Performance audit, Arizona Department of Agriculture

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Debra K. Davenport
Auditor General
May 2000
Report No. 00-5
ARIZONA
DEPARTMENT
OF
AGRICULTURE
LICENSING FUNCTIONS
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee
composed of five senators and five representatives. His 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, he 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
Representative Roberta L. Voss, Chairman
Senator Tom Smith, Vice-Chairman
Representative Robert Burns Senator Keith Bee
Representative Ken Cheuvront Senator Herb Guenther
Representative Andy Nichols Senator Darden Hamilton
Representative Barry Wong Senator Pete Rios
Representative Jeff Groscost Senator Brenda Burns
(ex-officio) (ex-officio)
Audit Staff
Dale Chapman—Manager
and Contact Person (602) 553-0333
Ann Orrico—Audit Senior
Joseph McKersie—Staff
Patricia Osmon—Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
(602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.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
May 18, 2000
Members of the Legislature
The Honorable Jane Dee Hull, Governor
Mr. Sheldon R. Jones, Director
Arizona Department of Agriculture
Transmitted herewith is a report of the Auditor General, A Performance Audit of the
Arizona Department of Agriculture—Licensing Functions. This performance audit was
conducted as part of the Sunset review set forth in A.R.S. §41-2951 et seq. The review of
the Department’s Licensing Functions is consistent with the June 16, 1999, resolution of
the Joint Legislative Audit Committee requiring the Auditor General to review seven of
the Department’s ten programs. All seven of these programs issue licenses.
This is the first in a series of reports to be issued on the Department of Agriculture.
As outlined in its response, the Department of Agriculture agrees with all of the
findings and recommendations.
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 19, 2000.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
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OFFICE OF THE AUDITOR GENERAL
SUMMARY
The Office of the Auditor General has conducted a performance
audit of the Arizona Department of Agriculture—Licensing
Functions. This audit was conducted as a part of the Sunset re-view
set forth in Arizona Revised Statutes (A.R.S.) §§41-2951
through 41-2957 and is the first in a series of audits to be con-ducted
on programs within the Arizona Department of Agri-culture.
In 1989, the Legislature passed Laws 1989, Chapter 162, estab-lishing
the Department of Agriculture to provide for a uniform
and coordinated agricultural program and policy in the State.
Prior to its formation, most of the Department’s duties were car-ried
out by four smaller state agencies: the Arizona Commission
of Agriculture and Horticulture, the Arizona Livestock Board,
the State Egg Inspection Board, and the State Dairy Commis-sioner.
The Department assumed many regulatory responsibili-ties
from these previous state agencies, including the responsi-bility
for issuing over 70 different licenses, permits, and certifi-cates.
The Department’s Licensing
Functions Should Be Centralized
(See pages 9 through 15)
The Department should centralize its various licensing functions
to improve efficiency, customer service, and management over-sight
of the licensing process. Since its formation in 1991, the De-partment
has employed a decentralized process to issue its li-censes,
permits, and certificates. Currently, the Department
maintains 12 separate licensing functions to issue these licenses.
This fragmented approach to licensing has led to a number of
inefficiencies and weaknesses, including duplication of person-nel
and other resources, increased financial risk due to inappro-priate
cash-processing controls, and poor customer service. For
example, licensees holding more than one of the 70 kinds of li-censes
may need to complete multiple forms, interact with
The Department has 12 sepa-rate
licensing functions.
Summary
ii
OFFICE OF THE AUDITOR GENERAL
different Department personnel, and make several payments at
different times to obtain all needed licenses. By centralizing its
licensing functions, the Department can reduce these redundan-cies
and enhance customer service.
The Department estimates that it should take between 12 to 16
months to fully centralize its licensing functions. While under-taking
this effort, the Department should consider and address
several factors. First, the Department will need to consider its
data needs and determine what type of automated system will
best meet those needs. Currently, the Department maintains over
30 different licensing databases. However, Department man-agement
has indicated that it would prefer implementing a sin-gle
database to handle its licensing needs, and it should work
with the Government Information Technology Agency to assess
the cost and feasibility of such a database. Second, the Depart-ment
should develop a licensing policies and procedures manual
and train assigned licensing staff on licensing policies and pro-cedures
before licensing is centralized. Third, the Department
should review the current expiration dates of its licenses, per-mits,
and certificates to ensure the centralized unit’s processing
would be more evenly dispersed throughout the year. Currently,
the majority of the Department’s licenses expire in June, Septem-ber,
or December.
Regardless of whether the Department centralizes licensing, it
should adopt appropriate cash-processing controls including
adequately segregating duties; restrictively endorsing checks and
money orders immediately upon receipt; making daily deposits;
and reconciling receipts to deposits to strengthen its control over
cash receipts.
