The board voted 8-1 to approve a settlement between the Colorado City Unified School District and state officials to immediately place the district under the financial oversight of an appointed receiver.
Colorado City and neighboring Hildale, Utah, are dominated by the Fundamentalist Church of Jesus Christ of Latter Day Saints, a sect that practices polygamy and broke away from the mainline LDS Church.
The district's teachers went without pay for two months last year, and state officials' receivership petition alleged that students and taxpayers were harmed by gross financial mismanagement that included the purchase of a nearly $200,000 airplane and questionable dealings in hiring, buildings, equipment and contracts.
With the board's action, ''the infrastructure is there now to right the ship,'' Attorney General Terry Goddard said.
Under a consent agreement approved by the board, the district's superintendent and business manager will step down by Dec. 31 and the district will continue to use an outside financial consultant to keep its operations going until the receiver submits a financial improvement plan to the state board.
Goddard filed the receivership petition on behalf of state officials on Aug. 12, the first day allowed under a new state law enacted last spring by the Arizona Legislature because of the Colorado City district's financial problems.
The district initially fought the receivership petition and said many of its money problems resulted from circumstances outside its control, but it surrendered last week when it agreed to be placed in receivership.
District officials didn't want to risk interruption of students' education, felt the new law made approval of the receivership petition a virtual slam-dunk and effectively lost the ability to oppose receivership when key administrators said they would invoke their Fifth Amendment rights against self-incrimination and would refuse to testify during a receivership hearing, said Matthew Wright, an attorney for the school district.
''It essentially left us with no witnesses,'' Wright told reporters after the meeting. ''But the most important thing is that kids need to be educated.''
Goddard said the district is $2 million in debt, chiefly to its insurer. Wright said the $2 million figure is too high but he wasn't sure of the correct debt figure.
''They are operating in the black and within budget,'' Wright told the board earlier.
While the receiver's powers center on financial matters, board members received assurances that they would receive reports on the district's educational situation as well.
The district's board members remain in charge of educational policy matters, though the five-member board now has two vacancies, Goddard said.
State Superintendent of Public Instruction Tom Horne said the district was treated fairly.
Board of Education member Anita Mendoza, a charter school administrator from Tucson, cast the sole dissenting vote.
The district's enrollment is now approximately 300 students, down from a peak of 1,200 in 2000. Its work force of 72 is down from more than 100 a year ago.