Sunset review, Arizona Department of Veterans' Services and Arizona Veterans' Service Advisory Commission, sunset factors

              A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Sunset Review
Performance Audit Division
September • 2011
REPORT NO. 11-10
Arizona Department of
Veterans’ Services and
Arizona Veterans’ Service
Advisory Commission—
Sunset Factors
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five
representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the opera-tions
of state and local government entities. To this end, she provides financial audits and accounting services to the State and political
subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and
the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Dale Chapman, Director
Shan Hays, Manager and Contact Person
Robin Hakes, Team Leader
Jennifer Allen
Senator Rick Murphy, Chair
Senator Andy Biggs
Senator Olivia Cajero Bedford
Senator Rich Crandall
Senator Kyrsten Sinema
Senator Russell Pearce (ex officio)
Representative Carl Seel, Vice Chair
Representative Eric Meyer
Representative Justin Olson
Representative Bob Robson
Representative Anna Tovar
Representative Andy Tobin (ex officio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
September 27, 2011
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Col. Joey Strickland, Director
Arizona Department of Veterans’ Services
Ms. Terrie Gent, Chair
Arizona Veterans’ Service Advisory Commission
Transmitted herewith is a report of the Auditor General, A Sunset Review of the Arizona
Department of Veterans’ Services and the Arizona Veterans’ Service Advisory Commission.
This report is in response to a November 3, 2009, resolution of the Joint Legislative Audit
Committee and was conducted as part of the Sunset Review process prescribed in
Arizona Revised Statutes §41-2951 et seq.
As outlined in its response, the Arizona Department of Veterans’ Services plans to
implement all of the recommendations directed to it. The Arizona Veterans’ Service
Advisory Commission did not provide a response to the report.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on September 28, 2011.
Sincerely,
Debbie Davenport
Auditor General
Attachment
cc: Arizona Veterans’ Service Advisory Commission Members
TABLE OF CONTENTS
Introduction 1
Department sunset factor analysis 9
Commission sunset factor analysis 23
Appendix A: Methodology a-i
Agency Response
Tables
1 Schedule of Revenues, Expenditures, and Changes in Fund Balance
Fiscal Years 2009 through 2011
(Unaudited) 8
page i
Office of the Auditor General
concluded
Department and Commission serve Arizona
veterans and their families
Department and Commission mission and history
The Department’s mission is to enrich and honor Arizona’s veterans and their
families through education, advocacy, and service. Arizona has approximately
557,000 veterans who may be eligible for federal and state benefits (see
textbox). Arizona has provided services to Arizona veterans since 1925, when
it created the position of Veterans’ Service Officer. This position was abolished
in 1951 and replaced by the Arizona Veterans’ Service Commission. In 1973,
the Commission was integrated into the Department of Economic Security.
Primarily at the request of various veterans’ organizations, the Governor
reestablished the Commission as a separate agency in 1982. In 1999, the
Legislature separated the Commission from the agency by making the
page 1
Office of the Auditor General
The Office of the Auditor
General has conducted a
sunset review of the
Arizona Department of
Veterans’ Services
(Department) and the
Arizona Veterans’ Service
Advisory Commission
(Commission) pursuant to a
November 3, 2009,
resolution of the Joint
Legislative Audit
Committee. This audit was
conducted as part of the
sunset review process
prescribed in Arizona
Revised Statutes (A.R.S.)
§49-2951 et seq.
This report includes
responses to the sunset
factors specified in A.R.S.
§41-2954 for both the
Department and the
Commission and is the last
of four reports on the
Department. The other
reports were performance
audits of the Department’s
fiduciary program, the
Veteran Home, and the
Veterans’ Donations Fund
and the Military Family
Relief Fund.
Scope and Objectives
INTRODUCTION
Veterans in Arizona, as of September 30, 20101
Total veterans: 557,000
Age distribution:
• Under 40 71,000
• 40-64 247,000
• 65 and over 239,000
Period served:2
• WWII 55,000
• Korea 69,000
• Vietnam era 180,000
• Gulf War 138,000
• Peacetime 140,000
1 Numbers represent projections for September 2010 from the U.S.
Department of Veterans Affairs, rounded to the nearest 1,000.
2 Period served numbers do not add up to the total number of veterans
because many veterans served in more than one period.
Source: Auditor General staff analysis of U.S. Department of Veterans
Affairs official estimates and projection of the veteran
population, obtained from http://www.va.gov/VETDATA/
Demographics Demographics.asp.
page 2
State of Arizona
Commission an advisory body and creating a separate Department headed by a
governor-appointed director.
The Commission acts as an advisory body to the department director and to the
Governor. The Commission does not act in an oversight or regulatory capacity. Its
mission is to promote public awareness and enhance the well-being of past and
present Arizona service members and their families. The Commission consists of
nine voluntary members selected by the Governor from nominations submitted by
state veterans’ service organizations. The Commission does not receive funding, but
receives administrative support from the Department.
The Department is one of several organizations that provides services to Arizona’s
approximately 557,000 veterans and their dependents. For example, the U.S.
Department of Veterans Affairs (VA) operates medical facilities nation-wide to care for
veterans and provides financial and other assistance to qualified veterans, such as
disability compensation, pensions, education, and burial benefits. Additionally, some
veterans’ service organizations, such as the Veterans of Foreign Wars and Disabled
American Veterans, accept power of attorney for individual veterans, supporting the
veteran’s benefits claims both with the VA and throughout the VA’s appeals process.
Department organization and staffing
The Department has five divisions and reported 356.3 authorized full-time equivalent
(FTE) positions as of June 30, 2011, 74.8 of which were not filled. The Department’s
five divisions are:
• Veteran Home (247 FTEs, 44.5 vacancies)—The Veteran Home (Home),
located in Phoenix, is a 200-bed facility providing nursing and rehabilitative care
in 150 long-term care beds, a 25-bed specialty care unit for Alzheimer’s and
dementia residents, and a 25-bed sub-acute unit for short-term care rehabilitation.
People eligible to stay at the Home include honorably released veterans, their
spouses, and parents whose children died while serving in the U.S. Armed
Forces. Although the Home is statutorily required to operate as a self-sustaining
facility, for the first three quarters of fiscal year 2011, the Home’s average
occupancy rate was 87 percent, which is slightly below its break-even census
of 177 residents. The Home receives revenues from Medicaid, the VA, private
sources, and Medicare. However, the Home was not self-sustaining in fiscal
years 2008 through 2010 and received State General Fund subsidies to help
pay for costs (see Report No. 11-06 for more information).
• Veterans’ Services Division (53 FTEs, 16 vacancies)—This division provides
information and assistance to Arizona veterans and their families regarding state
and federal benefits earned by honorable service in the U.S. Armed Forces. The
page 3
Office of the Auditor General
Department has established 18 offices throughout Arizona to provide this
assistance to Arizona veterans. At these offices, veterans benefits counselors help
veterans develop and file claims for disability, pension, insurance, burial,
education, home loan, social security, and other social services benefits. As of
March 2011, the Department had helped secure approximately $275 million in
annual federal benefits for Arizona veterans.
• Administration (29.3 FTEs, 6.3 vacancies)—The Department’s administration
includes internal support services as well as two units that provide federally
funded services external to the agency. The internal support services include
financial services, information technology, and human resources. The two units
that provide external services are: (1) the state approving agency, which approves
educational programs for veterans who are using GI Bill benefits to pay for their
education, and (2) the Troops to Teachers program, which helps eligible military
personnel transition into new careers as public or charter school teachers.1
• Fiduciary Division (25 FTEs, 8 vacancies)—This division provides services to
incapacitated veterans by serving as a court-appointed guardian or conservator
and also provides personal representative services for deceased veterans’
estates (see Report No. 11-03 for more information). Individuals eligible for
fiduciary services include incapacitated veterans, surviving spouses, and their
dependent children. As of March 2011, the division had 256 fiduciary cases.