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OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS
Page
Introduction and Background ......................... 1
Finding I: The Department’s Licensing
Functions Should
Be Centralized.............................................. 9
Decentralization Weakens the
Department’s Effectiveness............................................ 9
Centralization Would
Improve Efficiency.......................................................... 11
Process Implementation Time
Allows Department to Make
Sound Preparations ........................................................ 13
Recommendations .......................................................... 15
Agency Response
Table
Table 1 Arizona Department of Agriculture
Licenses Issued, Associated Fees, and
Number Issued
Year Ended June 30, 1999
(Unaudited)................................................... 3
iv
OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
1
OFFICE OF THE AUDITOR GENERAL
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance
audit of the Arizona Department of Agriculture—Licensing
Functions. This audit was conducted as a part of the Sunset re-view
set forth in Arizona Revised Statutes (A.R.S.) §§41-2951
through 41-2957 and is the first in a series of audits to be con-ducted
on programs within the Arizona Department of Agri-culture.
Department History
and Mission
In 1989, the Legislature passed Laws 1989, Chapter 162, estab-lishing
the Department of Agriculture to provide for a uniform
and coordinated agricultural program and policy in the State.
Prior to its formation, most of the Department’s current duties
were carried out by four smaller state agencies: the Arizona
Commission of Agriculture and Horticulture, the Arizona Live-stock
Board, the State Egg Inspection Board, and the State Dairy
Commissioner.
The Department began operating as a state agency on January 1,
1991, and has defined its mission as:
“To regulate and support Arizona agriculture in a manner that
encourages farming, ranching, and agribusiness while protect-ing
consumers and natural resources.”
Department Issues Over
70 Types of Licenses
Among the many regulatory responsibilities the Department
assumed from the previous state agencies is the responsibility for
issuing over 70 different licenses, permits, and certificates. The
Department issues these licenses through eight of its ten pro-grams.
The two remaining programs, Administrative Services
Eight different programs
issue licenses, permits, and
certificates.
Introduction and Background
2
OFFICE OF THE AUDITOR GENERAL
and Agricultural Consultation and Training, do not have licens-ing
activities. Listed below are the eight programs involved in
licensing and the types of licenses each issues (see Table 1, pages
3 through 5, for a complete list of all license groups; together
with the number of licenses issued in fiscal year 1999, the num-ber
of staff involved in the licensing process, and the fee for each
license).
n Food Safety and Quality Assurance (27 Licenses)—This
program issues various licenses to ensure that the public food
supply meets established standards for safety and quality.
For example, the program issues licenses to meat processing
facilities, dairies, and egg producers, and fresh produce
growers, packers, and shippers.
n Animal Disease, Ownership and Welfare Protection (7
Licenses)—This program licenses livestock feedlots, regis-ters
livestock brands, and issues livestock hauling permits as
part of its efforts to monitor and regulate livestock health,
ownership, and movement.
n Pesticide Compliance and Worker Safety (10 Licenses)—
This program provides testing and issues licenses, permits,
and certificates to ensure that agricultural pesticide applica-tors
are qualified and that pesticides are used, stored, trans-ported,
and disposed of properly. For example, the program
issues permits to pesticide sellers and certificates to pesticide
applicators.
n Non-Food Product Quality Assurance (9 Licenses)—This
program helps to ensure the quality of animal feeds, fertiliz-ers,
pesticides, hay (forage), and seed by licensing feed and
fertilizer manufacturers and distributors, seed dealers and la-belers,
and hay brokers. In addition, the Department registers
pesticide and specialty fertilizer registrations.
n Pest Exclusion and Management (9 Licenses)—This pro-gram
works to ensure the provision of pest-free agricultural
products and to protect the public from agricultural pests. As
such, the Pest Exclusion program issues federal phytosani-tary
certificates, which certify that a particular shipment of
agricultural products is pest-free and enables the shipper to
Introduction and Background
3
OFFICE OF THE AUDITOR GENERAL
Table 1
Arizona Department of Agriculture
Licenses Issued, Associated Fees, and Number Issued
Year Ended June 30, 1999
(Unaudited)
Licenses, Certificates, Registrations,
and Permits by Program; FTE by Group Fees
Number
Issued
Food safety and quality assurance
Aquaculture (less than 1 FTE)
Aquaculture Processor $100 15
Aquaculture Facility 100 26
Fee Fishing 100 8
Special Licenses 10 11
Transporter Licenses 100 25
Citrus, fruit, and vegetable (less than 1 FTE)
Citrus Fruit Dealer—Packer/Shipper License 150 to 450 42
Fruit & Vegetable Contract Packers License 200 58
Fruit & Vegetable Dealer 200 to 500 372
Fruit & Vegetable Shipper’s License 200 to 500 52
Citrus Fruit—Experimental Containers no fee 3
Fruits & Vegetables—Experimental Containers no fee 0
Dairy and Egg (less than 1 FTE)
Dairy Sampler License (New/Renewal) 5/1.50 66/110
Milk Tester License 1.50 0
Milk Distributing Plant 50 6
Producer /Distributor Milk Processing Plant 25 3
Wholesale /Distributor (New/Renewal) 25/25 4/42
Plant Licensing—Manufacturing 50 8
Egg & Egg Product 25 97
Meat and Poultry Inspection (less than 1 FTE)
Meat Processing Plant License 10 94
License to Slaughter 5 to 80 47
Official Slaughter Meat License—Horse 5 to 80 0
Rendering Facility Certification 10 5
Sale or Exchange of Meat or Poultry—Distributors 10 91
Transfer of License 10 0
Transfer of License Without Fee No fee 0
Ratite Slaughterhouse Registration 100 5
Ratite Wholesale Processing Registration 25 5
Animal disease, ownership and welfare protection
Brands (1 FTE)
Brand Registrations 50 to 75 n1
1 The program’s database was unable to isolate the number of licenses issued during fiscal year 1999. Between May
1998 and February 2000, the number of registered brands increased by 650.
