Performance audit, Arizona Game and Fish Commission, Heritage Fund

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Debra K. Davenport
Auditor General
HERITAGE FUND
ARIZONA
GAME AND FISH
COMMISSION
May 2001
Report No. 01-09
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 impar-tial
information and specific recommendations to improve the operations of state and local government
entities. To this end, she provides financial audits and accounting services to the state and political
subdivisions and performance audits of state agencies and the programs they administer.
The Joint Legislative Audit Committee
Senator Ken Bennett, Chairman
Representative Roberta L. Voss, Vice-Chairman
Senator Herb Guenther Representative Robert Blendu
Senator Dean Martin Representative Gabrielle Giffords
Senator Tom Smith Representative Barbara Leff
Senator Randall Gnant (ex-officio) Representative James Sedillo
Representative James Weiers (ex-officio)
Audit Staff
Melanie Chesney—Manager
and Contact Person (602) 553-0333
Natalie Coombs—Team Leader
Cathleen Akers—Team Member
Nancy Cameron—Team Member
Jay De Pree—Team Member
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.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
May 9, 2001
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Mr. Duane Shroufe, Director
Arizona Game and Fish Department
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Arizona
Game and Fish Commission Heritage Fund conducted pursuant to Arizona Revised Statutes
(A.R.S.) §17-298.01. This audit was conducted under the authority vested in the Auditor
General by A.R.S. §41-1279.03. I am also transmitting with this report a copy of the Report
Highlights for this audit to provide a quick summary for your convenience.
As outlined in its response, the Arizona Game and Fish Department agrees with all of the
findings and will implement 11 of the 12 recommendations. The Department indicates that it
will implement the recommendation to reconcile labor and related costs to cash expenditures
for each Heritage Fund program in a different way.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on May 10, 2001.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
OFFICE OF THE AUDITOR GENERAL
Heritage Fund-Purchased Properties:
Program Fact Sheet
Arizona Game and Fish Commission
Heritage Fund
Program Revenue: $7,996,800
(fiscal year 2001 estimate)
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
1999 2000 2001
Heritage Fund Interest
Personnel: 82 full-time staff
(fiscal year 2001 estimate)
Public Information
Officers and Customer
Service Representatives
(13)
Wildlife Managers and
Habitat Specialists (44)
Support Staff (25)
Services: Arizona Revised Statutes (A.R.S.) §17-298 specifies five program areas in which the
Game and Fish Commission may spend its Heritage Fund monies. The statutorily prescribed
Heritage Fund program areas are: 1) Identification, Inventory, Protection, Acquisition, and
Management—For the monitoring, protection, acquisition, and management of endangered
and threatened native Arizona wildlife, and candidates for such status; 2) Habitat Evaluation
and Protection—For the assessment and conservation of the condition and ecological value of
habitat; 3) Urban Wildlife and Urban Wildlife Habitat—For efforts related to wildlife and
wildlife habitat in or near urban areas; 4) Environmental Education—For educational pro-grams
related to enhancing public awareness of natural resources; and 5) Public Access—For
facilitating recreational access to publicly held land.
1 Upper Verde River Wildlife Area
2 Grasslands Wildlife Area (Ocote Ranch)
3 Grasslands Wildlife Area (Cross L Ranch)
4 Wenima Wildlife Area
5 Wenima Wildlife Area (Slade Parcel)
6 Sipe White Mountain Wildlife Area
7 Quigley Wildlife Area (Marlatt Parcel)
8 Robbins Butte Wildlife Area (610-Acre Parcel)
9 Picacho Reservoir/McFarland
10 Whitewater Draw Wildlife Area (Kovacs Parcel)
1  
2 & 3  
4 & 5
 
 
6
10  
7  
8  
9  
OFFICE OF THE AUDITOR GENERAL
Agency Mission:
To conserve, enhance, and restore Ari-zona’s
diverse wildlife resources and habi-tats
through aggressive protection and
management programs, and to provide
wildlife resources and safe watercraft and
off-highway vehicle recreation for the en-joyment,
appreciation, and use by present
and future generations.”
Program Goals:
The Commission does not have goals spe-cific
to the Heritage Fund, but rather uses
Heritage Fund monies to supplement the
Game and Fish Department’s mission, and
formal program goals.
Equipment:
Heritage Fund monies have been used to
purchase typical office equipment as well as
more specialized equipment, including:
  81 radios
  63 trucks
  11 global positioning systems (GPS)
  11 firearms
  9 boats
  8 trailers
  5 all-terrain vehicles
  3 modular buildings
  1 backhoe
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OFFICE OF THE AUDITOR GENERAL
SUMMARY
The Office of the Auditor General has conducted a performance
audit of Heritage Fund programs at the Arizona Game and Fish
Department (Department) pursuant to Arizona Revised Statutes
(A.R.S.) §17-298.01. This audit was conducted under the author-ity
vested in the Auditor General by A.R.S. §41-1279.03.
The Arizona Game and Fish Commission Heritage Fund re-sulted
from a November 1990 voter initiative to set aside state
lottery revenues each year to preserve, protect, and enhance Ari-zona’s
natural and scenic environment. The initiative allows the
Department to receive up to $10 million each year to be divided
among five Heritage Fund programs. By statute, each program
receives the following percentage of Heritage Fund monies:
  5 percent for Environmental Education
  5 percent for Public Access
  15 percent for Habitat Evaluation and Protection
  15 percent for Urban Wildlife and Urban Wildlife Habitat
  60 percent for IIPAM—Identification, Inventory, Protection,
Acquisition, and Management of sensitive habitat. Forty per-cent
of this amount (or 24 percent of the total) is dedicated to
acquiring sensitive habitat for endangered, threatened, and
candidate species.
This audit includes three findings, some of which relate to con-cerns
first identified in a 1996 performance audit that recom-mended
that the Department improve its accountability to the
public and Legislature for Heritage Fund expenditures and im-prove
land acquisition efforts (see Auditor General Report No.
96-13).
Summary
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OFFICE OF THE AUDITOR GENERAL
Department Needs to Improve Accountability
of Heritage Fund Expenditures
(See pages 9 through 16)
Although the Department has received approximately $92.7 mil-lion
in Heritage Fund monies over the past ten years, it has yet to
promulgate administrative rules or other formal criteria, such as
substantive policy statements, to govern how most of these mon-ies
are spent. The only formal criteria currently governing Heri-tage
Fund expenditures are administrative rules relating to
grants awarded to outside parties. These grants make up only
about 8 percent of all Heritage Fund expenditures. Without rules
or other formal criteria to guide how the remaining 92 percent of
the money should be spent, it is difficult to determine whether
projects and expenditures are appropriate and are the best use of
monies. For example, IIPAM, the largest Heritage Fund pro-gram,
spent approximately $225,000 over three years sponsoring
a television program about the Sonoran Desert. It is not clear
how this television program supports the statutory requirement
that IIPAM monies be spent to identify, inventory, protect, moni-tor,
acquire, and manage sensitive habitat.
In addition to adopting rules or substantive policy statements to
govern expenditures, the Department needs to improve its an-nual
Heritage Fund report so that the public and Legislature are
adequately informed of how monies are being spent. Currently,
the Heritage Fund annual report cannot be used to determine
basic information, such as whether the Department is staying
within statutory spending limits for Heritage Fund programs.
Further, although the report highlights some of the various pro-jects
and activities that the Department has worked on during
the year, it does not include any information about the costs of
these efforts.
Additional Guidance Is
Needed to Govern Acquisitions
(See pages 17 through 23)
The Department also lacks guidance for ensuring that Heritage
Fund property acquisitions are appropriate. Nearly one-fourth of
all Heritage Fund monies are designated for acquiring property.
Summary
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OFFICE OF THE AUDITOR GENERAL
According to statute, Heritage Fund acquisitions should be
within the geographical area currently or historically occupied
by an endangered, threatened, or candidate species, and the area
should have all of the features needed for the species’ continued
existence. In 1996 the Auditor General recommended that the
Department develop a long-term plan to guide its acquisition
efforts through identifying species and habitats most needing
protection. The Department has not developed such a plan, nor
has it developed rules that outline how it interprets Heritage
Fund statutes. Without such criteria, it is unclear whether all
Heritage Fund acquisitions are appropriate and clearly benefit
qualifying species. For example, two Heritage Fund properties
were purchased for the Little Colorado Spinedace and the Moun-tain
Plover, but neither species has been shown to currently or
historically occupy the acquired lands.
In addition, when the Department purchases property, it needs
to ensure it addresses potential ownership issues and consis-tently
obtains documents, such as water certificates, before mak-ing
final payments.
Heritage Fund
Accounting Is Inadequate
(See pages 25 through 28)
The Department has not adequately accounted for Heritage
Fund monies and ensured that monies are used for the purposes
outlined in statute. Currently, the Heritage Fund balance totals
more than $20 million; however, poor recordkeeping, changes in
computerized accounting systems, and inadequate accounting
practices have resulted in uncertainties about the portion of the
Fund balance that should be allocated to each of the five Heri-tage
Fund programs. The Department should make a reasonable
effort to determine program fund balances and then take steps to
ensure that records are accurately maintained in the future.
In addition, the Department needs to ensure that unspent Heri-tage
Fund monies earn interest revenue for Heritage programs
as provided by statute. Over a three-year period, the Department
had inappropriately lent Heritage Fund monies to other pro-grams,
and although the loan amounts were repaid, the Depart-ment
only recently paid interest on these monies.
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OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
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OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS
Page
Introduction and Background........................... 1
Finding I: Department Needs to Improve
Accountability of Heritage
Fund Expenditures ........................................ 9
Department Lacks Formal Criteria
for Most Heritage Fund Expenditures .............................. 9
Resources Exist for
Criteria Development............................................................ 12
Improved Reporting
Needed...................................................................................... 13
Recommendations.................................................................. 16
Finding II: Additional Guidance
Is Needed to
Govern Acquisitions...................................... 17
Heritage Fund Monies
Used to Acquire Properties.................................................. 17
Additional Guidance
Is Needed for Acquisitions................................................... 18
Recommendations.................................................................. 23
Finding III: Heritage Fund
Accounting Is Inadequate............................. 25
Accounting
Improvements Needed......................................................... 25
Table of Contents
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OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS (Concl’d)
Page
Finding III: (Concl’d)
Heritage Fund Used to
Provide Financial Assistance
to Other Programs.................................................................. 27
Recommendations.................................................................. 28
Agency Response
Figure and Table
Figure 1 Arizona Game and Fish Department
Percentage Allocation of
Arizona Game and Fish
Heritage Fund Monies...................................... 2
Table 1 Arizona Game and Fish Department
Heritage Fund
Schedule of Revenues, Expenditures, and
Accumulated Fund Balance by Program Area
Years Ended June 30, 1996 through 2000
(Unaudited) ......................................................... 5
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OFFICE OF THE AUDITOR GENERAL
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance
audit of Heritage Fund programs at the Arizona Game and Fish
Department (Department) pursuant to Arizona Revised Statutes
(A.R.S.) §17-298.01. This audit was conducted under the author-ity
vested in the Auditor General by A.R.S. §41-1279.03.