• State Veterans’ Cemeteries (2 FTEs, 0 vacancies)—This division operates a
state veterans’ cemetery in Sierra Vista that was opened in 2002. This cemetery
provides a burial place for Arizona veterans who were discharged under any
conditions other than dishonorable, along with their spouses and some
dependents. The Department has applied to the VA for a grant to build additional
cemeteries throughout the State.
2009 special investigative report and followup
The Department has made some changes in response to a special investigative report
that identified several problems in department operations. In November 2009, the
Office of the Auditor General released a special investigative report with findings
regarding the Department’s former director, which included misuse of public monies,
conflict of interest, and misfeasance.2 The former director resigned and later pled guilty
to two of the criminal charges brought against him. The Governor appointed the
Department’s current director in July 2008.
1 The GI Bill provides veterans with federally funded financial support for education and housing.
2 Office of the Auditor General, Special Investigative Unit. (2009). Arizona Department of Veterans’ Services: Misuse of public
monies, conflict of interest, and misfeasance by the former director. Phoenix, AZ: Author.
page 4
State of Arizona
The 2009 report included 8 recommendations regarding actions the Department
should take to improve its internal controls (see textbox). Auditors found that the
Department has strengthened its controls, although it needs to continue to make
improvements in its administration of the Veterans’ Donations Fund (donations fund)
(see Report No. 11-09 for more information).
Department has improved conflict-of-interest and hiring practices—
The 2009 report found that the Department’s director appeared to have inappro-priately
hired his son and his wife in violation of both conflict-of-interest statutes
and competitive hiring practices. The report recommended that the Department
ensure compliance with conflict-of-interest statutes, including: (1) requiring all
employees to periodically disclose potential conflicts of interests, and (2) requiring
employees to refrain from participating in department activities that may result in
conflicts of interest. The Department has taken several steps to help ensure known
conflicts of interest are periodically monitored. For example, to address require-ments
in A.R.S. §38-503, the Department
requires its employees to complete a disclo-sure
statement upon hire and once a year
thereafter (see textbox). The annual disclosure
statement requires employees to disclose infor-mation
regarding potential conflicts of interest.
As recommended in the 2009 report, the
Department maintains and periodically moni-tors
disclosure statements with a known conflict
of interest in a separate file, which is available
for public inspection.
Summary of 2009 special investigative report recommendations
1. Institute policies and procedures that effectively oversee management and
prevent management override.
2. Ensure and monitor employee compliance with conflict-of-interest statutes.
3. Strengthen employment process by competitively recruiting and hiring
employees.
4. Ensure the prudent use of Veterans’ Home and Veterans’ Donations Fund
monies.
5. Seek legal advice prior to making significant donations fund purchases.
6. Follow the State’s procurement regulations.
7. Ensure expenditures are processed based on proper documentation.
8. Ensure that all policies and procedures comply with statutes, rules, and
Arizona Governors’ Executive Orders.
Source: Auditor General staff review of the Office of the Auditor General’s 2009 special investigative
audit Arizona Department of Veterans’ Services—Misuse of Public Monies, Conflict of Interest,
and Misfeasance by the Former Director.
m
The Department’s disclosure statement requires
employees to disclose information about potential
conflicts of interest in three areas:
1. Other outside employment;
2. Potential for gain by employee or employee’s relative from
any department procurement; and
3. Names of any relatives who are also employed by the
Department.
Source: Auditor General staff review of the Department’s disclosure statement.
page 5
Office of the Auditor General
In addition, the Department has developed procedures for staff regarding how to
address known conflicts of interest. For example, for those employees who disclose
they are also employed outside the Department, procedures require staff to verify
that a secondary employment form was approved by both the employee’s supervisor
as well as the division manager. In addition, for employees who have a relative also
employed by the Department, staff monitor human resource records to ensure
relatives are not supervising each other. Auditors’ review of employee files during the
period between January and July 2010 found that department staff had followed
these procedures in all 15 files reviewed.
The 2009 report recommended ensuring open competitive practices in the
recruitment, selection, and placement of candidates, based on the candidate’s
knowledge, skills, abilities, qualifications, and overall fitness for the position
responsibilities. The Department has established and, for the most part, followed
open competitive practices for recruiting, selecting, and placing candidates.
Specifically, auditors’ review of 12 employee files during the period between January
1 and August 31, 2010, found that, where applicable, the Department followed these
practices when hiring 11 of the 12 employees. However, based on a review of an
employee’s personnel file and the posted position description, auditors determined
that one employee did not appear to have the prior experience or qualifications for
a position that assumes full responsibility of the operations of the Home in the
absence of the Home’s administrator.
Department has made improvements regarding some expenditures,
but additional improvements for donations fund administration are
needed—The 2009 report recommended that public monies from two department
funds—the Veterans’ Home Fund and donations fund—be used appropriately and
that the Department follow the State’s procurement regulations when purchasing
goods and services. Auditors’ review of 20 expenditures from the Veterans’ Home
Fund, for the period of January 1, 2010 through June 30, 2010, found that the
Department appropriately spent these monies. However, auditors’ review of
donations fund expenditures for the period December 1, 2009 through June 30,
2010, found that 6 of 18 expenditures reviewed did not benefit Arizona veterans, and
additional improvements to the Department’s administration of the donations fund
are needed (see Report No. 11-09 for more information).
Further, auditors’ review of applicable expenditures also found that the Department
followed procurement code requirements for the purchases of goods and services
from these two funds. Procurement code requirements help to ensure that state
agencies receive the best possible value for the public money they spend and
promote competition among vendors. Of the 38 expenditures that auditors reviewed
from these two funds, 8 were procurements for goods and services, to which the
procurement code would apply; the other 30 expenditures either fell below the
procurement code threshold of $5,000 or were not procurements, so the
procurement code did not apply to these expenditures. Auditors’ review of the 8
page 6
State of Arizona
procurements found that the Department followed procurement code requirements
for each expenditure.
However, most of the donations fund expenditures that auditors reviewed were
distributed to outside organizations, and these expenditures did not follow
applicable statutes. Specifically, auditors reviewed 13 expenditures distributed to
outside organizations and found that the Department did not follow the statutes
that govern the solicitation and award of grants, which would be the statutes that
apply to these types of expenditures. For example, the Department did not ensure
fair competition for grant monies by issuing a request for grant applications that
described evaluation criteria and their relative importance. As a result, some
potential applicants may not have been aware of the availability of the monies, and
applicants did not know how applications would be evaluated. Similarly, because
the Department did not issue a request that identified the criteria, it could not follow
the requirement to evaluate applications solely on the basis of these criteria. This
statutory requirement not only helps to ensure fairness, but also helps to ensure
that the applications that receive funding represent the best uses of the public
monies. As a result, auditors recommended that the Department should develop
and implement a formal grant process and develop policies and procedures that
comply with A.R.S. §§41-2701 through 41-2706 that govern grant solicitation and
award (see Report No. 11-09 for more information).