Introduction and Background
4
OFFICE OF THE AUDITOR GENERAL
Table 1 (cont’d)
Arizona Department of Agriculture
Licenses Issued, Associated Fees, and Number Issued
Year Ended June 30, 1999
(Unaudited)
Licenses, Certificates, Registrations,
and Permits by Program; FTE by Group Fee
Number
Issued
Animal disease, ownership and welfare protection (concl’d)
Equine (4 FTEs)
Equine Hauling Permits 5 14,467
Equine Ownership Transfer Certificates 5 21,727
Equine Trader Permit 100 15
Other Livestock (less than 1 FTE)
Beef Cattle Feedlot License 25 to 150 27
Livestock Import Permit No fee 12,439
Swine Garbage Feeder License 5 1
Pesticide compliance and worker safety
Pesticide Compliance (less than 1 FTE)
Pesticide Grower’s Permit $ 20 1,297
Pesticide Seller’s Permit 100 189
Agricultural Aircraft Pilot License 50 75
Custom Applicator License 100 61
Custom Application Equipment Tag 25 192
Agricultural Pesticide Control Advisor License 50 268
Commercial Applicator Certification 50 222
Private Applicator Certification 50 569
Government Applicator No fee 99
Trainer Certification No fee 239
Non-food product quality assurance
Fertilizer (less than 1 FTE)
Commercial Fertilizer License 125 328
Specialty Fertilizer Registration 50 1,890
Commercial Feed License—Distributor/Manufacturer 10 557
Sampler Certification No fee 0
Seed/Hay (less than 1 FTE)
Hay Broker License 10 62
Seed Dealer License 25 900
Seed Labeler License 40 181
Pesticide (less than 1 FTE)
Pesticide Registration 100 9,125
Experimental Use Permit No fee 12
Pest exclusion and management
Nursery/Phytosanitary (less than 1 FTE)
Arizona Certified Nursery Inspection 30 88
Ozonium Root Rot Inspection—Indicator Crops/Applicant’s
Property 50 3
Ozonium Root Rot Inspection—Indicator Crops/Surrounding
Area 50 0
Introduction and Background
5
OFFICE OF THE AUDITOR GENERAL
export these products to other countries. In addition, the pro-gram
issues certificates to plant nurseries certifying that they
are free from specific pests.
Table 1 (concl’d)
Arizona Department of Agriculture
Licenses Issued, Associated Fees, and Number Issued
Year Ended June 30, 1999
(Unaudited)
Licenses, Certificates, Registrations,
and Permits by Program; FTE by Group Fee
Number
Issued
Pest exclusion and management (concl’d)
Ozonium Root Rot Inspection—Method of Growing 50 5
Single Shipment Inspection for Nursery Products 10 124
Special Nursery Certification—Entire Nursery 30 68
Special Nursery Certification—Partial Nursery 20 2
Phytosanitary Field Inspection Certification Varies 1 396
Quarantine (less than 1 FTE)
Citrus Nursery Stock Pests No fee 422
Native plant and cultural resources protection
Native Plant (less than 1 FTE)
Non-Fee Permits to Move Cactus No fee 55
Scientific No fee 10
Municipalities2 No fee 8
Blue Seal 5 539
Harvest Restricted 25 10
Notice of Intent No fee 335
Salvage Assessed 25 13
Salvage Restricted 5 868
State agricultural laboratory
Laboratory (less than 1 FTE)
Laboratory Certification (New/Renewal) 200/100 0/5
Office of commodity development and promotion
Market Development and Promotions (less than 1 FTE)
Certificate of Free Sale 253 314
1 Price varies by commodity and acreage inspected.
2 Municipalities are salvage-restricted permits that pay no fees.
3 Per 100 consumable products listed.
Source: Auditor General staff analysis of license, permit, and certificate information obtained from the Department’s
annual reports from fiscal years 1992 through 1999; interviews with Department staff involved in licensing ac-tivities;
and reviews of licensing data from each program issuing licenses.
