Arizona State Representative Gail Griffin (R-LD19) is raising concerns over the state’s continued failure to meet federal auditing requirements, warning that billions of dollars in federal funding supporting health care, long-term care, and other assistance programs could face penalties.
Arizona has missed the federal Single Audit deadline for four consecutive fiscal years, from 2022 through 2025, under Governor Katie Hobbs’ administration.
The Single Audit is an annual financial and compliance review required by federal law to account for how states spend federal funding and ensure compliance with federal regulations.
Arizona’s fiscal year 2025 audit was due March 31, 2026, but remains incomplete. The Arizona Auditor General has projected that the report may not be released until March 5, 2027, less than a month before the fiscal year 2026 audit deadline.
According to state officials, Arizona spent approximately $28.6 billion in federal funding during fiscal year 2024, including $18.3 billion from the U.S. Department of Health and Human Services (HHS).
The funding supports several programs, including the Arizona Health Care Cost Containment System (AHCCCS), which administers Medicaid services, and the Arizona Long Term Care System (ALTCS), which provides nursing home and long-term care assistance to eligible seniors and individuals with disabilities.
Federal funding also supports behavioral health services, child care assistance, food assistance through the Supplemental Nutrition Assistance Program (SNAP), and other public assistance programs.
“Governor Hobbs has allowed Arizona to remain out of compliance year after year, and now the health care and benefits Arizonans depend on are exposed to federal penalties,” stated Rep. Griffin. “We are talking about $18.3 billion in HHS funding and services that seniors, people with disabilities, and vulnerable families rely on. These Arizonans should not have to worry about losing benefits because the Governor has failed to meet basic federal accountability requirements.”
🚨Hobbs’ Noncompliance Could Cost Arizona Billions in Health Care Benefits Federal government warns continued Single Audit failures put $18.3 billion in Medicare and other federal funding at risk, including services for seniors and Arizonans with disabilities
During a September 21 hearing of the Joint Legislative Audit Committee (JLAC), HHS Assistant Secretary for Financial Resources Gustav Chiarello criticized the state’s response to its overdue audits, calling it “inadequate.”
Under federal regulations, agencies have several enforcement options when recipients fail to comply with funding requirements, including withholding payments, disallowing costs, and suspending or terminating federal awards.
The federal government previously notified Hobbs of Arizona’s noncompliance in a July 14 letter, citing a “consistent pattern of noncompliance” and requesting corrective action.
On July 31, the Arizona Department of Administration (ADOA) proposed completing the overdue audit by December 30, 2026, and shifting portions of the federal compliance auditing process to outside accounting firms.
The Auditor General subsequently disputed that timeline, calling it unrealistic and identifying March 5, 2027, as a more achievable completion date.
Arizona’s delayed audits have already resulted in financial consequences for the state’s public universities. Federal agencies have reportedly withheld or frozen hundreds of millions of dollars in funding, including approximately $154 million from the National Institutes of Health (NIH).
Shortly after, the universities separated their federal audits from the statewide Single Audit process to protect their access to federal funding.
During the September hearing, Chiarello also testified that neither Hobbs nor her office had directly contacted him or his staff to address the state’s noncompliance following the July notification.
“For four years under Governor Hobbs, this problem has gotten worse instead of better,” Griffin said. “Arizona has missed four consecutive federal deadlines, the number of audit findings has grown, and HHS is now warning about federal enforcement. Even after HHS formally notified the Governor that Arizona was not in compliance, her office did not have a direct conversation with the federal official responsible for addressing the delinquency. Four years is more than enough time to get this under control.”
State officials have attributed the continued delays in part to late financial reporting from multiple agencies, including the Arizona Department of Economic Security (DES). The Auditor General also reported that agency submissions were arriving later than in previous years, further complicating efforts to complete the required audits.
At the hearing, ADOA acknowledged that the delays were unacceptable but did not commit to completing the fiscal year 2026 audit by its federal deadline.
Griffin called on the Hobbs administration to establish a realistic timeline, improve communication with federal officials, and implement corrective measures to bring Arizona back into compliance.
“Governor Hobbs needs to take responsibility and fix this,” said Griffin. “Arizona needs a credible timeline, direct engagement with the Department of Health and Human Services, and an immediate plan to bring the State back into compliance.”
“Seniors, families, and Arizonans with disabilities should not have their health care and other essential benefits put at risk because the administration cannot get its financial reporting in order,” added Griffin.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
A law firm with close ties to Gov. Katie Hobbs has benefited from a series of government contracts within her administration totaling over $6 million.
