Performance audit and sunset review, Governor's Regulatory Review Council

              Performance Audit and Sunset Review
Governor’s Regulatory
Review Council
Performance Audit Division
Debra K. Davenport
Auditor General
FEBRUARY • 2006
REPORT NO. 06 – 01
A REPORT
TO THE
ARIZONA LEGISLATURE
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative Laura Knaperek, Chair Senator Robert Blendu, Vice Chair
Representative Tom Boone Senator Carolyn Allen
Representative Ted Downing Senator John Huppenthal
Representative Pete Rios Senator Richard Miranda
Representative Steve Yarbrough Senator Harry Mitchell
Representative Jim Weiers (ex-officio) Senator Ken Bennett (ex-officio)
Audit Staff
Melanie Chesney, Director
Dale Chapman, Manager and Contact Person
Danielle Mariano, Team Leader
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
February 21, 2006
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Alex Turner, Chairman
Governor’s Regulatory Review Council
Transmitted herewith is a report of the Auditor General, A Performance Audit and Sunset Review
of the Governor’s Regulatory Review Council (GRRC). This report is in response to a May 24,
2005, resolution of the Joint Legislative Audit Committee. The performance audit was conducted
as part of the sunset review process prescribed in Arizona Revised Statutes §41-2951 et seq. I am
also transmitting with this report a copy of the Report Highlights for this audit to provide a quick
summary for your convenience.
Included with this report is a written response from the Governor’s Regulatory Review Council.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on February 22, 2006.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Services:
The Governor’s Regulatory Review Council (GRRC) has the following responsibilities:
􀁺􇩒 Review proposed administrative rules to ensure that they meet specific statutory criteria.
In fiscal year 2005, GRRC received and approved the adoption, repeal, amendment, or
renumbering of 1,183 rules.
􀁺􇩍 Maintain a list of agencies that need to conduct a 5-
year review of their administrative rules, as well as
review and approve agencies’ reports on their
reviews.
􀁺􇩒 Receive and consider public appeals regarding
three areas of agency practice, including an
agency’s decision to deny an individual’s petition
regarding whether an existing agency practice or
policy constitutes an administrative rule. In fiscal
year 2005, GRRC received two appeals.
􀁺􇩃 Compile reports on each agency’s efforts to review
its rules, agency compliance with overall licensing
time frames, and whether agencies maintain a
directory summarizing all applicable rules and sub-stantive
policy statements.
Membership and staffing:
GRRC consists of six members appointed by the
Governor and one ex-officio member representing the director of the Department of
Administration who also serves as the GRRC chair. A.R.S. §41-1051(A) requires that GRRC be
composed of the following:
􀁺􇩁 At least one public interest member,
􀁺􇩁 At least one business community member,
􀁺􇩏 One member from a list of three nonlegislators recommended by the President of the
Senate,
􀁺􇩏 One member from a list of three nonlegislators recommended by the Speaker of the
House, and
􀁺􇩔 Two at-large members.
As of December 2005, GRRC had five staff members and two vacancies. The filled positions
included three attorney analysts, one economist, and an office manager.
PROGRAM FACT SHEET
Governor’s Regulatory Review Council (GRRC)
Office of the Auditor General
Program revenue:
$505,900 (fiscal year 2006, estimated)
$420,000
$430,000
$440,000
$450,000
$460,000
$470,000
$480,000
$490,000
$500,000
$510,000
FY2004 FY2005 FY2006 (est.)
State General Fund
Facilities and equipment:
The Governor’s Regulatory Review Council was established within and continues to be a part of
the Department of Administration (Department). It occupies a total of 1,968 square feet of office
space in the Department’s building at 100 North 15th Avenue in Phoenix. The Department leas-es
this building under the PLTO (private lease-to-own) program and was scheduled to pay
approximately $2.6 million in rent for the entire building during fiscal year 2005. GRRC’s equip-ment
includes typical office equipment.
Mission:
GRRC’s mission is “to assist the Governor’s Regulatory Review Council and agencies to fulfill
their rulemaking responsibilities under the Administrative Procedure Act.”
Program goals:
􀁺􇨮. “To deliver customer service that is second to none in the Governor’s Regulatory
Review Council subprogram.”
􀁺􇨜 “To aggressively pursue innovative solutions and/or opportunities in the Governor’s
Regulatory Review Council subprogram.”
Adequacy of performance measures:
GRRC has developed a number of performance measures that are in line with its goals, and
include quality, input, output, outcome, and efficiency measures. These include measures for
customer satisfaction with GRRC’s services, the number of rules GRRC receives annually, the
percentage of administrative rules that the council acts upon in a way that is consistent with staff
recommendations, and the percentage of informal or courtesy reviews of agencies’ proposed
rules that GRRC conducts in 2 months or less.
However, GRRC could benefit from additional performance measures that provide more infor-mation
on the efficiency of its activities. For example, while GRRC has measures for the number
of rules it receives annually, and the percentage of those rules that are approved in the initial coun-cil
hearing, it does not track the length of time it takes for a rule package to be approved. Adding
such a measure would help GRRC demonstrate how long it takes to complete its reviews and
whether it complies with its 90-day statutory review and approval time frame.
Source: Auditor General staff compilation of unaudited information obtained from the Arizona Financial Information System (AFIS) for the years
ended June 30, 2004 and 2005; Arizona Revised Statutes, Master List of State Government Programs; and other information provided by
the Department, including revenue and expenditure estimates for the year ended June 30, 2006.
