Performance audit, Department of Agriculture food safety and quality assurance program and non-food product quality assurance program

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Debra K. Davenport
Auditor General
Date of Report June 2000
Report No. 00-10
DEPARTMENT
OF
AGRICULTURE
FOOD SAFETY AND
QUALITY ASSURANCE
PROGRAM
AND
NON-FOOD PRODUCT
QUALITY ASSURANCE
PROGRAM
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
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
June 28, 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—Food Safety and Quality Assurance Program and Non-Food
Product Quality Assurance Program. This report is in response to a June 16, 1999, resolution
of the Joint Legislative Audit Committee. The performance audit was conducted as part of
the Sunset review set forth in A.R.S. §41-2951 et seq. I am also transmitting a copy of the
Report Highlights for this audit to provide a quick summary for your convenience.
This is the third in a series of reports to be issued on the Arizona Department of Agriculture.
As outlined in its response, the agency 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 June 29, 2000.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
OFFICE OF THE AUDITOR GENERAL
Program Fact Sheet
Department of Agriculture
Food Safety and Quality Assurance Program
Revenue: $5.1 million
(Estimated for Fiscal Year 2000)
Personnel: 136.5 FTEs (Fiscal Year 2000)
Dairy (5)
Meat/Poultry
(23.8)
Ctirus, Fruit,
Veg (20)
Federal/State
(81.6)
Egg Inspection
(6)
Services: The Food Safety and Quality Assurance Program offers the following services: 1)
Meat and poultry licensing and inspection—Licenses and inspects slaughtering and proc-essing
facilities; 2) Dairy licensing and inspection—Licenses and inspects dairy processing
and distributing plants, dairy farms, and milk tankers; 3) Egg licensing and inspection—
Licenses egg producers and inspects eggs and egg products, as well as poultry and eggs
used in school lunch programs; 4) Citrus, fruit, and vegetable standardization licensing and
inspection—Licenses produce growers, shippers, and dealers, and provides quality inspec-tions
of Arizona produce 5) Federal/state inspection—Inspects produce imported from
Mexico.
Facilities: 3
Ø Most inspectors are stationed at the
Department’s office at the Capitol; and
Ø The USDA provides the Department
with buildings in Nogales and Yuma for
use in operating the Federal/State In-spection
Program.
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
1998 1999 2000
Other (fines, state/local grants, interest, misc.)
Federal
Licensing/Inspection Fees
General Fund Approps
$5 Million $5.1 Million
State Capitol
µ
Nogales
µ
Yuma
µ
$5.1 Million
OFFICE OF THE AUDITOR GENERAL
Adequacy of Goals and Performance
Measures: The Department could make
some improvements to the seven goals for
its two subprograms and their associated
performance measures.1
n The program’s goals incorporate too many
performance measurements to effectively
track performance. For example, under the
goal, “To maintain an effective regulatory
system of animal food product inspections,”
the Department has developed over 40 per-formance
measures.
n While the program generally employs ap-propriate
outcome and efficiency measures,
the Department does not collect all the data
necessary. For example, the Department has
not collected the data to track enforcement
actions taken by Fresh Produce Standardiza-tion
and Inspection. Further, the Department
does not report the number of days it takes
to process license applications, a measure re-quired
by the Office of Strategic Planning
and Budgeting.
n The Department has overstated its cus-tomer
satisfaction results. The Department
reports that 75 percent of the industry
rated overall program satisfaction as excel-lent
or good. However, to measure this,
the Department surveyed 198 industry
members but received only 37 responses.
______________________
1 The Department included two of these goals and
associated performance measures in order to com-ply
with guidelines specified in the Budget and
Planning Instructions for fiscal years 2000 and 2001
issued by the Governor’s Office of Strategic Plan-ning
and Budgeting.
Program Goals (Fiscal Years 2000
through 2002):
Subprogram 1: Animal Products Food
Safety and Quality Inspection
1. To provide an overview of
inspection and regulatory
measures.
2. To maintain an effective regula-tory
system of animal food
product inspections.
3. To satisfy customer needs in
responding to voluntary in-spection
and grading service
requests from industry or the
USDA.
Subprogram 2: Fresh Produce
Standardization and Inspection
1. To provide an overview of
inspection and regulatory
measures.
2. To maintain an effective system
of fresh produce inspections
and field monitoring activities.
3. To increase efficiency of admin-istrative
operations.
4. To provide accurate and uni-form
federal-state inspection
and grading services.
Equipment: State vehicles are the primary
equipment used.
6 15-passenger vans
20 trucks
16 cars
The Department leased 42 vehicles at a cost
of approximately $189,000 in fiscal year
2000.
OFFICE OF THE AUDITOR GENERAL
Program Fact Sheet
Department of Agriculture
Non-Food Product Quality Assurance Program
Services: The Non-Food Product Quality Assurance Program offers the following services:
1) Product registration—Registers pesticides and fertilizers; 2) Licensing—Licenses feed,
fertilizer, forage (hay), and seed dealers and labelers; 3) Inspection and sampling—Inspects
feed, fertilizers, pesticides, and seed, primarily at the retail level, and collects samples to
ensure that label statements and product guarantees are adhered to.
Facilities: 3
Personnel: 10.5 FTEs (Fiscal Year 2000)
Inspectors (3)
State Agricultural
Laboratory Staff (1.5)
Administrative
Support Staff (6)
State Capitol
µ
Tucson
µ
Yuma
µ
n Most staff are located at the Depart-ment’s
office at the Capitol, and
n The Department rents facilities in Tuc-son
and Yuma at an annual cost of ap-proximately
$13,880.
Revenue: $1.6 million
(Estimated for Fiscal Year 2000)
0
500,000
1,000,000
1,500,000
2,000,000
1998 1999 2000
Other (fines, state/local grants, interest, misc.)
Licensing, Inspection/Registration Fees
General Fund Appropriations
$1.9 Million $1.9 Million $1.6 Million
OFFICE OF THE AUDITOR GENERAL
Equipment: State vehicles are the primary
equipment used. Specifically, during fiscal
year 1999, the Department leased 13 trucks
at a cost of approximately $19,500.
Program Goals (Fiscal Years 2000
through 2002)
1. To provide an overview of inspection
and regulatory measures;
2. To provide accurate and timely licens-ing
and registration services to custom-ers
as the first step in gaining compli-ance
with feed, fertilizer, pesticide, for-age,
and seed regulations; and
3. To protect the interests of consumers by
removing substandard non-food prod-ucts
from the market place.
Adequacy of Goals and Performance
Measures: While the Department’s goals
and performance measures are appropriate
for the most part, some improvements
could be made. Specifically:
Ø The Department has overstated its customer
satisfaction results. The Department reports
that 85 percent of its customers rated overall
administrative processes as “excellent” to
“good.” However, to measure this, the De-partment
surveyed 653 customers, but only
received 62 responses.
Ø The Department does not have sufficient
measures to assess the efficiency of its in-spection
and sampling function. For exam-ple,
the Department lacks measures for de-termining
the number of retail stores visited
per inspector and the number of samples
collected by inspector.
Finally, the Department would like to make
some changes to its performance measures
to better align them with the Department’s
enforcement authority. Specifically, one
performance measure requires the Depart-ment
to track the number of calendar days
it takes manufacturers of non-food prod-ucts
to bring products into compliance from
the date they are notified of noncompliance.
While the Department can invoke its au-thority
to issue fines or cease-and-desist
orders, it has no authority over the number
of days it takes a manufacturer to make a
product compliant.
i
OFFICE OF THE AUDITOR GENERAL
SUMMARY
The Office of the Auditor General has conducted a performance
audit of the Arizona Department of Agriculture’s Food Safety
and Quality Assurance Program and its Non-Food Product
Quality Assurance Program, pursuant to a June 16, 1999, resolu-tion
of the Joint Legislative Audit Committee. This audit was
conducted as a part of the Sunset review set forth in Arizona
Revised Statutes (A.R.S.) §§41-2951 through 41-2957 and is the
third in a series of audits to be conducted on programs within
the Arizona Department of Agriculture.
Since 1991, the Department has regulated various food and non-food
product industries. Within its Food Safety and Quality As-surance
Program, the Department protects the public health and
safety through its meat and poultry, dairy, and egg inspection
activities. Further, as part of this program, the Department in-spects
fresh produce grown in Arizona or imported from Mexico
to ensure that Arizona-grown produce conforms to the State’s
minimum quality standards and that Mexican produce meets
federal import requirements. Through its Non-Food Product
Quality Assurance Program, the Department seeks to protect the
public’s interest by ensuring the quality of Arizona’s feed, fertil-izer,
pesticide, forage (hay), and seed products.
Department Could Take
Steps to Address Industry
Concerns Regarding the CFV
Standardization Program
(See pages 9 through 18)
Through the Citrus, Fruit, and Vegetable Standardization Pro-gram
(CFV), the Department is charged with ensuring that pro-duce
grown or sold in Arizona meets the State’s minimum qual-ity
standards. The Department performs this function for the
The Department inspects
meat, poultry, dairy prod-ucts,
eggs, and produce.
Summary
ii
OFFICE OF THE AUDITOR GENERAL
benefit of Arizona’s citrus, fruit, and vegetable industry, and the
industry funds the program through licensing fees and an as-sessment
of .004 cents for every carton of produce shipped from
Arizona growers/shippers. Although the CFV program is de-signed
solely for the benefit of industry, industry respondents to
an Auditor General survey had questions regarding the pro-gram’s
value, interest in “opting out” of the program, and strong
feelings against paying any more in assessments to increase
available inspection resources. For example, while 39 percent of
respondents (26 of 67) felt that assessment fees were too high to
justify the benefits derived from the program, 94 percent of re-spondents
are not willing to pay higher fees to expand the pro-gram’s
inspection resources.
