The list of persons be available for public inspection.

(c) A performance bond and a payment bond as required by this section be provided for contracts for construction by contractors.

(d) All bids for construction be opened at a public opening and the bids shall remain confidential until the public opening.

(e) All persons desiring to submit bids be treated equitably and the information related to each project be available to all eligible persons.

(f) Competition for construction projects under the simplified school construction procurement program be encouraged to the maximum extent possible.� At a minimum, a school district shall submit information on each project to all persons listed with the county school superintendent by any school district within that county.

(g) A provision, covenant, clause or understanding in, collateral to or affecting a construction contract that makes the contract subject to the laws of another state or that requires any litigation, arbitration or other dispute resolution proceeding arising from the contract to be conducted in another state is against this state's public policy and is void and unenforceable.

3. The state board of education shall adopt rules for the procurement of goods and information services by school districts and charter schools using electronic, online bidding.� The rules adopted by the state board shall include the use of reverse auctions and shall be consistent with the procurement practices prescribed in title 41, chapter 23, article 13, modifying as necessary those provisions and the rules adopted pursuant to that article that the state board determines are not appropriate for school districts and charter schools.� Until the rules are adopted, school districts and charter schools may procure goods and information services pursuant to title 41, chapter 23, article 13 using the rules adopted by the department of administration in implementing that article.

4. The auditor general shall review the proposed rules to determine whether the rules are consistent with the procurement practices prescribed in title 41, chapter 23 and any modifications are required to adapt the procedures for school districts.

5. If the auditor general approves the proposed rules, the auditor general shall notify the state board in writing and the state board shall adopt such rules.

6. If the auditor general objects to the proposed rules, the auditor general shall notify the state board of the objections in writing and the state board, in adopting the rules, shall conform the proposed rules to meet the objections of the auditor general or revise the proposed rules to which an objection has been made and submit the revisions to the auditor general for approval.

B. After the bids submitted in response to an invitation for bids are opened and the award is made or after the proposals or qualifications are submitted in response to a request for proposals or a request for qualifications and the award is made, the governing board shall make available for public inspection all information, all bids, proposals and qualifications submitted and all findings and other information considered in determining whose bid conforms to the invitation for bids and will be the most advantageous with respect to price, conformity to the specifications and other factors or whose proposal or qualifications are to be selected for the award. The invitation for bids, request for proposals or request for qualifications shall include a notice that all information and bids, proposals and qualifications submitted will be made available for public inspection.� The rules adopted by the state board shall prohibit the use in connection with procurement of specifications in any way proprietary to one supplier unless the specification includes all of the following:

1. A statement of the reasons why no other specification is practicable.

2. A description of the essential characteristics of the specified product.

3. A statement specifically permitting an acceptable alternative product to be supplied.

C. No project or purchase may be divided or sequenced into separate projects or purchases in order to avoid the limits prescribed by the state board under subsection A of this section.

D. A contract for the procurement of construction or construction services shall include a provision that provides for negotiations between the school district and the contractor for the recovery of damages related to expenses incurred by the contractor for a delay for which the school district is responsible, that is unreasonable under the circumstances and that was not within the contemplation of the parties to the contract.� This subsection shall not be construed to void any provision in the contract that requires notice of delays, provides for arbitration or any other procedure for settlement or provides for liquidated damages.

E. Except as provided in section 15‑213.04, the auditor general may conduct discretionary reviews, investigations and audits of the financial and operational procurement activities of school districts, nonexempt charter schools and school-purchasing cooperatives.� The auditor general has final review and approval authority over all school district, nonexempt charter school and school-purchasing cooperative audit contracts and any audit reports issued in accordance with this section.

