Arizona’s Municipal Tax Code Commission (MTCC) hasn’t met in over three years, spelling trouble for the state’s taxpayers and businesses.
The issue was the focal point of a report issued by Auditor General Lindsey Perry on Tuesday. Perry warned that continued inactivity would have an inevitable, adverse impact on Arizona’s cities and towns. That, and the inactivity runs counter to state law.
As Perry noted, every one of the MTCC member’s terms expired last October without successors. State law allows members whose terms have expired to continue serving in the position until a successor is appointed.
At present, there are three who continue their expired terms: Chairman René Lopez, Jr., a councilman for the city of Chandler; Jerry Weiers, mayor of Glendale; and Jim Waring, a councilman for the city of Phoenix.
MTCC’s last meeting was in May 2019, despite receiving three proposed amendments to consider last year for the Model City Tax Code (MCTC): the uniform sales and use tax act that facilitates economic order. State law requires MTCC to hold a public hearing within 60 days of receiving a proposed amendment.
Perry recommended that Governor Doug Ducey, State House Speaker Rusty Bowers (R-Mesa), and State Senate President Karen Fann (R-Prescott) abide by state statute and appoint members to meet quorum.
MTCC has 10 members: an Arizona Department of Revenue (ADOR) representative, and nine mayors or council members from various cities that serve three-year terms. The governor appoints five members, while the senate president and house speaker each appoint two members.
Lopez issued a response letter last month agreeing to Perry’s recommendations.
The State of Arizona has paid roughly $6 million in the last three years to private law firms to defend the Arizona Department of Child Safety against multiple allegations of staff malfeasance and misfeasance leading to the neglect, even death, of children placed into the state’s foster care system.
In the meantime, concerns brought forth by the Arizona Auditor General’s Office in 2019 about foster home recruitment, licensure, use, and retention have not been fully implemented by DCS, and there won’t be another status report to the Arizona Legislature until later this year, according to public records.
A nearly 60 page special report to Gov. Doug Ducey and lawmakers in September 2019 outlined six recommendations for improvements within DCS for Arizona’s foster care system. One key area of concern was foster parents who reported feeling excluded from decisions about the children in their care as well as difficulty accessing needed support and pressure to accept foster placements.
There were also several instances in which foster parents complained of being provided “incomplete or inadequate” information about the children placed in their care, something auditors confirmed when reviewing placement packets as part of the audit.
In May 2020, the Auditor General’s Office provided lawmakers with an initial follow-up, at which time it was revealed DCS was still in the process of implementing five of the six recommendations. Steps to implement the sixth recommendation had not been started, according to the audit report, despite the fact it addressed one of the main complaints – the lack of customer service to improve foster parent recruitment and ensure retention.
Instead, DCS was concentrating on developing and launching of Guardian, its much needed new agency-wide database. But when Guardian went live in February 2021, state employees closed off some features of the system to other state agencies, including the State Foster Care Review board and the Arizona Ombudsman’s Office.
In addition, there were numerous complaints from foster parents, adoptive parents, and foster children transitioning out of foster care about late payments for several weeks after Guardian went live.
A November 2021 “second follow-up” report by the Arizona Auditor General at the 24-month period did not get into those problems. Instead, the report to the chairs of the Joint Legislative Audit Committee remained focused on the six recommendations from 2019, of which DCS had fully implemented only 50 percent.
And there was still had no start date in sight for implementing an improved customer service model, according to that report.
Despite the lack of performance by DCS, there will not be another audit report to the Legislature on the foster home concerns until this fall, according to August General Lindsay Perry’s office. That will mark three years after the initial special report.
The six recommendations and findings as noted in the November 2021 report were:
1. DCS should develop and implement a customer service model to improve foster parent recruitment and retention, and engage in continuous quality improvement via feedback to ensure the model’s successful implementation.
But according to the Perry’s staff, DCS reported “it has yet to begin implementing a customer service model because of competing priorities within the Department, such as implementing its new case management system (Guardian). The Department has not identified a start date for implementing this recommendation.”
2. DCS should, as required by Arizona law, provide foster parents “with complete, updated written placement packet information upon placement of children with foster parents.”
The placement packets began being issued by DCS in September 2021 through an online portal for new and renewed placements. However, obtaining feedback on whether the packets were worthwhile was to be included as part of the improved customer service outlined in Recommendation 1. As a result, the Auditor General cannot make any assessments until the 3-year report on whether the placement packets have resolved concerns expressed by foster parents.
3. The Auditor General also recommended DCS undertake an effort to find out why a foster parent closes his or her license. The pre-Guardian database only allows one reason to be entered, even though foster parents fill out a form which allows for marking multiple reasons. According to DCS, this problem will be resolved at some point via Guardian.
4. Already implemented is the Auditor General’s recommendation that DCS develop and implement procedures to ensure contractors and staff adequately handle intake in English and Spanish, including answering or returning phone calls in a timely manner and meeting Department expectations for call quality.
5. Also implemented was the recommendation that DCS implement procedures to ensure contractors maintain websites with information about how to become a foster parent in Spanish.
6. DCS also improved its monitoring of foster home recruitment and support contracts to ensure core contract requirements are being met, such as providing access to respite care and other requirements DCS deems critical to the contracts’ success.
Nearly $75 billion in federal COVID-19 funds was allocated to the State of Arizona, its local governments, businesses, and individuals between March 2020 and October 2021. Of that, more than $4.4 billion went to improper unemployment insurance claims because anti-fraud measures were not utilized by a state agency, according to a special report issued by the Arizona Auditor General.