Although the Department and its CFV Advisory Council have
taken some steps to improve the program, more could be done
to help the program operate more efficiently with the resources it
has. Specifically, even though the Department has an inspection
sampling plan, it should develop a more systematic plan to assist
in determining what commodities to inspect, the quantity of each
commodity to inspect, and the specific growers to visit. Further,
the Department should explore options for scheduling and/or
centralizing some of its inspection activities, where appropriate,
to maximize its inspectors’ time. Moreover, the Department
could eliminate inspectors’ non-inspection related tasks, imple-ment
risk-based inspections to take violation histories into ac-count,
and improve its management of program data. Finally,
the Department and the CFV Advisory Council should take
steps to better communicate program information to all program
participants, including information on opting out of the pro-gram.
Non-Food Product Quality
Assurance Program Needs
Improved Sampling Approach
(See pages 19 through 23)
Although the Non-Food Product Quality Assurance Program
often identifies instances of substandard quality in feed, fertiliz-ers,
pesticides, or seed, the program is not as effective as it could
be. The Department is guided in its sampling efforts by sampling
The program could oper-ate
more efficiently.
Summary
iii
OFFICE OF THE AUDITOR GENERAL
plans. However, these plans lack some key components. Specifi-cally,
the Department’s plans lack a sampling frame, which is a
comprehensive list of retailers of the products being sampled,
and do not specify which retailers inspectors should visit to col-lect
product samples. Also, although the Department collects
violation data from its sampling efforts, it does not effectively use
this data to develop, monitor, or change its sampling of non-food
products.
While the Department established a committee in 1994 to de-velop
sampling plans that would maximize consumer protection
and public health and make efficient use of resources, the com-mittee
did not incorporate a comprehensive list of retailers to be
sampled or sufficiently consider product or retailer violations. To
ensure that its non-food product program adequately protects
the public and makes efficient and effective use of resources, the
Department should reconvene its sampling plan committee and
develop and implement appropriate sampling plans. Moreover,
the Department should ensure that the plans include sampling
frames, to the extent possible, and adequately consider violation
data. For example, to develop a sampling frame listing retailers
of non-food products, the Department can begin by using its
own data on licensees and product registrants as well the lists it
has developed identifying the retailers it has visited annually
during the past five years.
The Nogales Office Needs to
Strengthen Its Cash-Processing Controls
(See pages 25 through 28)
The Federal/State Inspection Service’s Nogales Office can help
prevent the loss or theft of state monies by making a number of
changes to its cash-handling policies. The Office receives ap-proximately
$2 million in inspection fees each year, primarily in
checks. To better protect these monies, the Office should appro-priately
segregate cash-handling responsibilities by separating
the billing function from cash collections. In addition, to safe-guard
checks received, the Department should immediately en-dorse
checks and securely store them while using a receipt for
processing. Further, to help track these monies, the Office should
regularly reconcile the monies it receives to its deposits. Finally,
Previous violations should be
considered in sampling.
The Office collects almost $2
million in fees.
Summary
iv
OFFICE OF THE AUDITOR GENERAL
the Office should develop and implement policies and proce-dures
for handling cash and cash-like receipts and periodically
request a procedural review from the State’s General Accounting
Office.
Other Pertinent Information
(See pages 29 through 31)
During the audit, other pertinent information was gathered in
response to legislative inquiries concerning the Department’s
current efforts to regulate exempt slaughtering and processing
facilities. Not only does the Department regulate official slaugh-tering
and processing facilities that process meat for intrastate
sale, the Department also regulates exempt facilities, which pro-duce
meat for an animal owner’s personal use. Because the meat
processed at exempt facilities is not for sale and does not enter
the public food chain, this industry is exempt from some of the
USDA and state inspection criteria applicable to facilities that
slaughter and process meat for public consumption.
To regulate the exempt industry, the Department licenses ex-empt
facilities. Further, state regulations require that non-mobile
exempt facilities be inspected at least twice a year. However,
some facilities are inspected more frequently based on violation
histories. These inspections focus on the sanitary conditions of
the facilities, and the condition of the animals, but not on the as-sociated
meat. This level of regulation is similar to other Western
states that regulate the exempt meat industry and is consistent
with federal regulations. Moreover, the Department reports that
it receives very few complaints regarding exempt facilities.
The Department regulates
“exempt” facilities.
v
OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS
Page
Introduction and Background.......................... 1
Finding I: Department Could Take
Steps to Address Industry
Concerns Regarding the CFV
Standardization Program............................. 9
CFV Program Exists
to Assist Industry............................................................ 9
Some Industry Members
Question Program’s Value ............................................. 10
Department Could Explore
Several Ways to
Increase Coverage........................................................... 12
Recommendations .......................................................... 18
Finding II: Non-Food Product Quality
Assurance Program Needs
Improved Sampling Approach.................... 19
Program’s Sampling and
Testing Efforts Identify Problems
with Non-Food Products................................................ 19
Department’s Sampling Plans
Lack Some Key Components......................................... 20
The Department Should
Develop and Implement
Appropriate Sampling Plans.......................................... 22
Recommendations .......................................................... 23
Table of Contents
vi
OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS (concl’d)
Page
Finding III: The Nogales Office
Needs to Strengthen Its
Cash-Processing Controls .......................... 25
Office Fails to Sufficiently
Protect Monies Collected................................................ 25
Department Needs to
Develop a Policy and
Procedures Manual......................................................... 27
Recommendations .......................................................... 28
Other Pertinent Information ............................. 29
Agency Response
Figure and Table
Figure 1 Department of Agriculture
Organization of Food Safety and
Quality Assurance and Non-Food
Product Quality Assurance Programs
As of March 31, 2000......................................... 2
Table 1 Arizona Department of Agriculture
Food Safety and Quality Assurance and
Non-Food Product Quality Assurance
Programs Statement of Revenues,
Expenditures, and Changes in Fund
Balance Years Ended or Ending
June 30, 1999 and 2000....................................... 6
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’s Food Safety
and Quality Assurance program and its Non-Food Product
Quality Assurance program pursuant to a June 16, 1999, resolu-tion
of the Joint Legislative Audit Committee. This audit was
conducted as part of the Sunset review set forth in A.R.S. §§41-
2951 through 41-2957, and is the third in a series of audits to be
conducted on programs within the Arizona Department of Agri-culture.
Prior to the Department’s formation in 1991, Arizona’s food
safety and quality assurance duties and non-food product qual-ity
assurance duties were carried out by four state agencies. The
State Livestock Board conducted meat and poultry inspections,
the State Dairy Commissioner regulated the dairy industry, and
the State Egg Inspection Board ensured the quality of eggs. Still
another agency, the Commission of Agriculture and Horticul-ture,
was responsible for the quality of fresh Arizona-grown
produce and regulated non-food products, such as feed, fertil-izer,
pesticides, and seed. When these agencies were combined to
form the Department of Agriculture, the functions they per-formed
became the Department’s responsibility.
Food Safety and Quality
Assurance Program
The Department’s Food Safety and Quality Assurance Program
is charged with ensuring that the public food supply meets es-tablished
quality and safety standards. The program has two
subprograms (see Figure 1, page 2):
n Animal Products Food Safety and Quality Inspection
Subprogram (34.8 FTEs)—This subprogram’s role is to pro-tect
the public against the distribution of unsafe, unwhole-some,
and improperly labeled meat, poultry, ratites, milk
and eggs. To protect the public health and safety, the
The Department inspects
meat, poultry, dairy prod-ucts,
eggs, and produce.
Introduction and Background
2
OFFICE OF THE AUDITOR GENERAL
Figure 1
Department of Agriculture
Organization of Food Safety and Quality Assurance
and Non-Food Product Quality Assurance Programs
As of March 31, 2000
Department of Agriculture
Food Safety and Quality
Assurance Program
Ensures that the public food
supply meets established
quality and safety standards.
Non-Food Product
Quality Assurance Program
Protects the public’s interest
by ensuring the quality of
Arizona’s feed, fertilizer, pesti-cide,
forage (hay), and seed.
Animal Products
Food Safety and
Quality Inspection
Subprogram
Protects the public
against the distribu-tion
of unsafe,
unwholesome, and
improperly labeled
meat, poultry,
ratites (ostriches,
emus, etc.), milk,
and eggs.
Fresh Produce
Standardization
and Inspection
Subprogram
Citrus, Fruit and
Vegetable
Standardization
and Inspection
Program
Conducts inspec-tions
to ensure that
any citrus, fruits,
vegetables, or nuts
marketed within or
exported from
Arizona conform to
state quality stan-dards.
Federal/State
Inspection
Program
Enforces U.S. com-modity
import
requirements and
marketing order
restrictions on
numerous com-modities
including
grapes, tomatoes,
oranges, limes,
avocados, and
strawberries at the
Arizona-Mexico
border.
Source: Arizona Department of Agriculture Strategic Plan for Fiscal Years 2000 through 2002.
Introduction and Background
3
OFFICE OF THE AUDITOR GENERAL
program collects and tests samples of meat and dairy prod-ucts
for microbiological, chemical, and physical food hazards.
To ensure wholesomeness, meat inspectors are required to be
present whenever regulated slaughtering or processing facili-ties
are operating, and the Department’s dairy inspectors
conduct inspections of dairy farms, processing facilities, and
milk tankers. Further, the Department’s egg inspectors in-spect
eggs to determine if they meet United States Depart-ment
of Agriculture (USDA) quality standards, and inspect
the quality and safety of poultry and eggs used in the State’s
school lunch programs. Cooperative agreements with the
USDA establish the health and quality standards to which
meat, milk, eggs, and poultry are graded and inspected.
n Fresh Produce Standardization and Inspection Subpro-gram
(101.7 FTEs)—This subprogram includes the Citrus,
Fruit, and Vegetable (CFV) Standardization Program and the
Federal/State Inspection Service Program. These programs
seek to ensure the quality of fresh produce in accordance
with either the State of Arizona or the USDA.
