Annual Report

Year Ended June 30, 2006

Our Authority
The Office of the Auditor
General is a legislative
agency under the direction
of the Joint Legislative Audit
Committee. The Office
provides information to the
Legislature and various
other governmental entities,
which assists them in
overseeing operations,
improving their financial
management and effectiveness, and giving the public a
measure of accountability.

Our Mission
To independently provide
the Legislature, government
decision-makers, and the
public with impartial,
relevant information, specific
recommendations, and
technical assistance to
improve state and local
government operations.

Our Vision
To serve as catalysts for
improving the quality and
accountability of government
in Arizona.

A Message from the
Auditor General
Educating Arizona's children is important. As
parents, taxpayers, and community, we all
understand the need to prepare our children
for the future. One of the unique challenges
Arizona faces in educating its children is
educating English Language Learners (ELL).
And because of recent legislation, our Office
has an opportunity to make a difference in
this unique area.

Debra K. Davenport, Auditor General

The Legislature’s goal is to have school
districts adopt cost-efficient, research-based
models for Structured English Immersion
(SEI) and manage incremental costs of the
SEI programs. Our new responsibilities
include modifying budget and reporting forms
for school districts' use, auditing school
district's ELL budget requests, auditing ELL

program compliance, and reporting biennially
on the ELL program's effectiveness.
We have begun the planning and preparation
for carrying out the activities and challenges
associated with our new responsibility. Our
efforts will assist the Legislature in
accomplishing their goal.

Auditor General Responsibilities and Activities
and investigative projects at the Legislature’s
request. The Office’s responsibilities and
activities detailed below are carried out by
four operating and three support divisions.

The Office has audit and oversight
responsibility for state agencies, universities,
counties, community colleges, and school
districts. We also complete specific research

Financial and compliance audits
• The State and its agencies
• Universities
• Counties
• Community college districts

Auditor General

Performance audits and program evaluations
• State agencies and programs
• School districts

Deputy Auditor
General

2006
Year Ended June 30, 2006

Financial
Audit

Performance
Audit

Information
Technology

School
Audits

Professional
Practice

Accounting
Services

Administration

Special audits, IT and procedural reviews, and
investigations
• State agencies
• Certain political subdivisions
Uniform accounting systems
• School districts
• Counties
• Charter schools
• Community college districts
Uniform expenditure reporting system
• Most political subdivisions

Auditor General Issued More Than 200 Reports
The Office issued 220 reports in fiscal year
2006, providing the Legislature, state and
local governments, and the public with
reliable, valuable information. These reports
communicate the results of our audits and
reviews, broadly summarized in three
categories as follows:
Performance audits, evaluations, studies, and
reviews—These reports focus on determining
how effectively, efficiently, and economically
state agencies and school districts conduct
business. For example, sunset audits help the
Legislature determine whether to continue or
terminate an agency. Our follow-up letters tell
the Legislature how well state agencies and
school districts are implementing our
recommendations.
Financial audits and related letter
reports—These reports focus on the accuracy
of financial data, effectiveness of internal
controls, and compliance with required
accounting practices of the State, its
agencies, and local governments. Also, we

issue letter reports that provide
recommendations to improve financial
practices.
Compliance reports and letters—These
reports focus on whether the State, its
agencies, and local governments are
complying with laws and regulations for
various administrative and reporting
requirements. Various federal and state
agencies use these reports to monitor state
and local governments’ activities. For
example, single audits satisfy federal audit
requirements, and are necessary for the State
and local governments to continue receiving
federal funding.
The table below summarizes the number of
reports issued, by type, for each of the state
agencies and local governments we audit.
Many reports are accompanied by report
highlights, which summarize the results and
conclusions of our audits and reviews. All of
our reports can be accessed from our Web
site at www.azauditor.gov.

Number of Reports Issued
by Type of Report and Government

Type of Report
Performance audit
Sunset audit
Audit follow-up letter
Special legislative report/study
Information brief
Financial statement audit
Single audit
Special investigation
Management letter
Procedural review letter
Compliance review
Status review
Agreed-upon procedures report
Expenditure limitation
Other special reports

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2

State
Agencies Universities Counties
16
7
44
2
2
7
1
15
10

Community School
Colleges
Districts
4
16
3

3

3
1

10
6
3
11

5
4
2
4
16
13

3
6
2

Cities

4
1

Auditor General Activities Positively Impact State and
Local Governments
We are committed to making a difference in
the way state and local governments operate.
We accomplish this through our audit and
oversight activities by providing impartial,
objective information in our reports or at
briefings and hearings, and technical
assistance to the State and local
governments. All of these activities focus on
helping state agencies and local governments
to improve their accountability.