Heritage Fund
History and Purpose
The Heritage Fund ballot initiative, approved by voters in No-vember
1990, earmarks up to $20 million of lottery revenues an-nually
for preserving, protecting, and enhancing Arizona’s natu-ral
and scenic environment. The Heritage Fund monies are di-vided
evenly between the Arizona Game and Fish Commission
and the Arizona State Parks Board, with each receiving up to $10
million.1 The initiative divides the monies that the Arizona Game
and Fish Commission receives among five general program ar-eas,
including a specific funding designation for property acqui-sitions.
Descriptions of the Heritage Fund programs are as fol-lows:
  IIPAM—Sixty percent of the Arizona Game and Fish Com-mission’s
Heritage Fund monies are designated for identify-ing,
inventorying, protecting, acquiring, and managing (II-PAM)
sensitive habitat. At least 40 percent of this money (24
percent of the total Heritage Fund) must be spent for acquir-ing
habitat used by endangered, threatened, and candidate
species that are native to Arizona.
1 The initiative requires State Parks to use its Heritage Fund monies primar-ily
for developing state, local, and regional parks; developing natural ar-eas;
and preserving state historic sites.
Department receives up to
$10 million of Heritage
Fund monies annually.
Introduction and Background
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OFFICE OF THE AUDITOR GENERAL
  Habitat evaluation and protection—Fifteen percent of Heri-tage
Fund monies are designated to protect the quality, di-versity,
abundance, and serviceability of habitats for the pur-poses
of maintaining or recovering populations of Arizona
wildlife. This program works with other state and federal
agencies and reviews land management plans or projects that
may impact fish and wildlife. It also develops recommenda-tions
for mitigating or minimizing habitat losses and for en-hancing
habitats.
  Urban wildlife—Fifteen percent of Heritage Fund monies are
to be used for conserving, enhancing, and establishing wild-life
and wildlife habitat within, or in close proximity to, ur-ban
areas.
  Environmental education—Five percent of Heritage Fund
monies are to be used for educational and public awareness
programs dealing with 1) basic ecological principles, 2) the ef-fects
of man and natural processes on the environment, and
3) the importance of safeguarding natural resources.
Figure 1
Arizona Game and Fish Department
Allocation of Arizona Game
and Fish Heritage Fund Monies
Source: Auditor General staff summary of information contained in
A.R.S. §17-298.
Urban Wildlife
Habitat Evaluation
And Protection
Public Access
Environmental
Education
“Sensitive habitat”
identification, inventory,
protection, and management
Acquisition of habitat for en-dangered,
threatened, and
candidate species
Introduction and Background
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OFFICE OF THE AUDITOR GENERAL
  Public access—The Department is required to use 5 percent
of Heritage Fund monies to provide increased access to pub-licly
held lands for recreational uses. This can be accom-plished
through constructing or improving roads, trails, and
fishing piers. Increased access might also be achieved by pur-chasing
private land or entering into agreements with land-owners
to allow access through their properties.
Heritage Fund
Accomplishments
Heritage Fund monies have been used for a wide variety of pro-jects
and activities. Highlighted below are examples of some of
the Heritage Fund’s accomplishments, as cited in the Depart-ment’s
Heritage Fund newsletter:
  Cooperative efforts to increase native frog populations—
The Department has been a leader in studying the decline of
native frogs in the Southwest and has developed and imple-mented
innovative approaches for conserving important
populations, such as the extremely rare Ramsey Canyon
leopard frog. Through a partnership with the Phoenix Zoo,
leopard frog eggs were reared to tadpoles and approximately
400 were released near Sierra Vista, Arizona, in September
1999. Although not listed as an endangered species, all native
leopard frogs are protected by the Department.
  Improving survival of endangered and threatened spe-cies—
The Department was instrumental in providing the
conservation efforts necessary to remove the Peregrine Fal-con
from the federal endangered species list in August 1999.
Additionally, the Department has gained recognition for suc-cessfully
breeding and releasing 63 endangered Black-footed
Ferrets into the wild.
  Grants to schools for improving wildlife habitat—The
Heritage Fund Schoolyard Habitat projects received the Gov-ernor’s
Pride in Arizona Award from Arizona Clean and
Beautiful for outstanding student projects. Schoolyard grants
are awarded to Arizona schools wishing to restore or convert
wildlife habitat on or adjacent to school properties. Seven
schoolyard projects totaling almost $46,000 were awarded
Introduction and Background
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OFFICE OF THE AUDITOR GENERAL
funding for the year 2000 grant cycle. Schoolyard projects in-cluded
an arboretum, courtyard, and outdoor classrooms,
and a project for the Grand Canyon Unified School District ti-tled
“Grand Canyon School to Work Restoration Project.”
Budget and Staffing
Although the Department can receive up to $10 million in Heri-tage
Fund monies annually, as lottery revenues have declined, so
too have Heritage monies. In fiscal year 2000, the Department
received approximately $8.1 million in lottery revenues to fund
Heritage programs. The Department anticipates that lottery
revenues will continue to decline based on lottery revenue pro-jections.
The amount of Heritage monies received and expended
by each of the five programs for fiscal years 1996 through 2000 is
shown in Table 1 (see page 5). The programs are not allowed to
spend more than their statutory funding allocation, and any
program that does not spend its full annual allocation can carry
these monies forward to fund future projects.
The Heritage Fund has received approximately $92.7 million in
state lottery revenues since 1990. At the end of fiscal year 2000,
the Fund balance was more than $20 million (see Finding III,
pages 25 through 28 regarding some Heritage Fund accounting
problems).
In fiscal year 2001, the Department will use Heritage Fund mon-ies
to fund 82 full-time equivalent (FTE) positions, including
wildlife supervisors and specialists, and administrative and
technical support staff.
Heritage Fund monies
have been declining.
Table 1
Arizona Game and Fish Department
Heritage Fund
Schedule of Revenues, Expenditures, and Accumulated Fund Balance by Program Area
Years Ended June 30, 1996 through 2000
(Unaudited)
IIPAM Program 1
Fiscal
Year
Environmental
Education
Public
Access
Urban
Wildlife
Habitat
Evaluation
Land
Acquisition General Administration Total
Fund balance, July 1, 1995 $684,586 $ 998,163 $2,109,592 $1,988,755 $6,535,423 $5,025,639 $ 279,393 $17,621,551
1996 Revenues 2 500,000 500,000 1,500,000 1,500,000 2,400,000 3,600,000 756,008 10,756,008
Expenditures (433,642) (522,500) (1,431,608) (1,340,373) (4,681,626) (3,493,082) (619,497) (12,522,328)
Net operating transfers out (53,976) 4 (53,976)
Fund balance, June 30, 1996 750,944 975,663 2,177,984 2,148,382 4,253,797 5,078,581 415,904 15,801,255
1997 Revenues 2 500,000 500,000 1,500,000 1,500,000 2,400,000 3,600,000 837,096 10,837,096
Expenditures (423,690) (585,121) (1,333,142) (1,359,557) (453,566) (3,988,845) (638,945) (8,782,866)
Net operating transfers in (out) (237,794) 3 164,859 4 (72,935)
Fund balance, June 30, 1997 827,254 890,542 2,344,842 2,288,825 5,962,437 4,854,595 614,055 17,782,550
1998 Revenues 2 500,000 500,000 1,500,000 1,500,000 2,400,000 3,600,000 937,175 10,937,175
Expenditures (431,586) (583,659) (1,317,302) (1,278,311) (153,121) (3,877,110) (718,514) (8,359,603)
Net operating transfers out (80,674) 3 (10,666) 4 (91,340)
Fund balance, June 30, 1998 895,668 806,883 2,527,540 2,510,514 8,128,642 4,566,819 832,716 20,268,782
1999 Revenues 2 435,313 435,313 1,305,938 1,305,938 2,089,500 3,134,250 868,816 9,575,068
Expenditures (427,768) (368,403) (1,612,192) (1,304,773) (2,113,822) (3,630,429) (729,960) (10,187,347)
Net operating transfers out (32,725) 3 (28,008) 4 (60,733)
Fund balance, June 30, 1999 903,213 873,793 2,221,286 2,511,679 8,071,595 4,042,632 971,572 19,595,770
2000 Revenues 2 404,840 404,840 1,214,520 1,214,520 1,943,232 2,914,848 974,395 9,071,195
Expenditures (519,284) (256,415) (1,047,246) (1,231,439) (2,044,452) (2,776,026) (652,934) (8,527,796)
Net operating transfers out (26,400) 3 (33,147) 4 (59,547)
Fund balance, June 30, 2000 $788,769 $1,022,218 $2,388,560 $2,494,760 $7,943,975 $4,148,307 $1,293,033 $20,079,622
1 Identification, Inventory, Protection, Acquisition, and Management program. Land Acquisition is part of the program; however, its amounts are presented separately for
informational purposes.
2 Revenues, except for administration, are lottery proceeds. Administration revenue is interest earned on investments.
3 IIPAM Land Acquisition reimbursements to IIPAM General.
4 Net amount after receipt of IIPAM Land Acquisitions reimbursements and transfers out to meet federal matching requirements for an endangered species grant.
Source: Arizona Game and Fish Department staff compiled this information from data recorded on the Department’s Integrated Fund Accounting System.
Introduction and Background
OFFICE OF THE AUDITOR GENERAL
5
Introduction and Background
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OFFICE OF THE AUDITOR GENERAL
1996 Report and Update
Auditor General staff revisited the concerns identified in a 1996
Heritage Fund performance audit (see Auditor General Report
No. 96-13). That report contained two findings. The first recom-mended
that the Department develop a long-term Heritage
Fund acquisition plan to identify and prioritize lands needing
protection and that the Department proactively seek to acquire
these lands. The Department has not adopted these recommen-dations.
Consequently, this report again recommends that the
Department prepare a long-range acquisition plan and develop
and implement administrative rules to more clearly define crite-ria
for purchasing property (see Finding II, pages 17 through 23).
The second finding in the 1996 audit report recommended that
the Department be required to report more comprehensive in-formation
about Heritage Fund expenditures, and that it use ad-visory
committees to increase public involvement in Heritage
programs. Although the Department’s annual Heritage Fund
report contains the minimum information required in statute,
additional information is needed to enable the Legislature and
the public to determine such things as whether Heritage Fund
expenditures are within statutory limits; the amount of money
expended for major activities; and what has been the impact of
Heritage Fund programs. In addition, although the Commission
established the Heritage Fund Public Advisory Committee in
December 1996 to advise the Commission, the Department has
not significantly included the Committee in Heritage Fund plan-ning
processes and could assign it a more active role (see Finding
I, pages 9 through 16).
Audit Scope and
Methodology
Audit work focused on the Department’s accountability for Heri-tage
Fund expenditures, including land acquisitions, and ac-counting
practices used for Heritage Fund monies. This per-formance
audit includes findings and recommendations as fol-lows:
Introduction and Background
7
OFFICE OF THE AUDITOR GENERAL
  The need for the Commission to adopt administrative rules
or other formal criteria to guide and ensure that Heritage
Fund monies are expended appropriately;
  The need for the Commission to adopt administrative rules
that clearly define the criteria for property purchases and to
adopt a long-range acquisitions plan; and
  The need for the Department to improve accounting for all
Heritage Fund program monies.
Auditors used a number of research methods for this review.
Specifically,
  To determine whether the Department is sufficiently ac-countable
to the public for Heritage Fund program expendi-tures,
auditors reviewed the Heritage Fund voter initiative,
statutes, and administrative rules, as well as Department stra-tegic
plans, five-year project narratives, annual work plans,
annual internal performance reports, and annual reports to
the Legislature. Other documents reviewed included biologi-cal
assessments of Heritage Fund properties, land manage-ment
plans, and purchase agreements. Auditors also inter-viewed
outside interest groups such as the Arizona Heritage
Alliance.