Coppersmith Brockelman PLC has been awarded legal counsel contracts for multiple state agencies, according to initial reporting by FOIAzona.
The law firm, which has been a go-to for top Democrats, is also providing legal counsel to Hobbs’ secretive inaugural fund. The firm has disclosed its defense of Hobbs’ inaugural fund as one in a list of conflict-of-interest matters considered adverse to state interests.
Two of the firm’s partners have been appointed to high court positions in recent years. In 2022, Roopali Desai was appointed to the Ninth Circuit Court of Appeals; she administered Hobbs’ oath of office months later in January 2023. Earlier this year, Hobbs appointed Andy Gaona to the Arizona Court of Appeals.
Last year, one of Hobbs’ general counsel members, Bo Dul, joined Coppersmith Brockelman. Prior to joining the Hobbs administration, Dul had been senior counsel at States United Democracy Center, where she represented Hobbs pro bono.
Coppersmith Brockelman has contracts to provide counsel to the Department of Health Services (DHS), Arizona Department of Administration (ADOA), Arizona Department of Water Resources (ADWR), and the Arizona Health Care Cost Containment System (AHCCCS).
For all of the agencies, contracts were listed as “competition impracticable” — meaning the state didn’t undergo the competitive bidding process to award those contracts. For example, ADOA designated Coppersmith Brockelman in a 2024 competition impracticable procurement authorization form as having “specialized expertise” with DHS contracts.
The law firm received two contracts in 2024, two contracts in 2025, and one so far this year.
The two contracts in 2024 were for DHS and ADOA.
One of the 2024 contracts was for DHS litigation claims related to Sober Living Assisted Facilities at the request of Hobbs’ office; that contract has an initial estimated cost of up to $3 million, with listed counsel rated at anywhere from $350 to $500 per hour, paralegals listed at $150 per hour, and a legal assistant listed at $50 per hour.
The other 2024 contract was for civil claims against ADOA following a disqualification notice filed by Attorney General Kris Mayes. The contract had an initial estimated cost of up to $2 million, with listed counsel rated from $350 to $400 per hour, a paralegal for $150 per hour, and a legal assistant for $50 per hour.
The two contracts in 2025 were for ADWR and AHCCCS.
One of the 2025 contracts was for ADWR related to two separate actions filed in Maricopa County Superior Court pertaining to groundwater rules and regulations. Counsel rates were $400 and $425 per hour, with an estimated cost of up to $120,000 per year.
The other 2025 contract was to provide miscellaneous legal counsel for AHCCCS, with an initial estimated cost of $100,000 that was extended earlier this year to $200,000. Counsel rates were listed as $350 to $475 per hour, and an associate for $275 per hour.
The contract this year concerned ADWR’s involvement in an appeal and special action lawsuit on the assured water supply program: Home Builders Association of Central Arizona v. Arizona Department of Water Resources. The contract listed an initial estimated cost of up to $600,000. The state justified competition in this contract as impracticable because ADWR’s in-house attorneys were handling other litigation as well as Hobbs’ policy priorities.
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Arizona State Senator Mark Finchem (R-LD11) is questioning a request by the Arizona Health Care Cost Containment System (AHCCCS) to pause 30 pending administrative appeals involving a healthcare provider while the agency pursues a separate lawsuit over the same disputes.
AHCCCS filed the motion September 2 with the Arizona Office of Administrative Hearings, asking an administrative law judge to stay the pending proceedings involving Prorenata Labs and six AHCCCS-contracted health plans.
The request has drawn scrutiny from Finchem, co-chair of the Joint Legislative Audit Committee, who argues that the move raises broader questions about whether Arizona residents and businesses can rely on the state’s administrative hearing process when challenging government decisions.
“This is bigger than one laboratory and one billing dispute. It is about whether Arizonans can trust the process when they challenge the government,” stated Senator Finchem.
🚨FOR IMMEDIATE RELEASE: Senator Finchem Sounds Alarm Over AHCCCS Attempt to Sidestep Provider Appeals Process
The underlying dispute concerns reimbursement for certain COVID-19 tests. Among the questions being litigated is whether the tests are subject to a maximum reimbursement rate, typically $100 per test, and whether an out-of-network laboratory can receive payment for non-emergency services provided without prior authorization or documented urgent medical need.
According to Finchem, AHCCCS acknowledges that hundreds of similar cases have already proceeded through administrative hearings and were resolved in favor of AHCCCS and its contracted health plans.