Department monitors changes in statutory requirements—The 2009
investigative report found that the Department spent more than $213,000 for the
design and construction of a war memorial; however, Arizona Governor Janet
Napolitano strictly prohibited the use of any public monies for this memorial in an
Executive Order. The 2009 report recommended that the Department should peri-odically
monitor all of its procedures to ensure they align with statutes, rules, and
Executive Orders and are being followed. As of August 2010, the Department
implemented a process wherein its legislative liaison monitors statutory changes
and Executive Orders and prepares a weekly management report highlighting
changes that could affect the Department. However, the Department should con-tinue
to enhance its efforts to comply with statutory and other requirements. For
example, the 2011 performance audit of the Department’s fiduciary program
found that the Department needs to improve its operations to ensure that the pro-gram
complies with statutory requirements regarding services to fiduciary clients
(see Report No. 11-03). In addition, auditors determined that the Department
needs to improve its administration of the donations fund by developing a grant
awards process that complies with A.R.S. §41-2701 et seq, unless the Legislature
modifies statute to require it to use donations fund monies only to purchase goods
and services to benefit veterans (see Report No. 11-09 for more information).
page 7
Office of the Auditor General
Budget
As illustrated in Table 1 (see page 8), the Department received nearly $39 million in
revenues in fiscal year 2011. The Department’s largest source of revenue is charges
for resident services at the Veteran Home in Phoenix, which provided nearly 43 percent
of the Department’s revenues in fiscal year 2011. State General Fund appropriations
to the Department totaled approximately $5.3 million, a reduction of nearly $11.7
million from fiscal year 2010. Most of this reduction reflects a one-time $10 million State
General Fund appropriation that was provided to the Department in fiscal year 2010 to
construct the new Tucson Veteran Home. The Department also received donations
and a portion of the fees for several specialized license plates totaling more than $2.5
million in fiscal year 2011, and other revenue totaling more than $640,000 in fiscal year
2011, which primarily consisted of fees for its fiduciary program. Finally, the Department
received nearly $13.7 million from the VA, including nearly $13 million to build the new
Tucson Home.
Department expenditures included more than $16.2 million for personal services and
related benefits in fiscal year 2011, which represented a decrease of more than
$575,000 from fiscal year 2010’s personal services costs. Most of the Department’s
personal services costs are for the operation and staffing of the Phoenix Veteran
Home. These costs totaled an estimated $10.9 million in fiscal year 2011. Additionally,
the Department spent more than $19.6 million for buildings, building improvements,
and equipment. This amount increased significantly from the fiscal year 2010
expenditure of approximately $3.35 million because the Department began con-struction
of the Tucson Home. Finally, the Department uses monies for aid to organi-zations
and individuals, including assistance provided through the Military Family
Relief Fund and expenditures from the donations fund. Altogether, the Department
spent approximately $1.5 million for aid to organizations and individuals in fiscal year
2011.
page 8
State of Arizona
Table 1: Schedule of Revenues, Expenditures, and Changes in Fund Balance
Fiscal Years 2009 through 2011
(Unaudited)
1 Amount is primarily fees for the Department’s fiduciary program.
2 Amount includes $10 million of State General Fund appropriations to provide a 35 percent state match to build the new Tucson Veteran Home.
3 Amount increased significantly in fiscal year 2011 because the Department received nearly $13 million in federal monies to build the new Tucson Veteran
Home.
4 According to a department official, the Department has increased assistance to soldiers and their families through the Military Family Relief Fund and
increased support to nonprofit veteran support organizations since fiscal year 2009 (see Auditor General Report No. 11-09 for more information).
5 Amount increased significantly in fiscal year 2011 because the Department began construction of the new Tucson Home.
6 Consists of transfers to the State General Fund in accordance with Laws 2009, 1st S.S., Ch. 1, §4, and Ch. 12, §44.
7 Ending fund balance includes approximately $7.8 million and $1.4 million in fiscal years 2010 and 2011, respectively, which were unexpended State General
Fund appropriations for the construction of the new Tucson Home. The remaining ending fund balance is primarily restricted to use for such purposes as
operating the Phoenix Veteran Home, providing assistance through the Military Family Relief Fund, and spending donations to benefit Arizona veterans.
Source: Auditor General staff analysis of the Arizona Financial Information System (AFIS) Accounting Event Transaction File for fiscal years 2009 through 2011
and AFIS Management Information System Status of General Ledger-Trial Balance screen for fiscal years 2009 through 2011.
2009 2010 2011
Revenues:
Charges for services:
Veteran Home patient services $ 12,730,861 $ 14,970,866 $ 16,608,085
Other1 709,229 919,809 640,067
State General Fund appropriations 7,642,769 16,975,645 5,313,517
Donations 1,553,177 1,190,526 1,281,689
Intergovernmental 1,512,028 2,003,750 13,672,536
Specialized license plates 1,004,956 1,101,718 1,241,055
Other 63,280 86,226 109,496
Total revenues 25,216,300 37,248,540 38,866,445
Expenditures and transfers to the State General Fund:
Personal services and related benefits 16,799,646 16,795,492 16,217,644
Professional and outside services 1,949,768 1,663,312 1,467,163
Travel 140,178 137,482 160,175
Food 486,858 502,911 515,342
Aid to organizations and individuals4 163,235 864,366 1,500,564
Other operating 3,269,310 3,545,137 3,848,410
Buildings, building improvements, and equipment 442,497 3,350,530 19,614,256
Total expenditures 23,251,492 26,859,230 43,323,554
Transfers to the State General Fund6 243,200 121,600
Total expenditures and transfers to the State General Fund 23,494,692 26,980,830 43,323,554
Net change in fund balance 1,721,608 10,267,710 (4,457,109)
Fund balance, beginning of year 10,316,908 12,038,516 22,306,226
Fund balance, end of year7 $ 12,038,516 $ 22,306,226 $ 17,849,117
2
3
5
1. The objective and purpose in establishing the Department and
the extent to which the objective and purpose are met by private
enterprises in other states.
The Department’s mission is to enrich and honor Arizona’s veterans
and their families through education, advocacy, and service. To
achieve this mission, the Department provides veterans and their
families with the following services: nursing and rehabilitative care
delivered in the Veteran Home (Home), benefits counseling and
assistance, burial in the State Veterans’ cemetery, and fiduciary
services. The Department’s objective and purpose have been met by
private enterprises in other states, to varying extents. For example:
• Veteran Home—The Home was established to provide long-term
care services and skilled nursing care to eligible veterans,
their spouses, and parents whose children died while serving in
the U.S. Armed Forces. The Home is a 200-bed facility in Phoenix
that was 87 percent occupied through the first three quarters of
fiscal year 2011. The Department plans to open a second
veterans’ home in Tucson in October 2011. All 50 states have one
or more veterans’ homes. Although veterans can also choose to
live in private nursing homes to receive services, department
officials stated that many veterans enjoy the company of other
veterans at veterans’ homes.
• Benefits counseling and assistance—The Department provides
information and assistance to Arizona veterans and their families
regarding state and federal benefits earned by honorable service
in the U.S. Armed Forces. Specifically, department counselors
help veterans process compensation and pension applications;
appeal U.S. Department of Veterans Affairs (VA) decisions; file for
survivors’ death benefits; apply for aid and housebound benefits;
certify claim documents; request military service records; and
upgrade military discharges. Auditors determined that 41 other
states’ veterans’ services departments provide benefits-counseling
services.1 However, the form and extent of this
assistance varies. For example, Alaska, Michigan, and Utah do
not use their own staff to provide benefit-claims assistance, but
have contracts with community veterans’ service organizations to
1 In July 2011, auditors spoke with staff members of veterans’ services departments in 48 other states and
asked several questions, including whether each offered assistance to veterans in filing claims with the
VA. Wyoming was excluded because it does not have a veterans’ services department.
page 9
Office of the Auditor General
Department sunset factor analysis
In accordance with Arizona
Revised Statutes (A.R.S.)
§41-2954, the Legislature
should consider the factors
included in this report in
determining whether the
Arizona Department of
Veterans’ Services
(Department) should be
continued or terminated.
Auditors’ analysis showed
strong performance by the
Department with regard to
many of these factors, but
it also showed a need for
changes in two areas:
• The Department should
strengthen oversight of
benefits-counseling field
offices and contractors;
and
• The Legislature should
consider a statutory
change to eliminate the
requirement that the
Department approve
organizations seeking to
solicit money in the
name of veterans.