  To determine whether the Department appropriately ac-counts
for Heritage Fund monies and whether expenditures
remain within statutory limits, auditors reviewed Heritage
Fund statutes and the Department’s internal accounting re-cords
and the methods for maintaining these records. Audi-tors
also compared the information available in the Depart-ment’s
records with the statewide accounting system to iden-tify
potential discrepancies. Finally, auditors reviewed fund
transfer documents to determine whether the Department
had repaid monies to the Heritage Fund that had been used
to fund other programs in fiscal years 1998, 1999, and 2000.
This audit was completed in accordance with government audit-ing
standards.
Introduction and Background
8
OFFICE OF THE AUDITOR GENERAL
The Auditor General and staff express appreciation to the Ari-zona
Game and Fish Commission Chairman and members, the
Director of the Arizona Game and Fish Department, and staff for
their cooperation and assistance throughout the audit.
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OFFICE OF THE AUDITOR GENERAL
FINDING I DEPARTMENT NEEDS TO
IMPROVE ACCOUNTABILITY OF
HERITAGE FUND EXPENDITURES
The Commission and the Department should improve account-ability
to the public and the Legislature for Heritage Fund ex-penditures.
Although this voter-approved program has existed
for ten years, the Commission has not adopted administrative
rules or other formal criteria to govern the majority of Heritage
Fund expenditures. As a result, it is unclear whether all Heritage
Fund expenditures meet the statutory intent for the monies. To
help ensure expenditures are appropriate, the Department needs
to develop rules or other formal criteria, such as substantive pol-icy
statements, with the assistance of such resources as the Heri-tage
Fund Public Advisory Committee. Further, the Department
needs to improve its annual Heritage Fund performance report
by including additional details about expenditures and progress
toward goals.
Department Lacks Formal Criteria
for Most Heritage Fund Expenditures
Although the voter-approved Heritage Fund has existed for ap-proximately
ten years, the Commission has failed to develop and
adopt administrative rules or other formal criteria to guide most
Heritage Fund expenditures. Currently, the Department has
rules only for governing grants awarded to outside organiza-tions,
which make up only about 8 percent of Heritage Fund ex-penditures.
Under the Identification, Inventory, Protection, Ac-quisition,
and Management program (IIPAM), the largest Heri-tage
Fund program with the broadest statutory mandate, the
lack of formal criteria makes it particularly difficult to determine
whether IIPAM expenditures are appropriate. For example, it is
not clear why the Department decided to sponsor a television
series rather than fund a project that directly protects wildlife.
Likewise, reasons for funding activities under the Urban Wildlife
and Urban Wildlife Habitat program are also unclear.
Finding I
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OFFICE OF THE AUDITOR GENERAL
Not all Heritage Fund expenditures governed by rules or other
formal criteria—The Commission has not established adminis-trative
rules or other formal criteria, such as substantive policy
statements, to govern how the Department spends the majority
of Heritage Funds. While the Commission has adopted rules
governing Heritage Fund grants to outside parties, the Commis-sion
has not developed similar standards for the approximately
92 percent of the Heritage Fund monies the Department spends
internally. To better ensure accountability, the Commission
should adopt formal criteria to guide how the Department
spends all Heritage Fund monies. These criteria should clarify
how the Department will interpret the broad statutory language
for each Heritage program, define funding criteria, and outline
processes similar to those in the existing Heritage Fund grants
rules.1
It is unclear whether all IIPAM projects are appropriate—
Without rules or other formal criteria, it is particularly difficult to
determine whether projects under IIPAM, the largest Heritage
Fund program, are appropriate and are the best use of monies.
Statute broadly mandates
that 36 percent, or up to
$3.6 million, of Heritage
Fund monies must be
spent on the identification,
inventory, protection, and
management—including
maintenance and opera-tions—
of sensitive habitat.
However, the statutes de-fine
only sensitive habitat
and habitat protection, not the other core elements of IIPAM,
such as identification, inventory, and management. Monies spent
under IIPAM have few statutory limitations, except that monies
spent on acquisitions must be used to acquire sensitive habitat
1 Administrative rules state how an agency applies its interpretation or im-plementation
of statutes generally to the public or to particular groups.
Substantive policy statements describe an agency’s approach to or opinion
of statutes and the agency’s current practice. These statements are advisory
only and therefore do not require the same level of public involvement as
administrative rules. Substantive policy statements may be appropriate for
most Heritage Fund expenditures, except for those relating to acquisitions
(see Finding II, pages 17 through 23).
Ninety-two percent of
Heritage Fund expendi-tures
not governed by
formal criteria.
Sensitive habitat:
“Specific areas within the geographical
area historically or currently occupied by
a species or community of species in
which are found those physical or bio-logical
features essential to the establish-ment
or continued existence of the species
and which may require special manage-ment,
conservation or protection
considerations.”
—A.R.S. §17-296
Statutes lack definitions
for IIPAM program.
Finding I
11
OFFICE OF THE AUDITOR GENERAL
for endangered, threatened, and candidate species. Without rules
or other formal criteria to further clarify appropriate program ac-tivities,
it is not clear that all program activities are appropriate.
For example:
  Television series—In fiscal years 1997, 1998, and 1999, the
Department expended approximately $75,000 annually in II-PAM
monies to fund a University of Arizona public television
series called “The Desert Speaks.” The series features animals,
plants, people, and geology of the Sonoran Desert in Arizona,
California, and Mexico. The Department indicated that
funding the television show is appropriate under the
“protection” component of IIPAM. However, statute defines
protection as the process of protecting habitats to maintain or
recover wildlife populations, and it is questionable whether
the television show is in line with the statutory intent. Not
only does using IIPAM monies to fund a project such as this
reduce the monies available for activities that more directly
impact wildlife, there are separate Heritage Fund monies
available for environmental education.
  Property management activities— The Department ex-pends
IIPAM monies to manage properties purchased as
Heritage acquisitions for endangered, threatened, and candi-date
species. However, IIPAM monies have contributed to
property management activities that do not appear to directly
address the needs of those species for which the property was
acquired. For example, on the Sipe White Mountain and Wen-ima
Wildlife Areas near Springerville, which were purchased
for the Little Colorado Spinedace fish, the Department has
spent a total of $285,733 in IIPAM monies in fiscal years 1997,
1998, and 1999 to operate and maintain the properties. Some
of these IIPAM monies, in conjunction with monies from
other funding sources, have been used to improve these
properties to accommodate visitors. For example, IIPAM
monies contributed to expanding and surfacing a parking lot
and converting a ranch house into a visitor center at the Sipe
White Mountain Wildlife Area. While these activities have
enhanced the property, it is unclear how these expenditures
directly benefit the sensitive species that may inhabit the
property, such as the spinedace. Further, there may be more
appropriate funding sources for some of these activities, such
as grants through Arizona State Parks.
Finding I
12
OFFICE OF THE AUDITOR GENERAL
Urban Wildlife program funding decisions also unclear—
Although statutory language regarding the Heritage Fund Ur-ban
Wildlife and Urban Wildlife Habitat program appears to be
more straightforward than for IIPAM, it is still difficult to deter-mine
whether some activities funded under this program are
appropriate. The Urban Wildlife and Urban Wildlife Habitat
program receives 15 percent of Heritage Fund monies, or up to
$1.5 million each year, and the
Department divides these monies
between urban wildlife manage-ment
and public information ac-tivities.
Examples of urban wild-life
management efforts include
relocating bears and javelina that
wandered into cities back into the
wild, advocating wildlife considerations in land-use planning
and development, and patrolling urban lakes for fishing viola-tions.
However, approximately $371,600, or about 50 percent of the
Urban Wildlife program’s total payroll, is used to fund six re-gional
public information officer and three customer service rep-resentative
positions whose duties do not wholly focus on urban
wildlife. For example, activities performed by the public infor-mation
officers not focused on urban wildlife include coordinat-ing
classes related to hunting, fishing, and environmental educa-tion;
compiling regional hunt information reference guides; and
managing big game hunt permit application deadline days. In
addition, customer service representatives also perform a num-ber
of activities that do not focus on urban wildlife, such as issu-ing
hunting and fishing licenses and registering and inspecting
watercraft. Although these employees must perform a variety of
tasks to efficiently serve the public, it is not clear that they per-form
sufficient urban-wildlife related work to justify the current
level of Urban Wildlife funding that they receive.
Resources Exist for
Criteria Development
The Department has resources that can assist in developing ad-ministrative
rules or other formal criteria for Heritage Fund ex-penditures.
The Department and the Commission can obtain ad-
Urban Wildlife:
“Wildlife that occurs within the
limits of an incorporated area or
in close proximity to an urban
area that receives significant im-pact
from human use.”
—A.R.S. §17-296
Urban Wildlife-funded
positions perform non-urban
wildlife activities.
Finding I
13
OFFICE OF THE AUDITOR GENERAL
vice and guidance from their two full-time Attorney General
representatives and the Heritage Fund Public Advisory Commit-tee.
Following the Auditor General’s 1996 Heritage Fund audit
(see Report No. 96-13), the Commission created the Committee
to increase public involvement in the Department’s Heritage
Fund programs and provide recommendations and advice for
Commission consideration. Although the Commission has not
significantly included the Committee in Heritage Fund planning
processes to date, the Committee has sought more meaningful
involvement. The Commission could assign the Committee a
more active role than it currently serves and obtain valuable in-put
to develop Heritage Fund expenditure criteria.
In addition to these advisors, the Department can incorporate
federal and state lists of sensitive species as criteria for prioritiz-ing
expenditures. The U.S. Fish and Wildlife Service actively
maintains lists of species considered endangered and threatened,
as well as lists of candidates for such status. Arizona has a similar
list of wildlife of special concern, which identifies those wildlife
species in the State whose existence or habitat is in jeopardy or
could be in the future. If the Commission includes this state list
in any formal criteria it develops, the Department should for-mally
update the list, since the Commission has not approved it
since 1988. Further, the Department should then update the list
regularly to ensure that it reflects the most current information
on sensitive species in Arizona. If the Commission does not use
the state list as criteria for expenditures, the Commission should
adopt the federal lists of endangered, threatened, and candidate
species.
Once the Commission develops and adopts Heritage Fund rules
or other formal criteria, the Department should reassess whether
activities, such as those performed by urban public information
officers, meet the criteria and make any necessary adjustments to
ensure activities are appropriately funded.
Improved Reporting
Needed
Along with establishing formal expenditure criteria, the Depart-ment
needs to increase its accountability to the public by improv-ing
how it reports on Heritage Fund programs. Although the
Lists of endangered,
threatened, and candi-date
species exist.
Finding I
14
OFFICE OF THE AUDITOR GENERAL
Department provides very basic expenditure information in its
annual report to the Legislature, such as the total amount each
program spent for personal services and equipment, no expendi-ture
data is detailed at the project level. In addition, despite pro-viding
the total dollars spent by each Heritage Fund program,
the annual report fails to demonstrate that these amounts fall
within the statutory spending limits.