“The Legislature has already paid for an independent hearing system so people and businesses can challenge government actions without being forced into a more expensive court fight,” said Finchem. “AHCCCS says it has already prevailed in hundreds of these cases through that process. If it worked hundreds of times, the agency must explain why it now wants 30 pending appeals frozen while it pursues a different legal strategy in court.”
AHCCCS argues that temporarily pausing the administrative hearings would reduce costs, prevent duplicative litigation, and avoid potentially inconsistent rulings between the administrative and judicial proceedings.
An administrative law judge has not yet ruled on the agency’s request.
The Office of Administrative Hearings was established to provide an independent forum for individuals and businesses challenging decisions made by state agencies.
Finchem said the Legislature needs to determine whether AHCCCS’s request could undermine that process or establish a precedent that other state agencies could use when facing administrative challenges.
“We are not deciding whether this laboratory is owed money,” added Finchem. “We are asking why an executive agency wants to halt established proceedings and shift the legal question to a lawsuit it initiated.”
Finchem said he intends to use the Joint Legislative Audit Committee’s oversight authority to examine the circumstances surrounding AHCCC’s request.
Among the questions he wants answered are how long the 30 appeals could be delayed, how much the Superior Court litigation could cost taxpayers, why AHCCCS changed its approach after prevailing in hundreds of administrative cases, and whether the agency considers its strategy a potential precedent for other disputes involving state agencies.
“Without a full and public explanation, this smells like another attempt by the Hobbs administration to cover up agency actions,” said Finchem. “If this becomes a playbook for state agencies, the consequences will reach far beyond this case. I intend to use the Joint Legislative Audit Committee’s oversight authority to get the facts, demand answers, and determine whether legislative or audit action is necessary. Due process cannot exist only when it is convenient for the government.”
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
“I’m Katie Hobbs, and the rules don’t apply to me.” That might as well run at the end of the next campaign ad featuring Arizona’s governor. Since taking office in 2023, Hobbs has been building a rap sheet of scandals that would make Minnesota Governor Tim Walz blush.
From one of the largest Medicaid fraud scandals in Arizona history to a pay-to-play scheme that has put her administration under active criminal investigation, Hobbs has taken corruption to new heights in our state. But now, her latest campaign-finance reports are raising even more troubling questions: How did more than $1 million in small-dollar contributions disappear? And why are over 46,000 of her contributors listed as unemployed?
A Million-Dollar Campaign-Finance Mystery
How many times can a campaign-finance report be amended before it starts to raise red flags? For the 2026 Quarter 2 report, the Hobbs campaign has managed to amend it 10 times so far. But why? Were there some typos or decimals in the wrong spot? Nope. Many of these amendments repeatedly changed the amount of money the Hobbs campaign reported receiving.
The biggest mystery involves more than $1.4 million in small-dollar contributions. In its original filing, Elect Katie Hobbs reported $1.426 million in exempt small contributions—donations under $100 that can be reported in aggregate. The campaign reported the same amount in its first amended filing.
But something happened in its second and third amended filings. All of a sudden, that $1.426 million dropped to $0. And then, in the fourth amended filing, nearly $400,000 suddenly reappeared.
The campaign’s total receipts also followed a similarly bizarre path, jumping from $2.64 million to $3.1 million, falling below $1.7 million, and then climbing back above $2.6 million through various amendments.
So, where did the money go?
That’s a great question. And Hobbs has yet to answer. But it’s not the only anomaly in her campaign-finance reports…
Arizona Attorney General Kris Mayes declined to prosecute Gov. Katie Hobbs on Friday over allegations of a pay-to-play arrangement involving Sunshine Residential Homes. The decision prompted Senate President Warren Petersen (R-LD14), Mayes’ Republican opponent in the November election, to accuse the attorney general of protecting a political ally.
Mayes announced that her office found no evidence establishing that political contributions from Sunshine were exchanged for rate increases granted by the Arizona Department of Child Safety (DCS).
“The investigation has not uncovered any evidence of the necessary quid pro quo to support a bribery charge,” Mayes said.
The decision followed a two-year criminal investigation that included 12 interviews and reviews of campaign-finance records, procurement records, bank documents, and state communications comprising more than one terabyte of data and more than 100,000 documents.
The investigation began in June 2024 after Republican Sen. T.J. Shope (R-LD16) requested reviews by both Mayes’ office and the Maricopa County Attorney’s Office following reporting about Sunshine’s political contributions and subsequent rate increases.
