Audit finds Apache Elementary received funds for out-of-state students

Apache Elementary School District improperly drew state money for students who lived in New Mexico, a finding that puts a hard number on how cross-border enrollment errors can drain a tiny rural district and distort Arizona’s school funding system. The audit also raises the question of whether the district, which serves just a handful of students near Portal, had enough oversight in place to track who was eligible for state dollars and who was not.

Arizona Auditor General findings released May 28 said half of the district’s eight students in fiscal year 2024 resided in New Mexico, and the district did not follow out-of-state student admission and reporting requirements. The report said the district improperly received state funding for those students and should evaluate operational changes for educating the few Arizona students it serves. School records identify Loy Guzman as head teacher and superintendent, Tamara Winkler as business manager, and Frank Zepeda as teacher’s assistant at the school on Skeleton Canyon Road in Portal.

The financial stakes were significant for such a small district. State records show Apache Elementary did not charge tuition to four New Mexico students in 2024 and 2025, then received $55,000 in state funds to educate them. The Arizona Department of Education later reviewed enrollment data going back to 2021 after being notified by the auditor general in January 2025 and found the district overstated in-state enrollment from 2021 through 2023, costing Arizona $198,061. The department waived repayment because the misallocated funds represented 94% of the district’s total budget over that period.

District officials told auditors they were unaware state law required tuition for out-of-state students, and they said they had since put procedures in place to require acceptable proof of residence at enrollment and again at the start of each school year. Even so, the audit found more problems: unauthorized fringe benefits for two employees, weak information-technology safeguards, and noncompliance with some cash-handling requirements.

The report also said Apache Elementary received more than $27,500 in 2025 to reimburse New Mexico parents who drove their children to the remote schoolhouse, one of the few remaining one-room schoolhouses in Arizona. Auditor general financial risk analysis shows the district had eight students in fiscal 2024 and just three in fiscal 2025, a steep drop that makes every enrollment decision and every funding error far more consequential for staffing, services and the school’s future in this corner of Apache County.