Ü CFV Standardization Program—As required by statute,
the CFV Standardization Program conducts inspections
to ensure that citrus, fruits, vegetables, or nuts marketed
within or exported from Arizona conform to state quality
standards. CFV inspectors attempt to ensure product
quality by enforcing standards for minimum quality (i.e.,
size, maturity, color, firmness, and decay), and labeling,
storage, handling, and refrigeration of citrus, fruit, and
vegetables. The quality standards are not health stan-dards
and are not meant to protect the public from food-borne
illnesses. Additionally, the CFV Program licenses
all Arizona shippers, produce dealers, citrus dealers, and
contract packers.
Ü Federal/State Inspection Program—Under a coopera-tive
agreement first signed in 1996, Federal/State Inspec-tion
Services (FSIS) is charged with enforcing USDA qual-ity
standards on produce imported into the country in-cluding
grapes, tomatoes, oranges, limes, avocados, and
strawberries. The program’s primary function is to en-force
United States commodity import requirements and
CFV focuses on quality
rather than health standards.
Introduction and Background
4
OFFICE OF THE AUDITOR GENERAL
marketing order restrictions at the Arizona-Mexico bor-der.
Also, to comply with state regulations, federal/state
inspectors inspect watermelons entering Arizona from
Mexico to ensure that they meet the same state quality
standards that Arizona-grown watermelons are held to
by the standardization program. Finally, when requested
by the industry, federal/state inspectors grade products
under USDA quality grade standards at the shipping
point (point of origin) or the terminal market (point of
destination). The Department’s inspectors typically con-duct
these voluntary inspections in Nogales, Phoenix,
and Yuma.
n Food Safety and Quality Assurance Program Budget—
This program receives monies from the federal government,
industry sources, and the State General Fund. Specifically, as
seen on Table 1 (see page 6), during fiscal year 2000,
Ü The Animal Products subprogram received an estimated
$575,500 in federal monies; $286,200 in licensing fees; and
over $1.2 million in General Fund revenue to pay for its
inspection and licensing activities.
Ü The CFV Standardization program, an industry-funded
program, received an estimated $196,000 in licensing fees
and more than $539,000 in fees generated through an as-sessment
of .004 cents on each carton of fresh produce
grown in Arizona.
Ü The Federal/State Inspection program received an esti-mated
$2 million, which was generated through inspec-tion
fees.
Non-Food Product Quality
Assurance Program
Non-Food Product Quality Assurance Program (10.5 FTEs)—
This program seeks to protect the public’s interest by ensuring
the quality of Arizona’s feed, fertilizer, pesticide, forage, and
seed. To regulate the content and distribution of products that
Introduction and Background
5
OFFICE OF THE AUDITOR GENERAL
could potentially affect public health, this program registers pes-ticides
and fertilizers used in Arizona; and issues licenses to feed,
fertilizer, forage, and seed dealers and labelers. Additionally,
inspectors collect feed, fertilizer, pesticide, and seed samples to
ensure compliance with labeling and quality requirements. In-spectors
also respond to individual consumer complaints regard-ing
product quality concerns.
Non-Food Product Quality Assurance Budget—During fiscal
year 2000 and as illustrated in Table 1 (see page 6), the Non-Food
Product Quality Assurance Program generated an estimated $1.6
million in product licensing and registration fees and inspection
fees. As required by statute, the Department estimates it will
transfer over $689,000 in pesticide and fertilizer registration and
licensing fees to the Water Quality Assurance Revolving Fund.
Audit Scope
and Methodology
This audit focuses on the efficiency and effectiveness of the De-partment’s
CFV Standardization Program; the effectiveness of
the Department’s sampling and testing of non-food products to
ensure adherence to label statements, product guarantees, and
applicable laws; and the appropriateness of the cash-processing
controls in place at its Federal/State Program’s Nogales office.
The audit also reviewed the Department’s regulation of the ex-empt
meat industry (meat processing or slaughtering facilities
that are exempt from some of the USDA and state inspection
requirements because the meat processed is not for sale and does
not enter the public food chain). Methods used to study the is-sues
addressed in this audit included the following:
n Surveying 144 citrus, fruit, and vegetable standardization
licensees who were assessed fees in crop year 1999 (Septem-ber
1, 1998 through August 31, 1999) and analyzing the 72 re-
The program ensures the
quality of feed, fertilizers,
forage (hay), pesticides, and
seeds.
Table 1
Arizona Department of Agriculture
Food Safety and Quality Assurance and Non-Food Product Quality Assurance Programs
Statement of Revenues, Expenditures, and Changes in Fund Balance
Years Ended or Ending June 30, 1999 and 2000
(Unaudited)
Food Safety and Quality Assurance Program Non-Food Product Quality
Animal Products Fresh Produce Assurance Program
1999 2000 1999 2000 1999 2000
(Actual) (Estimated) (Actual) (Estimated) (Actual) (Estimated)
Revenues:
State General Fund appropriations $1,345,500 $1,213,400 $ 295,800
Charges for services:
Federal/state inspection fees $2,085,468 $2,094,600
Citrus, fruit, and vegetable inspection fees 513,804 539,700
Feed and fertilizer inspection fees 375,119 $ 375,100
Pesticide and fertilizer registration fees 1,025,856 1,032,300
Federal grants and contracts 549,357 575,500
Licenses and permits 284,295 286,200 195,950 196,000 119,040 81,900
Other 25,214 25,000 103,842 140,700 87,310 91,400
Total revenues 2,204,366 2,100,100 2,899,064 2,971,000 1,903,125 1,580,700 1
Expenditures:
Personal services and employee related 1,291,328 1,315,800 2,356,812 2,765,600 583,251 423,300
Professional and outside services 9,589 28,700 97,997 282,200 46,797 87,000
Travel 123,787 122,500 214,556 201,000 59,856 51,700
Other operating and equipment 138,108 135,800 323,742 348,500 214,121 115,100
Total expenditures 1,562,812 1,602,800 2,993,107 3,597,300 904,025 677,100 1
Excess of revenues over (under) expenditures 641,554 497,300 (94,043) (626,300) 999,100 903,600
Other financing sources (uses):
Operating transfers in (out) (27,194) 421 (814,358) 2 (689,100) 2
Remittances to the State General Fund (401,969) 3 (438,800) (2,991) (5,000)
Total other financing sources (uses) (429,163) (438,800) 421 (817,349) (694,100)
Excess of revenues over (under) expenditures and other uses $ 212,391 $ 58,500 $ (93,622) $ (626,300) 4 $ 181,751 $ 209,500
1 Revenues and expenditures are expected to significantly decrease in 2000 since the Department reallocated General Fund resources to another program.
2 Includes approximately $734,000 and $689,100 in 1999 and 2000, respectively, of pesticide and fertilizer registration and licensing fees transferred to the Water
Quality Assurance Revolving Fund in accordance with A.R.S. §§ 3-272 and 3-351.
3 Includes approximately $391,400 of United States Department of Agriculture Meat and Poultry Inspection monies due but not remitted to the State General
Fund at June 30, 1999.
4 In 2000, the Department plans to expend a portion of the $2.1 million beginning fund balance in the Federal State Inspection Fund; therefore, expenditures are
expected to exceed revenues by approximately $626,300.
Source: The Arizona Financial Information System Accounting Event Extract File and Status of Appropriations and Expenditures reports for the year ended June 30,
1999; and Division-prepared estimates of financial activity for the year ending June 30, 2000.
Introduction and Background
OFFICE OF THE AUDITOR GENERAL
6
Introduction and Background
7
OFFICE OF THE AUDITOR GENERAL
sponses (50 percent response rate) to evaluate licensees’ satis-faction
with the program and their recommendations for im-provement.
n Analyzing citrus, fruit, and vegetable standardization licens-ing
and assessment data for crop year 1999 to determine the
program’s funding and expenditures as well as how the pro-gram
utilizes its inspection resources.
n Observing citrus, fruit, and vegetable standardization; meat
and poultry; dairy; and egg inspections to determine the in-spection
processes for these agricultural commodities, and
studying cash-processing activities at the Department’s FSIS
Nogales Office to determine the appropriateness of its cash-processing
procedures.
n Attending two meetings of the Citrus, Fruit, and Vegetable
Standardization Advisory Council to observe the Council’s
role in guiding the program, and meeting with industry
members including the Yuma Vegetable Shippers Associa-tion,
the Western Growers Association, and members of the
Advisory Council to obtain their views on the CFV Program.
n Reviewing and analyzing the Non-Food Product Quality
Assurance Program’s current sampling plans for feed, fertil-izers,
pesticides, and seed to determine their adequacy.
n Contacting 12 Western states as well as the USDA and the
Food and Drug Administration (FDA) regarding fresh pro-duce
standardization and exempt meat industry issues.1
1 California and Washington were contacted to determine the requirements
of their fresh produce standardization programs and how inspections are
carried out. The following ten Western states were contacted because they
regulate exempt livestock slaughtering and meat processing facilities: Cali-fornia,
Colorado, Idaho, Kansas, Montana, Oklahoma, Oregon, Utah,
Washington, and Wyoming. The USDA and FDA were contacted to
gather further criteria regarding regulation of the exempt meat industry.
Introduction and Background
8
OFFICE OF THE AUDITOR GENERAL
n Conducting a literature review to obtain information on im-proving
the efficiency and effectiveness of inspection pro-grams,
developing appropriate sampling plans, and estab-lishing
appropriate cash-handling controls.
The report presents findings and recommendations in three ar-eas:
n The Department should address industry’s concerns regard-ing
the CFV program by taking steps to improve the pro-gram’s
operations.
n The Department’s current sampling efforts are inadequate to
ensure the quality and label accuracy of feed, fertilizer, pesti-cide,
and seed products.
n The Department should strengthen its cash receipt controls at
its Federal/State Inspection Service’s Nogales Office.
In addition, the report contains Other Pertinent Information re-garding
the Department’s regulation of the exempt meat indus-try.
This audit was conducted in accordance with government audit-ing
standards.
The Auditor General and staff express appreciation to the Direc-tor
and staff of the Department of Agriculture for their coopera-tion
and assistance throughout the audit.