Introduction and Background
6
OFFICE OF THE AUDITOR GENERAL
n Native Plant and Cultural Resources Protection (8 Li-censes)—
With its mission to protect and conserve Arizona’s
native plants, historical sites, and other natural resources, this
program regulates the harvesting, transporting, and sale of
native plants by issuing permits to anyone who wishes to
remove a protected native plant from its habitat.
n State Agriculture Laboratory (1 License)—The Laboratory
certifies other laboratories that it contracts with to provide
service to the Department.
n Office of Commodity Development and Promotion (1
License)—This program issues Certificates of Free Sale,
which confirm that products listed on the certificate are sold
free and clear in the United States, to foster the domestic and
international consumption of Arizona agricultural com-modities.
Department’s Licensing
System Is Decentralized
After the four state agencies that today comprise the Department
of Agriculture were merged in 1991, some basic functions, such
as accounting, purchasing, and personnel, were centralized. The
licensing functions of the newly formed Department, however,
were not centralized because they were viewed as core responsi-bilities
of the merged organizations. The licensing function is
decentralized even further within individual programs. For ex-ample,
the Food Safety and Quality Assurance program has
separate functions and separate personnel to issue licenses for
egg and dairy, meat and poultry, and fresh produce.
The Department recently began looking into the possibility of
centralizing all of its licensing functions in an effort to improve
customer service and allow the Department to better utilize its
resources. The Department has appointed a task force, which
began meeting in mid-March 2000 to study the steps that must
be taken to centralize the Department’s licensing functions.
Introduction and Background
7
OFFICE OF THE AUDITOR GENERAL
Scope and Methodology
This audit focuses on the efficiency and effectiveness of the De-partment’s
current decentralized method of issuing licenses,
permits, and certificates. Several methods were used to study
this issue, including:
n Reviewing various reports, including the Department’s an-nual
reports from fiscal year 1992 to fiscal year 1999 and the
Department’s fiscal year 2000–2002 strategic plan, and perti-nent
statutes and rules to determine which licenses, permits,
and certificates the Department is mandated to issue.
n Analyzing Uniform Statewide Accounting System data to
document the total revenue generated by all Department li-censes,
permits, and certificates for fiscal years 1997, 1998,
and 1999.
n Reviewing literature regarding centralization of various or-ganizational
functions to study the potential benefits and
drawbacks of a centralized licensing function.
n Interviewing Department employees involved in licensing
and reviewing their Position Description Questionnaires
(PDQ) to determine and assess the processes used to issue li-censes,
permits, and certificates as well as collect associated
fees, and the percentage of time employees spend on the li-censing
function. Also, discussing with Department man-agement
the factors that would need to be considered before
implementing a centralized licensing system.
n Surveying other entities that issue various licenses, permits,
and certificates through a centralized licensing function, in-cluding
the State of Montana’s Department of Agriculture as
well as Arizona’s Department of Health Services, Depart-ment
of Liquor Licenses and Control, and the Registrar of
Contractors to gather information on these entities’ experi-ences
with centralized licensing functions.1
1 The Montana Department of Agriculture was contacted because it was
the only Western state identified that issues various agricultural-related
licenses, permits, and certificates through a centralized system.
Introduction and Background
8
OFFICE OF THE AUDITOR GENERAL
This report presents one finding along with recommendations,
addressing the need for the Department to centralize its licensing
functions.
This audit was conducted in accordance with government
auditing standards.
The Auditor General and staff express appreciation to the Di-rector
and staff of the Department of Agriculture for their coop-eration
and assistance throughout the audit.
9
OFFICE OF THE AUDITOR GENERAL
FINDING I THE DEPARTMENT’S
LICENSING FUNCTIONS
SHOULD BE CENTRALIZED
The Department should centralize its licensing functions. The
Department’s current decentralized licensing approach causes
duplication of effort, exposes receipts to greater risk of loss or
theft, and lessens the Department’s ability to make licensing as
easy as possible for the customer. Centralizing the licensing
function offers the Department the opportunity to better manage
and allocate its staff resources so that operations can become
more efficient and risk can be reduced. It also provides opportu-nities
to better serve customers by simplifying the process. To
prepare for a centralized approach, the Department needs to
address its data processing needs, establish clear procedures for
its staff to follow, and better balance the cyclical nature of its li-censing
workload.
Decentralization Weakens the
Department’s Effectiveness
The Department has had a decentralized licensing process since
its creation in 1991. This approach has led to a number of ineffi-ciencies
and weaknesses, including duplication of effort, greater
financial risk for the State, and a diminished ability to provide
good customer service. Specifically:
n Duplication of Effort—The Department’s decentralized li-censing
approach divides licensing responsibilities among
many employees. Currently, 17 employees within the various
programs that process licenses receive and review license ap-plications
for completeness, collect the associated fees, enter
the application information into a computerized database or a
manual recording system, and issue a completed license to an
applicant.1 Six of these employees work on licensing activities
full-time, while the remaining 11 employees spend 5 to 40
1 This number does not include management or administrative employees
who oversee licensing functions.