Sunshine gave $200,000 to the Arizona Democratic Party before Hobbs’ 2022 election, $100,000 to her inaugural fund, and another $100,000 to the party in August 2023. Sunshine founder Simon Kottoor and his wife, Elizabeth, also contributed to Hobbs’ gubernatorial campaigns. Arizona campaign-finance records showed Hobbs was the only Arizona candidate to receive contributions from either Kottoor during the 2022 and 2024 election cycles.
Sunshine received a mid-contract increase in May 2023 that raised its rate to $195 per bed, followed by an increase to $234 per bed during its April 2024 contract renewal. The Attorney General’s memorandum said the company’s rate increased 56% from 2019 to 2024, although two other providers received larger percentage increases over that period while maintaining lower daily rates.
Investigators found that DCS officials were aware of Sunshine’s political contributions while considering its request. According to the memorandum, then-DCS official Robert Navarro told agency officials during a February 2023 meeting that Sunshine was likely to request an increase and added that the company was a donor to the governor. Internal teams messages also included discussions of Sunshine’s contributions.
Navarro told investigators that the donations created perceived pressure, but the Attorney General’s Office concluded that the pressure resulted from his knowledge of the contributions and found no evidence that Hobbs or her office directed DCS to raise Sunshine’s rate.
The investigation instead concluded that Sunshine’s rate increases “appear as the result of its outsized leverage” over the state’s congregate-care system. The company has been one of Arizona’s largest group-home providers and accounted for approximately 20% to 25% of the state’s non-Division of Developmental Disabilities congregate-care beds, according to the AG memorandum.
DCS officials told investigators that Sunshine had indicated it could shift beds to the federal Office of Refugee Resettlement, which was paying substantially higher rates to house unaccompanied migrant children. Officials expressed concern that losing Sunshine’s capacity would make it more difficult to keep siblings in foster care together. Two other providers had already left state contracts in favor of federal work.
Mayes would not say whether Hobbs would ultimately sit for questioning, while saying the investigation was nearing completion. The memorandum released Friday says Hobbs declined to sit for an in-person interview with investigators but submitted two written statements through her attorneys on Aug. 17, one in her capacity as governor and another as a candidate.
Hobbs wrote that she “has never discussed DCS contract rates, Sunshine’s rates, or any DCS procurement decision” with Kottoor or anyone affiliated with Sunshine. She also denied directing anyone else to have such discussions and said neither Sunshine’s contributions nor other financial support influenced state decisions concerning the company.
Petersen criticized Mayes’ decision in a statement released through Arizona Senate Republicans Friday.
“Mayes’ decision was predictable in an election season,” Petersen said. He accused Mayes of having “shamefully shifted accountability and protected her political ally, turning a blind eye to Hobbs’ misconduct” and said she had placed politics ahead of law enforcement.
Petersen’s office said Sunshine made three $100,000 contributions to the Arizona Democratic Party during Mayes’ investigation. However, AZ Free News previously reported that Sunshine gave the party $200,000 in September and October 2022 and another $100,000 in August 2023, before Mayes opened her investigation in June 2024. The Attorney General’s findings released Friday do not identify any additional Sunshine contributions made during the investigation.
Petersen won the Republican nomination for attorney general in July and will face Mayes in the general election.
Mayes called for new state contracting transparency laws while announcing the decision, saying the absence of evidence sufficient for prosecution did not eliminate concerns about disclosure requirements surrounding state contractors and political donations.
The Legislature has previously sent Hobbs two bills sponsored by Shope addressing those issues. SB 1612 in 2025 would have required companies responding to state requests for proposals or seeking grants to disclose items of value provided during the previous five years to the governor, gubernatorial political committees, inaugural funds, and related entities. It also included procurement-record retention requirements and removed an Arizona Health Care Cost Containment System (AHCCCS) exemption from state procurement laws. Hobbs vetoed the measure.
Shope returned this year with SB 1186, which retained the political-contribution disclosures and record-retention provisions without the AHCCCS provision. Hobbs vetoed the bill in June after lawmakers sent it to her amid the continuing Sunshine investigation.
Hobbs separately proposed her own procurement and campaign-finance changes earlier this year, including limits on political giving while companies were bidding for state contracts and a searchable database of state contractors. The competing proposals did not produce legislation acceptable to both the governor and Legislature before lawmakers adjourned.
Mayes’ criminal division recommended closing its investigation into the alleged pay-to-play arrangement involving Hobbs and Sunshine. The memorandum said the office would keep its investigation open for the limited purpose of assisting the Arizona Auditor General if requested. A separate investigation involving Maricopa County Attorney Rachel Mitchell and the Arizona Auditor General also remains ongoing.