9
OFFICE OF THE AUDITOR GENERAL
FINDING I DEPARTMENT COULD TAKE
STEPS TO ADDRESS INDUSTRY
CONCERNS REGARDING THE
CFV STANDARDIZATION
PROGRAM
Although the Department’s citrus, fruit, and vegetable (CFV)
standardization program exists primarily to benefit the agricul-ture
industry, the Department’s current operation of the pro-gram
has resulted in some industry members questioning the
need for the program. Concerns appear to center on the extent to
which the program, which operates at a relatively minimal staff-ing
level, manages to conduct inspections. At the same time, in-dustry
respondents appear strongly opposed to paying more for
the program. With available resources, the best improvement
options available to the Department are to develop a more sys-tematic
inspection plan, schedule more inspections in advance,
reduce the time inspectors spend on other tasks, and make better
use of inspection data to document coverage and focus inspec-tion
efforts on violators.
CFV Program Exists
to Assist Industry
The CFV Program exists primarily for the economic benefit of
Arizona’s agriculture industry, not to ensure safe, quality prod-ucts
for consumers. Established in 1929 as the Fruit and Vegeta-ble
Standardization Service, Arizona law currently directs the
CFV Program to inspect and enforce minimum quality stan-dards
for all citrus, fruit, vegetables, nuts, and dates either pro-duced
or sold in Arizona. Statute also provides for the CFV
Standardization Advisory Council, which consists of various
industry members and assists the Department by providing
guidance and oversight of the program.
The CFV program exists for
the benefit of Arizona’s cit-rus,
fruit, and vegetable in-dustries.
Finding I
10
OFFICE OF THE AUDITOR GENERAL
Under state law, minimum standards to be enforced under the
program focus on physical appearance and taste, not on whether
commodities are healthy or safe for human consumption. Mini-mum
quality standards include factors such as size, maturity,
color, firmness, and decay. For instance, CFV inspectors check
head lettuce for broken midribs and tipburn, and cantaloupe and
other melons for sugar content. The Department also inspects
and enforces standards for containers, labeling, storage, han-dling,
and refrigeration of fresh produce and licenses all Arizona
shippers, produce dealers, citrus fruit dealers, and contract pack-ers.
The CFV Program, which will generate estimated fee revenues of
over $735,000 for fiscal year 2000, is funded entirely by industry.
Approximately 27 percent of its revenue came from licensing
fees, and the other 73 percent came from an assessment on each
carton of product shipped from Arizona. While Arizona law
permits an assessment of up to 1.25 cents per carton, the current
assessment is .004 cents per carton. The assessment was reduced
from .005 cents in 1998. The Department, in consultation with the
CFV Advisory Council, sets the assessment amount.
Some Industry Members
Question Program’s Value
Although the CFV program is designed solely for the benefit of
the industry, industry respondents to an Auditor General sur-vey:
(1) Questioned the program’s value,
(2) Expressed interest in “opting out” of the program, and
(3) Voiced strong feelings against paying any more in assess-ments
to improve the program.
Despite these concerns, CFV Program licensees expressed some
positive opinions regarding the program. For example, over 60
percent of the respondents agreed that the benefits derived from
the program were equal to or greater than the assessment and
licensing fees they pay to support the program.
The program is funded en-tirely
by industry.
Finding I
11
OFFICE OF THE AUDITOR GENERAL
Some concern over level of inspections—An Auditor General
survey of CFV program licensees who paid assessments during
crop year 1999 (September 1, 1998 through August 31, 1999)
shows that 39 percent of respondents (26 of 67) felt that assess-ment
fees paid did not justify the benefits derived from the CFV
program. Some respondents reported that they had never re-ceived
or received few inspections of their products. For exam-ple,
six growers/shippers reported never receiving any inspec-tion
during crop year 1999, despite paying over $7,200 in as-sessment
fees. Moreover, 73 percent of respondents (45 of 62) felt
there would be no effect on their business if the CFV Program no
longer provided inspections. Licensees offered several reasons
for this, including the fact that their own internal quality control
measures and those of their buyers were stricter than those im-posed
by the State.
Interest in opting out—Fifty-two percent of respondents (32 of
62) expressed interest in opting out of the CFV Program. Since
1998, state statute has allowed fruit and vegetable producers to
opt out of the standardization program if at least 51 percent of
the producers who produce at least 51 percent of the total quan-tity
of a specific commodity agree to opt out. For example, the
carrot industry opted out in crop year 1999. Consequently, carrot
producers no longer receive inspection services, but also do not
have to pay the standardization program assessment. The opt-out
provision was added to state law to provide producers in
specific commodity groups the opportunity to leave the CFV
Program. However, even though the opt-out provision has been
in state law for over two years, 54 of 71 (76 percent) survey re-spondents
stated that they were not aware of this option.
Lack of interest in paying more to expand the program—The
over $735,000 in revenue the CFV program expects to generate
during fiscal year 2000 funds 13.8 inspector FTEs.1 This is an in-sufficient
number to provide inspection services to all industry
members contributing to the program as well as provide inspec-tions
of imported commodities. Although statute calls for the
program to inspect commodities imported into the State as well
1 In addition to inspector FTEs, program revenues also fund administra-tive
positions and other resources, such as inspectors’ vehicles and other
equipment needed to perform inspections.
The industry does not want
to pay more for increased
inspections.
Finding I
12
OFFICE OF THE AUDITOR GENERAL
as those grown in Arizona, the Department has decided to allo-cate
only a very small amount of its inspectors’ time to conduct-ing
inspections at imported commodity distribution points, such
as warehouses and retail stores. Specifically, during the crop year
1999 (October 1998 through July 1999), CFV inspectors spent an
average of 2.1 percent of their time each month inspecting pro-duce
in retail markets and an average of 4.6 percent of their time
each month inspecting produce in warehouses. However, some
industry members feel the Department needs to devote more
time to inspecting imported commodities that compete against
Arizona-grown commodities to ensure a level playing field. De-spite
this fact, as well as the insufficient number of inspector
FTEs, 94 percent of survey respondents (66 of 70) did not support
an increase in assessment fees to expand the program’s inspec-tion
resources.
Department Could Explore
Several Ways to
Increase Coverage
Given that the industry appears to want better services but does
not want to pay more in assessments, auditors examined ways
the CFV program might be able to operate more efficiently with
the resources it has. It should be noted that the Department and
the CFV Advisory Council have already taken steps in recent
years to improve the program. For example:
n The Department and industry have worked together to
stretch available resources by employing seasonal or part-time
inspectors during peak growing seasons.
n To improve the efficiency and reduce the cost of phyto-sanitary
inspections, which certify that a product is disease-or
pest-free and are required for foreign export, CFV inspec-tors
now assist federally certified state inspectors with these
inspections.
However, auditors were able to identify several other areas for
improvement, including more systematic inspection plans,
greater scheduling of inspections ahead of time, reductions in the
amount of time spent on other tasks, and better data for docu-
More could be done to im-prove
the efficiency of CFV
inspections.
Finding I
13
OFFICE OF THE AUDITOR GENERAL
menting inspection coverage and focusing more efforts on viola-tors.
Finally, the Department should take steps to ensure all in-dustry
members are aware of program direction and changes
and the program’s opt-out provision.
Developing a more systematic inspection plan—While the De-partment
has an inspection sampling plan, this plan does not
assist it in systematically determining what commodities to in-spect,
the quantity of each commodity to inspect, and the specific
growers to visit. Instead, inspectors, who are assigned to specific
geographic zones, choose where to conduct inspections by driv-ing
around their inspection zones, stopping to inspect when they
observe harvesting occurring. In the absence of a systematic in-spection
plan, the level of inspections provided by the Depart-ment
varies by the type of commodity and the location of the
grower/shipper. While some variance is expected, the current
variance among products inspected is not defined or planned,
but left to the discretion of individual inspectors. For example, in
crop year 1999, CFV inspectors spent over 560 hours inspecting
broccoli, but only 229 hours inspecting romaine lettuce. How-ever,
growers shipped more than 8.7 million cartons of romaine
lettuce as compared to nearly 7.9 million cartons of broccoli. Fur-ther,
because the Department’s inspectors are based in Yuma
and Maricopa Counties, growers in these counties typically re-ceive
a higher rate of inspections than growers in other counties,
such as Cochise or La Paz.
A systematic inspection plan is important to ensure that the De-partment
makes efficient and effective use of its limited re-sources.
The Department should develop and implement a sys-tematic
inspection sampling plan that would provide guidance
to inspectors regarding which commodities to inspect, the quan-tity
of each commodity to inspect, and the specific growers to
visit.
Scheduling inspections in advance—The Department does not
maximize its inspectors’ time by scheduling inspections. During
calendar year 1999, the Department had approximately 24,100
hours of CFV inspectors’ time available to perform CFV-related
activities. While inspectors spent about 85 percent (20,464 hours)
of this time performing CFV-related activities, only 8,557 hours,
or 42 percent, of the 20,464 hours were spent performing inspec-
Only 42 percent of inspectors’
time was spent performing
inspections.
Finding I
14
OFFICE OF THE AUDITOR GENERAL
tions. By contrast, from July 1999 through March 2000, inspectors
spent almost 40 percent of their working hours driving between
inspections.1
Currently, the majority of the inspections take place in the field.
For example, the Department has divided the Yuma area into 11
inspection regions containing fields where crops are grown. In-stead
of scheduling inspections with growers, inspectors, at their
discretion, typically start at one end of their assigned region and
work their way to the other end, stopping to inspect when they
observe harvesting taking place. One inspector stated that be-cause
of the large size of the zones, this process could take up to
a week. Furthermore, an inspector stated that if a commodity is
being harvested in an area somewhere other than where the in-spector
is located, it will not be inspected.
Scheduling inspections would mean that a higher percentage of
inspections would be done at agreed-upon times and locations,
including centralized locations, rather than in the field. Such a
change, while making the inspection program more efficient,
may not have the support of all growers. Some industry mem-bers
said that although inspecting commodities in the fields prior
to packing increases inspectors’ driving time, this type of inspec-tion
best suits their needs. However, industry members agreed
that efficiencies could be gained if some inspection activities
could be scheduled and industry would support scheduling, as
long as it does not increase their costs to comply with the pro-gram.