In addition to the
recommendations in this
report, the Department
needs to address the
recommendations directed
to it in the other three audit
reports issued as part of
this sunset review (see
Report Nos. 11-03, 11-06,
and 11-09).
Sunset Factors
page 10
State of Arizona
provide these services. Similar services are also provided by some
veterans’ service organizations, such as the Veterans of Foreign Wars and
Disabled American Veterans. According to the Department, however, many
community veterans’ service organizations rely on volunteers to offer these
services, and the level of expertise, training, and availability of assistance
varies by city, county, and state. More veterans use state and local
government programs for benefits assistance than other sources.
Specifically, according to the National Association of County Veterans
Service Officers, between 75 and 90 percent of the claims presented to the
VA each year originate in a state or county veterans’ office (see Sunset
Factor 12, pages 20 through 21, for more information).
• Veterans’ cemetery—The Southern Arizona Veterans’ Memorial Cemetery
provides a burial place for veterans in Arizona. According to the VA, 43
states have at least one state veterans’ cemetery, and 39 states have at
least one national veterans’ cemetery. Although a veteran could choose
burial in a private cemetery and receive a headstone and marker at no
charge as part of his/her federal veterans’ benefits, the Arizona veterans’
cemetery provides a gravesite, marker, and perpetual care at no cost for
veterans and for a one-time fee of $300 for spouses and dependents. The
national veterans’ cemeteries in the Phoenix and Prescott areas provide
similar benefits to veterans but do not charge this one-time fee.
• Fiduciary services—The Department’s fiduciary program provides
services to incapacitated veterans by serving as a court-appointed
guardian or conservator, and also provides personal representative
services for deceased veterans’ estates. Individuals eligible for fiduciary
services include incapacitated veterans, surviving spouses, and their
dependent children. As of July 2011, Arizona was one of only four states
whose veterans’ departments provided some form of fiduciary services to
veterans throughout the state, with four additional states providing some
services, but only to residents of their state veterans’ homes.1 For example,
Oregon’s veterans’ services department provides only conservatorship
services to its veterans. Because they would not have access to fiduciary
services provided by state veterans’ services departments, veterans in
most states would need to obtain fiduciary services from other public or
private fiduciaries. Arizona has both public and private entities that provide
fiduciary services.
1 Report No. 11-03 stated that Arizona was one of only two states with such a program, but subsequent to that report’s
publication, auditors obtained information about additional states with fiduciary programs for veterans. Three states—
New Mexico, Oregon, and Washington—have limited veterans’ fiduciary programs. Further, four additional states—
Idaho, Illinois, Mississippi, and Pennsylvania—provide some fiduciary services, but only to residents of their state
veterans’ homes.
page 11
Office of the Auditor General
2. The extent to which the Department has met its statutory objective and
purpose and the efficiency with which it has operated.
The Department has somewhat met its objective and purpose, but it can improve
in several areas, including the efficiency with which it provides services to
veterans. Specifically:
• Department has improved the Veteran Home’s financial situation, but
additional actions needed—Although required to be self-sustaining, the
Home operated at a loss between fiscal years 2008 and 2010 and received
State General Fund and Veterans’ Donations Fund subsidies to support its
operations. The Department has taken steps to improve the Home’s financial
condition by increasing its average daily occupancy, improving the quality of
care at the Home, developing a more balanced payer mix, and reducing
operating expenditures. These steps have allowed the Department to
improve the Home’s occupancy from 75 percent in fiscal year 2009 to 87
percent through the third quarter of fiscal year 2011, which is slightly below
the Home’s break-even census of 177 residents. The Department also did
not receive State General Fund subsidies in fiscal years 2011 and 2012 for
the Home. Despite improvements, financial risks remain. As a result, although
the Department has increased the Home’s cash on hand to $1.8 million as
of April 2011, enough to cover more than 43 days of operations, the
Department should continue to increase this cash balance. Additionally, the
Department should finalize policies and procedures for monitoring home
operations and finances and further reduce its administrative expenditures.
Finally, the Department should ensure that the improvements it has made
and the implementation of these additional recommendations are applied to
the operations of future veterans’ homes to help ensure their self-sufficiency
(see Report No. 11-06 for more information).
• Department provides benefits-counseling services to veterans, but
needs to improve its oversight of these services—In 18 offices around the
State, the Department provides information and assistance to Arizona
veterans and their families regarding state and federal benefits earned by
honorable service in the U.S. Armed Forces. Specifically, department
counselors help veterans process compensation and pension applications,
appeal VA decisions, file for survivors’ death benefits, apply for aid and
housebound benefits, certify claims documents, request military service
records, and upgrade military discharges. Based on VA projections, as of
March 2011, the Department had helped secure approximately $275 million
in annual federal benefits for Arizona veterans. However, the Department
should better monitor its benefits counselors and the community organizations
it contracts with that also provide benefits counseling. Specifically, the
Department should:
page 12
State of Arizona
° Regularly review benefits-counselor activities—The Department
has established a procedure for visiting its benefits-counseling offices
on a quarterly basis to provide training to its benefits counselors and
audit claims for accuracy and completeness. However, the Division
has not conducted these monitoring visits and audits regularly. As of
June 28, 2011, the Department had conducted only three audits since
2009: one in September 2009 of the Phoenix region’s four offices, one
in January 2010 of the Tucson region’s four offices, and one in March
2011 of the Chinle office. Therefore, the Department should follow its
procedures for conducting audits of its benefits-counseling offices and
ensure that the offices address any deficiencies identified.
° Improve contractor oversight—If the Department continues to
contract with veterans’ services organizations for benefits-counseling
services, it should increase its oversight of these contractors. As of
July 2011, the Department had contracts with three such organizations,
but the Legislature eliminated designated funding for such services
beginning with the fiscal year 2012 budget, and according to a
department official, the Department had not yet decided whether it
would continue these contracts (see Sunset Factor 12, pages 20
through 21, for more information).
The Department’s contracts with these three organizations state that
the organizations must supply financial information at prescribed times
to the Department, according to requirements established by the
Department. However, as of July 2011, the Department had not
established these requirements and did not require these organizations
to report financial information. If the Department decides to continue
contracting for these services, it should establish the requirements and
ensure that the contracted organizations provide the financial
information the contracts require.
• Department should consider phasing out fiduciary program or
increasing fees and needs to address operational deficiencies—The
Department is authorized but not required to accept court or federal agency
appointments to manage the affairs of veterans, their spouses, or
dependent children who cannot take care of themselves. Such appointments
include conservatorships, where the Department handles a veteran’s
financial affairs, or guardianships, where the Department makes personal
decisions on behalf of the veteran. However, three factors suggest the
Department should consider phasing out its program. First, statutes do not
require the Department to provide this service. Second, the Department
has had significant operational issues in providing fiduciary services,
resulting in enhanced oversight and penalties imposed by the courts. Third,
page 13
Office of the Auditor General
approximately 50 other private and public entities in the State provide
fiduciary services, some of which already have clients who are veterans.
However, if the Department continues its program, it should increase the
program’s fees. For fiscal years 2009 through 2011, client fees covered
between 55 and 60 percent of the Department’s fiduciary program costs.
State General Fund monies covered the rest, averaging more than $508,000
annually. Therefore, the Department should develop or adopt a structured
approach to evaluate its fees and propose revised fees. This approach
should include assessing the efficiency of its operations, developing fees
based on relevant costs, capturing and analyzing cost data, and revising the
fees it is authorized to revise and proposing revised fees to the Legislature
for its consideration.