To increase the quality and quantity of Heritage Fund informa-tion
available to the public and Legislature, the Department
should report information in the following areas:
  Project-level information—The Department should con-tinue
to include in its annual report highlights of projects un-der
each Heritage Fund program; however, these highlights
should consist of the projects that proportionally make up the
bulk of Heritage Fund expenditures. The project descriptions
should also cite the project’s cost. Currently, the projects that
it highlights in its annual report can mislead readers since
these examples are not necessarily the activities that cost the
most or required the greatest effort. For example, the 1999
annual report indicates that the Department participated in a
species survival-planning meeting for the Thick-billed Parrot,
a species it unsuccessfully attempted to reestablish in Ari-zona
from 1986 to approximately 1994. The Department in-cluded
this as an example in the report, even though it cost
only $66. On the other hand, it did not report funding “The
Desert Speaks” television program, which cost approxi-mately
$75,000.
Although describing every activity is unnecessary, the De-partment
should include among the report highlights those
projects that make up the great majority of each program’s
costs. For example, the report could highlight projects whose
combined costs make up at least 50 percent or more of the
program’s total costs; individual projects costing $50,000 or
more; or the top ten most costly projects for each program.
  Project and program expenditures—To better comply
with the statutory requirement to provide a summary of pro-jects,
activities, and expenditures, the report’s appendices
should include tables that list descriptive titles of all Heritage
Fund projects and their corresponding costs. In addition,
Annual report should
include projects’ cost
information.
Finding I
15
OFFICE OF THE AUDITOR GENERAL
these project expenditures should be aggregated to show the
total amount spent on major categories of activities. For ex-ample,
in its annual report the Department currently groups
IIPAM activities relating to inventorying, monitoring, and
managing sensitive habitat together but does not show the
total cost of the combined activities.
  New and completed projects—Finally, the Department’s
annual report lacks information about what goals Heritage
Fund projects aim to achieve or how long they will take to
finish. When the Department adopts new projects, it should
note these in the annual report, explaining how the new pro-jects
fit within the Department’s goals and objectives and not-ing
a time frame for completion. Likewise, when a project is
completed, the Department should describe what the project
accomplished in terms of goals and objectives and cite the to-tal
cost of that achievement.
Report should explain
how new projects will
meet Heritage Fund goals.
Finding I
16
OFFICE OF THE AUDITOR GENERAL
Recommendations
1. The Commission should develop and adopt administrative rules,
or other formal criteria such as substantive policy statements, to in-terpret
Heritage Fund statutes and describe how the Department
will expend Heritage Fund monies. The Heritage Fund Public Ad-visory
Committee could be involved in developing formal expen-diture
criteria.
2. In developing administrative rules or other formal expenditure cri-teria
for the IIPAM program, the Commission should develop cri-teria
that a species must meet to justify expending Heritage Fund
monies, and a corresponding list of qualifying species. If the Com-mission
determines that the state list of wildlife of special concern is
the species list governing expenditures, it should ensure that this
list is regularly updated and formally approved. Otherwise, the
federal lists of endangered, threatened, and candidate species
should be adopted.
3. Once the Commission establishes administrative rules or other
formal criteria for all Heritage Fund programs, the Department
should assess the activities and responsibilities of Heritage-funded
projects and staff positions to determine whether these meet the re-quirements
of the formal criteria and make necessary adjustments
to correspond with the assessments.
4. The Department should modify the Commission’s annual Heritage
Fund report to the Legislature to include the following information:
  Confirmation that the total expenditures for each Heritage
Fund program meet the statutory spending limits;
  Tables of project-level data in report appendices that are aggre-gated
under major categories of activity and include a descrip-tive
title of the project and its actual cost;
  Descriptions and costs of highlighted projects, such as those
that expend 50 percent or more of a program’s total allocation,
those funded at $50,000 or more, or the top ten most costly pro-jects;
  New project information, including what each new project is
designed to achieve and an estimated time frame for project
completion; and
  Outcomes of completed projects, particularly in terms of pro-gress
toward objectives and total cost.
17
OFFICE OF THE AUDITOR GENERAL
FINDING II ADDITIONAL GUIDANCE
IS NEEDED TO
GOVERN ACQUISITIONS
The Commission and the Department lack guidance for ensuring
that Heritage Fund property acquisitions are appropriate. Nearly
one-fourth of all Heritage Fund monies are designated for ac-quiring
property for endangered, threatened, and candidate spe-cies.
However, the Commission and Department have not de-veloped
administrative rules to ensure purchases meet statutory
requirements, and have not created a long-term plan to guide
acquisition efforts.
Heritage Fund Monies
Used to Acquire Properties
A.R.S. §17-298(B) requires that at least 24 percent of the Game
and Fish Heritage Fund,
up to $2.4 million each
year, be used to acquire
sensitive habitat used by
endangered, threatened,
and candidate species. The
Arizona statutes define the
species designations (see
box at right), and these
definitions are similar to
those used by the U.S. Fish
and Wildlife Service. Since
the Heritage Fund was es-tablished
in 1990, the De-partment
has spent ap-proximately
$13.5 million to acquire ten properties totaling ap-proximately
7,500 acres. The Commission’s policy is to secure
habitats to ensure protection for as many endangered, threat-ened,
and candidate species as possible. However, the Depart-ment
indicates that there are relatively few qualifying species in
Arizona that could benefit from property acquisitions. To date,
Species Designation Defined
in A.R.S. §17-296
  Endangered Species—population
in imminent danger of elimination or
has been eliminated.
  Threatened Species—population
not presently in imminent danger of
being eliminated but likely to become
an endangered species in the fore-seeable
future.
  Candidate Species—population
threats are known or suspected but
substantial declines from historic lev-els
have not been documented.
The Department has
spent $13.5 million for
ten properties.
Finding II
18
OFFICE OF THE AUDITOR GENERAL
Heritage Fund purchases have been made primarily for five spe-cies,
including the endangered Yuma Clapper Rail bird; the
threatened Bald Eagle, Spikedace fish, and Little Colorado
Spinedace fish; and the candidate Mountain Plover1 bird.
The Commission acquires Heritage Fund property from willing
sellers, and does not pursue an acquisition unless a landowner
approaches the Commission with an offer to sell. Once a seller
offers property, the Department assesses whether the purchase
could benefit a qualifying species.
Additional Guidance
Is Needed for Acquisitions
The lack of formal criteria to govern purchases, coupled with the
Commission’s reactive acquisitions policy, make it difficult to
determine whether the properties purchased with the Heritage
Fund are appropriate and the best use of monies. Administrative
rules are needed to help ensure purchases are appropriate. In
addition, a long-term plan is needed to identify species and habi-tats
that most need protection so that the Department can ap-propriately
focus its acquisition efforts when properties are of-fered
for sale. Finally, when the Department does purchase
property, it needs to ensure that it obtains all required ownership
documents before making final payments.
Administrative rules needed—The Commission needs to codify
in administrative rules the criteria a property must meet to be
purchased with Heritage Fund monies. Currently, A.R.S. §17-
298(B) allows the Department to use Heritage Fund monies to
purchase sensitive habitat used by endangered, threatened, and
candidate species. Sensitive habitat is defined in A.R.S. §17-296(2)
as the:
“. . .specific areas within the geographical area histori-cally
or currently occupied by a species or community of
species in which are found those physical or biological
1 The Mountain Plover was listed as a candidate species in 1996, and in Feb-ruary
1999 the U.S. Fish and Wildlife Service proposed upgrading its
status to threatened.
Finding II
19
OFFICE OF THE AUDITOR GENERAL
features essential to the establishment or continued exis-tence
of the species and which may require special man-agement,
conservation or protection considerations. . . .”
However, several terms within the sensitive habitat definition,
such as “specific areas,” “geographical areas,” “historically occu-pied,”
and “currently occupied” are broad and undefined in
statute or administrative rule. Without further clarification of
these terms, it is difficult to evaluate whether Heritage Fund
property purchases are appropriate. For example:
  The Department recently purchased two Heritage Fund
properties totaling $4 million. Documentation leading up to
the purchases indicates that these properties benefit a large
number of species, particularly elk, antelope, and waterfowl.
Although biological information indicates that Heritage Fund
qualifying species were not known to exist on the properties,
the Department determined that the properties could be pur-chased
to benefit the threatened Little Colorado Spinedace
and the candidate Mountain Plover.
However, it is not clear how the Department reached its de-termination,
since neither
property is clearly his-torical
or current habitat
for either species. In fact,
there appears to have
been some confusion
within the Department
about the criteria a prop-erty
must meet to qualify
for purchase with Heri-tage
Fund monies. While
the properties were being considered, Department staff
raised concerns about the properties’ lack of streams, which
are the natural habitat of spinedace. Staff also pointed out
that the fish was not documented as historically occurring on
the property. The Department has since indicated that the
purchases are appropriate because the properties are located
within the Little Colorado watershed, which is the broad
geographical area the fish have historically occupied. The
Department plans to raise spinedace in stock ponds that had
Rules needed to clarify
land purchase criteria.
Five Heritage Fund acquisitions have
been directed toward protecting the
threatened Little Colorado Spinedace,
shown above.
Finding II
20
OFFICE OF THE AUDITOR GENERAL
been used to water livestock on the properties; however,
stock ponds are not natural habitat for the fish.
In addition, the Mountain Plover had not been documented
as historically occurring on the property and none were
found on the property during two surveys the Department
conducted in May 1999. Again there appears to be some con-fusion
about the criteria a property must meet to qualify for
Heritage Fund purchase. A note relating to one of the bio-logical
surveys stated that the Department would be survey-ing
for plover, and that plover were needed as part of the
property management plan. Mountain Plover, however,
were not found on the property. Some were sighted near the
state grazing lease lands that the Department also acquired
with the properties, and the Department indicates that the
proximity of these sightings, as well as the types of habitat
available on the properties, make the purchase acceptable.
The Department indicates that it plans to manage the proper-ties
to create desirable plover habitat; however, no plover are
known to reside there currently and there are no plans to in-troduce
the birds to the properties.
To reduce confusion, and ensure that property purchases meet
statutory requirements, the Commission needs to adopt
administrative rules formalizing how the Heritage Fund statute
is to be implemented. Rules are needed to ensure that purchases
are appropriate and to inform property owners of the criteria the
Department will use when considering a property purchase.
Specifically, the rules should set out the criteria a property must
meet to be considered for Heritage Fund purchase, and should
include a definition of geographical area, perhaps by class of
animal. For example, for a fish, “geographical area” could be the
perennial streams that the fish historically or currently occupies,
avoiding the claim that all of the land draining into the stream is
the geographical area. For a bird, it might be the area historically
or currently occupied and needed to sustain a nesting pair. There
should also be some requirement as to the evidence necessary to
show “historical or current occupation.” Further, the rules
should also include an official state list of endangered, threat-ened,
and candidate species that is updated periodically, or the
federal list should be adopted.
Finding II
21
OFFICE OF THE AUDITOR GENERAL
Long-term plan is needed to direct efforts—In addition, the De-partment
needs to develop a long-term acquisition plan to iden-tify
species and habitats in the State most needing protection.
The Auditor General first recommended that the Department
adopt an acquisitions plan in 1996, but the Department has yet to
implement the recommendation (see Auditor General Report
No. 96-13). A long-term plan is still needed to help the Depart-ment
better evaluate properties that are offered to it and to iden-tify
areas where it can pursue protection efforts other than pur-chases.
The Commission and the Department have been reluctant to
proactively pursue property purchases because of negative pub-lic
feedback about a state agency purchasing private property.
The Commission has directed the Department to wait for prop-erty
owners to approach the Department with offers to sell prop-erty.