The Department, in consultation with the CFV Advisory Coun-cil,
should explore options for scheduling and/or centralizing
some of its inspection activities where appropriate. Currently,
the Department does inspect some commodities, such as melons,
at central locations. This has reduced the amount of driving that
inspectors must do. The Department should explore further op-portunities
for centralized inspections and develop a process
whereby some inspections could be scheduled. For example,
Imperial County, California, schedules inspections by having
licensees notify the County when harvesting will be occurring.
This allows the program in Imperial County to more efficiently
1 Prior to July 1999, the Department did not track inspector drive time.
The Department should explore
centralized inspections.
Finding I
15
OFFICE OF THE AUDITOR GENERAL
use its inspectors. While the industry expressed a preference to
have inspectors in the field and performing inspections unan-nounced,
notifying the Department of product ready for inspec-tion
could decrease drive time and enable the Department to
inspect more commodities.
Reducing noninspection-related tasks—Currently, inspectors
spend some of their time performing noninspection-related
tasks. For example, the Department requires its inspectors lo-cated
in Yuma to collect shipping certificates on a daily basis.
These certificates, which contain information on the type and
quantity of commodities shipped each day, are used to deter-mine
assessment amounts and provide shipment information to
the USDA Market News service. While the Department receives
$26,000 annually from the USDA to collect shipping certificates,
the Department could potentially save hundreds of hours in in-spector
time by exploring other means of collecting this informa-tion.
During calendar year 1999, the Department reported that
inspectors spent over 1,000 hours collecting shipment certificates.
Instead of requiring inspectors to collect shipping certificates
daily, the Department should develop a process whereby licen-sees
can send this information directly to the Department. The
means exist to either fax or e-mail this information to Depart-ment
offices. This would save up to one to two hours daily of
inspection time. While the industry expressed reservations about
employing a different process to collect shipping certificates, as
some licensed shippers do not always remember to report this
information, the Department should work with licensed ship-pers
to develop a workable solution.
Using data to document coverage and focus on violators—
Although the Department maintains a variety of information
concerning licensees, including licensing, assessment, and viola-tion
data, it does not have a way to use this data effectively. For
example, the Department knows who is licensed, which licen-sees
are assessed, total assessment amounts, total assessments
derived from each commodity, and which licensees have re-ceived
violations. However, because the Department stores its
licensing, assessment, and violation data on three separate and
incompatible databases, the Department cannot analyze this im-portant
data in any systematic manner.
Finding I
16
OFFICE OF THE AUDITOR GENERAL
Additionally, the Department does not generate sufficient infor-mation
on which licensees it has inspected. Specifically, inspec-tors
record their daily activities in a log including information on
which licensees and commodities were inspected and the time
spent on each inspection. However, although the Department
extracts information from the logs to determine how much time
inspectors spent inspecting each commodity, it does not summa-rize
the logs to ascertain which licensees have been inspected.
Without information concerning which and how often licensees
have been inspected, the Department cannot ensure that all li-censees
receive inspections or that licensees receive the appropri-ate
level of inspection.
Finally, the Department does not document all identified viola-tions
or use information about violators to make inspection deci-sions.
When a violation is uncovered during a field inspection, it
is the Department’s policy to have the inspector issue verbal or-ders
designed to bring the grower into compliance instead of
issuing a written notice. Therefore, the Department lacks a com-plete
paper trail documenting violations that occur in the grow-ing
fields. Even when the Department issues a written violation,
primarily through inspections conducted at produce ware-houses,
it does not use this information to target inspectors’ ac-tivities.
The Department issued 198 written violations during
crop year 1999, but did not use this information when deciding
where to perform subsequent inspections.
The Department should improve the analysis and management
of program data. Better management of this data should allow
the Department to determine what licensees and commodities
are receiving inspections, which licensees are committing viola-tions,
and where it should focus its inspection activities. Accu-rately
documenting all violations issued, whether verbal or writ-ten,
and using this information to enhance its inspections of li-censees
who have committed violations, would also help ensure
growers that the program has an effect on improving product
quality.
Department and CFV Advisory Council should better communi-cate
with program participants—The Department and CFV Ad-visory
Council should take steps to better communicate program
information to all program participants. This would include ba-
The Department does not
document all violations.
Finding I
17
OFFICE OF THE AUDITOR GENERAL
sic information, such as program responsibilities and rights, and
information on proposed changes to the program. For example,
76 percent of the industry members who responded to the Audi-tor
General’s survey stated that they were unaware of the opt-out
provision and its requirements. Improved communication
between participants and the Department could adequately in-form
participants of this provision and other aspects of the pro-gram.
Additionally, current and former members of the CFV
advisory council agreed that better communication among par-ticipants
is needed.
Seventy-six percent of sur-vey
respondents were un-aware
of the “opt-out” pro-vision.
Finding I
18
OFFICE OF THE AUDITOR GENERAL
Recommendations
1. The Department should improve the management of inspec-tions
by:
a. Expanding its current planning efforts by implementing a more
systematic inspection sampling plan;
b. Scheduling and/or centralizing more of its inspections;
c. Transferring responsibility for collecting shipping certificates
from CFV inspectors to produce shippers by requiring shippers
to fax or e-mail the certificates to the Department; and
d. Using violation data to implement risk-based inspections.
2. The Department should improve its management and analy-sis
of program data, and use this data to better manage in-spection
activities and provide customer service by:
a. Documenting and analyzing all verbal and written violations;
b. Documenting licensees that receive inspections and using this
information to ensure that all licensees receive an appropriate
level of inspection service; and
c. Merging the data from its three databases so that it can analyze
this data in a comprehensive and systematic manner.
3. The Department and the CFV Advisory Council should im-prove
communication with program participants, including
providing basic program information and proposed changes
to the program, as well as information on opting out of the
program by:
a. Using its current Department newsletter to provide program
information to all CFV program licensees who pay assessment
fees; and
b. Ensuring that Council meeting agendas and decisions are dis-tributed
to all CFV licensees who pay assessments.
19
OFFICE OF THE AUDITOR GENERAL
FINDING II NON-FOOD PRODUCT QUALITY
ASSURANCE PROGRAM NEEDS
IMPROVED SAMPLING
APPROACH
Although the Non-Food Product Quality Assurance Program
often identifies instances of substandard quality in feed, fertiliz-ers,
pesticides, or seed, the program has two main problems that
keep it from being as effective as possible. First, the Department’s
procedures do not ensure that samples are taken from a fully
representative cross-section of retailers. Second, if past testing
indicates a problem with particular products or retailers, the De-partment’s
procedures include no way to focus part of the testing
on this risk. These problems take on added importance because
the Department would like to devote fewer resources to this
program. Operating an effective program with even fewer re-sources
heightens the need to make appropriate changes in these
procedures.
Program’s Sampling and
Testing Efforts Identify Problems
with Non-Food Products
Under the Non-Food Product Quality Assurance Program, De-partment
inspectors collect samples of feed, fertilizer, pesticide,
and seed products for analysis by the State Agricultural Labora-tory.
The analysis helps ensure that label statements, product
guarantees, and applicable laws are adhered to. For example,
samples of pool chlorine (a pesticide) are tested to ensure that the
product conforms with its labeling, and seeds are tested to en-sure
that actual germination rates match packaging claims. De-partment
inspectors collect non-food product samples primarily
from product retailers located throughout the State. During fiscal
year 1999, 11 inspectors worked on this program. In all, they col-lected
nearly 1,300 samples of feed, fertilizer, pesticide, and seed
for testing.
Eleven inspectors collected
nearly 1,300 samples of feed,
fertilizer, pesticide, and seed
during fiscal year 1999.
Finding II
20
OFFICE OF THE AUDITOR GENERAL
Tests of the sampled products show problems with the quality of
some products. For example:
n Twenty-one percent of the fertilizer samples (161 of 770)
failed laboratory tests.
n Twenty-eight percent of the feed samples (89 of 317) failed
laboratory tests.
n The Department had to take legal action against a manufac-turer
of pool chemicals because the chemicals’ contents did
not match labeling guarantees.
Department’s Sampling Plans
Lack Some Key Components
While the program does identify problems, its sampling plans
have limitations that weaken the State’s effort to some extent.
The plans lack some components that would typically be ex-pected,
such as a complete listing of the population to be sam-pled
and a specific list of those locations selected for sampling.
They also do not include a way to adjust the work to account for
products or retailers that show higher risk. The Department es-tablished
a committee to address such issues, but the committee
was disbanded without finishing the work.
Department lacks systematic method for sampling non-food
products—Because the sampling program can test only a small
portion of the locations that sell products covered under the pro-gram,
care must be taken in selecting the retailers to be tested.
The quality of some non-food products can vary from retailer to
retailer, depending on how the product is stored or how old it is.
For example, pool chlorine can degrade if stored improperly,
whereas feed, and seed can degrade if left on the shelf too long.
Current sampling plans are not adequate to ensure that the test-ing
effort is fully representative. The plans are adequate with
regard to specifying which products to sample and which tests
to perform. However, they do not contain all the components
Product quality can vary
from retailer to retailer.
Finding II
21
OFFICE OF THE AUDITOR GENERAL
needed to ensure that all retailers have an equal chance of being
selected in the sample.
A quality sampling plan should include a “sampling frame,”
which is a comprehensive list of retailers of the products being
sampled, and it should specifically list the locations to be sam-pled.
The current plans specify which cities or towns inspectors
should visit, but they leave the selection of specific retailers to the
inspectors’ discretion. This approach increases the possibility
that retailers could be missed, under-sampled, or over-sampled.
Without a comprehensive sampling frame and clear direction for
inspectors as to where to go to collect product samples, the De-partment
cannot ensure that it systematically collects samples
that are representative of all the feed, fertilizer, pesticide, and
seed products sold throughout the State.