Regardless of the option it pursues, the Department needs to address
several operational problems. Both the Arizona Supreme Court and the
Maricopa County Superior Court identified numerous problems during
reviews conducted in 2010, and auditors determined that some of these
problems continue. These problems have affected the Department’s ability
to meet its fiduciary responsibilities for managing clients’ affairs and have
cost the Department more than $65,000 to address complaints filed with the
Arizona Supreme Court’s Fiduciary Board. Matters needing improvement
include improving the accuracy and completeness of inventory and client
records, ensuring the accuracy of court reports, and meeting deadlines for
issuing death notifications and other statutorily required reports to superior
courts (see Report No. 11-03).
• Department should improve its administration of the Veterans’ Donations
Fund (donations fund)—The donations fund is administered at the
discretion of the department director and was established to benefit Arizona
veterans. However, a 2009 Office of the Auditor General special investigation
found that the Department had inappropriately spent more than $670,000 in
donations fund monies.1 In December 2009, the Department established a
multi-level review process for donations fund expenditures to help ensure the
appropriate expenditure of these monies. However, in the Office of the
Auditor General’s September 2011 performance audit of the donations fund,
auditors again identified expenditures of donations fund monies that did not
benefit Arizona veterans (see Report No. 11-09). Specifically, auditors
reviewed 18 donations fund expenditures totaling more than $253,000 and
determined that although some of these expenditures benefited Arizona
veterans, several did not. Additionally, most of the specific expenditures
reviewed did not follow applicable state statutes that govern the distribution
of public monies to outside organizations. The Department also did not
1 Office of the Auditor General, Special Investigative Unit. (2009). Arizona Department of Veterans’ Services: Misuse of public
monies, conflict of interest, and misfeasance by the former director. Phoenix, AZ: Author.
page 14
State of Arizona
document that it obtained legal advice about proposed expenditures as
recommended in the Auditor General’s 2009 special investigation, and it
did not consistently follow the new review process it had adopted.
To better ensure the appropriate use of donations fund monies, the
Legislature should consider strengthening existing statutory requirements.
Specifically, the Legislature should consider modifying A.R.S.§41-608 to
either explicitly authorize the use of donations fund monies to provide
grants to nonprofit organizations in compliance with grant solicitation and
award statutes, or specify that the Department use donations fund monies
itself to benefit Arizona veterans through its own programs, and thus
prohibit the use of these monies for grants. Additionally, the Legislature
should consider statutory changes that would place additional requirements
on the Department for spending donations fund monies (see Sunset Factor
9, pages 18 through 19, for more information).
Regardless of whether the Legislature revises statute, the Department
should establish a formal grant process for the distribution of donations
fund monies to other veterans’ organizations and ensure the new process
complies with statutes governing grant solicitation and award.1 The
Department should also require applicants to report to the Department how
donations fund monies they received were used and to sign the request
form certifying that monies will be used for the requested purpose and that
application information is accurate (see Report No. 11-09).
• Military Family Relief Fund (family relief fund) assists families;
additional funding award criteria needed—The family relief fund was
established to assist military service members, veterans, and their family
members. The Military Family Relief Fund Advisory Committee (Committee)
was established to review applications for financial assistance from the
family relief fund and makes award recommendations to the department
director. The director can then approve, reject, or alter the Committee’s
recommendations. The family relief fund had a balance of approximately
$2.6 million as of June 30, 2011, and the Department provided approximately
$450,000 in assistance during fiscal year 2011.
Auditors’ review of the family relief fund found that although the Committee
has provided assistance to eligible families through its review of applications
and recommendations to the department director, there have been some
inconsistencies in the Committee’s recommendations (see Report No.
11-09). Specifically, auditors identified instances where the Committee
recommended applications for assistance based on certain circumstances
1 The only instance in which strengthened procedures would not be needed is if the Legislature modifies statute to limit
the use of donations fund monies to the Department’s own programs; in that case, the Department would not need to
establish a grant process.
page 15
Office of the Auditor General
or for certain types of assistance, but then recommended denying similar
requests. For example, in August 2010, the Committee recommended
helping one applicant pay $9,017 in student loans and $983 in credit card
debt. However, in December 2010, the Committee recommended denying
two other applicants’ requests for assistance with such payments, but
provided both applicants with other types of assistance. Similarly, the
Committee recommended approval for grocery assistance for one applicant,
but then recommended denying grocery assistance for another applicant.
The Committee should develop policies and procedures that establish
additional criteria for guiding the Committee’s decisions. These criteria
should address factors the Committee will consider to determine eligibility
and list expenses eligible for funding and documentation that applicants
must submit to support their applications. The Committee and Department
should also document the reasons for its recommendations, establish and
implement processes for communicating reasons for award recommendations
and denials, and inform applicants of their option to appeal decisions (see
Report No. 11-09). According to a committee member and the Department,
as of August 2011, the Committee and Department had begun to implement
some of these recommendations.
3. The extent to which the Department serves the entire State rather than
specific interests.
Through its operations and the services it provides, the Department has generally
served veterans throughout the State. Specifically:
• In addition to its 200-bed Veteran Home in Phoenix, the Department is
completing construction of a second Veteran Home in Tucson, which it plans
to open in October 2011. Construction of the new Tucson Veteran Home was
paid for with a VA grant of the lesser of approximately $17 million, or 65
percent, of this Home’s actual construction cost and $10 million in State
General Fund monies. The Department also reported that it has long-range
plans to open additional 100- or 120-bed veterans’ homes in the Flagstaff,
Kingman, and Yuma areas by 2019.
• The Department provides veterans’ benefits counseling in 18 offices
throughout the State, including offices in Chinle, Kingman, and Yuma.
According to the VA, as of March 2011, more than 24,250 veterans and
veterans’ family members the Department had assisted were receiving
federal benefits. As of March 2011, the VA projected that these benefits
would total approximately $275 million annually.
• The Department provided fiduciary services to 256 veterans throughout the
State as of March 2011.
page 16
State of Arizona
• The Department operates a state veterans’ cemetery in Sierra Vista that
had 2,904 total burials from its October 2002 opening through June 2010.
According to a department official, the Department has plans to open
additional cemeteries using a standard planning model produced by the
VA National Cemetery Administration.
4. The extent to which rules adopted by the Department are consistent with
the legislative mandate.
General Counsel for the Auditor General has analyzed the Department’s
rulemaking statutes and believes that the Department has adopted rules
consistent with the legislative mandate. However, if the Department takes certain
actions allowed by statute, it will need to develop rules to govern those actions.
For example, the Department provides training for department and community
benefits counselors such as how to file veterans’ benefits claims with the VA. If
the Department establishes a fee for its training center’s services as allowed by
A.R.S. §41-603, the Department will need to establish relevant rules. In addition,
if the Department develops additional criteria for approving veterans’ education
and training programs beyond the criteria in federal regulations, as it plans to
do, it will need to develop rules for those criteria.
5. The extent to which the Department has encouraged input from the public
before adopting its rules and the extent to which it has informed the public
as to its actions and their expected impact on the public.
The Department takes a variety of steps to encourage input from the public
before promulgating rules and regulations. First, the Department files rulemaking
notices with the Secretary of State’s Office for publication in the Arizona
Administrative Register. Second, the Department circulates proposed rules to
an e-mail list of stakeholders who have expressed an interest in receiving
information about the agency. Third, the Department presents proposed rule
changes at meetings of two key stakeholder umbrella groups: the Unified
Arizona Veterans and the Arizona Veterans’ Service Advisory Commission
(Commission).
In compliance with open meeting laws, the Department posts Military Family
Relief Fund Advisory Committee meeting notices on its Web site, as required by
A.R.S. §38-431.02.