This reactive policy requires the Department to attempt to
justify purchasing property that is offered to it, rather than iden-tifying
habitats or properties that would offer the greatest benefit
to the greatest number of qualifying species. Although the
Commission appears unlikely to change its acquisition policy,
developing a long-term acquisitions plan could benefit the De-partment
by establishing habitat protection goals and providing
a basis for evaluating whether properties that are offered to it
meet these goals.
In addition, using a long-term plan as guidance, the Department
could contact owners of sensitive habitat and assess their interest
in protecting the habitat through other protection options. These
other options include conservation easements, stewardship
agreements, and leases. Conservation easements allow the De-partment
to pay a landowner to restrict or limit the type and
amount of development that may take place on the property.
Stewardship agreements consist of a partnership between a
landowner and the Department. Under the agreement, the De-partment
agrees to help fund habitat enhancements. Leases in-volve
contracts for the use of the property for a given period of
time in exchange for rent payments.
The Department has the tools and expertise necessary to develop
a long-term acquisitions plan. Since 1981 it has had the Heritage
Data Management System (HDMS) that contains information
about where endangered, threatened, and candidate species exist
The Department still
lacks a long-term property
acquisition plan.
Finding II
22
OFFICE OF THE AUDITOR GENERAL
in the State. Other Department resources include a Geographic
Information System (GIS) that can generate maps of habitats. The
Department also has biologists and wildlife managers on its staff
who have expertise about various species and could provide
valuable input into a plan. In addition, the Department has some
experience in compiling information that could be used in a
long-term plan. For example, Department staff helped The Na-ture
Conservancy compile a detailed plan to identify and priori-tize
conservation sites in the Sonoran Desert.
All ownership issues need to be addressed before purchase—
Finally, the Department’s current land acquisition process does
not specifically require that all potential ownership issues be ad-dressed
before final payments are made. For example, although
the Department generally obtains surveys, it is not required to do
so and there is not a clear process for ensuring that boundary
discrepancies are resolved. In addition, the Department has not
always ensured that it obtains other items, such as water rights
determinations and certificates, and grazing lease assignments,
before paying sellers. Once the Department makes a final pay-ment
to the seller, it may be less able to obtain final proof of
ownership rights and interests. Therefore, it needs to take steps
to ensure that these types of issues are resolved before making
final payments.
Finding II
23
OFFICE OF THE AUDITOR GENERAL
Recommendations
1. The Commission should adopt administrative rules that
more clearly define the criteria a property must meet to be
considered for purchase with Heritage Fund monies. The
rules should clarify how the Department interprets statutory
terms such as “specific areas,” “geographical areas,” “histori-cally
occupied,” and “currently occupied.” The rules should
also include an official list of endangered, threatened, and
candidate species that is updated periodically, or the Com-mission
should adopt the federal list.
2. The Department should ensure that future Heritage Fund
property acquisitions meet criteria established through its
rules.
3. The Department should prepare and implement a long-term
plan to enable it to better evaluate whether potential Heritage
Fund acquisitions meet its conservation goals. Such a plan
should identify the species and habitats in the State most
needing protection, and should be used to guide purchases
and other protection efforts such as conservation easements,
stewardship agreements, and leases.
4. The Department needs to revise its process for Heritage Fund
land acquisitions to include steps for ensuring that all owner-ship
issues are addressed, including such things as survey
discrepancies and water rights issues, before final payments
are made.
24
OFFICE OF THE AUDITOR GENERAL
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25
OFFICE OF THE AUDITOR GENERAL
FINDING III HERITAGE FUND
ACCOUNTING IS INADEQUATE
Changes are needed to ensure that Heritage Fund monies are
properly accounted for and are used only for the purposes out-lined
in the statutes. Current procedures are insufficient to en-sure
that balances for the Fund’s various programs are accurate
and appropriately accounted for. The Department has used un-spent
fund balances for purposes other than Heritage Fund ac-tivities,
depriving the Fund of interest revenue for programs au-thorized
by statutes.
Accounting
Improvements Needed
The Department needs to better account for the monies allocated
to the five statutory Heritage Fund programs. As noted previ-ously,
the Department receives up to $10 million each year to be
allocated among five Heritage Fund programs. The programs
are not allowed to spend more than their statutory funding allo-cation,
and any program that does not spend its full annual allo-cation
can carry these monies forward to fund future projects.
However, the Department’s accounting for these monies is not
sufficient to ensure that the fund balances for each of these pro-grams
are accurate. The only available record of these carryfor-ward
monies is an informal spreadsheet that one Department
employee voluntarily developed and began maintaining in 1998.
Although the spreadsheet represents the best source of informa-tion
currently available, its accuracy appears questionable for
several reasons:
  Department and state accounting records differ—The
Department’s Heritage Fund spreadsheet is not reconciled to
the statewide accounting system to verify the total Heritage
Fund balance. At the end of fiscal year 2000, the statewide ac-counting
system showed a total Heritage Fund Balance of
The accuracy of the pro-gram
fund balance is
questionable.
Finding III
26
OFFICE OF THE AUDITOR GENERAL
approximately $21.3 million. The Department’s spreadsheet
showed $20.1 million, a difference of approximately $1.2 mil-lion.
Variations in other recent years ranged between ap-proximately
$697,000 and $876,000.
  Records lacking, possibly inaccurate—Further, Depart-ment
accounting records for the first few years of the Heri-tage
Fund are unavailable, and some recent records may not
be accurate. The Department changed its internal accounting
system in 1996, and staff indicate that records from the old
system are inaccessible; therefore, the spreadsheet’s numbers
cannot be verified against that system. Because information
prior to 1996 was unavailable, the spreadsheet was based on
unaudited numbers Auditor General staff compiled for a
Heritage Fund performance audit completed in 1996 (Audi-tor
General Report No. 96-13). Department staff manually ex-tracted
subsequent information from the Department’s Inte-grated
Fund Accounting System (IFAS), which maintains in-ternal
accounting records. However, staff indicate that soft-ware
problems in the IFAS system may have resulted in
some expenditures being improperly charged against various
programs.
  Internal accounting records not reconciled—Finally, the
Department does not reconcile the activity in IFAS to ensure
that charges to each program are correct. IFAS has two sepa-rate
functions: the first is to record cash expenditures; the
second is a job costing function that records the specific pro-jects
that employees record on their time sheets and associ-ated
charges. The second function enables the Department to
determine whether an employee who is normally paid from
federal funds has worked on a Heritage Fund project, and al-locate
costs to the fund that received the work. However, the
Department does not reconcile the cash expenditures, or gen-eral
ledger, information with its job costing data to ensure
any discrepancies are resolved. Further, because the Depart-ment
does not fully reconcile its internal accounting system,
any reconciliation it performs between its system and the
statewide accounting system may not be complete.
The Department needs to take steps to improve its accounting
for the Heritage Fund. First, it should determine the total amount
of Heritage Fund carryforward monies available by resolving
Finding III
27
OFFICE OF THE AUDITOR GENERAL
discrepancies between its internal records and the statewide ac-counting
system. Second, the Department should make a rea-sonable
determination of how these carryforward monies should
be divided among the individual programs. Once program bal-ances
are determined, the Department will need to formalize the
process for maintaining accounting information about Heritage
Fund programs and ensure that this information remains accu-rate.
Heritage Fund Used to
Provide Financial Assistance
to Other Programs
In fiscal years 1998, 1999, and 2000, the Department borrowed
some of the Heritage Fund’s large balance of unspent money to
assist other programs. Although there is no statutory provision
for the Heritage Fund to be used as a lending source, the De-partment
used approximately $1.4 million from the Fund to
cover such things as payroll expenses for federally funded pro-jects
and capital improvements. At least one of the loans was
outstanding for more than one year. Although these monies
were eventually repaid, the Department did not initially pay the
Heritage Fund approximately $30,200 in interest on the loans.
Statute provides for the Heritage Fund to earn interest, which
may be used to administer the Fund or divided among the Heri-tage
programs.
Expanded use of the
statewide accounting sys-tem
could be beneficial.
Heritage Fund lost
$30,200 in interest in-come.
Finding III
28
OFFICE OF THE AUDITOR GENERAL
Recommendations
1. The Department should determine the total amount of Heri-tage
Fund carryforward monies available by reconciling dis-crepancies
between its internal records and the statewide ac-counting
system.
2. The Department should make a reasonable determination of
how these carryforward monies should be allocated among
the five Heritage Fund programs. In making this determina-tion,
the Department should take into consideration the fea-sibility
and costs of obtaining accounting data from past
years.
3. The Department should develop a comprehensive system to
account for each Heritage Fund program’s financial informa-tion.
Any such system should include processes for reconcil-ing
labor and related costs to cash expenditures for each
Heritage Fund program.
4. The Department should eliminate practices that may ad-versely
impact Heritage Fund interest revenues, such as loan-ing
Heritage Fund monies to other programs.
OFFICE OF THE AUDITOR GENERAL
Agency Response
OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
April 30, 2001
Ms. Debra K. Davenport
Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Ms. Davenport:
We have reviewed the revised preliminary report draft of the performance audit of the
Arizona Game and Fish Commission – Heritage Fund.
In reference to your letter of April 13, 2001, we have attached our written response
regarding the audit findings as outlined in the report draft.
Our response includes the required statements regarding each audit recommendation in
the report.
Our Department appreciates the time and effort involved in developing positive
recommendations to assist us to continue to improve our management of the Arizona
Game and Fish Commission – Heritage Fund.
Sincerely,
Duane L. Shroufe
Director
DSL:as
Attachment
1
Department Response to the
Audit Report by the Auditor Generals Office
of the Arizona Game and Fish Commission Heritage Fund
Response To Recommendations
Finding I Page 16
• The finding of the Auditor General is agreed to and audit recommendation
numbers 1 through 4 will be implemented.
Finding II Page 23
• The finding of the Auditor General is agreed to and audit recommendation
numbers 1 through 4 will be implemented.
Finding III Page 28
• The finding of the Auditor General is agreed to and audit recommendation
numbers 1, 2, and 4 have been implemented.
• The finding of the Auditor General is agreed to and a different method of dealing
with the finding, other than the method indicated in audit recommendation no. 3,
will be implemented.
Department Comments:
Page 6 1996 Report and Update, Paragraph 2
The report asserts that the annual Heritage Fund report does not contain sufficient
information for the public or the Legislature to determine whether the Department has
complied with statutory funding limits, how much was spent for various projects, and the
impact of Heritage Fund programs. The subject report has never been considered a report
to the public. Its sole purpose has been to appraise the Legislature (pursuant to statute), in
general terms, of the Heritage funded activities for that specific year. Details about such
activities, and assessments of progress toward goals and objectives, are contained in an
extensive number of technical and performance reports that support the annual report.
Over the ten years for which such reports have been generated, we have seldom received
any indication from the Legislature that these reports were inadequate. The little feedback
we did receive indicated only highly favorable comments along the lines of “This is the
best annual report they receive”.
2
Page 9 Paragraph 1 (Opening Paragraph)
We believe that guidance for the expenditure of funds has been adequately dealt with in
the State’s Financial Management Handbook and the Procurement Code. First and
foremost it is important to remember that the Heritage Fund was created as a result of a
voter initiative. The voters themselves in ARS § 17-297 (B) gave the Game and Fish
Commission the authority to expend monies from the Fund without the need for outside
approval. Since the inception of the Heritage Fund details associated with the
Commission’s programs and the budgets that implement those programs have been acted
upon in public session. As a result, the Commission has taken approval for both the
components of its programs and the associated expenditures directly to the people of
Arizona. Also, we send the entire biennial budget package, including the Heritage
component, in budget book format to the Legislature for their information.