F. Except as provided in section 15‑213.04 and in addition to the requirements of sections 15‑914 and 15‑914.01, school districts, nonexempt charter schools and school-purchasing cooperatives, in connection with any audit conducted by a certified public accountant, shall contract for a systematic review of purchasing practices using methodology consistent with sampling guidelines established by the auditor general. The auditor general shall consider cost when establishing guidelines pursuant to this subsection and to the extent possible shall attempt to minimize the cost of the review. The purpose of the review is to determine whether the school district, nonexempt charter school or school-purchasing cooperative is in compliance with the procurement laws and applicable procurement rules of this state.� A copy of the review shall be submitted on completion to the auditor general. The auditor general may conduct discretionary reviews of school districts, nonexempt charter schools and school-purchasing cooperatives not required to contract for independent audits.

G. The attorney general or county attorney has jurisdiction to enforce this section.� The attorney general or county attorney may seek relief for any violation of this section through an appropriate civil or criminal action in superior court, including an action to enjoin a threatened or pending violation of this section and including an action to enforce compliance with any request for documents made by the auditor general pursuant to this section.

H. The department of education shall enact policies and procedures for the acceptance and disposition of complaints from the public regarding school procurement practices and shall forward all school procurement complaints to the attorney general. Notwithstanding rules adopted by the state board, school districts shall not be required to prepare or submit an annual report on the benefits associated with the use of construction‑manager‑at‑risk, design‑build, qualified select bidders list and job‑order‑contracting methods.

I. The state board of education shall adopt, and the auditor general shall review, rules authorizing school districts to procure construction services by construction‑manager‑at‑risk, design‑build, qualified select bidders list and job‑order‑contracting methods of project delivery. The rules shall not require school districts to obtain bid security for the construction‑manager‑at‑risk method of project delivery.

J. A school district or charter school may evaluate United States general services administration contracts for materials and services.� The governing board or governing body may authorize purchases under a current contract for materials or services without complying with the requirements of the procurement rules adopted by the state board of education if the governing board or governing body determines in writing that all of the following apply:

1. The price for materials or services is equal to or less than the contractor's current federal supply contract price with the general services administration.

2. The contractor has indicated in writing that the contractor is willing to extend the current federal supply contract pricing, terms and conditions to the school district or charter school.

3. The purchase order adequately identifies the federal supply contract on which the order is based.

4. The purchase contract is cost effective and is in the best interests of the school district or charter school.

K. Unless otherwise provided by law, multiterm contracts for materials or services and contracts for job-order-contracting construction services may be entered into if the duration of the contract and the conditions of renewal or extension, if any, are included in the invitation for bids or the request for proposals and if monies are available for the first fiscal period at the time the contract is executed. The duration of contracts for materials or services and contracts for job‑order‑contracting construction services shall be limited to no more than five years unless the governing board determines in writing before the procurement solicitation is issued that a contract of longer duration would be advantageous to the school district.� Payment and performance obligations for succeeding fiscal periods are subject to the availability and appropriation of monies.

L. Notwithstanding the rules adopted by the state board of� education, the maximum dollar amount of an individual job order for job‑order‑contracting construction services shall be one million dollars or a higher or lower amount prescribed by the governing board in a policy adopted in a public meeting held pursuant to title 38, chapter 3, article 3.1. Requirements shall not be artificially divided or fragmented in order to constitute a job order that satisfies the requirements of this subsection.�

M. For the purposes of this section:

1. "Nonexempt charter school" means a charter school that is not exempted from procurement laws pursuant to section 15‑183, subsection E, paragraph 6.

2. "School-purchasing cooperative" means an entity engaged in cooperative purchasing as defined in section 41‑2631.

3. "Total cost" means the cost of all materials and services, including the cost of labor performed by employees of the school district, for all construction as provided in subsection A of this section. END_STATUTE

Sec. 2. Title 15, chapter 2, article 1, Arizona Revised Statutes, is amended by adding section 15-213.04, to read:

START_STATUTE15-213.04. Exemption from audit and investigatory requirements; procedural review

A. To the extent permitted by the single audit act amendments of 1996 (P.L. 104‑156; 110 Stat. 1396; 31 United States Code sections 7501 through 7507) and any other federal law, a school, school district, joint technical education district or charter school is exempt from the audit and investigatory requirements prescribed in this title if each of the last three consecutive audits did not contain any significant negative findings.