The Department engages in additional activities intended to inform the public
regarding its actions and their expected impact on the public. According to a
department official, the Department issues press releases on a regular basis,
and the director and public information officer frequently attend community
events where they offer speeches updating the public regarding department
activities. For instance, the Department stated that its representatives have
page 17
Office of the Auditor General
offered presentations at state-wide meetings of the Vietnam Veterans of America,
Veterans of Foreign Wars, and the American Legion.
6. The extent to which the Department has been able to investigate and resolve
complaints that are within its jurisdiction.
According to the Department, it has not had to investigate or resolve any
complaints that are within its jurisdiction. The audit found that the Department’s
only regulatory authority is its responsibility as the state approving agency for
education and training programs for veterans. Although the Department has a
process in place to handle complaints for this area, a department official reported
that it has never received a complaint. (See Sunset Factor 11, page 20, for more
information regarding the state approving agency for education and training
programs for veterans.)
7. The extent to which the Attorney General or any other applicable agency of
state government has the authority to prosecute actions under the enabling
legislation.
Although there is no provision under the Department’s enabling statutes
authorizing the Attorney General to prosecute actions, the Attorney General is the
legal advisor to the Department and is required to provide legal services to the
Department according to A.R.S. §41-192.
8. The extent to which the Department has addressed deficiencies in its
enabling statutes that prevent it from fulfilling its statutory mandate.
The Department proposed and the Legislature enacted four changes to the
Department’s enabling statutes in 2009 and 2010. Specifically:
• Laws 2009, Ch. 111: Enduring Freedom Memorial; public monies—
Allowed monies from the donations fund to be used to complete the Enduring
Freedom Memorial.
• Laws 2009, Ch. 24: Military Family Relief Fund—Expanded eligibility for
assistance from the Military Family Relief Fund by allowing any immediate
family member, not just spouses and minor children, to apply for assistance,
and allowing assistance to families of service members who were deceased,
wounded, or became seriously ill while deployed, instead of restricting
assistance to families of service members who were killed or wounded in
action. The law also established a $10,000 limit on assistance to a family and
made changes affecting the Military Family Relief Fund Advisory Committee’s
administrative processes. For instance, the law allows the Committee to
establish a chairperson and to establish a subcommittee that can meet in
executive session without prior public notice.
page 18
State of Arizona
• Laws 2010, Ch. 254: Military Family Relief Fund—Further altered
eligibility for assistance from the Military Family Relief Fund to include only
families of Arizona service members deployed after September 11, 2001.
The law also gave the Military Family Relief Fund Advisory Committee
greater discretion in distributing family relief fund monies. Specifically,
although the family relief fund could previously pay only for living expenses
for the families of service members, this revision allowed the family relief
fund to also pay for other appropriate expenses as determined by the
Committee. Another change allowed the Department to hire a family relief
fund administrator.
• Laws 2010, Ch. 208, §3: Military Affairs Commission—Transferred the
authority to acquire real estate, property rights, and related infrastructure for
the purpose of preserving or enhancing Arizona military installations from
the Department and authorized the Department of Emergency and Military
Affairs to make grants for such purposes.
9. The extent to which changes are necessary in the laws of the Department
to adequately comply with the factors listed in the sunset law.
The Legislature should consider several changes to the Department’s governing
statutes. Specifically, the Legislature should consider:
• Revising the fees that the Department can charge for the conservatorship
services it provides to veterans through its fiduciary program—In its
June 2011 performance audit on the Department’s fiduciary program, the
Auditor General recommended two options for this program, including
phasing out the program (see Report No. 11-03). If the Department retains
its fiduciary program, it should consider taking steps to develop, propose,
and revise its fees to more closely reflect its costs for providing fiduciary
services. The Department can take these steps when reviewing its
guardianship and personal representative fees because statute allows
guardians and personal representatives to charge reasonable fees for their
services. However, since statute caps the amount that the Department can
charge for its conservatorship services, if the Department determines that
its conservatorship fees should be increased, legislative action would be
required.
• Strengthening controls over donations fund monies—Auditors’ review
of the donations fund identified several ways statutes could be strengthened
to better ensure donations fund monies are spent appropriately (see
Report No. 11-09). Specifically, the Legislature should consider:
° Strengthening existing statutory requirements for the donations fund
by modifying A.R.S.§41-608 to either explicitly authorize the use of
page 19
Office of the Auditor General
donations fund monies to provide grants to nonprofit organizations in
compliance with grant solicitation and award statutes, or specify that the
Department use donations fund monies itself to benefit Arizona veterans
through its own programs, and thus prohibit the use of these monies for
grants.
° Placing additional requirements on the donations fund, including
eliminating the director’s sole discretion to authorize the expenditure of
donations fund monies, specifying what donations fund monies may or
may not be used for, adding external oversight by a committee such as
the Commission, and mandating annual reports by the Department
regarding expenditures of donations fund monies be sent to a third
party, such as the Commission or Governor (see Report No. 11-09 for
more information).
• Eliminating requirement to approve veterans’ organizations—A.R.S. §41-
603(B)(10) requires the Department to approve or disapprove veterans’
organizations seeking to solicit money or other support in the State in the
name of American veterans. However, the U.S. Supreme Court has
determined that laws regulating the solicitation of money by nonprofit
organizations violate the First Amendment of the U.S. Constitution, although
states can prosecute for fraud. Further, A.R.S. §44-6551 et seq already
require persons or organizations that solicit funds for charitable purposes to
register and make filings with the Arizona Secretary of State. Therefore,
because the Department could not establish meaningful criteria for approving
or disapproving organizations, and because laws governing solicitation of
donations already exist, the Legislature should consider removing this
requirement from statute.
10. The extent to which the termination of the Department would significantly
affect the public health, safety, or welfare.
Although terminating the Department would not significantly affect the general
public’s health, safety, or welfare, it could impact many veterans and their families
in the State and may result in the State’s having to repay some federal monies.
For example, if the Department were terminated and the Home transferred to
private interests, residents of the Home could be required to seek alternative
arrangements for long-term nursing care and other services provided by the
Home. The State would also be required to repay the federal government 65
percent of the value of the Home, up to the amount of the federal subsidy to
construct the Home.
Terminating the Department would also affect veterans and their families who
receive benefits-counseling from the Department at 18 locations across the State.
The Department, like 41 of the 48 other states that auditors surveyed, provides
page 20
State of Arizona
federal and state benefits-counseling services to veterans. Similar services are
also provided by some veterans’ service organizations, such as the Veterans of
Foreign Wars and the Disabled American Veterans. According to the Department,
however, many community veterans service organizations rely on volunteers to
offer these services, and the level of expertise, training, and availability of
assistance varies by city, county, and state.
The Department also provides fiduciary services to 256 clients as of March
2011, but as reported in the Office of the Auditor General’s June 2011
performance audit of the Department’s fiduciary program, nearly 50 other public
and private entities are licensed to provide fiduciary services in the State (see
Report No. 11-03). This report recommended that the Department should
consider either gradually phasing out its fiduciary program and transitioning its
clients to other providers or increasing fees to cover costs. The report
acknowledges that phasing out the program could take several years because,
for each client, the Department would need to resign its court appointment and
have the court accept the resignation, and to ensure continued service to the
client, the court would have to appoint a replacement fiduciary. For clients who
could not be transferred, the Department could gradually end its fiduciary
program through attrition.
Finally, if the Department were terminated, the State would still be required to
maintain the veterans’ cemetery or repay the federal monies granted to the State
to build the cemetery. According to a VA official, when a state accepts a grant
from the VA to build such a cemetery, it agrees to maintain that cemetery
indefinitely. If the State does not maintain the veterans’ cemetery, it is required
to repay all of the grant monies the VA provided.
11. The extent to which the level of the regulation exercised by the Department
compares to other states and is appropriate and whether less or more
stringent levels of regulation would be appropriate.