Decentralized licensing leads
to duplication, greater risk of
loss or theft, and less efficient
customer service.
Finding I
10
OFFICE OF THE AUDITOR GENERAL
percent of their time on licensing tasks. Because most of the
17 employees devote only part of their time to licensing, the
time devoted to licensing equals approximately 8 FTEs. De-partment
management agrees that too many employees issue
licenses within the Department and centralization would al-low
some licensing personnel to be reassigned other duties.
One outgrowth of the divided responsibilities is considerable
duplication of tasks. Each licensing function has its own
computerized database or manual recording system for
storing and tracking licensing data, resulting in duplicate
data entry. Currently, there are over 30 databases being used
for licensing purposes throughout the Department. As a re-sult,
basic data, such as name, address, and type of business
for customers requiring multiple licenses must be separately
entered into each applicable database. A review of data from
11 different licensing databases revealed over 300 licensees
who were included in two or more of these databases be-cause
they require multiple licenses. For example, one cus-tomer
is separately licensed as an egg producer and a hay
dealer, but also holds feed and fertilizer licenses as well as
livestock hauling permits. Therefore, data on this customer is
entered into at least five different databases.
n Increased Financial Risk—The decentralized licensing pro-cess
also increases the Department’s exposure to risk for theft
or misappropriation. Most of the Department’s licensing
functions have only one employee assigned to handle all as-pects
of the licensing process, including fee collection. Thus,
the fees for these licenses or licensing functions are received,
processed, and deposited by the same person. This practice
does not allow the Department to properly segregate cash re-ceipt
duties for fee collection. For example, the employee
who processes citrus, fruit, and vegetable licenses collected
over $195,000 in license fees during fiscal year 1998-99. Be-cause
fee collection duties are not properly segregated for
any of the Department’s licensing functions, this places the
over $1.5 million the Department received in total licensing
revenue during fiscal year 1998-99 at greater risk for possible
theft or misappropriation. In addition, receipts are typically
not reconciled to deposits to ensure that all monies received
were deposited and credited to the appropriate program and
revenue category.
The Department uses over 30
databases for licensing.
Inadequate controls place
$1.5 million in licensing fees
at risk for theft or misappro-priation.
Finding I
11
OFFICE OF THE AUDITOR GENERAL
n Diminished Customer Service—The Department’s current
licensing approach hinders effective customer service in sev-eral
ways. First, processing delays or backlogs can result from
assigning only one employee to handle a specific license or li-cense
group, especially if that employee is absent from work
for any length of time. Currently, the Department has a lim-ited
number of staff who are cross-trained to issue licenses in
the absence of any of the ten employees who work alone to
process licenses.
Another way in which decentralization hinders effective
customer service is the added degree of effort involved for
customers who go through the licensing process. Customers
requiring various licenses must contact different employees
throughout the Department for each license required, poten-tially
resulting in confusion or frustration. In addition, these
customers must fill out the same types of information on dif-ferent
forms for each license sought. In contrast, the Arizona
Department of Liquor Licenses and Control currently uses 4
licensing forms to issue 16 different licenses through its cen-tralized
licensing function.
Centralization Would
Improve Efficiency
Centralizing the Department’s various licensing functions would
improve customer service and management oversight, and
eliminate processing redundancies.1 In this instance, centraliza-tion
offers the following benefits:
n Better Allocation of Staff Resources—Centralization
would enable the Department to more efficiently and effec-tively
use its staffing resources. Specifically, the Department
1 According to the Department, while virtually all of its licensing and/or
permitting functions can be centralized, a few of its licenses and/or per-mits
would not be conducive to centralization. For example, certain Pest
Exclusion and Management Program quarantine permits cannot be is-sued
without the technical expertise of State Agricultural Laboratory
personnel as well as other Department personnel. Thus, the staff of a
centralized licensing unit would not have the expertise needed to issue
these permits.
Finding I
12
OFFICE OF THE AUDITOR GENERAL
could reduce the number of staff assigned to licensing, free-ing
positions for other responsibilities and allowing the re-maining
licensing staff to develop greater expertise in this
area.
n Improved Control over Receipts—A centralized licensing
system would allow the Department to strengthen its control
over cash receipts by properly segregating the duties of re-ceiving,
processing, and depositing licensing fee payments
among the employees within the licensing area.
n Streamlined Administrative Processes—Centralization
would allow the Department to implement a single licensing
database instead of the multiple databases it currently uses,
providing a single source for collecting and reporting licens-ing
data. It would also allow the Department to develop uni-form
licensing policies and procedures to ensure that all li-censes
are processed and issued in an appropriate and con-sistent
manner.
n Better Customer Service—Centralizing the licensing func-tion
would also allow the Department to improve its cus-tomer
service efforts. Customers would no longer need to go
to multiple places, fill out as many forms, or face possible li-censing
delays due to employee absences.
