East Valley Institute of Technology’s lack of planning will likely result in its overspending for a transitional housing community for 64 young adults in foster care, the Arizona auditor general says.
The state Legislature gave EVIT $10 million to build and furnish HopeTech, which is anticipated to be complete in July at its main campus in downtown Mesa.
According to the auditor general report, EVIT expected to spend $9.84 million to build and partially outfit HopeTech with 64 beds, desks and other furniture for 48 bedrooms. The June report noted that EVIT hadn’t evaluated if it has enough money left to furnish the common areas such as living rooms and office space.
The state agency looked at EVIT’s planning and procurement activities for HopeTech and for a $1.3-million renovation project and found no strategic plan in place to ensure that capital spending would provide the intended benefits and won’t financially affect the school’s educational programs.
Over 5,000 high school students living in the boundaries of 11 East Valley school districts, including Mesa, Gilbert, Queen Creek, Scottsdale, Chandler and Tempe take classes at EVIT. The school offers over 50 career training programs such as in nursing, cosmetology and automotive technologies.
EVIT Superintendent Dr. Chad Wilson agreed with the findings and indicated that the auditor general’s recommendations will be implemented.
Four months after the Legislature approved the funding in 2022, EVIT began seeking design-build construction services.
The auditor general indicated that EVIT could have asked for additional time to do appropriate planning as the state appropriation did not set a deadline for HopeTech to be built and only gave reporting deadlines.
The report said that EVIT didn’t bother to get the costs to equip HopeTech for residential use before entering into construction contracts. EVIT said it intended to use any remaining money after construction to furnish the facility.
After construction was nearly completed, EVIT obtained a quote from one vendor wanting $330,000 to provide the furniture for the bedrooms, according to the report. That would have left EVIT with just $160,000, which may not be enough to furnish the rest of the facility, the report said
EVIT, however, said that it would only need to furnish 12 bedrooms and the associated common spaces as the first year would be a pilot program with 16 students. As of April, 19 foster youth had applied to live at HopeTech.
“As of May 2024, the district appears to have sufficient monies from the appropriation to furnish the facility to operate at a limited capacity, but the district may need to find additional monies to furnish HopeTech for 64 foster youth as the Legislature intended,” the report said.
“If the district had developed a comprehensive capital and strategic plan and included HopeTech as part of these plans, it could have determined whether the construction design needed to be modified or if other changes were necessary to ensure it could meet the legislative intent for its $10-million appropriation.”
The report also cited EVIT’s lack of planning for possibly contributing to its failure to determine the services it will offer the foster youths, the ongoing costs to operate HopeTech and how it will pay for the operations and maintenance.
Although EVIT indicated that it intended to pay for HopeTech’s ongoing operating costs by charging the residents rent and seeking outside financial support if that fell short, the report said the rent would be insufficient as the facility would be operating in a limited capacity the first year.
HopeTech rents could potentially generate about $96,000 in revenue, or $8,000 monthly. (Monthly rent will be capped at $500 for each of the initial16 students, according to EVIT).
“However, the foster youth director’s salary and benefits costs alone exceed the anticipated rental revenue and there will be additional personnel and operating costs once HopeTech opens,” the report said.
As for donor dollars and grants, EVIT as of April hasn’t secured any or identified additional sources of new funding, the auditor general said, adding that this could force EVIT to use funds that could have been spent on other priorities such as expanding or enhancing its central and satellite CTE programs.
The auditor general also dinged EVIT for failing to realize the full return for the $1.3 million it spent to renovate a building to lease to a charter-school operator.
The auditor general said that EVIT risked not recouping about $500,000 of its investment, which may impact the funding available for its programs.
“Any monies that the district does not recover from the lease agreement are not available to purchase equipment and upgrade facilities for its CTE programs,” the report stated.
The total amount of revenue EVIT will receive from the charter school under the initial seven-year lease is $804,000, according to the report.
If the lease was extended, the payments would increase by 5% annually – at which rate EVIT would not recover its total renovation cost until an additional four years later or in Fiscal Year 2034, the report said.
It pointed out that EVIT was not guaranteed payment for the full seven years as either party could terminate the lease before then.
The auditor general also faulted EVIT for not taking steps to ensure that the lease would provide other anticipated benefits.
“For instance, although district officials said that they leased space to the charter school operator to provide support for foster youth attending the district’s central programs, and they believed that the charter school would offer preferential enrollment to foster youth, the May 2023 signed lease agreement between the district and the charter school operator does not mention foster youth or any goal for foster youth enrollment,” the report said.
“Instead, it specifies only that all charter school students in grades 10 through 12 must enroll in a CTE program at the district’s main campus.”
The auditor general said that because EVIT didn’t have a comprehensive capital and strategic planning process in place, administration was able to provide scant information on HopeTech and the renovation project that lacked key critical data for the Governing Board.
Gov. Katie Hobbs visited Hope Tech Feb. 9 and signed a plaque.
“When requesting board approval for construction contracts for HopeTech, the district provided brief summaries relating mainly to construction costs,” the auditor general said. “Our review of board minutes and packets for an eight-month period found that the district did not include information relating to the cost for furnishing HopeTech, services to be provided to HopeTech residents or estimates for and funding sources to be used to pay for HopeTech’s ongoing operations.
“Furthermore when board members asked questions about risks to the district and specific costs, district administration did not directly address their questions at the time nor in subsequent meetings,” the report said.
According to the report, a board member had assumed that the district conducted a fiscal analysis before building HopeTech.
For the renovation project, the board members did not receive any supporting documentation to help them evaluate the costs relative to the lease revenues, the report said.
In contrast, the board received robust information, including building plans and feasibility study for a recent construction that was more directly related to CTE programming at the Power satellite campus, the report added.
The auditor general’s recommendations for EVIT are as follows:
• Develop and implement a formal multiyear capital plan for the central campuses that includes components such as capital needs, maintenance requirements, funding options and operating budget impacts.
• Develop and implement a formal strategic planning process to ensure issues, such as CTE (career technical education) program needs, costs, benefits, time frames, resources and potential fiscal impacts are addressed for new capital projects.
• Develop and implement a formal strategic plan for operating HopeTech that includes information such as goals for HopeTech, services to be offered, projections for ongoing operating and maintenance costs, how the facility will be funded and how the district’s funding choices may impact CTE programs.
• Administration should present the strategic plan for HopeTech to its Governing Board.
• Determine the current costs and benefits of the charter school lease and operations on its campus and identify future goals to help guide decisions about the lease going forward.
• Administration should present its analysis and goals for the charter school lease and operations to the board.
The auditor general will assess EVIT’s progress on implementing the recommendations in six months.