Page 10 Not all Heritage Fund Expenditures governed by rule or other formal criteria
The only statute relevant to rule-making and the expenditure of Game and Fish funds is
A.R.S. § 17-231(A)(7), which requires the Commission to “[p]rescribe rules for the
expenditure, by or under the control of the director, of all funds arising from
appropriation, licenses, gifts or other sources.” (Emphasis added). The Commission
“administers” the Heritage Fund and “[a]ll monies in the [fund] shall be spent by the
Arizona Game and Fish commission.” A.R.S. § 17-297(A) & (C). These provisions
demonstrate that expenditure of the Heritage Fund is under the Commission’s control,
and therefore, the plain language of A.R.S. § 17-231(A)(7) that refers to expenditures by
the Director makes A.R.S. § 17-231(A)(7) inapplicable to expenditures from the Heritage
Fund. The Commission is under no separate statutory requirement specifying the
adoption of rules for the expenditure of the Heritage Fund. However, we will implement
the audit recommendation via Commission Policy.
Page 11 Television series
In order to be successful, wildlife management programs, especially those designed to
protect and manage sensitive species and sensitive habitats, must involve an array of
diverse approaches. Our Department believes outreach is an essential component that
must be embedded in each and every management program for which we are responsible.
In our view, our public trust responsibilities require us to ensure that Arizona’s citizens
understand our management programs for their resources and recognize the benefits they
derive from our efforts. Given that television represents the most frequently cited
mechanism used by Americans to gain information about wildlife, our perception of the
appropriateness of the Game and Fish contribution of $75,000 (which accounts for less
than 12% of the total production costs of $645,000) for “The Desert Speaks” is contrary
to that of the Auditor General. Our partnership with KUAT allows us to reach millions
of Arizona residents on an annual basis with important management information about
sensitive wildlife and sensitive habitats. As such, we feel compelled to reiterate that we
believe the expenditure is appropriate and that the public benefit gained far exceeds the
level of expenditure.
3
Page 11 Property management activities
We feel that appropriate changes to the Management Plans, Land Protection Evaluation
Process (LPEP), and upgrades to the Land Projects Database, procedures would resolve
this concern. Included in the draft LPEP, and outlined in the revised Management Plan is
a required 5-year Plan of Development for each wildlife area.
While some property management activities were funded with IIPAM monies, the
Department believes these expenditures were appropriate. In addition, the primary source
of funding for the conversion of the ranch house into a visitor center and the parking lot
improvements were from a donation account and the building renewal fund, respectively.
The Heritage Program FY2000 Report to the Arizona Legislature states on Page i under
Project Funding that funding for this program was provided by the Arizona Game and Fish
Department’s Heritage Fund, enhanced by voluntary contributions from Arizona’s
Nongame Wildlife Checkoff, Arizona hunting and fishing license fees, various private
contributions; and matching funds from a variety of federal sources, including contracts and
other funding agreements with federal agencies, the Federal Aid in Wildlife Restoration Act
(Pittman-Robertson Act), the Federal Aid in Sport Fish Restoration Act (Dingell-Johnson
and Wallop-Breaux Acts), and Title VI (Section 6) of the Endangered Species Act.
Page 12 Urban wildlife program funding decisions also unclear, Paragraph 2
The Urban Wildlife funding source was used for the regional public information officers
(RPIOs) because the majority of our customers live in urban areas and our outreach
efforts are concentrated in these cities. The Urban Wildlife fund was selected because it
was consistent with the objective of the regional public information officer position,
which is to conduct information and education activities in urban project areas that are
designed to increase public awareness and appreciation of wildlife and their habitat
resources. Examples of eligible activities include the development and dissemination of
publications, videos, press releases, interviews and public presentations largely to an
urban dwelling public. Additional job functions include the backyard wildlife habitat
program, educational activities that present wildlife and habitat concepts in schools and
other educational settings and work related to Urban Heritage grants for Information and
Education projects.
The audit asserts the following examples of activities performed by the public
information officers are not focused on urban wildlife: coordinating classes related to
hunting, fishing, and environmental education; compiling regional hunt information
reference guides; and managing big game hunt permit application days. All of these
activities are conducted within “. . .the limits of an incorporated area or in close
proximity to an urban area that receives significant impact from human use” per A.R.S. §
17-296.6. As such, these activities provide significant benefits to the public inhabiting
urban areas and contribute to their awareness and appreciation of wildlife and their
habitat resources. For example, the curriculum of classes related to hunting, fishing and
environmental education all include sections designed to increase public knowledge,
awareness and subsequently appreciation of wildlife and their habitat requirements.
4
Hunt information guides not only include urban hunting opportunities, but direct hunters
and other wildlife users into areas where interactions with game species are likely to
occur. Big game hunt permit application days are often sponsored or also attended by a
variety of wildlife conservation groups such as the Rocky Mountain Elk Foundation,
Desert Bighorn Sheep Society, and local conservation groups. Such groups generally
have educational booths or displays and interact with the public during these events,
raising public awareness and appreciation for wildlife. The Department also has its own
informational and educational displays for the public at these events. Additionally, these
events often receive significant coverage from the local media that have included
newspaper, television and radio coverage, including live remote broadcasts. All of which
significantly enhance the Department’s ability to increase public awareness and
appreciation of wildlife and their habitats.
The audit also asserts that the following duties of three regional customer service
representative (CSR) positions include duties that do not focus wholly on urban wildlife:
issuing hunting and fishing licenses and registering and inspecting watercraft. The
customer service program in the regional offices must provide a variety of services to
both internal and external customers. Service to internal customers requires providing
clerical and administrative support to all regional staff and includes purchasing supplies,
payroll and accounting functions, and typing and document preparation. External
services include handling public phone calls that request information and assistance; sale
of hunting and fishing licenses, tags and stamps; and registering and inspecting
watercraft.
Since the regional CSRs must perform a wide variety of tasks and services they are
funded from several different funding sources including the following: Sportfish and
Wildlife Restoration, state Watercraft fund, U.S. Coast Guard, Game and Fish fund and
the Heritage Urban fund. The regional customer service program is intentionally
designed to allow all the CSRs the ability and flexibility to perform all of the duties
necessary to meet the needs of our internal and external customers. This allows for an
efficient and effective use of our available resources and greatly enhances our ability to
provide timely assistance to the public allowing CSRs to assist the public during times of
peak visitation and perform other duties when public visitation is low. For example, a
typical region may have four to five customer service representatives, but only one or two
may be funded by a source that is eligible to register watercraft (e.g., state Watercraft
fund or U.S. Coast Guard). If only those CSRs funded by an eligible source were
allowed to register watercraft, it would result in long delays for the public during peak
visitation periods with three to four CSRs unable to assist with this effort. Imagine the
public perception issue that would be created if the public was forced to wait in long lines
for the only two employees able to assist them while three CSRs tried to explain to the
public that they were unable to assist because they were funded from an ineligible
funding source.
There are currently 29.5 customer service representatives located throughout the six
regional offices. Three (10%) of them are funded by the Heritage Urban fund. Many of
these positions are “split funded” (ex. ½ Game and Fish fund, ½ Watercraft). One of the
5
Urban funded CSR positions has been vacant since January 4, 2000, and is scheduled to
be abolished July 1, 2001 due to funding constraints. This will leave only two full-time
Urban funded CSRs remaining in the regional offices. The Department monitors and
makes reasonable efforts to ensure that the funding sources of CSRs proportionally match
their workload. The Department works to achieve an equitable allocation of funding
sources by conducting a semi-annual desk audit of the time spent by CSRs performing
their different job functions and comparing this with funding sources. The current system
works well by providing a maximum amount of flexibility in the jobs each CSR can
perform while ensuring that overall funding for CSR staff is consistent with volume and
type of jobs performed. It allows the Department to provide excellent customer service
while maximizing available resources without violating the eligibility criteria of any
funding source.
The Department does not agree with the assertion of the report that the CSRs and RPIOs
do not perform sufficient urban-wildlife related work to justify the current level of Urban
Wildlife funding that they receive. However, to ensure our expenditure of Heritage Funds
is consistent with statutory intent and public expectations, the Department has agreed
with Audit Recommendation Number 3. The Department will establish formal criteria for
all Heritage Fund programs and assess the activities and responsibilities of Heritage
funded projects and staff positions to determine whether these meet the requirements of
the formal criteria. The Department will make any necessary adjustments to correspond
with the assessments, if necessary.
Pages 12-13 Resources Exist for Criteria Development
The Commission relies upon sources other than the Department in formulating
recommendations for criteria for expenditures of the Heritage Fund. The Commission,
however, does not have authority to delegate the final decision to any such group. The
Commission has the statutory duty to prescribe rules, and the Commission cannot
delegate this authority.
We are very concerned that the audit is inadvertently setting the stage for conflict
between Commission guidance and HPAC guidance for Heritage. The agency cannot
serve “two masters.” Any HPAC involvement in rule development, or strategic or
operational planning must be subordinate to Commission involvement. We must also
ensure that delegation of authority, direct or indirect, is not at odds with Comprehensive
Management System requirements regarding our federal funding, for which Heritage
funds are often used as match. The lines of authority and control under Federal Aid
guidelines are not highly flexible.
The Department accepts Audit Recommendation Number 1 to assign HPAC a more
active role in developing expenditure criteria, but the Commission must retain final
authority over any decision. The HPAC might perform a greater advisory role similar to
that provided by the Habitat Partnership Committee. They will be included in the
development of Commission policy regarding Heritage expenditures.
6
The list of Species of Special Concern would be entirely inappropriate as a list of
Sensitive Elements for guiding Heritage Fund expenditures. Mixing the two would cause
us to once again have a list of Species of Special Concern and a Biotic Communities of
Special Concern list that includes species for which we merely lack sufficient information
to document the extent of their “imperilment” or “non-imperilment,” and what to do to
ensure they do not become, or remain, imperiled. Adoption of the federal Threatened &
Endangered/Candidate list, which is rigid and not at all within our control, and often does
not reflect Arizona priorities, would be even more problematic both biologically and
politically.
Nonetheless, we agree to commit to adopting through formal process the Species of
Special Concern and Biotic Communities of Special Concern lists as this would be
consistent with our new wildlife strategic plan and the requirements of new and related
federal funding.
Pages 13-15 Improved Reporting Needed
The report asserts that the annual Heritage Fund report does not contain sufficient
information for the public or the Legislature to determine whether the Department has
complied with statutory funding limits, how much was spent for various projects, and the
impact of Heritage Fund programs. The subject report has never been considered a report
to the public. Its sole purpose has been to appraise the Legislature (pursuant to statute), in
general terms, of the Heritage funded activities for that specific year. Details about such
activities, and assessments of progress toward goals and objectives, are contained in an
extensive number of technical and performance reports that support the annual report.
Over the ten years for which such reports have been generated, we have seldom received
any indication from the Legislature that these reports were inadequate. The little feedback
we did receive indicated only highly favorable comments along the lines of “This is the
best annual report they receive”.
