Strengthening Conflict of Interest Practices

by Scott Tang, CPA, Audit Manager

Posted on August 11, 2026

Updates to the Uniform System of Financial Records (USFR) effective for fiscal year 2027 were recently released by the Arizona Auditor General’s Office. The updated version now includes a section on conflict of interest, which contains extensive information, such as definitions, policies, procedures, penalties, and a sample form. For this article, I want to highlight two areas from this new section where districts can strengthen their practices.

The first area is regarding the requirement specifically outlined related to management’s review of disclosed conflicts. Although this requirement was not explicitly stated in previous versions of the USFR, it was a best practice that districts should have been following. The USFR requires each district’s conflict of interest policy to address the following:

“Require district management to establish and implement a review and remediation process to ensure governing board members and employees with disclosed substantial interest refrain from voting upon or otherwise participating in any manner in any district contract, sale, purchase, or decision for which they or their relative has a substantial interest.”

Essentially, districts should have a review process in place for management to determine what action, if any, is needed for an employee’s disclosed conflict of interest. Depending on the district’s process for completing and submitting conflict of interest forms, districts may have different ways to document that a review has been performed. For example, a district that requires its employees to complete a physical conflict of interest form would have a different review and documentation process than a district using an online form.

As mentioned earlier, a sample conflict of interest form is now included in the USFR. The three-page sample has a section for management to complete, which includes space for an administrator to sign, indicating that person has reviewed the disclosure form for completeness and has determined an appropriate remediating action. Districts that use physical forms could incorporate this section into their own form.

The second area I want to highlight relates to training. For employees and governing board members to properly disclose potential conflicts, they must be aware and familiar with what constitutes a conflict. The USFR requires that school districts develop and provide training for all employees and governing board members to ensure awareness of conflict of interest laws and the district’s related policies and procedures. This training should be provided annually to all employees and governing board members. Districts should also maintain documentation of who received the training and the date it was provided along with the training itself, whether it was held using presentation slides or a training video. For districts who provide this training in-person, a sign-in or attendance log is sufficient. For districts who provide this training via an on-line platform, a completion report should be sufficient.

The new USFR section includes much more information in addition to above. To view the new conflict of interest section, please see the most up-to-date version of the USFR here.