Arizona’s Empowerment Scholarship Account (ESA) program has grown rapidly, providing public money to families for private school tuition, tutoring, educational supplies, and other approved expenses. With that growth has come concern about whether the state has enough safeguards to prevent fraud and improper spending.
One of the most important parts of Arizona’s oversight system is a $2,000 threshold. According to the Arizona Department of Education, ESA purchases over $2,000 are reviewed before payment, while purchases of $2,000 or less can be paid first and subjected to later, risk based auditing. The Department says this system is necessary because of the enormous volume of transactions. In 2026, ADE reported that it was processing more than two million orders annually with a limited number of employees reviewing purchases.
This does not mean that purchases under $2,000 are never audited. Instead, they are not necessarily individually reviewed before the money is paid. The Arizona Auditor General’s 2024 Single Audit examined this system and recommended that the Department annually evaluate whether the $2,000 automatic processing threshold is appropriate. Auditors also recommended that ADE improve its risk assessment and make sure all types of ESA transactions are included in its audit sampling.
There is evidence that the system has uncovered improper spending. ADE reported in 2025 that it had collected or referred for collection more than $622,000 in improper purchases that had been paid before review. More recently, the Department reported that more than $1.2 million had been recovered through efforts to identify improper ESA spending.
However, it is important not to label every improper purchase as fraud. ADE estimated in March 2026 that about 2% of ESA spending was unallowable, while approximately 0.3% represented fraud or “egregious” purchases. The Department emphasized that an unallowable purchase can result from a mistake and does not automatically constitute fraud.
There have also been genuine criminal fraud cases. In one case, two people pleaded guilty after using forged documents to obtain more than $110,000 in ESA funding for more than 40 real and fictitious children.
The larger question is whether Arizona’s risk based system provides enough oversight to catch improper or fraudulent spending quickly. The $2,000 threshold does not mean that purchases below that amount escape auditing entirely. It does mean that some public money can be spent before the transaction receives individual review. For a program using taxpayer funds, the effectiveness of the later auditing process is therefore an important part of determining how well the system protects against fraud and misuse.
Read More:
- Arizona Auditor General, State of Arizona 2024 Single Audit Report
Arizona Auditor General report - Arizona Department of Education, ESA expenditure analysis
Arizona Department of Education analysis - Arizona Department of Education, ESA fraud case and recovery information
Arizona Department of Education ESA fraud information - Arizona Attorney General, ESA fraud convictions
Arizona Attorney General ESA fraud convictions - Arizona Revised Statutes, A.R.S. § 15-2403
Arizona Legislature, ESA administration and auditing requirements