Quote Quoting Nana in PHX
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Our lease agreement calls for the last month’s rent in advance and also states that:
At the expiration of the fixed lease term, the lease “shall become a month-to-month tenancy upon the approval of landlord. Where said term is a month-to-month tenancy, either party may terminate this tenancy by the serving of a 30 day written notice.”
From what you're telling us, the tenant neither sought nor received your approval to extend the lease. Your language does not suggest automatic extension of the lease into a month-to-month tenancy in the absence of your approval. Under that language they cannot automatically extend the lease - the most they can do is ask. The lease ends unless you act.
Quote Quoting Nana in PHX
The fact that they didn’t give notice or ask for their security deposit strengthens our believe that they planned well and fully intended to just move away without our knowing and leave us holding the bag with a vacant rental home that will take much time and cost far more than the deposit to make rentable again.
Yes, it would appear that they intended to move at the end of the initial lease term, but for some reason didn't want you to know. You, being (no offense) a rookie landlord started to act appropriately but got cold feet about inspecting the unit even when you had pretty much figured out what was going on. And as you never approved a lease renewal, they can point to the lease language if you try to claim that the lease automatically renewed or that they had to give notice that they were leaving at the end of the fixed term.

Are we talking about an extreme amount of damage that your contractors can't reasonably get fixed within a week or two, or are we talking about damage that could be fixed quickly but took longer than it otherwise would have because you live far away from the rental and/or chose to do the repairs yourself?
Quote Quoting Nana in PHX
We didn’t give them any termination notice and presume that is enough to imply our approval of the rental agreement changing to the month to month basis. Is that wrong?
Yes, that's wrong.
Quote Quoting Nana in PHX
Did they have a right to leave when they did without giving us written notice?
From what you've told us so far, they had the right to leave at the end of the original lease term.
Quote Quoting Nana in PHX
Does the last month’s rent apply to the last month they were actually there or to the last month they would state in a 30 day termination notice?
It applies to their last month of tenancy which, from what you've told us, is the last month of the original lease term.