Data on risk not incorporated into sampling plans—Although
the Department collects data from its sampling efforts, it does
not effectively use this data to develop, monitor, or change how
the sampling should be done. Further, the Department reports
that through product sampling and testing, it has identified areas
where violations are minimal and areas with greater violation
rates. However, the Department has not adequately factored this
information into its sampling plans. Doing so would help the
Department make more effective use of inspection resources,
because a greater portion of the effort could be focused on prod-ucts
or retailers with a history of problems.
Sampling plan committee did not complete plans—In 1994, the
Department established a committee to develop sampling plans
that would maximize consumer protection and public health
and make efficient use of Department resources. Although the
committee met for almost four years, it had not achieved its mis-sion
before it stopped meeting in July 1998. While the committee
discussed the need for a comprehensive sampling frame, it did
not follow through and develop such a frame. The committee
also examined the possibility of incorporating risk more fully
into sampling plans but decided that it did not have sufficient
product violation historical data to do so.
Sampling plans do not con-sider
past violations.
Finding II
22
OFFICE OF THE AUDITOR GENERAL
The Department Should
Develop and Implement
Appropriate Sampling Plans
The Department would like to redirect part of its work in the
non-food program into other related work it considers to be of
higher priority. Reducing efforts in the non-food program places
an even greater importance on resolving the problems with
sampling plans. To ensure that the non-food program ade-quately
protects the public and makes efficient and effective use
of program resources, the Department should reconvene its
sampling committee and develop and implement appropriate
sampling plans. The Department and its sampling plan commit-tee
should address the following issues within the plans:
Department would like to redirect some resources to another
program—The 11 inspectors involved in the non-food program
currently divide their time between this program (40 percent)
and the Pesticide Compliance and Worker Safety Program (60
percent), which ensures the proper use and application of agri-cultural
pesticides. Because the Department feels that the Pesti-cide
Compliance and Worker Safety Program represents a
greater risk to public health, it would like to devote a higher per-centage
of time to this program. To do so, it must reduce the per-centage
of inspectors’ time currently spent gathering non-food
product samples. Appropriate sampling plans would help re-duce
the amount of time devoted to this program by targeting
sampling efforts toward products with high violation rates and
ensuring systematic coverage of retail locations for sampling.
n Sampling Frame—To provide proper guidance and elimi-nate
the need for inspectors to use their own discretion in
choosing sampling locations, the Department should identify
the sampling frame for each product type’s sampling plan to
the extent possible. The Department can begin building lists
of retailers carrying regulated non-food products by using its
own data on licensees and product registrants as well as the
lists it has developed identifying the retailers it has visited
annually during the past five years. By identifying a sam-pling
frame, the Department can decide which specific loca-tions
inspectors should collect samples from and ensure sys-tematic
coverage of the sampling population. The Depart-
The Department should recon-vene
its sampling plan commit-tee.
Finding II
23
OFFICE OF THE AUDITOR GENERAL
ment should also periodically review the sampling frame
and add new retailers as necessary to ensure that its lists are
current.
n Risk-Based Component—To maximize sampling efficiency
and effectiveness, the Department’s sampling decisions
should be weighted by risk and other factors that would al-low
it to target specific areas of product noncompliance. For
example, if the Department’s analysis of violations shows
that a particular product or retailer has a high incidence of
violations, it should enhance its sampling of this product or
retailer.
Further, the Department should project its sampling plans over a
long-term period. Violations and other demographic information
on retailers and products can be used to develop a sampling cy-cle
which sets out a plan over a longer time frame, such as three
to five years, to further maximize the efficiency and effectiveness
of the sampling program. However, the Department should en-sure
that the plan is flexible enough to incorporate any special
needs as they arise. For example, if recent sampling results show
a need to expand the testing of a certain product, the sampling
plan must be flexible enough to accommodate additional sam-pling
of the product.
Recommendations
1. The Department should develop and implement long-term
formal sampling plans for feed, fertilizer, pesticide, and seed
products that would allow it to better protect the public from
poor-quality non-food products and make efficient and effec-tive
use of resources. The Department should also incorpo-rate
a sampling frame and risk-based component into these
sampling plans.
2. The Department should reconvene its sampling plan com-mittee
to guide the development and monitoring of the non-food
program sampling plans.
24
OFFICE OF THE AUDITOR GENERAL
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25
OFFICE OF THE AUDITOR GENERAL
FINDING III THE NOGALES OFFICE NEEDS
TO STRENGTHEN ITS CASH-PROCESSING
CONTROLS
The Department’s Federal/State Inspection Service Office in No-gales
lacks adequate internal controls to protect the nearly $2
million it receives in inspection fees each year. As a result, the
receipts are susceptible to being lost or stolen. The Office does
not segregate the duties involved in handling the monies, imme-diately
endorse checks upon receipt, or reconcile receipts to de-posits.
By taking steps such as adequately segregating cash-handling
responsibilities and immediately endorsing receipts,
the Office can help prevent the loss or theft of the monies it re-ceives.
Office Fails to Sufficiently
Protect Monies Collected
The Nogales Office lacks adequate internal controls to protect the
monies it receives from providing required and voluntary fed-eral/
state inspections of produce entering the United States from
Mexico. Approximately 75 percent of the nation’s winter pro-duce
enters the U.S. through Nogales and during crop year 1999,
Department inspectors conducted over 47,000 inspections, gen-erating
about $2 million in inspection fees. The Office is respon-sible
for all of the billing, collecting, and depositing of these fees
based on the information obtained by inspectors during inspec-tions.
However, the Office employs several inappropriate proce-dures
in its cash-handling process, including lack of segregation
of cash-handling duties, not immediately endorsing checks upon
receipt, and not reconciling the cash-receipt ledger to deposits.
The Nogales Office collects
almost $2 million annually in
inspection fees.
Finding III
26
OFFICE OF THE AUDITOR GENERAL
n Cash-handling procedures not properly segregated—
The Nogales Office does not adequately segregate cash-handling
responsibilities, though it has enough staff to do so.
Currently, the Department calculates fees and bills produce
distributors every ten days based on services rendered, as re-flected
on inspection certificates issued by inspectors. How-ever,
payments are remitted to the same person who calcu-lated
the bill. This same person also endorses the check, posts
the payment, places the check in the safe, and completes the
deposit slip. While the Department recently instituted
changes to the Office’s cash-handling procedures in an effort
to employ adequate segregation of duties, too many duties
remain the responsibility of one person without any compen-sating
controls or supervisory review.
To decrease the chance of theft, fraud, or loss, the Office
needs to appropriately segregate cash-handling responsibili-ties.
Specifically, the billing function should be separated
from the cash collections. No single individual should be able
to authorize a bill, record the collection of fees in the account-ing
records, and maintain custody of the payments resulting
from the transaction. While one employee can prepare bill-ings,
two individuals, independent of the billing function,
should be assigned to process payments. The first employee
should receive and open the mail, immediately endorse the
check, enter the check into the cash-receipt ledger, place the
check in the safe, and forward the payment documentation to
the second employee, who will enter the payment into the
computer system. Someone independent of recording the
payments should be responsible for depositing the cash and
checks.
n Checks not endorsed immediately—The Office does not
safeguard its checks through restrictive endorsement until
midway into its process. Restrictively endorsing a check
helps prevent someone other than the Office from depositing
the payments. However, the checks received by the Office are
currently handled by at least two employees prior to en-dorsement.
When the mail is received, the first employee
opens and sorts all the mail and forwards all checks to a sec-ond
individual who records the payment information in a
cash-receipts ledger. The checks are then returned to the first
The Office does not ade-quately
segregate cash-handling
duties, immediately
endorse checks, or reconcile
receipts to deposits.
Finding III
27
OFFICE OF THE AUDITOR GENERAL
employee for endorsement. Prior to this point, the checks are
unsecured and in an open office area through which numer-ous
personnel pass.
To protect these payments, the Office should immediately
endorse checks, enter them into the cash-receipts ledger, and
securely store them during processing. Checks should be
immediately endorsed upon receipt and stored in the Office’s
safe, especially since the Office does not make daily deposits.
The Office should prepare a receipt noting the payment
amount to accompany the associated documentation. Once
staff verifies that the payment amount and documentation
are complete and accurate, it can then deposit these monies.
These procedures would better safeguard receipts and
minimize employee access to these receipts during process-ing.
n Cash-receipts ledger not reconciled to deposits—The
Office also fails to reconcile deposit receipts with the cash-receipts
ledger. Specifically, Office staff enters data about
checks received into a ledger but never reconciles this infor-mation
with deposits to ensure that the checks received are
deposited. Therefore, once the Office has finished processing
payments, including depositing those payments, someone
independent of the process, such as a supervisor, should
regularly reconcile the cash-receipts ledger to the deposit re-cords
to ensure that all payments received by the Office are
deposited.
Department Needs to
Develop a Policy and
Procedures Manual
While the Office institutes changes to its cash-handling proce-dures,
the Department should develop and implement written
policies and procedures for handling cash and cash-like receipts
to ensure appropriate cash-handling activities are consistently
performed by Office staff. These policies and procedures should
incorporate the recommended changes to the Office’s cash-handling
process, and define employee responsibilities for each
step in the process. Additionally, to refine and update its cash-
The Office should immedi-ately
endorse checks.
Finding III
28
OFFICE OF THE AUDITOR GENERAL
handling process, the Department should periodically request a
procedural review from the State’s General Accounting Office.
Such a review analyzes an organization’s cash-handling process
and looks for internal control weaknesses. By regularly review-ing
its internal controls, the Department can ensure that its pro-cedures
effectively safeguard state and federal monies.
Recommendations
1. The Department should establish and maintain the following
processes and procedures to better safeguard state monies for
the Nogales Office of its Federal/State Inspection Service, in-cluding
processes and procedures for:
n Adequately segregating cash-handling responsibilities;
n Immediately endorsing all checks upon receipt; and
n Regularly reconciling monies received to deposits.