Regardless of whether the Department centralizes the licensing
function, it should take several other steps to strengthen its con-trol
over cash receipts. For instance:
n The Department should ensure that all fee payments,
whether received in-person or through the mail, are immedi-ately
endorsed upon receipt and deposited daily to better
safeguard these monies.
n The Department should also ensure that all monies received
are deposited and credited to the appropriate program by
reconciling receipts to deposits.
Finding I
13
OFFICE OF THE AUDITOR GENERAL
Process Implementation Time
Allows Department to Make
Sound Preparations
Careful planning is important for making sure the centralization
process works as efficiently as possible. The Department esti-mates
that the centralization process could take 12 to 16 months
to complete. This gives the Department time to make sound
preparations. Matters needing particular attention in those
preparations include the following:
n Developing a single database as economically as possi-ble—
The Department will need to consider its data needs
and determine what type of automated data system will best
meet these needs. Specifically, Department management
would like to implement a single database to handle all of the
Department’s licensing needs. Therefore, the Department
should work with the Government Information Technology
Agency (GITA) to assess the feasibility and cost of a single or
networked licensing database. In fact, GITA review and ap-proval
of information technology projects is required for all
proposed projects costing at least $25,000 and according to
the Director of GITA, can assist agencies in obtaining the nec-essary
approval and funding from the Legislature for these
projects. Department management estimates the cost to de-velop
and implement a new licensing database could poten-tially
total $1 million.
Similarly, the Department of Liquor Licenses and Control re-ports
that it implemented an automated information system
with a single licensing database and imaging capabilities in
1994 at a cost of $1.1 million. Not only does this system allow
the Department of Liquor Licenses and Control to maintain
its licensing information in one location and more easily re-trieve
this information, it allows the Department to scan and
store all licensing documents into the system and thereby op-erate
in a paperless work environment. This has facilitated
the Department of Liquor Licenses and Control’s efforts to
process an estimated 10,200 new and renewed licenses annu-ally.
Likewise, the Department could benefit from a similar
information system because the Department issued ap-proximately
70,000 licenses, permits, and certificates in fiscal
year 1999 and currently must store its license-related docu-
Licensing files take up nearly 90
four-drawer filing cabinets.
Finding I
14
OFFICE OF THE AUDITOR GENERAL
ments in nearly 90 four-drawer filing cabinets. To minimize
the potential costs of a new automated licensing system, the
Department should consider contacting the Department of
Liquor Licenses and Control and the Registrar of Contractors,
which also operates a single licensing database, to determine
whether these agencies’ databases can be adapted to meet the
Department’s needs.
n Creating comprehensive policies and procedures—The
Department should develop a licensing policies and proce-dures
manual. The manual should contain policies and pro-cedures
specific to each license, permit, or certificate type to
ensure that staff can handle each one appropriately and con-sistently.
Specifically, the manual should contain detailed in-structions
on how to process and issue each type of license,
permit, and certificate and discuss proper cash-processing
controls. The Department should also ensure that all em-ployees
assigned to the centralized licensing unit receive
training on licensing policies and procedures before the unit
begins operations.
n Making the workload as consistent as possible—The
Department should review the current expiration dates of its
licenses, permits, and certificates to ensure that the unit’s
workload would be as consistent as possible throughout the
year. Currently, the majority of the Department’s licenses ex-pire
in June, September, or December, while the remainder
are scattered throughout the rest of the year. The Department
should consider developing a renewal method that would
provide for even workloads while not burdening its custom-ers.
The Department reports that while it may have to main-tain
some of its current license renewal dates to meet cus-tomer
needs, it may be possible to develop alternative re-newal
methods for other licenses.
For example, citrus, fruit, and vegetable licenses are currently
renewed during the off-peak growing season of August and
September, so as not to overburden these customers during
the peak growing season. However, other licenses, such as
egg or dairy licenses, could be renewed at various dates
throughout the year without interrupting these customers’
business operations. For licenses without sensitive renewal
dates, the Department could consider assigning expiration
Finding I
15
OFFICE OF THE AUDITOR GENERAL
dates based on the customer’s last name or company name
rather than by license type. This approach would allow the
Department to provide an even workload throughout the
year for its licensing staff, and customers requiring various li-censes
would be able to obtain all necessary licenses at the
same time.
Recommendations
1. The Department should centralize its license, permit, and
certificate functions into a single function.
2. The Department should work with GITA to explore the fea-sibility
of developing and implementing a single database to
store and track all licensing data. The Department should
also explore the possibility of adapting a single licensing da-tabase
from another state agency.
3. The Department should develop a licensing policies and pro-cedures
manual that contains specific instructions on how to
process and issue each type of license, permit, and certificate
the Department is responsible for. The manual should also
detail proper cash receipt controls, including segregating fee
collection, processing, and depositing; restrictively endorsing
checks and money orders immediately upon receipt; making
daily deposits; and reconciling receipts to deposits.