The audit found that the current level of regulation the Department exercises is
appropriate. The Department’s only regulatory authority is its responsibility as
the state approving agency for education and training programs for veterans.
Only programs the Department approves can receive federal GI Bill benefits.
There are 419 approved education and training programs in Arizona, including
programs such as institutes of higher learning, apprenticeships, and flight
schools. The VA provides the funding for this regulatory authority, and federal
laws govern program administration and establish criteria for evaluating the
educational and training programs. According to the National Association for
State Approving Agencies, all states have at least one state approving agency.
page 21
Office of the Auditor General
12. The extent to which the Department has used private contractors in the
performance of its duties as compared to other states and how more
effective use of private contractors could be accomplished.
The Department has relied on private contractors to provide a variety of services,
including some services at the Home and some veterans’ benefits-counseling
services. Specifically:
• Veteran Home contracts—The majority of the Department’s contracts are
for services at the Home. According to the Department, its largest contract
provides rehabilitation services for the Home’s residents, such as physical
therapy, with projected expenditures totaling $500,000 in fiscal year 2011.
The Department also has contracts for dietary consulting, hospice services,
laundry, nursing services, and maintenance at the Home.
Although the Department manages the Home, some states contract with
private companies to manage their veterans’ homes. Specifically, 9 of the
49 other states auditors reviewed contracted out management of their
veterans’ homes.1 For example, Georgia uses a contractor to manage
both of its veterans’ homes. In addition, according to a North Carolina
State Veterans’ Home official, a private contractor manages North
Carolina’s two state veterans’ homes.
• Veterans’ benefits-counseling contracts—As of July 2011, the Department
also maintained contracts with three veterans’ services organizations for
veterans’ benefits-counseling services. These contracts totaled $29,200 for
fiscal year 2011 and were part of a line item established in the Department’s
budget. However, the Legislature eliminated the dedicated funding for these
contracts effective in fiscal year 2012. As of July 2011, the Department had
yet to determine whether it would maintain these contracts using some of its
unallocated State General Fund appropriation.
Six of the other states auditors surveyed maintain contracts with community
veterans service organizations to provide benefits claims assistance to
veterans.2 For example, Michigan does not have state-employed veterans’
service officers, but provides grants to five community organizations, such as
the American Legion and Veterans of Foreign Wars, to provide these services
to veterans. However, a 2001 audit by the Michigan Office of the Auditor
General found that, according to a 1999 VA report, Michigan ranked well
below the national average in compensation and pension benefits received,
as well as percentage of claims filed.
1 In addition to the 48 other states that auditors surveyed, auditors reviewed the Web site of the Wyoming Veterans’ Home.
2 Forty-five of the other states that auditors surveyed provided information about whether or not they maintain such
contracts.
page 22
State of Arizona
This audit did not identify any additional areas where the Department should
consider using private contractors.
1. The objective and purpose in establishing the Commission and
the extent to which the objective and purpose are met by private
enterprises in other states.
The Commission was established in 1951 with the authority to act as
a guardian for veterans, provide emergency relief to veterans and their
dependents, and disseminate information relating to laws beneficial to
veterans and their widows and children. In 1999, the Legislature
changed the Commission’s role by creating the Arizona Department
of Veterans’ Services (Department), which provides the services the
Commission previously provided. The Commission’s responsibility is
to provide policy advice to the Governor and department director
regarding veterans’ issues.
According to a department official, some veterans’ services
organizations, such as the Veterans of Foreign War and the American
Legion, have a presence in each state and provide legislative input at
the state level when there is an issue that concerns veterans. However,
according to this official, the Commission is the only organization
outside of the Department that provides actual advice to policymakers
on issues important to veterans in the State of Arizona on a regular
basis.
2. The extent to which the Commission has met its statutory
objective and purpose and the efficiency with which it has
operated.
The Commission has generally met its statutory objective and purpose
to advise the department director and the Governor regarding
veterans’ issues. Specifically:
• Advice to department director—The Commission has frequently
provided advice to the department director. The department
director or his personal representative regularly attends
commission meetings and consults with the Commission
regarding policy matters. For example, at the October 14, 2010,
commission meeting, the Commission advised the director
regarding cemetery-building priorities and suggested a way the
Department might obtain federal funding to assist with necessary
maintenance at the Veteran Home.
• Advice to Governor—The Commission also provides policy
advice to the Governor in the form of advocacy letters. The
page 23
Office of the Auditor General
Commission sunset factor analysis
In accordance with Arizona
Revised Statutes (A.R.S.)
§41-2954, the Legislature
should consider the
following factors in
determining whether the
Arizona Veterans’ Service
Advisory Commission
(Commission) should be
continued or terminated.
Because the Commission
is established as an
advisory commission,
some factors do not apply.
For the factors that do
apply, auditors’ analysis of
the Commission’s
performance found that it
needed to address one
area related to compliance
with the State’s open
meeting laws, which the
Commission addressed
during the audit.
Sunset Factors
page 24
State of Arizona
Commission has a goal to contact the Governor at least once per year, and
met this goal in calendar years 2009, 2010, and 2011. For example, in
2009, the Commission advised the Governor to continue department
funding, and in 2010 and 2011, the Commission suggested that the
Department should have an in-house attorney.
In addition to its advisory responsibilities, the Commission advocates positions
that members believe will benefit Arizona veterans. Specifically, the Commission
sends advocacy letters to state lawmakers, government officials, and
nongovernmental organizations whose decisions and actions affect Arizona
veterans. Between May 2009 and October 2010, the Commission issued nine
letters that offered policy advice to these types of groups and individuals. For
example, the Commission addressed letters to several state legislators
encouraging support for two veteran-related bills, including a bill that sought to
expand eligibility for assistance from the Military Family Relief Fund. In another
letter, the Commission encouraged the U.S. Department of Veterans Affairs (VA)
to conduct oversight of the Troops to Teachers program rather than the U.S.
Department of Education.
The Commission’s activities have had some impact. For example, according to
the Commission, in 2005 it recommended that the Governor initiate a Veterans’
Task Force to help Arizona lawmakers create a more coordinated approach to
addressing veterans’ issues in Arizona. Governor Janet Napolitano convened
this task force in 2005, and as of July 2011, several of its recommendations had
been implemented. For example, according to the Commission, task force
recommendations contributed to the Legislature’s decisions to provide funding
to increase the number of state veterans benefit counselors and to appropriate
state matching funds for a second veterans’ home in Tucson. The Tucson Home
is expected to open in October 2011.
3. The extent to which the Commission serves the entire state rather than
specific interests.
The Commission serves veterans throughout the State. It has generally operated
within the public interest in three ways. Specifically, the Commission identifies
veterans’ issues across the State, promotes public awareness of the needs of
the military/veteran community, and attempts to resolve the challenges of
individual veterans as they are brought to its attention. For example, the
Commission maintains a list of the types of veterans’ issues raised at
commission meetings and makes this information available as a resource to the
Governor, department director, and other agencies. In addition, since 2007, the
Commission has also tracked the status of unresolved concerns brought to its
attention by members of the public who attend its meetings. For example, one
attendee indicated that he/she had difficulty obtaining a response from the VA
regarding a benefits claim, and another attendee requested that a veterans’
page 25
Office of the Auditor General
cemetery be built in Yuma. As of August 2010, 13 of the 14 issues that the
Commission tracked had been addressed.
4. The extent to which rules adopted by the Commission are consistent with
the legislative mandate.
The Commission does not have authority to promulgate rules and regulations.
5. The extent to which the Commission has encouraged input from the public
before adopting its rules and the extent to which it has informed the public
as to its actions and their expected impact on the public.