2. The Department should develop policies and procedures for
handling cash and cash-like receipts, including defining em-ployee
responsibilities for each step in the cash-handling pro-cess.
3. The Department should periodically request a procedural
review from the State’s General Accounting Office to ensure
it adheres to established policies and procedures for the No-gales
Office.
29
OFFICE OF THE AUDITOR GENERAL
OTHER PERTINENT INFORMATION
During the audit and in response to legislative inquiries, other
pertinent information was gathered regarding the Department of
Agriculture’s current efforts to regulate exempt slaughtering and
processing facilities.
Regulating the Exempt
Meat Industry
As part of its Food Safety and Quality Assurance program, the
Department regulates slaughtering and processing facilities that
produce meat for intrastate sale. The Department also regulates
facilities, known as exempt facilities, that slaughter livestock and
process meat for an animal owner’s personal use. For exempt
facilities, state regulation mirrors federal requirements in calling
for fewer and more narrowly scoped inspections than for facilities
that produce meat for sale. Arizona’s level of regulation of ex-empt
facilities is similar to regulation in other Western states, and
the Department has received very few complaints regarding its
regulation of the exempt meat industry.
Exempt slaughtering and processing facilities—Exempt slaugh-tering
and meat-processing facilities slaughter livestock and pro-cess
meat for the sole use of an animal’s owner. Because the meat
processed at exempt facilities is not for sale and does not enter the
public food chain, this industry is exempt from some of the
USDA and state inspection criteria applicable to facilities slaugh-tering
and processing meat for public consumption. Within the
exempt industry, there are two types of slaughtering facilities.
Specifically,
n Non-Mobile Exempt Slaughtering Facilities—Non-mobile
facilities slaughter livestock in a stationary building. Non-mobile
exempt slaughtering facilities often also provide meat-processing
services. There are currently 29 non-mobile ex-empt
slaughtering and/or processing facilities in Arizona.
The Department regulates
facilities that slaughter and
process meat for an animal
owner’s use.
Other Pertinent Information
30
OFFICE OF THE AUDITOR GENERAL
n Mobile Exempt Slaughtering Units—Mobile slaughtering
units use mobile structures to slaughter livestock on an ani-mal
owner’s property. Because mobile units are for slaughter-ing
only, the mobile slaughterer can transport the carcass to
an exempt processor for processing.
Exempt meat processors are prohibited by law from selling any
of the meat or meat by-products they process for an animal’s
owner. When livestock are processed by exempt facilities, all as-sociated
meat and meat by-products must be returned to the
animal’s owner and labeled “not for sale.” If the owner does not
want all the meat or meat by-products, the processing facility
must take steps to render the meat unfit for consumption and
dispose of it.
Exempt facilities represent only a small part of the Department’s
meat inspection program. The majority of the Department’s meat
inspection resources are devoted to inspecting facilities, com-monly
referred to as official facilities, that slaughter livestock and
process meat for intrastate sale and public consumption. Cur-rently,
there are approximately 70 official slaughtering and/or
processing facilities in Arizona.
Regulation of exempt and official facilities—To regulate both
official and exempt facilities, Arizona has statutorily adopted
meat inspection requirements that are equal to the USDA’s meat
inspection regulations. The State’s meat inspection program op-erates
under various cooperative agreements with the USDA and
the requirements of Arizona’s program mirror or are equal to the
meat inspection regulations imposed by the USDA. According to
the Federal Meat Inspection Act, if states do not maintain a meat
inspection program that is equal to the USDA’s requirements, the
USDA must perform all meat inspections in that state. To enforce
meat inspection requirements in Arizona, the Department li-censes
official slaughtering and processing facilities, and inspec-tors
visit official facilities each day that these facilities are slaugh-tering
livestock or processing meat. When inspecting official fa-cilities,
Department inspectors focus on both the condition of the
animals and associated meat as well as the condition and sanita-tion
of the facilities.
The State’s program oper-ates
under agreements with
the USDA.
Other Pertinent Information
31
OFFICE OF THE AUDITOR GENERAL
In contrast, while non-mobile exempt facilities are licensed, state
regulations require only that these facilities be inspected at least
twice a year. These inspections focus on the sanitary conditions of
the facilities, and the condition of the animals, but not on the as-sociated
meat. The Department will conduct more than two in-spections
each year based on an exempt facility’s violation his-tory.
If problems are identified during an inspection, the Depart-ment
will conduct follow-up inspections to ensure that all prob-lems
are resolved. Further, the Department licenses mobile
slaughtering facilities, but neither state nor federal law require
mobile facilities to be inspected.
This level of regulation is similar to other Western states that
regulate the exempt meat industry. During the course of the au-dit,
auditors contacted ten Western states with state meat inspec-tion
programs similar to Arizona’s.1 Eight of the ten states con-tacted
believe that the current level of regulation sufficiently
monitors the exempt meat industry. Only Montana and Idaho
expressed dissatisfaction with their current level of regulation,
believing that their own state rules need to be updated and
strengthened.
The Department receives few complaints on exempts—While the
level of regulation applied to the exempt meat industry is con-siderably
less than the Department’s regulation of the official
meat industry, the Department reports that it has received very
few complaints regarding non-mobile or mobile exempt facili-ties.
Although the Department does not track the number of
complaints it receives regarding exempt facilities, the Depart-ment
reports that it has had to take action against only three ex-empt
facilities during the past three years (1997 through 1999).
Two of these actions involved facilities that did not meet man-dated
sanitation requirements and these facilities entered into
consent agreements with the Department to remedy the sanita-tion
deficiencies. The third action involved an exempt facility
that illegally offered meat for sale and the Department fined the
operator of this facility. The Department has not found any fur-ther
problems with exempt facilities for the past 12 months.
The Department’s regulation
of exempt facilities is in ac-cordance
with USDA stan-dards.
1 The following Western states were contacted because they have an ex-empt
industry regulated by a state meat inspection program: California,
Colorado, Idaho, Kansas, Montana, Oklahoma, Oregon, Utah, Washing-ton,
and Wyoming.
32
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)
June 19, 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 Food Safety and
Quality Assurance and Non-Food Products Quality Assurance Programs. The ADA agrees in
general with the findings and recommendations of the audit team.
The ADA appreciates that the audit team recognized the numerous improvements to these
programs presently underway. Further, we are pleased to note that the Department has begun
implementing corrective action to many of the issues documented in your report.
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 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.
We believe the ADA, while it continues to identify methods of improving its delivery of
service to Arizona’s agriculture industry and the consuming public, is accepting the
challenge of regulating agricultural activity in an increasingly changing environment. We
take very seriously our mission and our charge to regulate and support Arizona
agriculture in a 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. 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.
The Food Safety and Quality Assurance Program is charged with ensuring that the public
food supply meets established standards for quality and safety. To assist the Department
in meeting its statutory mandates, this program is managed in two subprograms: Animal
Products Food Safety and Quality Inspection, and the Fresh Produce Standardization and
Inspection.
The Animal Products Food Safety and Quality Inspection subprogram is designed to help
protect the public health and safety from microbiological, chemical and physical food
hazards or substandard quality resulting from the processing and packaging of meat,
poultry, ratite, milk and eggs.
The Fresh Produce Standardization and Inspection subprogram is designed to inspect the
quality of fresh produce distributed in Arizona in accordance with standards established
by either the State of Arizona or the United States Department of Agriculture. State
quality inspections are industry- funded and aid the Arizona citrus, fruit, vegetable, and
nut industries in complying with quality standards. The purpose of state inspections is to
ensure that any produce or nuts marketed within or exported from Arizona conform to
state quality standards established for each commodity. Standards are established to
encompass several areas including quality, maturity, processing, labeling, storage,
handling and refrigeration of products.
2
Additionally, under a cooperative agreement, United States Department of Agriculture
(USDA) produce inspections are given by federal/state inspectors at the shipping point,
the international port-of-entry, or the terminal market. USDA grade inspections are fee-based
and given at the request of an industry desiring either to market their produce under
USDA quality grade standards, or to fulfill requirements for United State imports,
exports, marketing orders, or military shipments. Federal/State inspectors also inspect
watermelons and other identified produce entering Arizona from Mexico according to
State quality standards.
The Non-Food Product Quality Assurance program serves to ensure public confidence in
the quality of feed, fertilizer, pesticide, forage, and seed products. Many do not realize
that pesticides include, but are not limited to traditional crop protection agents, swimming
pool chemicals, pet pest treatments and household cleaners. Regulation of these various
industries is accomplished through two basic functions. First, regulatory processes are
undertaken to register pesticides and fertilizers and to issue licenses to fee, fertilizer,
forage and seed dealers and labelers. Secondly, enforcement activities are conducted by
inspectors who confirm product registrations and dealer licensing, and who regularly
sample these products to ensure that label statements, product guarantees, and applicable
laws are adhered to. Inspectors also, of course, respond to individual consumer
complaints regarding product quality concerns.
As indicated in the Auditor General’s report, certain characteristics of the programs
contribute to duplication of effort and resources on the part of both the Department, as
well as the public it serves. The findings and recommendations of this audit report will be
incorporated into our discussions with our counterparts in other states and other agency
stakeholders to further refine the system for meeting the dynamic and ever-changing
needs of Arizona’s growing agriculture industry and the public at large.
3
Finding I: Department Could Take Steps to Address Industry Concerns
Regarding the CFV Standardization Program.
Recommendation: The Department should improve the management of inspections
by:
A. Expanding its current planning efforts by implementing a
more systematic inspection sampling plan;
B. Scheduling and/or centralizing more of its inspections;
C. Transferring responsibility for collecting shipping
certificates from CFV inspectors to produce shippers by
requiring shippers to fax or e-mail the certificates to the
Department; and
D. Using violation data to implement risk-based inspections.
1A. Agency Response: The finding of the Auditor General is Agreed to and the
audit recommendation will be implemented.
Agency Explanation: The Arizona Department of Agriculture recognizes the value
of implementing each component of this recommendation.