The example offered is not referenced to year, so we cannot address specifics. However,
our current and long-standing approach to the annual report and the auditor’s stated
objective of better informing the public suggest that both the parrot project and “The
Desert Speaks” should have been included. The annual report is intended to provide
information on all activities undertaken to accomplish the annual Heritage work plans.
The public “values” such activities in ways not necessarily consistent with those of the
auditors. Based on Responsive Management information, we can safely say that the
public’s values for wildlife management (conservation) efforts are often not at all related
to the costs of such activities. The public values the species themselves, efforts to
conserve them, and opportunities to enjoy them or to know that they exist. In this sense,
the parrot project is/was at least as important to the public, if not to the auditors in this
context, as the television show.
Moreover, the cost figures offered by the auditors suggest that either they were provided
with inaccurate information, or they did not ask the right question or pose it to the right
people. We suspect the $66 cost for the parrot project is tied to registration at the project
7
related meeting, or to travel costs associated with the meeting. If so, it fails to include the
staff time spent on the parrot project, and perhaps expenditures from other funds that
supplemented the Heritage expenditure.
Regarding the paragraph beginning near the bottom of page 14, “…the report could
highlight projects whose combined costs make up at least 50 percent or more of the
program’s total costs”, the issue of public values that are often not cost-based also argues
against restricting the report to the “top 50.” So does the reality that Heritage
expenditures are not the only expenditures associated with activities conducted under the
Heritage program.
The Department has been in compliance with the reporting requirements of A.R.S. § 17-
298.G.1. thru 7. Also, the Department has never received any feedback from either the
Legislature or the public indicating that more information should be provided. However,
the Department will modify the Commission’s annual report to the Legislature by
providing the requested data.
Pages 17-18 Heritage Fund Monies Used to Acquire Properties
While it is a fact that Heritage Fund acquisitions have resulted in benefiting a small
number of qualifying species, it is incorrect that the Department has focused or directed
efforts towards those few species. The reason for this is because Commission direction
limits land acquisitions to offers received by the Department from willing sellers. The
Department cannot pursue an acquisition unless a landowner approaches the Commission
with an offer to sell. The Department is looking at continued use of conservation
easements as an additional tool or opportunity to purchase lands that would benefit more
species.
Almost half of the forty-two wildlife species in Arizona listed as endangered, threatened,
or candidate, are fish species. Purchasing lands to benefit many of these species would
be impossible or impractical. Many of those fishes are "big river fishes" that typically
inhabited long stretches of large rivers. Purchasing relatively small chunks of land would
not benefit these species, because the underlying threats in those types of systems must
be addressed on a much larger scale. Another large number of the listed fish species (8)
historically only ever existed on the periphery of the state, due to the nature of the
watersheds (Yaqui, Virgin, Sonoyta, and Magdalena river systems). Nearly all the
permanent water within those historical distributions now exist on public lands (USFS,
BLM, USFWS, National Parks) and very little opportunity exists to purchase lands to
benefit these species. This leaves a small number of fish species left in which land
purchases that would benefit those listed species would be realistic. Of these, it happens
that the opportunities that have been presented to the Commission have only benefited
spikedace and Little Colorado (LC) spinedace. In the case of spikedace, any land
purchase that benefits that species also has the chance of benefiting the threatened loach
minnow. It just happens that loach minnow are not currently present in that location(s).
A recently published rule on critical habitat for spikedace and loach minnow by the U.S.
Fish and Wildlife Service (April 25, 2000) states that the two species generally occur
8
together and habitat improvements or protections for one species would also benefit the
other. Future reintroduction efforts would negate the current absence of one of the
species.
Pages 18-20 Administrative rules needed
We disagree with the Auditor General’s concerns regarding how the Department reached
its determination for two recent Heritage Fund properties [Cross L and Ocote Ranches,
now known as the Grassland Wildlife Area (GWA)].
The Auditor General’s comments suggested that these acquisitions may not have been
consistent within the definitions or intent of the Heritage statutes that pertain to land
acquisition for sensitive species habitat. The report questioned whether or not the
acquisitions actually provide benefit to the sensitive species described in the
Department’s justification and management plans for these acquisitions. We strongly
believe that all Department acquisitions have been well within the provisions of the law,
and that our purchases provide for direct benefit to several wildlife species identified in
the Auditor General’s comments, including the Little Colorado spinedace, mountain
plover and quite possibly the Chiricahua leopard frog.
In addition, the acquisition of the GWA and subsequent development of it’s management
plan provides the opportunity to accomplish many of the objectives outlined in the United
States Fish and Wildlife Service’s Recovery Plan for the Little Colorado spinedace. The
draft management plan provides for the development of several spinedace refugia
throughout the GWA, that are specifically designed to allow the Department to
successfully raise, breed and re-introduce this federally Endangered fish species back into
it’s original native habitat in the Little Colorado River Watershed. Furthermore, the
rearing and propagation of the endangered spinedace at the GWA, as well as the planned
subsequent releases of the spinedace back into it’s native habitats, will occur within the
original known geographic distribution of this species. Therefore, the Department is not
proposing to raise sensitive species for reintroduction purposes outside of their known
geographic distribution, which eliminates or minimizes any risk of reintroductions into
habitats outside of their known range.
The GWA is considered to fall within historical range of the species even though
spinedace have not yet been documented there. Because of the paucity of historical fish
collections within the watershed (none until 1930's), and the early use of the area by
settlers, it is difficult to pinpoint every exact location for a now rare fish. Without a
doubt, the property meets the requirement that the habitat has the features necessary to
allow the Department to maintain its continued existence. Spinedace are separated into
distinct populations by drainage (Recovery Plan, USFWS 1998). Some of these
populations are maintaining themselves, while others are in clear danger of disappearing.
The Silver Creek population is one of these. In fact, it was considered to be extirpated
for 30 years, until several years ago. Because of the drastic alteration of most of this
drainage, and lack of opportunities to expand their range or create refugia within
historical range, the only viable alternative may be to create a refugia population for that
9
genetic stock to protect the population from extirpation. Production of fish within this
refugia population would also allow possible efforts to expand or enhance the wild
population to further prevent extirpation. These steps are clearly outlined in the recovery
plan and the GWA would allow us to accomplish this.
The Auditor General’s comments reference the mountain plover to suggest that there is
confusion about the criteria a property must meet to qualify for Heritage Fund purchase.
Although we do not have documentation of historic occurrences of mountain plovers on
the Cross L and Ocote Ranches, the Department followed established criteria to
determine if mountain plovers or other sensitive species are likely to occur in this area.
This is the same procedure that the Department uses in evaluating other projects. The
mountain plover surveys conducted on the properties are not intended to irrefutably
document the absence of a particular species. Since they are rare and highly mobile, it is
not realistic to guarantee finding these birds in just two surveys. The strategy employed
by the Department in acquiring property for the benefit and potential recovery of rare
species is entirely consistent with that practiced by conservation strategists worldwide
(e.g. USFWS Implementation of Endangered Species Act). It is the standard practice of
the profession.
Implementation of Audit Recommendation Numbers 1 and 2, through revision of the
Land Protection Evaluation Process (LPEP), will include more stringent procedures such
as property evaluation criteria ensuring that all acquisitions, including Heritage, are in
compliance with the requirements of all appropriate statutes, rules and regulations. For
example, the property evaluation criteria for Heritage funded acquisitions would include
clear definitions of, and requirements for the identification of “sensitive habitat”. For
Heritage funded acquisitions, LPEP will place a higher priority on properties identified
that contain the greatest, or the most diverse species listing of sensitive wildlife species as
well as those species of greatest concern. LPEP will be modified to include property
evaluation review forms that will require investigators to carefully and fully review all
properties to ensure that all fund requirements will be met.
Pages 21-22 Long-term plan is needed to direct efforts
Because the Department will continue to revise the Land Protection Evaluation Process,
which will completely address Audit Recommendation Numbers 1 and 2, we disagree
with the need to develop another mechanism for prioritizing potential acquisitions. The
Department believes that rather than build a rigid plan that details potential acquisition
priorities, that all offerings of real property be evaluated and those that are currently
offered are evaluated for potential purchase based on the current availability of property.
Commission direction limits acquisitions to offers received from willing sellers.
Although we believe that a long-term plan may imply the Department proactively targets
properties for acquisition, which is not completely appropriate, we can implement Audit
Recommendation Number 3 to enable us to better evaluate whether potential Heritage
Fund acquisitions meet our conservation goals and criteria established through rules and
policies. Although potential acquisitions will continue to be dependent on offers received
10
from willing sellers, this long-term plan could enable us to evaluate the appropriateness
and value of potential acquisitions more efficiently.
Over the years the Department has pursued a number of conservation easements. Our
rationale was based on the fact that fee title purchases are the most costly land tenure
vehicles, in terms of operation and maintenance expenditures. We believe that
conservation objectives can often be attained through the acquisition of only a portion of
the bundle rights associated with land ownership. However, as of yet we have been
unable to successfully complete such a transaction. To date, our experiences have been
such that most landowners would rather sell out right than deal with the monitoring
programs and validation processes inherent to conservation easements. Although we are
somewhat discouraged, we continue to believe that deployment of conservation
easements is a desired strategy to achieve our Heritage-related conservation objectives
and will attempt their deployment as a function of our long-term conservation strategy.
Page 22 All ownership issues need to be addressed before purchase
In each instance where the Department has acquired real property through the
expenditure of Heritage Funds, a specific contract or purchase agreement has been
negotiated between the seller and the Department. These agreements document each
valued element in the transaction. If, at the time of close of escrow, any unresolved
issues arise involving valued elements of the transaction, such as associated water rights
certificates or grazing leases, the Department would utilize the redress available to us
under the terms of the contract to satisfy any deficiencies.
The Department feels that modifications to the Commission’s Land Protection Evaluation
Policy (LPEP) would ensure that all legal documents and necessary surveys have been
obtained or satisfied prior to the close of escrow. We have already initiated a complete
review and modification of LPEP. The Department’s revision to its LPEP Policy will
include steps for ensuring that all ownership issues as indicated in audit recommendation
number 4 will be addressed.
Page 25 Accounting Improvements Needed, Paragraph 1
The Department has more than one available record of carryforward monies. In addition
to the Department’s Integrated Fund Accounting System (IFAS), carryforward balances
were also available on the Statewide Accounting Financial Information System (AFIS).
The Department implemented Audit Recommendation Number 2, as AFIS was able to
assist in determining the allocation of these carryforward balances among the five
Heritage Fund programs. An Addendum is attached that details Heritage activity from the
fund’s inception through FY2000.
Pages 25-26 Department and state accounting records differ
The audit recommendation has already been implemented as of February 28, 2001. As of
fiscal year ending June 30, 2000, the Heritage Program carry forward balances have been
11
determined based on the Statewide Accounting Financial Information System (AFIS)
records. AFIS records are cumulative. The Department’s Integrated Fund Accounting
System (IFAS) records are annual, resulting in the internal system being incapable of
determining carry forward balances. The Department will research the availability of a
budget version in the internal system that will automatically calculate the carry forward
balance and disclosing the data both on line and in real time.
Page 26 Records lacking, possibly inaccurate
The audit recommendation has already been implemented as of February 28, 2001. AFIS
accounting records exist back to the inception of the Heritage program. These records
were used to determine a true carry forward balance in the Heritage Fund by program.
The Department has reconciled the internal accounting system’s IFAS General Ledger to
the IFAS Job Cost Ledger for operating expenditures. The Department has run special
reports and any errors have been corrected. The Department reconciles its IFAS General
Ledger to the Statewide AFIS on a monthly basis.