B. A school, school district, joint technical education district or charter school that qualifies for an exemption pursuant to subsection A of this section is subject to a procedural review if deemed appropriate by the auditor general. END_STATUTE

Sec. 3. Section 15-914, Arizona Revised Statutes, is amended to read:

START_STATUTE15-914. Financial and compliance audits

A. Except as provided in section 15‑213.04, the governing board of a school district that is required to comply with the single audit act amendments of 1996 (P.L. 104‑156; 110 Stat. 1396; 31 United States Code sections 7501 through 7507) shall contract for at least annual financial and compliance audits of financial transactions and accounts subject to the single audit act amendments of 1996 and kept by or for the school district. The governing board of a school district that is not required to comply with the single audit act and that has adopted an expenditure budget of two million dollars or more for the maintenance and operation fund pursuant to section 15‑905 shall contract for an annual financial statement audit.� The governing board of a school district that is not required to comply with the single audit act and that has adopted an expenditure budget of less than two million dollars but more than seven hundred thousand dollars for the maintenance and operation fund pursuant to section 15‑905 shall contract for a biennial financial statement audit.� An independent certified public accountant shall conduct the audit in accordance with generally accepted governmental auditing standards.� To the extent permitted by federal law, a school district that is required to participate in an annual audit pursuant to this subsection may convert to a biennial audit schedule if the previous annual audit did not contain any significant negative findings. If a biennial audit of a school district conducted pursuant to this subsection contains any significant negative findings, the school district shall convert back to an annual audit schedule. If a school district is required to convert back to an annual audit schedule pursuant to this subsection because of significant negative findings, the school district may subsequently convert to a biennial audit schedule if the previous two annual audits did not contain any significant negative findings. For the purposes of this subsection, "significant negative finding" means a finding that results in the issuance of a letter of noncompliance from the auditor general.

B. Except as provided in section 15‑213.04, the governing board of a charter school that is required to comply with the single audit act amendments of 1996 shall contract for an annual financial and compliance audit of financial transactions and accounts subject to the single audit act amendments of 1996 and kept by or for the charter school.�

C. Except as provided in section 15‑213.04, a charter school that is not subject to the single audit act amendments of 1996 shall contract for at least an annual financial statement audit conducted in accordance with generally accepted governmental auditing standards. An independent certified public accountant shall conduct the audit.�

D. For all audits referred to in subsections A, B and C of this section, the independent certified public accountant shall submit a uniform system of financial records compliance questionnaire to the auditor general with the applicable audit reports.

E. Contracts for all financial and compliance audits and financial statement audits and the completed audits shall be approved by the auditor general as provided in section 41‑1279.21. Contracts for all financial and compliance audits and financial statement audits shall comply with the rules for competitive sealed proposals as prescribed by the state board of education in section 15‑213.

F. If the school district or charter school will incur costs of financial and compliance audits for the budget year, the governing board of a school district or the governing body of the charter school may increase its base support level for the budget year by an amount equal to the amount expended for the district's or charter school's financial and compliance audits in the year before the current year, increased by the growth rate as prescribed by law, subject to appropriation. In determining the amount expended for the district's or charter school's financial and compliance audits, the school district or charter school shall include only the portion of the audit that must be paid from monies other than federal monies. The department of education and the auditor general shall prescribe a method for determining the increase in the base support level and shall include in the maintenance and operation section of the budget format, as provided in section 15‑903, a separate line for financial and compliance audits expenditures.