consequences that encourage districts to
ensure applications are correctly approved;
require expanded verification sample sizes
when higher error rates are identified; and
ensure that key district employees attend the
Department's training classes.
Recently, our work in information technology
areas have increased. For example, we issued
performance audit reports of the Department
of Administration, Department of Economic
Security, Department of Education, and
Department of Revenue, all of which included
recommendations to improve information
technology functions. For the Departments,
we recommended, respectively, improvement
in information security procedures; adherence
to state-wide security standards related to
user access, network protection, and
computer program changes; better
management of systems and applications

Our audit results and oversight activities
provide recommendations to state agencies
and local governments, which give guidance
on improving an agency’s operations. For
example, our performance audit of Child
Protective Services' timeliness and
thoroughness of investigations addressed the
need for CPS to improve its investigations of
child abuse and neglect reports. Our audit
found that CPS did not investigate some
reports, and many reports that were
investigated did not meet
requirements for timeliness and
Results of Audit Work
thoroughness. Accordingly, our audit
report recommended streamlining the
z
School districts implemented or were in the process of implementing
investigation process and establishing
99 percent of our performance audit recommendations
effective oversight and accountability
mechanisms.
z
State agencies implemented or were in the process of implementing
98 percent of our performance audit recommendations
Another example is our work on the
z
The Legislature implemented 64 percent of our performance audit
National School Lunch Program that
recommendations
resulted in two reports. The first report
provided a state-wide overview of the
z
62 percent of school districts corrected deficiencies sufficiently to
Program in Arizona schools. Our
comply with the Uniform System of Financial Records
report recommended the Legislature
consider other indicators of poverty
z
Single audits identified over $1.5 million in federal grant monies that
on which to base state funding for
state and local governments spent in violation of federal grant
education programs. The second
provisions
report verified the eligibility of 100
percent of approved program
z
School district performance audits identified a district that spent
applications at seven sampled
nearly $2 million to re-open a closed school while other schools
schools. Verification results showed
within the district were operating far below capacity
that 41 percent of the applicants lost
z
Special investigations found that over $112,600 was stolen from three
their benefits because the parents or
local governments
guardians did not respond to
verification requests, a required
z
Provided technical assistance to other agencies, universities,
provision for eligibility. This second
counties, cities, community college districts, and school districts
reoprt recommended that the State's
about financial reporting, compliance, and other matters
Department of Education establish
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3

TO OBTAIN
MORE INFORMATION
Or to obtain copies of
our reports, call

security; and improvements in new IT systems
development. With the recent expansion of the
Office's IT Audit Team, our work should
continue to increase in the important areas of
information technology operations and
security.
One measure of our success is how many of
our recommendations are implemented.
During fiscal year 2006, state agencies and
school districts implemented over 98 percent
and 99 percent, respectively, of our
performance audit recommendations. Local
governments are also addressing our Uniform
System of Financial Reports compliance and
single audit recommendations for improving
their accountability.

(602) 553-0
0333

or visit
our Web site at:
www.azauditor.gov

Another way our Office makes a difference is
by helping state agencies and local
governments implement new accounting
requirements and establish practices that
improve operations and compliance with laws.
For example, our Office issued five budget
preparation packages and three annual report
preparation packages to counties, cities and
towns, community college districts, school
districts, charter schools, and special districts.
These efforts provide guidance that helps
these local governments implement annual
budgeting and financial accounting and
reporting requirements to comply with Arizona
law.

Auditor General Staff Has Excellent
Reputation in Government Auditing
Our staff’s achievements and activities
demonstrate their commitment to leadership in
the government auditing field. We have an
excellent national reputation among state audit
organizations, including recognition for the
quality of our work and involvement in
professional organizations.
One example is the National Legislative
Program Evaluation Society (NLPES)
presenting its Recognition of Impact Award to

National Awards and Recognition
z

•

z

Received NLPES Recognition of Impact Award
for study performed on the structure and funding
for joint technological education districts
Numerous staff actively participate in national,
state, and local professional accountability
organizations
Gave 14 presentations to numerous professional
organizations and local governments, providing
technical assistance and education

Annual Report of the Office
of the Auditor General
page

4

our Office in fiscal year 2006 for our special
study, Joint Technological Education Districts:
Analysis of an Urban and a Rural JTED. This
award was presented to us for demonstrating
impact from the legislature's, public's, and
other organization's perspectives, and/or dollar
savings and program improvements resulting
from the implementation of our report
recommendations. This award acknowledges
our Office's efforts to produce meaningful and
useful audit reports.
Our staff’s expertise, energy, and enthusiasm
draw attention in other ways, too. Numerous
employees participate in professional
organizations in various capacities, such as
national, state, and local organizations at the
board, executive, committee, task force, and
conference levels. They are involved in
standards-setting, oversight and monitoring,
best-practices sharing, and training activities.
As individuals, and cumulatively as an audit
organization, this has helped to establish our
Office as one of the premier state audit
organizations in the country.

YEAR ENDED JUNE 30, 2006