“This year we got beat up a little more than normal,” Santa Cruz County Supervisor Bruce Bracker said to the PRT in response to the Arizona Auditor General’s Nov. 21 report to the County Board of Supervisors (BOS) on their fiscal Year 2022 audit findings.
The Auditor’s report revealed a number of deficiencies at the County impacting financial management, information technology, property assessments, superior court procedures, workforce development, and health services.
The Arizona Auditor General determines whether state agencies, counties, universities, community college districts and school districts are making wise use of their resources. They deliver information and recommendations to improve operations via financial audits and accounting services, investigating possible misuse of public monies, and conducting performance audits and special reviews. This includes compliance with laws and regulations, and government accounting and financial reporting standards.
At the Nov. 21 BOS meeting, Arizona Deputy Auditor General and Acting Director Melanie Chesney said their agency’s audit had found five deficiencies in internal controls and compliance and three deficiencies in federal programs. They were:
Deficiency 1: “The County failed to provide key financial information timely and issued its Annual Comprehensive Financial Report late which resulted in untimely financial information to decision-makers.”
The financial information was issued by the County six months late and lacked complete financial statements, disclosures and supporting schedules.
Bracker told the PRT that “a lot of the delay was due to the delay in the investigation into Fuentes,” referring to the recent FBI investigation into former County Assessor Felipe Fuentes. Fuentes has been charged with bribery conspiracy for his actions while serving as an elected Santa Cruz County official.
“We asked the Auditor General to step in and audit the assessor’s office when the FBI case came to light,” said Bracker. “That delayed our paperwork we received from the state auditors, which we used to create our final documentation.”
Deficiency 2: “The County Assessor’s office did not follow State property-valuation laws and guidelines for some properties we (auditors) reviewed and did not have an oversight process which contributed to inaccurate valuations and may have allowed the former County Assessor to allegedly engage in bribery schemes to alter property values in exchange for providing reduced property taxes and other benefits to a property owner also allegedly involved in the schemes.”
The Auditor reviewed 42 properties and found internal control weaknesses for 24 of the 42 properties. Eleven agricultural properties were reviewed, and none demonstrated they complied with the law requiring the county to use the income approach for valuing the properties. In 11 of 15 commercial properties reviewed, the county failed to collect or retain required property characteristics data to support valuation adjustments, including two properties pertaining to the indictment of the former Assessor.
For two vacant land properties reviewed that were sold at auction, the County did not prepare and retain documentation to support that the valuation approach used was consistent with Arizona Department of Revenue guidance. The Auditor also found that 58 additional land parcels were purchased by the property owner in the same transaction, and none had documentation supporting their valuation.
The Auditor’s report stated, “Contrary to federal internal control standards, the County did not have any oversight mechanisms in place to review and ensure the accuracy and appropriateness of its property valuations.”
This may have allowed the former Assessor to allegedly engage in bribery schemes where he allegedly co-conspired with a property owner and another individual in the community for personal gain, without these activities being prevented or detected in a timely manner. The Auditor also noted that the Assessor’s Office lacked policies and procedures specifying the documentation required to be maintained to support its property valuations, as well as the necessary approvals and oversight and failed to maintain such on some properties.
Deficiency 3: “The County’s deficiencies in its process for managing and documenting its risks may put its operations and IT systems and data at unintended and unnecessary risk of potential harm.”
Deficiency 4: “The County’s control procedures over IT systems and data were not sufficient, which increases the risk that the County may not adequately protect those systems and data.”
Deficiency 5: “The County Superior Court lacked written agreements and monitoring procedures to ensure it received all the indigents’ legal defense services for which it paid $832,456 to 28 attorneys during the year, putting the County at risk of wasting public monies.”
Deficiency 6: “Contrary to federal regulation, the County’s Workforce Development Department failed to ensure that it spent the required 75%, or $289,562, of WIOA Youth Activities monies earmarked to provide services to out-of-school youth. Instead, the Department spent only 45% of the required 75% and spent the remaining $114,224 to provide services to in-school youth.”
Deficiency 7: “Contrary to the County’s award terms with the Arizona Department of Health Services, the County’s Health Services Department requested and received reimbursement of federal program monies related to the County’s Border Region Partnership award for services it did not provide and for which it was ineligible to be reimbursed.”
The County requested and received reimbursement totaling $83,330 when its records reflected that it incurred only $16,346 in program expenditures during the award period. As such, the County must reimburse the state for the $66,984 of federal funding that it improperly received.
Deficiency 8: “Contrary to federal regulation, the County did not submit its June 30, 2022, Single Audit Report to the federal audit clearinghouse until September 2023, six months later than required.”
The late submission prevents the federal government and other grantors of federal awards from having current information to effectively monitor their programs and could delay corrective actions. Further, federal grantors may deny the County future federal awards or subject it to additional cash-monitoring requirements.
The Supervisors had no questions at the end of the presentation. However, Chairman Manuel Ruiz stated, “[SCC Finance Director] Mauricio [Chavez] and his team are working with the departments to make sure all the items that were noted will be corrected and we will continue to work to make sure we get a clean audit.”
Commenting to the PRT on the consequences of the auditor’s report, which all three supervisors had received prior to the meeting, Bracker said, “It’s pretty typical for the auditor general to find something. At the end of the day you don’t want findings, but some of this was unavoidable because of the delay we experienced. If it was a pattern then it would be a problem, but this is the first time. What it means is that the County’s Finance department has to step up its game.”