G. Every audit contract shall include a systematic review of average daily membership, as defined in section 15‑901, using methodology that is consistent with guidelines established by the auditor general.� The auditor general shall consider cost when establishing guidelines pursuant to this subsection and, to the extent possible, shall attempt to minimize the cost of the review.� The purpose of the review is to determine whether the average daily membership reported by the charter school or school district is in compliance with the laws of this state and the uniform systems of financial records for charter schools and school districts. END_STATUTE

Sec. 4. Section 15-914.01, Arizona Revised Statutes, is amended to read:

START_STATUTE15-914.01. Accounting responsibility; definition

A. School districts may apply to the state board of education to assume accounting responsibility.

B. A school district applying to the state board of education to assume accounting responsibility shall develop and file with the department of education an accounting responsibility plan and document in the plan:

1. Administrative and internal accounting controls designed to achieve compliance with the uniform system of financial records and the objectives of this section, including:

(a) Procedures for approving, preparing and signing vouchers and warrants.

(b) Procedures to ensure verification of administrators' and teachers' certification records with the department of education for all classroom and administrative personnel required to hold a certificate by the state board of education pursuant to section 15‑203 before issuing warrants for their services.

(d) Procedures for reconciling the accounting records monthly to the county treasurer.

2. A compilation of resources required to implement accounting responsibility, including, at a minimum, personnel, training and equipment, and a comprehensive analysis of the budgetary implications of accounting responsibility for the school district and the county treasurer.

C. Prior to January 1 of the fiscal year preceding the fiscal year of implementation and before submitting an application to assume accounting responsibility, a school district shall apply for evaluation by the auditor general. On completion of the evaluation the auditor general may recommend approval or denial of accounting responsibility to the state board of education. The evaluation by the auditor general shall be performed contingent on staff availability and may be billed to the school district at cost. Evaluation at a minimum shall include the following:

1. The most recent financial statements audited by an independent certified public accountant.

2. The most recent report on internal control, report on compliance and uniform system of financial records compliance questionnaire prepared by an independent certified public accountant or procedural review completed by the auditor general.

3. The working papers of the independent certified public accountant responsible for auditing the school district, if deemed appropriate by the auditor general.

4. A procedural review if deemed appropriate by the auditor general.

D. Except as provided in section 15‑213.04, school districts that are approved by the state board of education to assume accounting responsibility shall contract with an independent certified public accountant for an annual financial and compliance audit.� The auditor general may reevaluate the school district annually based on the audit to determine compliance with the uniform system of financial records.� If permitted by federal law, a school district may convert to a biennial audit schedule if the previous annual audit conducted pursuant to this subsection did not contain any significant negative findings.� If a biennial audit of a school district conducted pursuant to this subsection contains any significant negative findings, the school district shall convert back to an annual audit schedule.� If a school district is required to convert back to an annual audit schedule pursuant to this subsection because of significant negative findings, the school district may subsequently convert to a biennial audit schedule if the previous two annual audits did not contain any significant negative findings. For the purposes of this subsection, "significant negative finding" means a finding that results in the issuance of a letter of noncompliance from the auditor general.

E. To assume accounting responsibility a school district shall notify the county treasurer and the county school superintendent of its intention before March 1 of the fiscal year preceding the fiscal year of implementation. On notification, the county treasurer shall establish acceptable standards for interface by school districts with the county treasurer, including specifications for computer hardware and software compatibility and procedures to ensure the capacity of each school district for reconciliation of accounts with those of the county treasurer.

F. Any school district that fails to maintain accounting standards as provided by the uniform system of financial records and that is found to be in noncompliance with the uniform system of financial records by the state board of education as provided in section 15‑272 is not eligible to participate in the program provided by this section.

G. Any school district that has assumed accounting responsibility pursuant to this section, that fails to maintain accounting standards as provided by the uniform system of financial records and that is found to be in noncompliance with the uniform system of financial records by the state board of education as provided in section 15‑272 is no longer eligible to participate in the program provided by this section.

H. For the purposes of this section, "accounting responsibility" means authority for a school district to operate with full independence from the county school superintendent with respect to revenues and expenditures, including allocating revenues, monitoring vouchers, authorizing and issuing warrants and maintaining and verifying staff records for certification and payroll purposes. END_STATUTE