4. The Department should adopt appropriate cash-processing
controls for the licensing fees it receives regardless of its ef-forts
to centralize its licensing functions.
5. The Department should train its licensing staff on the licens-ing
policies and procedures, when developed.
6. The Department should consider developing a renewal
method that would provide for an even licensing workload
throughout the year, while not burdening customers.
16
OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
OFFICE OF THE AUDITOR GENERAL
Agency Response
OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
JANE DEE HULL
Governor
SHELDON R. JONES
Director
Arizona Department of Agriculture
Office of the Director
May 5, 2000
Ms. Debbie Davenport
Auditor General
Office of the Auditor General
2910 North 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Ms. Davenport:
Enclosed is the Arizona Department of Agriculture’s response to the ADA, Licensing Functions Audit.
The ADA agrees in general with the findings and recommendations of the audit team.
The ADA is pleased to note that it has already begun to identify many of the issues documented in your
report and have begun implementing corrective action. Our goal for the next twelve to sixteen months is
to continue the efforts already underway with a strong emphasis on improving the delivery of quality
customer service to our internal and external stakeholders.
We extend our appreciation to the audit team for their professionalism and attention to detail. I certainly
appreciate their willingness to seek out the department’s input and clarification of issues identified in this
report.
Sincerely,
Sheldon R. Jones
Director
SRJ:NW:jg
Enclosure
1
AUDITOR GENERAL’S RECOMMENDATIONS
AGENCY RESPONSE
Overview:
The Arizona Department of Agriculture (ADA) agrees in general with the findings and
recommendations of the audit team and would like to thank the Auditor General’s staff
for the professional manner in which the audit was performed.
Mark Twain once wrote, “Few things are harder to put up with than the annoyance of a
good example.” We believe the ADA, while it continues to identify methods of
improving its delivery of service to Arizona’s growing agricultural industry and the
public as a whole, is a good example of how government should strive to work. We take
very seriously our mission and our charge to regulate and promote Arizona agriculture in
manner that promotes farming, ranching and agribusiness while protecting consumers
and natural resources.
While this cabinet level agency was created only ten years ago, to serve and regulate
Arizona’s agriculture industry, a number of things have and continue to change about the
industry we serve. Foremost is the changing face of our customers, which reflects the
industry as a whole. Arizona is internationally renowned for its diverse agricultural
production. From artichokes to cattle, cotton and citrus to shrimp and watermelons,
Arizona is continuously increasing its agricultural diversity. It is entirely fascinating to
observe the customers that call on us every day. The ADA is constantly asked to service
more than the program crops of wheat, cattle, cotton and dairy. Ten years ago, the
aquaculture, ratite, custom slaughter, wine and massive nursery industry did not exist as
they do today. Because of the changing face of our customers and the public’s demands
for faster, more efficient service, the ADA recognizes more must be done to meet the
challenges we face today and those we will face in the future.
As indicated in the Auditor General’s report, the characteristics of the ADA’s multiple
licensing functions contribute to duplication of effort and resources on the part of both
the Department, as well as the public it serves. The ADA appreciates the Auditor
General’s recognition of the many efforts and initiatives made by ADA staff to explore
the efficiencies to be gained by streamlining its licensing functions. Our goal in the next
twelve to sixteen months is to fully explore and implement, where prudent, the
centralization of our multiple licensing functions. As the report indicates, while such an
effort will result in a cost-effective, customer service oriented process, the report equally
stressed the need for the purchase and development of technology to accommodate a
singular database warehouse.
The findings of this audit report will be incorporated into our discussions with other state
agencies and other agency stakeholders to further refine the system for meeting the
dynamic and ever changing needs of Arizona’s agriculture industry and the public at
large.
2
Finding I: The Department’s Licensing Functions Should Be Centralized
Recommendation 1: The Department should centralize its license, permit, and
certificate functions into a single function.
Agency Response: The finding of the Auditor General is agreed to and the audit
recommendation will be implemented.
The Arizona Department of Agriculture was created by legislation
that united the functions and employees of multiple boards and
commissions under the leadership of one cabinet level agency. In
so doing, the Arizona Department of Agriculture was challenged to
perform all the responsibilities of its multiple predecessors, and to
do so more consistently, efficiently and timely.
The centralization of the administrative aspect of the Department’s
licensing functions is the next step to uniting the responsibilities of
the agency’s late predecessors. By streamlining, we will be doing
more than housing old programs with old functions. By
streamlining, we will be blending program functions across
divisional lines by minimizing duplications of effort, resources,
and time. By streamlining, the ADA will break down the
remaining walls of its predecessors. In so doing, the ADA receives
the Auditor General’s recommendation as an endorsement of
internal initiatives already underway.