Effective July 1, 2001 each job (Program Cost Account-PCA) that applies to the Heritage
fund will be given a grant number and a phase that indicates the source program. The
carry forward monies will be distributed among the individual programs. The exact cash
balance in each of these programs will be available on the AFIS Cash Control Record
Inquiry screen (Screen no. SO63).
Page 26 Internal accounting records are not reconciled
The Department will continue to reconcile its internal IFAS General Ledger to the
Statewide AFIS on a monthly basis. The IFAS General Ledger reflects both Heritage
actual expenditures and revenue processed through AFIS. The reconciliation of the IFAS
Job Cost Ledger to AFIS is impossible because of the job costing of labor, a problem
common to all of state government. The statewide payroll system, Human Resources
Management System (HRMS) is not currently capable of allowing for job costing due to
the high number of multiple jobs that are worked on during any pay period basis. It
would entail reviewing approximately 234,000 entries for a five-year time frame to
reconcile the actual labor charges to the IFAS Job Cost Ledger.
HRMS is being considered for replacement. Through initial meetings, various agencies
have requested that the new system have the ability to job cost. If the new HRMS is
designed in this manner, it could replace the IFAS Job Cost Ledger.
Page 27 Heritage Fund Used to Provide Financial Assistance to Other Programs
The loans to the Federal Revolving Fund had occurred only during the first month (July)
for each of the three fiscal years noted in the finding. Effective July 1, 2000 the
Department’s leadership, upon learning of this past internal practice, eliminated the
loaning of monies from the Heritage Fund to other programs. This decision was made
prior to the Auditor General’s Staff starting their audit fieldwork.
12
In each of the three fiscal years noted, the Department borrowed monies from the
Heritage Fund to pay expenses for the Federal Revolving Fund that had occurred at year-end.
Near fiscal year end Federally incurred expenditures are reimbursed to us in the
following month (July). However, an Arizona Department of Administration policy will
not allow us to pay these expenditures unless there is sufficient cash on hand within our
Federal Revolving Fund to fully meet the June 30 obligations; thereby imposing a
financial hardship on the Department. Federal law does not allow for an advance of
Federal funds for our programs.
The Department has attempted to resolve this problem by establishing a Total Quality
(TQ) team effort to analyze the process deficiencies and recommend improvements. In
February 2001, the Department approved the TQ teams internal recommendations to
maximize the Federal Revolving Fund balances both throughout the year and especially
at year-end.
13
Addendum
Heritage Fund Activity FY1991 – FY2000
Percent Revenue Revenue Expenditures Cash Balance
From Lottery Other
FY90/91 Environmental Education 5% 295,000.00 29,509.11 265,490.89
FY91/92 Environmental Education 5% 500,000.00 1,912.47 250,544.63 516,858.73
FY92/93 Environmental Education 5% 500,000.00 1,645.00 335,309.67 683,194.06
FY93/94 Environmental Education 5% 500,000.00 1,177.29 428,186.65 756,184.70
FY94/95 Environmental Education 5% 500,000.00 1,584.90 515,122.18 742,647.42
FY95/96 Environmental Education 5% 500,000.00 1,071.90 452,970.25 790,749.07
FY96/97 Environmental Education 5% 500,000.00 2,551.46 401,259.99 892,040.54
FY97/98 Environmental Education 5% 500,000.00 0.00 444,277.14 947,763.40
FY98/99 Environmental Education 5% 435,312.50 0.00 434,235.18 948,840.72
FY99/00 Environmental Education 5% 404,840.00 107.04 526,895.21 826,892.55
FY90/91 Public Access 5% 295,000.00 28,971.10 266,028.90
FY91/92 Public Access 5% 500,000.00 5,164.44 151,437.37 619,755.97
FY92/93 Public Access 5% 500,000.00 0.00 281,889.65 837,866.32
FY93/94 Public Access 5% 500,000.00 0.00 297,374.06 1,040,492.26
FY94/95 Public Access 5% 500,000.00 0.00 372,047.63 1,168,444.63
FY95/96 Public Access 5% 500,000.00 9.00 454,990.60 1,213,463.03
FY96/97 Public Access 5% 500,000.00 0.00 490,429.67 1,223,033.36
FY97/98 Public Access 5% 500,000.00 186.78 611,028.57 1,112,191.57
FY98/99 Public Access 5% 435,312.50 2,070.00 321,499.68 1,228,074.39
FY99/00 Public Access 5% 404,840.00 5.00 378,955.14 1,253,964.25
FY90/91 Land Acquisition 24% 1,416,000.00 0.00 28,214.37 1,387,785.63
FY91/92 Land Acquisition 24% 2,400,000.00 5,783.18 779.83 3,792,788.98
FY92/93 Land Acquisition 24% 2,400,000.00 (3,903.54) 795,496.52 5,393,388.92
FY93/94 Land Acquisition 24% 2,400,000.00 0.00 3,095,665.14 4,697,723.78
FY94/95 Land Acquisition 24% 2,400,000.00 0.00 561,176.73 6,536,547.05
FY95/96 Land Acquisition 24% 2,400,000.00 0.00 5,068,156.21 3,868,390.84
FY96/97 Land Acquisition 24% 2,400,000.00 0.00 465,716.09 5,802,674.75
FY97/98 Land Acquisition 24% 2,400,000.00 0.00 389,341.49 7,813,333.26
FY98/99 Land Acquisition 24% 2,089,500.00 0.00 2,153,279.66 7,749,553.60
FY99/00 Land Acquisition 24% 1,943,232.00 0.00 2,110,295.42 7,582,490.18
14
Heritage Fund Activity FY1991 – FY2000
Percent Revenue Revenue Expenditures Cash Balance
From Lottery Other
FY90/91 IIPAM 36% 2,124,000.00 28,753.01 2,095,246.99
FY91/92 IIPAM 36% 3,600,000.00 8,867.28 1,434,366.66 4,269,747.61
FY92/93 IIPAM 36% 3,600,000.00 3,903.54 2,803,888.85 5,069,762.30
FY93/94 IIPAM 36% 3,600,000.00 0.00 3,569,312.21 5,100,450.09
FY94/95 IIPAM 36% 3,600,000.00 129,247.18 3,601,449.90 5,228,247.37
FY95/96 IIPAM 36% 3,600,000.00 4,394.32 3,505,927.62 5,326,714.07
FY96/97 IIPAM 36% 3,600,000.00 16,968.10 3,982,700.93 4,960,981.24
FY97/98 IIPAM 36% 3,600,000.00 693,400.34 4,747,756.57 4,506,625.01
FY98/99 IIPAM 36% 3,134,250.00 103,569.35 3,510,483.74 4,233,960.62
FY99/00 IIPAM 36% 2,914,848.00 69,206.22 2,562,335.46 4,655,679.38
FY90/91 Habitat Evaluation 15% 885,000.00 31,132.63 853,867.37
FY91/92 Habitat Evaluation 15% 1,500,000.00 1,250.87 719,140.45 1,635,977.79
FY92/93 Habitat Evaluation 15% 1,500,000.00 2,722.97 1,066,239.01 2,072,461.75
FY93/94 Habitat Evaluation 15% 1,500,000.00 0.00 1,407,214.44 2,165,247.31
FY94/95 Habitat Evaluation 15% 1,500,000.00 1,473,493.39 2,191,753.92
FY95/96 Habitat Evaluation 15% 1,500,000.00 0.00 1,313,891.74 2,377,862.18
FY96/97 Habitat Evaluation 15% 1,500,000.00 14,553.36 1,444,641.17 2,447,774.37
FY97/98 Habitat Evaluation 15% 1,500,000.00 9,034.74 1,362,564.81 2,594,244.30
FY98/99 Habitat Evaluation 15% 1,305,937.50 1,996.65 1,281,067.36 2,621,111.09
FY99/00 Habitat Evaluation 15% 1,214,520.00 2,053.35 1,304,880.16 2,532,804.28
FY90/91 Urban 15% 885,000.00 28,319.53 856,680.47
FY91/92 Urban 15% 1,500,000.00 13,105.98 647,837.29 1,721,949.16
FY92/93 Urban 15% 1,500,000.00 1,182.16 1,077,852.90 2,145,278.42
FY93/94 Urban 15% 1,500,000.00 250.00 1,253,027.78 2,392,500.64
FY94/95 Urban 15% 1,500,000.00 42,267.94 1,489,751.83 2,445,016.75
FY95/96 Urban 15% 1,500,000.00 13,256.00 1,509,198.19 2,449,074.56
FY96/97 Urban 15% 1,500,000.00 127,311.77 1,372,560.80 2,703,825.53
FY97/98 Urban 15% 1,500,000.00 21,011.06 1,339,533.17 2,885,303.42
FY98/99 Urban 15% 1,305,937.50 10,610.00 1,324,445.23 2,877,405.69
FY99/00 Urban 15% 1,214,520.00 139,552.19 1,022,468.83 3,209,009.05
FY90/91 Interest 173,540.82 0.00 173,540.82
FY91/92 Interest 395,270.82 578.99 391,738.71 177,651.92
FY92/93 Interest 745,665.52 135.00 592,208.40 331,244.04
FY93/94 Interest 476,851.11 1,892.37 559,902.15 250,085.37
FY94/95 Interest 711,405.23 7,092.39 630,501.25 338,081.74
FY95/96 Interest 756,008.12 327.57 595,365.58 499,051.85
FY96/97 Interest 837,095.76 0.00 651,454.25 684,693.36
FY97/98 Interest 937,173.74 1,510.56 725,619.62 897,758.04
FY98/99 Interest 868,815.74 0.00 742,498.09 1,024,075.69
FY99/00 Interest 974,395.09 113.88 618,168.10 1,380,416.56
15
Other Performance Audit Reports Issued Within
the Last 12 Months
Future Performance Audit Reports
Department of Public Safety’s Licensing Bureau
Arizona Commission on the Arts
00-10 Arizona Department of Agricul-ture—
Food Safety and Quality As-surance
Program and Non-Food
Product Quality Assurance Program
00-11 Arizona Office of Tourism
00-12 Arizona Department of Public
Safety—Scientific Analysis Bureau
00-13 Arizona Department of Agricul-ture—
Pest Exclusion and Manage-ment
Program
00-14 Arizona Department of Agricul-ture—
State Agricultural Laboratory
00-15 Arizona Department of Agricul-ture—
Commodity Development
00-16 Arizona Department of Agricul-ture—
Pesticide Compliance and
Worker Safety Program
00-17 Arizona Department of Agricul-ture—
Sunset Factors
00-18 Arizona State Boxing Commission
00-19 Department of Economic Security—
Division of Developmental Disabili-ties
00-20 Department of Corrections—
Security Operations
00-21 Universities—Funding Study
00-22 Annual Evaluation—Arizona’s Fam-ily
Literacy Program
01-01 Department of Economic Security—
Child Support Enforcement
01-02 Department of Economic Security—
Healthy Families Program
01-03 Arizona Department of Public
Safety—Drug Abuse Resistance
Education (D.A.R.E.) Program
01-04 Department of Corrections—
Human Resources Management
01-05 Arizona Department of Public
Safety—Telecommunications Bureau
01-06 Board of Osteopathic Examiners in
Medicine and Surgery
01-07 Department of Corrections—
Support Services
01-08 Arizona Game and Fish Commission
and Department—Wildlife
Management Program