The questionable payments by the Arizona Department of Economic Security were from federal funds provided through the CARES Act, one of six Congressional acts and one Presidential memorandum that resulted in $74.9 billion being allocated within Arizona for response and recovery efforts stemming from the pandemic.
For purposes of the special report, the term allocated refers only to funds set aside, not necessarily spent.
The payment of fraudulent claims from the federal COVID-19 funding is not the only concern raised by the Auditor General. Another is the potential future adverse impact caused by the fact the Arizona Department of Administration was 29 days late in submitting a required audit report to a federal audit clearinghouse.
“The late report submission was primarily because State agencies experienced personnel and resource challenges throughout the year responding to the COVID-19 pandemic, including administering the COVID-19 federal program monies and navigating their new requirements,” the report noted.
Federal agencies, the report notes, could “potentially” take action against the State and its three universities due to the late reporting.
The Auditor General’s report also highlights how the overall $74.9 million is split between $43.8 billion available directly to individuals, businesses, local governments, and other non-State programs while $31.1 billion in funds is allocated to the State of Arizona and its agencies.
Of the $43.8 billion in federal COVID-19 funding available directly to individuals, businesses, and local governments, a huge hunk ($18.3 billion) was allocated for individual and family assistance. Almost 95 percent of that has already been distributed in the form of various stimulus payments to individuals.
Another $18 billion is earmarked for business aid, most of which was paid out through the Paycheck Protection Program (PPP) and Economic Injury Disaster loans. The remaining $7.5 billion that was already allocated went to things like public health, transportation, and education (for a combined $4.3 billion) and $3.2 billion to local governments for varied purposes, including COVID-19 mitigation efforts.
The Auditor General’s report also took a close look at $6.3 billion spent or distributed from the State’s allocation between March 1, 2020 and June 30, 2020, the end of Fiscal Year 2020.
“We audited these monies as part of the annual compliance audit of federal monies the State spent and distributed, which we performed in accordance with State law and federal regulations, and in conjunction with our audit of the State’s financial statements,” according to the report, which noted the $6.3 billion was a small part of the overall $26.4 billion of various federal funds spent or distributed by the State of Arizona in FY2020.
Of the $6.3 billion, more than 84 percent ($5.3 billion) was for individual and family assistance, while $352 million was allocated for public health programs. There was also $32 million earmarked for education and another $643 million categorized in the Auditor General’s report as for “miscellaneous” usage.
The report also breaks down how the other $24.8 billion allocated to the State of Arizona and its agencies from July 2020 through October 2021 is designated, with the majority $13.1 billion (about 53 percent) again earmarked for individual and family assistance, including $7.1 billion for unemployment insurance benefits.
While most of the unemployment funding had to be spent by Sept. 6, some allocated funds can be spent as late of Sept. 30, 2025, according to the report.
The next largest chunk of COVID-19 funds to the Arizona state government is $5.7 billion for education, including $643.6 million of a direct allocation for the state’s three universities. Again, some of the fundings can be spent through September 2025.
Another $2.8 billion is categorized as “to be determined use” through Dec. 31, 2024. Examples of how those funds can be spent include COVID-19 mitigation efforts and infrastructure.
As to public health, there was $1.9 billion allocated to Arizona from July 2020 through October of this year. The main area of expenditure for these funds is for various COVID-19 “response.” The majority of that allocation does not have to be spent until July 31, 2024.
That leaves roughly $1.3 billion in miscellaneous funding to be spent on things such as transportation, community services, and business assistance. Much of that allocation can be spent as late as Dec. 31, 2024, according to the report.
Not included in the Auditor General’s report is an estimated $4.8 billion of federal COVID-19 related funding which the Arizona Joint Legislative Budget Committee believes was allocated to tribal governments located wholly or partially within Arizona’s geographical boundaries
An audit report found Wickenburg Unified School District’s (WUSD) former director of operations, William Moran, had engaged in illicit contract dealings for several years. These findings were presented to the State Grand Jury earlier this week; as a result, Moran has been indicted for four felony counts of fraud, forgery, and conflict of interest.
From 2017 to 2018, Moran allegedly benefitted from a near-$100,000 contract with a vendor that provided WUSD with construction services. He received approximately 500 to 700 truckloads of dirt worth $50,000 to $70,000, and a $2,000 discount on $7,000 dirt compacting services.
The truckloads of dirt were delivered and compacted in 2017 at a personal lot that Moran owned. Moran then built a home on the lot spanning over 2,000 square feet, which he sold around two years later for $445,000.
It appears that this house flip presented itself as a lucrative opportunity, especially after his resignation from WUSD in light of allegations of misconduct. Moran currently identifies himself as a self-employed home salesman. As of press time, his LinkedIn bio says that he finished construction on at least two other homes since leaving WUSD, finished another home lot in April, and has had at least three other lots opened up since May.
Additionally, the audit report revealed that Moran allegedly leveraged his position as director of operations to grant the WUSD vendor $30,000 and in return, accept an IOU worth $25,000. The audit speculated that the $5,000 difference had to do with the dirt compacting services.
Moran was also suspected of creating at least two false price quotes for construction services. The audit was unable to determine if Moran had a relationship with either of the vendors related to these false quotes.
The audit report determined that WUSD had failed to provide “adequate oversight” to Moran’s work. However, it did commend the district for taking immediate action after receiving their first complaint that Moran was possibly engaging in illicit conduct. Additionally, the audit commended the district for increasing oversight on construction vendor contracts under $100,000, as well as preventing conflict-of-interest issues.
Prior to resigning over an alleged fake bid in 2018, Moran had worked as director of operations for 5 years, and with WUSD for over 30 years.