The Arizona Department of Agriculture, as the report asserts,
began work on “centralizing all of its licensing functions in an
effort to improve customer service and allow the Department to
better utilize its resources.” As the agency strives to centralize the
administrative aspect of its licensing functions, we fully anticipate
the possibility that some of these licenses may be better maintained
in separate, decentralized functions. This possibility has been
discussed at great length with members of the audit team and will
likely be the subject of numerous debates with various agricultural
associations. At this point, however, the ADA will continue to
work with an internal task force comprised of staff members from
every licensing program to identify which aspects each of these
permits, certificates and licenses have in common. By identifying
the common denominator between the administrative aspects of
these licensing functions, the ADA will be able to identify which
licenses fit into a centralized environment and just as importantly,
identify those licenses that may remain better maintained and
issued in the field.
3
Therefore, while the ADA will continue to centralize the
administrative aspect of its licensing functions, the ADA
anticipates that a few licenses may be better managed by remaining
decentralized.
Additionally, it is important to note that centralized licensing will
not result in the narrowing of geographical access to ADA services
by members of the public or Arizona’s agriculture industry. To the
contrary, controls over common data and processes can be
centralized, while delivery of service can be managed to a higher
level of customer satisfaction. There are multiple ways to achieve
this. For example, agency stakeholders and customers will still
receive necessary services in the field, however, the data collected
from these licensing transactions will be centralized into one
function for consistent and accessible storage. The ADA
appreciates the Auditor General’s support of this philosophy.
Recommendation 2: The Department should work with GITA to explore the
feasibility of developing and implementing a single database to
store and track all licensing data. The Department should also
explore the possibility of adapting a single licensing database
from another state agency.
Agency Response: The finding of the Auditor General is agreed to and the audit
recommendations will be implemented.
The Arizona Department of Agriculture has already implemented
this recommendation. While the Department is presently working
with GITA and other state agencies to determine the extent to
which the singular database must perform, it is quite likely that
additional information resources will be necessary.
As the audit report points out, such a database is estimated to cost
approximately $1 million. With such resources, the ADA would
be able to centralize the administrative portion of its more than
seventy licensing functions, and enable reliable and accessible data
between programs and to the public. The ADA appreciates the
support the audit team so enthusiastically showed for this
necessary resource and hopes that the Legislature will
acknowledge and fulfill this need during the next budget biennium.
Recommendation 3: The Department should develop a licensing policies and
procedures manual that contains specific instructions on how
to process and issue each type of license, permit, and certificate
4
the Department is responsible for. The manual should also
detail proper cash receipt controls, including segregating fee
collection, processing, and depositing; restrictively endorsing
checks and money orders immediately upon receipt; making
daily deposits; and reconciling receipts to deposits.
Agency Response: The finding of the Auditor General is agreed to and the
recommendation will be implemented.
We believe the greatest challenge of centralizing the Department’s
numerous licensing functions will be the need for employee
education. To prepare for this eventuality, the ADA has begun
work on a policy and procedures manual that will assist the
licensing personnel in the proper methods of record retention,
GAAP financial requirements and customer service.
As a small agency with duplicative licensing functions, we do not
have sufficient people in all areas, at present, to comply with
GAAP financial controls for handling money which, of course,
involves separate people for receipt, posting, depositing, and
reconciliation of funds. Centralized licensing will give the ADA
the necessary coverage and training to comply with GAAP, better
maintain records, and provide improved customer service. By
centralizing these and other administrative aspects of agency
licensing, the ADA will be able to lessen overhead and other
physical resources by re-deploying employees into other activities
where their presence will be of greater assistance to Arizona’s
agriculture industry.
Recommendation 4: The Department should adopt appropriate cash-processing
controls for the licensing fees it receives regardless of its efforts
to centralize its licensing functions.
Agency Response: The finding of the Auditor General is agreed to and the
recommendation will be implemented.
As the ADA is in the preliminary stages of centralizing the
administrative portion of its licensing functions, the Department
will implement the recommendation in tandem with its efforts to
centralize. Such a recommendation falls completely on the side of
common sense and would be implemented regardless of the
Auditor General’s recommendation.
5
Recommendation 5: The Department should train its licensing staff on the licensing
policies and procedures, when developed.
Agency Response: The finding of the Auditor General is agreed to and the
recommendation will be implemented.
As a step in the centralization process, the ADA will make every
effort to cross-train its licensing personnel on the policies and
procedures manuals once completed. Such a step is the only
responsible and prudent method to go about centralizing so many
activities.
The Department has already begun planning for this critical stage
of the centralization process by enlisting the expertise of its
Training Manager.
Recommendation 6: The Department should consider developing a renewal method
that would provide for an even licensing workload throughout
the year, while not burdening customers.
Agency Response: The finding of the Auditor General is agreed to and the
recommendation will be implemented.
The ADA will certainly consider ways to provide for an even
licensing workload throughout the year. As the audit team is
aware, however, many of the ADA’s present licensing renewal and
expiration timeframes are established by statute and based on the
seasonality of the agricultural producer’s (our most frequent
customer) needs.
Other Performance Audit Reports Issued Within
the Last 12 Months
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99-6 Department of Health Services—
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