Arizona flagged $99.7M as high-risk. It never checked the file.
Summary
Arizona's Auditor General reviewed the state's Empowerment Scholarship Account (ESA) voucher program and found that $654.4 million -- nearly 2.3 million transactions -- was automatically paid out under a $2,000-or-less threshold with no review required. Of that, ClassWallet's own system separately flagged 581,487 transactions worth $99.7 million as high-risk, but the Program couldn't show it had reviewed or acted on any of them. When auditors tested a 63-transaction sample the Program said it had already reviewed, they found 25 transactions -- 34.4% of the sampled dollars -- with issues the Program's own process had missed: missing documentation, possible misuse, missing accreditation, overpayments, and outright unallowable purchases.
A program that grew 66% while its oversight didn't keep up
ESA enrollment climbed from 61,689 students⧉ as of June 30, 2023, to 102,532 as of April 2026 -- a 66.2% increase. To manage the volume, the Program in December 2024 began automatically processing any transaction of $2,000 or less, paying the account holder or vendor first and subjecting the purchase to only a "potential future audit." The Program told auditors it manually reviewed 30% of these transactions every week.
The claimed 30% review rate never happened
Auditors tested five weeks of the Program's actual review activity in October 2025. Properly accounting for the transaction types the Program's own stated process was supposed to cover⧉, the real review rate ranged from 6.5% to 23.9% -- never once reaching the claimed 30% in any of the five weeks. The Program had also excluded reimbursement and direct-pay transactions from its review lists in some periods, despite those being exactly the categories its own methodology said should be covered.
View data as table
| Lowest week actually reviewed | 6.5% |
|---|---|
| Highest week actually reviewed | 23.9% |
| Program's claimed review rate | 30% |
The flagged transactions the Program never opened
Beyond the Program's own weekly sampling, ClassWallet's system separately escalates⧉ transactions it judges high-risk for unallowable spending or missing documentation into a queue for manual Program review. Auditors reviewing transaction records from July 2023 through October 2025 found 581,487 such escalated transactions, totaling $99.7 million -- and found no support that the Program had reviewed or taken action on any of them. Separately, for a five-month window (September 2025-January 2026), $102.1 million in prepaid-card and reimbursement spending -- 25.4% of transactions in that window -- wasn't even subject to most of the risk-assessment dashboard's checks in the first place.
When auditors checked the Program's own reviewed cases, a third had problems anyway
Auditors didn't stop at the unreviewed pile. They pulled 63 transactions⧉ totaling $251,446 -- cases the Program's process had already touched -- and found the Program's own review had missed problems in 25 of them, worth $86,599, or 34.4% of the sampled dollars: 11 with missing documentation, 7 missing required provider accreditation, 3 overpayments, 2 with indicators of possible misuse, and 2 explicitly unallowable purchases. Four of those problem transactions, worth $23,955, happened in fiscal year 2024 and are now outside the state's two-year window to recover the money at all -- and auditors note that figure could grow, since it doesn't account for any additional unallowable spending by those same account holders that a fuller audit might have caught in time.
View data as table
| Unallowable expense | 2,155 |
|---|---|
| Overpayment | 9,977 |
| Missing accreditation | 14,175 |
| Indicators of possible misuse | 17,531 |
| Missing documentation | 42,760 |
The takeaway
- A 30% review rate the Program claimed never materialized. Auditors found actual weekly review rates as low as 6.5% -- less than a quarter of what the Program said it was doing.
- Nearly $100 million in self-flagged risk sat unreviewed. The payment platform's own system identified $99.7 million in high-risk transactions across 16 months; the Program has no record of checking them.
- Even the transactions the Program did review weren't clean. A third of the dollars in a 63-transaction sample the Program had already processed turned out to have missing paperwork, overpayments, or worse -- and some of that money is already too old to recover.
All findings are from the Arizona Auditor General's State of Arizona Single Audit Report for the year ended June 30, 2024, issued April 23, 2026 -- read directly from the full 200-plus-page PDF (extracted with pdftotext -layout), not a summary. The auditors' 63-transaction and other samples were judgmentally selected to support specific findings and, per the report's own note, were 'not intended to be projected to the entire population' -- these are documented instances, not a statistically representative estimate of total program-wide misuse. The Arizona Department of Education's formal response to these findings appears later in the same report; this piece covers the auditors' findings, not the Department's full rebuttal.
Sources(1) ▾
- Arizona Auditor General (Lindsey A. Perry), State of Arizona Single Audit Report, Year Ended June 30, 2024 (2026-04-23) — Arizona's statewide Single Audit Report for the fiscal year ended June 30, 2024, issued by the Arizona Auditor General on April 23, 2026 -- itself submitted nearly 13 months late per the report's own separate finding. Read the full PDF directly (extracted with pdftotext -layout); the ESA-specific findings (2024-02 and a related finding on high-risk transaction review) run from roughly pages 19-45 of the 200+ page statewide report and are not summarized in any press release. Direct azauditor.gov PDF access blocks some automated fetches; WebFetch returned the binary, which was then converted with pdftotext. azauditor.gov · original document
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Arizona's Auditor General found⧉ that the state's Empowerment Scholarship Account voucher program automatically paid out $654.4 million -- nearly 2.3 million transactions -- under a $2,000-or-less threshold with no review required before payment. Separately, the payment platform's own risk-detection system flagged 581,487 transactions worth $99.7 million as high-risk for unallowable spending or missing paperwork. The Program couldn't show it had reviewed or acted on any of them.