Annual Report

Year Ended June 30, 2010
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 improve state and local
government operations and
accountability by
independently providing the
Legislature, government
decision-makers, and the
public with timely, accurate,
and impartial information;
relevant recommendations;
and technical assistance.

Office Staff Have Excellent Reputation in
Government Auditing
The Office conducts high-quality work and
demonstrates leadership in the government
auditing field. As a result, we have an excellent national reputation among audit organizations, including our involvement in professional organizations and recognition for the
quality of our work.
Our staff’s involvement in professional organizations demonstrates their expertise, energy,
and enthusiasm as leaders in the government
auditing field. Numerous employees participate in professional organizations in various
capacities, at the national, state, and local
levels. For example, the Auditor General just
completed a term as President of the
National State Auditors Association. Further,
staff serve in organizations at the board,
executive, committee, task force, and conference levels, and are involved in standardssetting oversight and monitoring, best-practices sharing, and training activities. For
example the Director of Professional Practice
is a member of the American Institute of

Certified Public Accountants’ Auditing
Standards Board. The activities our staff participate in directly contribute to their professional development and improve the audit
quality of government auditors and accountability over government auditees. As individuals, and cumulatively as an audit organization,
these efforts have helped to establish our
Office as one of the premier state audit organizations in the country.
One example of our high-quality work being
recognized is the National Legislative
Program Evaluation Society (NLPES) presenting its Recognition of Impact Award to our
Office for our performance audit of the
Department of Health Services—Division of
Licensing Services. NLPES presented us with
this award for the significant amount of dollar
savings and program improvements resulting
from the implementation of our report recommendations. Our recommendations resulted
in a savings of over $5 million to the State
General Fund in fiscal year 2010.

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

National Awards and Recognition
•

Received NLPES Recognition of Impact Award for performance audit
of the Department of Health Services—Division of Licensing Services

•

Numerous staff actively participate in national, state, and local
professional accountability organizations



2010
Year Ended June 30, 2010

Gave 39 presentations to numerous professional organizations and
government officials, providing technical assistance and education

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

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

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

Auditor General

Performance audits
• State agencies and programs
• School districts

Deputy Auditor
General

Financial
Audit

Performance
Audit

Information
Technology

Professional
Practice

School
Audits

Accounting
Services

Administration

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

Office Issued 169 Reports
The Office issued 169 reports in fiscal year
2010, 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, modify, 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
page

2

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 on page 3 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

State
Community School
Agencies Universities Counties
Colleges
Districts

Performance audit
Sunset audit
Audit follow-up letter
Special legislative report/study
Questions and answers
Financial statement audit
Single audit
Special investigation
Internal control letter
Management letter
Procedural review letter
Compliance review
Status review
Agreed-upon procedures report
Expenditure limitation
Other special reports

5
6
29
3
5
1
1
3
2
2

1

7
4

1

3

5
4

3

5

2
8
3

30
2
5
4
1
5
8
6
3
1

1

Office 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.

local governments under the American
Recovery and Reinvestment Act (ARRA) are
properly accounted for and expended in
accordance with laws and regulations.
Through 2012, the State is expecting to receive
approximately $2.8 billion of ARRA monies
with additional monies being received directly
from the federal government by the community
college districts, public school districts, and
counties.

For example, we issued two reports that provided timely and important information to the
Legislature at the start of the 2010 regular legislative session. The first report addressed the
reorganization and restructuring of the Office
of Pest Management, which addressed a legislative request regarding the Office's efficiency. The second report provided information on
the Department of Public Safety's Photo
Enforcement Program, including these findings: 47 percent of detections were rejected
for various reasons; only $37 million of the
projected $90 million was raised in the program's first year; and approximately 38 percent of the photo violation notices sent were
paid in the program's first year.

To accomplish our objectives regarding ARRA,
we provided technical guidance to the
Governor's Office of Economic Recovery and
the Arizona Department of Education to help
them develop the State's plan for distributing
and accounting for the ARRA monies provided
to school districts and charter schools. We
also modified the school district and charter
school budget forms and issued guidance to
school districts, charter schools, and their
auditors to help them properly account for and
report the ARRA monies. In addition, we have
provided ongoing assistance regarding
accounting for ARRA monies to districts and
charter schools through Webinars, e-mails,
and telephone consulting.

Beginning in fiscal year 2010, our Office has a
key role in ensuring that monies received by

We are also responsible for auditing monies
expended by the State, counties, and commupage

3

TO OBTAIN
MORE INFORMATION

nity college districts—including those for
ARRA programs—in accordance with federal
guidelines. These audits focus on internal
controls established by the entities administering the programs and on compliance with
applicable laws and regulations. And now, our
audits will pay particular attention to programs
with large amounts of ARRA funding.

Office of Economic Recovery's oversight
responsibilities to maximize the use of our
resources and prevent duplicated effort.

This year's seven school district performance
audits are yet another example of how we
have a positive impact, identifying some comOr to obtain copies of
mon issues that affect the accountability and
our reports, call
effective use of public monies. These school
(602) 553-0333
district performance audits found that districts
In addition to our audit responsibilities, we
underutilized school facility space, overstaffed
have been providing technical guidance and
operational areas, had poor controls over
assistance to state agencies, counties, and
cash handling and facility rentals that resulted
community colleges about ARRA administraor visit
tive and reporting requirements. For example, in the loss of district monies including one
our Web site at:
case of theft, made excessive and inappropriwe assisted the Governor's Office of
www.azauditor.gov
Economic Recovery in developing a guide for ate food purchases for staff, misreported mileage had state funding formula issues resulting
state agencies that describes common fraud
in the overfunding of transportation by the
schemes and recommends proper internal
controls to prevent fraud schemes from occur- State, and supplanted Classroom Site Fund
monies. All of these reports made recommenring. We have also been coordinating our
dations for improving or correcting the probaudit responsibilities with the Governor's
lems we found. We also conducted followup visits at 17 school districts to determine
their status in implementing recommendaMaking a Difference
tions we made in prior audits. Those districts reported saving millions of dollars by

State agencies implemented or were in the process of implementing
implementing audit recommendations in
98 percent of our performance audit recommendations
areas such as reducing excess building

School districts implemented or were in the process of
capacity; eliminating transportation or
implementing 97 percent of our performance audit
administrative positions; reducing unusualrecommendations
ly generous retiree benefits; and recovering
monies for inappropriate credit card pur
85 percent of school districts with deficiencies corrected those
chases, overages from a vendor, and
deficiencies sufficiently to comply with the Uniform System of
underbilling of organizations that had rentFinancial Records
ed facilities.






Single audits verify appropriate spending of federal monies by the
State, and are necessary for state and local government programs
to continue receiving federal funding. In fiscal year 2009, state
agencies, universities, community college districts, and counties
spent more than $13 billion in federal monies to provide a variety of
services to Arizona citizens, including healthcare, financial
assistance, and education programs
Special investigations found that over $1 million was misused by a
state agency director, which led to an indictment on 8 felony counts,
and over $23,000 was misused by a community college president
We provided technical assistance to other agencies, universities,
counties, cities, community college districts, and school districts

Annual Report of the Office
of the Auditor General
page

4

One final measure of our success is how
many of our recommendations are implemented. During fiscal year 2010, state
agencies and school districts implemented, or were implementing, 98 percent and
97 percent, respectively, of our performance audit recommendations. Local governments are also addressing our Uniform
System of Financial Records compliance
and single audit recommendations for
improving their accountability.

YEAR ENDED JUNE 30, 2010