The Department intends to implement a more systematic
inspection plan by increasing the level of supervision of daily
field inspections to ensure more efficient and systematic plans
for inspecting products are actualized.
1B. Agency Response: The finding of the Auditor General is agreed to and the
finding will be implemented.
Agency Explanation: Where possible, the Department will encourage the CFV
program to conduct more centralized inspections. We
recognize the value, both to the industry and to the State,
for such inspections to take place at the point of packing.
Whether the product is being packed in a field or in a
packing shed, the Department appreciates that there exists a
higher likelihood that any violations discovered could be
corrected before the product is widely distributed.
Therefore, while the Department intends to centralize or
schedule its inspections, it is willing to cooperate with the
industry to continue to offer inspections at the point of
packing.
1C. Agency Response: The finding of the Auditor General is agreed to and the
finding will be implemented.
4
Agency Explanation: Transferring responsibility for collecting shipping
certificates from CFV Standardization inspectors to the
shippers has already begun on a voluntary basis with thirty-two
of our shippers participating. By the Fall of 2000, we
would like to require that all central and eastern shippers
send us directly their shipment certificates thereby reducing
the amount of time a State inspector spends managing
paperwork during an inspection. This recommendation,
however, may not have taken into consideration the
contract the Department has with the United States
Department of Agriculture’s Market News program.
Through this contract the Department serves as the
collection service of the shipping certificates for the USDA
in Arizona’s western region (Yuma County). While we are
fairly confident such a requirement will be equally
beneficial for our inspectors in western Arizona, it will be
necessary for the Department to review the terms of our
contract and to meet with the USDA before we commit to
changing the way those shipping certificates are collected.
As the recommendation suggests, the Department is
amenable to accepting delivery of these shipping
certificates from the shippers through most mediums
including facsimile, e- mail or standard mail delivery.
1D. Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
Agency Explanation: The CFV Standardization program will begin immediately
to use violation data collected to implement risk-based
inspections that adhere to the sampling and inspection
protocols of the Department.
5
Recommendation 2: The Department should improve its management and
analysis of program data, and use this data to better
manage inspection activities and provide customer
service by:
A. Documenting and analyzing all verbal and written
violations;
B. Documenting licensees that receive inspections
and using this information to ensure that all
licensees receive an appropriate level of inspection
service; and
C. Merging the data from its three databases so that
it can analyze this data in a comprehensive and
systematic manner.
2A. Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
Agency Explanation: Based upon the finding of the auditor general and the
recommendation of this report, the Department has
structured a system for documenting licensees, verbal and
written violations, and the level of inspection being
provided to those licensees. Beginning July 1, 2000, the
CFV Standardization program will begin documenting and
analyzing verbal violations in addition to our presently
tracked written violations by adjusting our inspectors’ daily
field service reports. This will indicate which shippers or
growers were brought into compliance by verbal means and
with what frequency.
As has been stated in our response to previous audit
reports, the Arizona Department of Agriculture believes its
responsibility to provide unbiased compliance assistance to
a willing industry is every bit as important as serving as a
strong enforcement agency. To this end, CFV
Standardization inspectors are more than willing to work
with growers and shippers to help bring their product into
compliance before having to issue a formal written
violation.
2B. Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
While the CFV Standardization program utilizes its daily
field service activity reports to track the number of
inspections the State’s licensees receive, the program is
committed to utilize its existing daily field service reports
6
to track and document more specifically the number of
inspections licensees receive. The Department will
encourage the program to continue to refine these reports to
ensure that all licensees receive an appropriate level of
inspection service.
The inspections licensees receive will be based upon the
ratio of commodities grown in Arizona.
2C. Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
7
Recommendation 3: The Department and the CFV Advisory Council should
improve communication with program participants,
including providing basic program information and
proposed changes to the program, as well as
information on opting out of the program by:
A. Using its current Department newsletter to provide
program information to all CFV program licensees
who pay assessment fees, and
B. Ensuring that Council meeting agendas and
decisions are distributed to all licensees who pay
assessments.
3A & 3B. Agency Response:The finding of the Auditor General is agreed to but a
different method of dealing with the finding will be
implemented.
While the Department concedes that it has an opportunity
to improve the level of communication between itself and
the regulated industry, it will implement alternative and
more cost-effective methods to address the finding. The
CFV program, like all Department programs, abides by
requirements of public meeting laws by advertising
Advisory Council meetings. Additionally, whenever a rule
change is proposed or implemented, the program, through
the Department’s rules specialist, solicits industry
comments and feedback. Additionally, its important to
note that the Advisory Council, itself, is a tool to make the
industry aware of program activities as each member is
selected to represent the concerns of a particular segment of
the industry.
Therefore, while the Department concedes it may have an
opportunity to improve its level of communication with the
industry, it will implement alternative and more cost
effective methods of dealing with the finding including
incorporating CFV updates in the existing Department
newsletter and posting meetings on the Department’s
website.
8
Finding II: Non-Food Product Quality Assurance Program Needs
Improved Sampling Approach
Recommendation 1: The Department should develop and implement long-term
formal sampling plans for feed, fertilizer,
pesticide, and seed products that would allow it to
better protect the public from poor-quality non-food
products and make efficient and effective use of
resources. The Department should also incorporate a
sampling frame and risk-based component into these
sampling plans.
Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
Agency Explanation: The Department agrees to implement a long-term sampling
plan for the non- food commodities. It is also agreed that a
risk based component be added to the plan. Contrary to the
report however, the Department believes inspector
discretion is absolutely warranted and will continue to play
a role in sampling.
As was indicated in conversations with Department staff,
the Program does not have a mechanism to obtain
information on the retail outlets selling these materials.
The Department is not able to obtain information such as
the number of retail outlets in Arizona, their locations and
what regulated materials are sold at such facilities.
State law does not require these retail outlets to obtain a
license to operate in Arizona. The Department is aware,
also, that a retail center’s location, inventory, and even
ownership can change on a frequent basis. A database can
be generated out of those establishments that have
previously been inspected; however, the materials that they
sell can not be as easily tracked. It would be unreasonable
to try and track products other than those found to be in
violation. The only stores that will be consistently
providing these products will be those that make up major
conglomerates such as Home Depot, Wal-Mart, etc.
The Department recognized these deficiencies and less than
a year ago revised the rules covering feeds, fertilizers and
pesticides. A requirement now exists in the fertilizer rule
that all specialty products labels are provided to the
program. In feed, all persons that will be distributing
9
commercial feed in the state must now provide us with a
copy of the label. These provisions allow the department to
gather information on the products that are available for
sale and for sampling purposes.
As the Department has no statutory authority to require a
product listing, the Department is currently requesting that
the fertilizer licensees provide us with a listing of all
fertilizers by name and grade for inclusion in its sampling
planning. A similar request will be made for the seed
labelers with license renewals. With this information, the
Program will have a fair estimate of the materials that are
available for sale within the State.
10
Recommendation 2: The Department should reconvene its sampling plan
committee to guide the development and monitoring of
the non-food program sampling plans.
Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation has already been implemented.
Agency Explanation: The sampling committee has already been reconvened and
has met as a whole. Now, it will start to meet in
subcommittees to deal with each commodity.
The sampling committee is made up of core professionals.
These members are: two managers from the State
Agricultural Laboratory, two managers from ESD, and Mr.
Will Sherman, State Statistician for the United States
Department of Agriculture’s Agricultural Statistics Service.
The committee is then broken down categorically with
someone from the field with considerable knowledge in a
particular sector is added to the committee. A
representative from the Structural Pest Control Commission
will also sit on the pesticide committee.
11
Finding III: The Nogales Office Needs to Strengthen Its Cash-
Processing Controls
Recommendation: The Department should establish and maintain the
following processes and procedures to better safeguard
state monies for the Nogales Office of its Federal/State
Inspection Service, including processes and procedures
for:
A. Adequately segregating cash-handling
responsibilities
B. Immediately endorsing all checks upon receipt; and
C. Regularly reconciling monies received to deposits.
Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
Recommendation 2: The Department should develop policies and
procedures for handling cash and cash-like receipts,
including defining employee responsibilities for each
step in the cash-handling process.
Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
Recommendation 3: The Department should periodically request a
procedural review from the State’s General Accounting
Office to ensure it adheres to established policies and
procedures for the Nogales Office.
Agency Response: The finding of the Auditor General is agreed to and the
audit recommendation will be implemented.
Other Performance Audit Reports Issued Within
the Last 12 Months
99-8 Department of Water Resources
99-9 Department of Health Services—
Arizona State Hospital
99-10 Residential Utility Consumer
Office/Residential Utility
Consumer Board
99-11 Department of Economic Security—
Child Support Enforcement
99-12 Department of Health Services—
Division of Behavioral Health
Services
99-13 Board of Psychologist Examiners
99-14 Arizona Council for the Hearing
Impaired
99-15 Arizona Board of Dental Examiners
99-16 Department of Building and
Fire Safety
99-17 Department of Health Services’
Tobacco Education and Prevention
Program
99-18 Department of Health Services—
Bureau of Epidemiology and
Disease Control Services
99-19 Department of Health Services—
Sunset Factors
99-20 Arizona State Board of Accountancy
99-21 Department of Environmental
Quality—Aquifer Protection Permit
Program, Water Quality Assurance
Revolving Fund Program, and
Underground Storage Tank Program
99-22 Arizona Department of Transportation
A+B Bidding
00-1 Healthy Families Program
00-2 Behavioral Health Services—
Interagency Coordination of Services
00-3 Arizona’s Family Literacy Program
00-4 Family Builders Pilot Program
00-5 Department of Agriculture—
Licensing Functions
00-6 Board of Medical Student Loans
00-7 Department of Public Safety—
Aviation Section
00-8 Department of Agriculture—
Animal Disease, Ownership and
Welfare Protection Program
00-9 Arizona Naturopathic Physicians
Board of Medical Examiners
Future Performance Audit Reports
Department of Tourism
Department of Public Safety—
Crime Lab