Because the Commission does not have the authority to promulgate rules and
regulations, input from the public has not been necessary for this purpose.
In compliance with the State’s open meeting laws, the Commission posts public
meeting notices at least 24 hours in advance on its Web site and at additional
locations, and makes agendas available to the public. As of August 2011, the
Commission had conspicuously posted a statement on its Web site indicating
where all public notices of its meetings will be posted as required by statute.
6. The extent to which the Commission has been able to investigate and
resolve complaints that are within its jurisdiction.
The Commission has no authority to investigate complaints.
7. The extent to which the Attorney General or any other applicable agency of
state government has the authority to prosecute actions under the enabling
legislation.
The Commission’s purpose is to act as an advisor to the Governor and the
department director. Therefore, it has no regulatory authority and, consequently,
no enforcement powers.
8. The extent to which the Commission has addressed deficiencies in its
enabling statutes that prevent it from fulfilling its statutory mandate.
According to the Commission, it has not proposed any legislation to revise its
enabling statutes in the past 5 years.
9. The extent to which changes are necessary in the laws of the Commission
to adequately comply with the factors listed in the sunset law.
The audit did not identify any needed changes to the Commission’s statutes.
page 26
State of Arizona
10. The extent to which the termination of the Commission would significantly
affect the public health, safety, or welfare.
Terminating the Commission would not significantly affect the public health,
safety, or welfare since the Commission primarily provides policy advice to the
Governor and the department director on veterans’ issues, and the Department
could continue to function without the Commission. However, the Commission
has fulfilled its statutory responsibility by advising the Governor and the
department director on issues facing veterans. These efforts include encouraging
the Governor to address critical department budgetary issues, advocating
statutory changes, and providing advice to department leadership. Additionally,
commission meetings provide a public forum in which veterans can express
their views and concerns while members of the veterans’ services community
exchange knowledge and ideas.
11. The extent to which the level of the regulation exercised by the Commission
compares to other states and is appropriate and whether less or more
stringent levels of regulation would be appropriate.
This factor does not apply because the Commission has no regulatory authority.
12. The extent to which the Commission has used private contractors in the
performance of its duties as compared to other states and how more
effective use of private contractors could be accomplished.
Given its advisory role, the Commission has not used the services of private
contractors, nor did this review identify a need for the Commission to use private
contractors. In addition, the Commission does not receive any funding, so it
does not have the resources to pay private contractors.
Methodology
This appendix provides
information on the methods
auditors used to meet the
audit objectives.
This audit was conducted
in accordance with
generally accepted
government auditing
standards. Those
standards require that we
plan and perform the audit
to obtain sufficient,
appropriate evidence to
provide a reasonable basis
for our findings and
conclusions based on our
audit objectives. We
believe that the evidence
obtained provides a
reasonable basis for our
findings and conclusions
based on our audit
objectives.
The Auditor General and
staff wish to express
appreciation to the Arizona
Department of Veterans’
Services’ (Department)
Director, staff, and the
Arizona Veterans’ Service
Advisory Commission
(Commission) for their
cooperation and assistance
throughout this audit.
page a-i
Office of the Auditor General
The Department’s and Commission’s performance was analyzed in accordance
with the statutory sunset factors. Prior work on the Department’s fiduciary
program (see Report No. 11-03), Veteran Home (Report No. 11-06), and the
Veterans’ Donations and Military Family Relief Funds (Report No. 11-09)
provided information for this report. Auditors also reviewed the Department’s
Web site; guidelines for the Department’s veterans’ benefits counselors and
the Commission; statutes and session laws; a U.S. Supreme Court case
related to regulating the solicitation of money by nonprofit organizations;
various reports and documents, including department internal audit reports
and contracts; various U.S. Department of Veterans Affairs reports; and the
Fiscal Years 2010-2013 Master List of State Government Programs.1 Auditors
also reviewed statistical and other information from a variety of veterans’
organizations’ Web sites.2
In addition, auditors interviewed department management and staff,
commission members, and a representative of a national association of local
government veterans’ services employees; observed four commission
meetings between May and November 2010; and reviewed all commission
meeting minutes between January and November 2010.
Auditors contacted military and veterans services’ department staff in 48 other
states and reviewed the Web site for the veterans’ home in a 49th state,
Wyoming, which does not have a veterans’ services department, to determine
the extent of each state’s efforts to privatize services.
To develop the financial table found in the Introduction of this report, auditors
gathered and analyzed information about the Department from the Arizona
Financial Information System (AFIS) Accounting Event Transaction File for fiscal
years 2009 through 2011, and AFIS Management Information System Status
of General Ledger–Trial Balance screen for fiscal years 2009 through 2011.
Finally, to follow up on the recommendations from the Office of the Auditor
General’s November 2009 special investigative report, auditors reviewed
various samples, including:3
1 Riley v. The National Federation of the Blind, 487 U.S. 781, 108 S.Ct. 2667 (1988).
2 Examples of these Web sites included the U.S. Department of Veterans Affairs, Veterans of Foreign Wars,
Disabled American Veterans, National Association of County Veterans Service Officers, and National
Association of State Approving Agencies.
3 Office of the Auditor General, Special Investigative Unit. (2009). Arizona Department of Veterans’ Services:
Misuse of public monies, conflict of interest, and misfeasance by the former director. Phoenix, AZ: Author.
APPENDIX A
page a-ii
State of Arizona
• A sample of 11 of the 42 employee files for employees who were hired at the
Department between January 1 and June 30, 2010, and 1 employee file from
employees hired in August 2010, to determine whether the Department used
competitive hiring practices and retained appropriate documentation;
• A sample of 20 of the 5,835 expenditures from the Veterans’ Home Fund for the
period of January 1, 2010 through June 30, 2010, to determine whether the
Department appropriately spent these monies and followed applicable
procurement laws for these expenditures; and
• A sample of 17 of 182 expenditures from the Veterans’ Donations Fund for the
period of January 1, 2010 through June 30, 2010, and 1 Veterans’ Donations
Fund expenditure made in December 2009, to determine whether the
expenditures benefited Arizona veterans as required by statute, followed laws
governing use of public monies, and followed department procedures. The
sample was also reviewed to determine whether the Department sought legal
advice for significant expenditures.
AGENCY RESPONSE
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Arizona Board of Regents—Tuition Setting for Arizona Universities
Arizona Board of Regents—Sunset Factors
10-L1 Office of Pest Management—
Regulation
10-09 Arizona Sports and Tourism
Authority
11-01 Department of Public Safety—
Followup on Specific
Recommendations from
Previous Audits and Sunset
Factors
11-02 Arizona State Board of Nursing
11-03 Arizona Department of Veterans’
Services—Fiduciary Program
11-04 Arizona Medical Board
11-05 Pinal County Transportation
Excise Tax
11-06 Arizona Department of Veterans’
Services—Veteran Home
11-07 Department of Corrections—
Oversight of Security Operations
11-08 Department of Corrections—
Sunset Factors
11-09 Arizona Department of Veterans’
Services—Veterans’ Donations
and Military Family Relief Funds
09-09 Arizona Department of Juvenile
Corrections—Suicide Prevention
and Violence and Abuse
Reduction Efforts
09-10 Arizona Department of Juvenile
Corrections—Sunset Factors
09-11 Department of Health Services—
Sunset Factors
10-01 Office of Pest Management—
Restructuring
10-02 Department of Public Safety—
Photo Enforcement Program
10-03 Arizona State Lottery
Commission and Arizona State
Lottery
10-04 Department of Agriculture—
Food Safety and Quality
Assurance Inspection Programs
10-05 Arizona Department of Housing
10-06 Board of Chiropractic Examiners
10-07 Arizona Department of
Agriculture—Sunset Factors
10-08 Department of Corrections—
Prison Population Growth