State of Arizona
The Office of the Auditor General has conducted a performance audit and sunset
review of the Governor’s Regulatory Review Council (GRRC) pursuant to a May 24,
2005, resolution of the Joint Legislative Audit Committee. This audit was conducted
as part of the sunset review process prescribed in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
GRRC was established by executive order in 1981 to examine proposed
administrative rules that state agency directors determined would have an economic
impact on any state, county, city, or town agency; community college district; or
school district.1 In 1986, GRRC was created in statute and given authority to review
all proposed rules. In 1995, the Legislature made sweeping changes to the
rulemaking process that expanded GRRC’s role, including giving GRRC final
approval authority over all proposed administrative rules, except those that are
exempted from the rulemaking process. GRRC consists of six members who are
appointed by the Governor and one ex-officio member representing the director of
the Department of Administration, who also serves as the GRRC chair.
GRRC’s responsibility to review and approve rules comes at the end of a lengthy
rulemaking process. Before submitting proposed rules to GRRC for their review and
approval, agencies must have already gone through several steps, including
determining whether an administrative rule is needed, opening and publishing a
rulemaking docket or public record, drafting the proposed rule and analyzing the
costs and benefits associated with the rule, soliciting public comment, and drafting
proposed final rules that incorporate or otherwise address any public comments
received. After these steps have been completed, agencies must submit their
proposed final administrative rules to GRRC for review. According to A.R.S. §41-
1052, GRRC must then review proposed rules against several statutory criteria, which
require that:
􀁺􇩔 The language of the administrative rule must be clear, concise, and
understandable,
􀁺􇨠 The agency has statutory authority to make the administrative rule, including
authority for new or increased fees and for requests that a rule become effective
immediately,
1 The Governor’s Regulatory Review Council was established within and continues to be a part of the Department of
Administration. However, GRRC has its own sunset date.
Office of the Auditor General
SUMMARY
page i
􀁺􇩔 The administrative rule does not conflict with existing law,
􀁺􇩔 The probable benefits of the administrative rule outweigh its probable costs,
􀁺􇩔 The administrative rule contains a generally accurate economic impact
statement,
􀁺􇨠 The economic impact statement describes the probable costs or benefits of the
administrative rule,
􀁺􇩔 The economic impact statement includes statements on the administrative
rule’s probable effects on small businesses and state revenues, and
􀁺􇩔 The agency adequately addressed public comments on the administrative rule.
GRRC has 90 days from the date it receives an agency’s rule package to approve or
return an agency’s final rules. In fiscal year 2004, GRRC reported that it approved the
adoption, repeal, amendment, or renumbering of 1,330 individual rules and returned
3 rules. In fiscal year 2005, GRRC reported that it approved the adoption, repeal,
amendment, or renumbering of all 1,183 individual rules it reviewed.
In addition to its responsibilities within the administrative rulemaking process, GRRC
performs several other duties. These include reviewing and approving agencies’ 5-
year reviews of their administrative rules; receiving and considering appeals from the
public regarding certain agency practices; and reporting on agencies’ efforts to
make necessary changes to administrative rules, compliance with licensing time
frames, and whether each agency maintains a directory summarizing the subject
matter of all current applicable rules and substantive policy statements, and that the
directory, rules, and substantive policy statements are available to the public.
Sunset Factors (see pages 13 through 22)
GRRC has generally met its objectives and purposes by effectively reviewing and
approving agency rules and by reviewing and approving agency 5-year rule review
reports. Specifically:
􀁺􇩇 GRRC’s review of administrative rules consistent with statute—GRRC has
established various policies, procedures, and mechanisms to help ensure that
its required review and approval of proposed administrative rules complies with
statutory criteria and time frames. Auditors reviewed a random sample of ten
proposed administrative rule packages submitted to GRRC between
September 2004 and August 2005. This review showed that GRRC met its
various statutory requirements with regard to such matters as ensuring that the
State of Arizona
page ii
language of the proposed rule was clear, concise, and understandable; that the
agency has the statutory authority to adopt the administrative rule; and that the
probable benefits of the proposed rule outweighed its probable costs. Although
GRRC reports that it does not determine the timeliness of its reviews, GRRC
completed its review of the random sample of 10 rule packages within the 90-
day time frame required by A.R.S. §41-1052(B). Additionally, comments from six
agency rule-writers who auditors interviewed showed general satisfaction with
GRRC’s performance. To help ensure the timely review of rule packages, GRRC
has established a yearly schedule with monthly due dates for the submission of
rule packages and corresponding public meeting dates. If agencies submit their
rule packages on or before the indicated submission date, the rule package
should be ready for GRRC member consideration on the corresponding public
meeting date. GRRC’s adoption of a standardized process for reviewing
administrative rules also contributes to its ability to meet the statutory time frame
requirement.
􀁺􇨠 GRRC’s analysis of 5-year review reports follows established process—GRRC
also follows specific policies and procedures to ensure that the reports agencies
produce documenting their internal analysis of their own rules every 5 years
comply with statutory requirements. According to A.R.S. §41-1056(A), at least
once every 5 years, each agency must review its administrative rules to
determine if any rules need to be amended or repealed and then, as necessary,
develop a plan for making needed revisions to its rules. Agencies must prepare
a report documenting their review and submit it to GRRC. GRRC must then
review these reports for compliance with various statutory criteria, such as
whether the report includes an analysis of any written criticisms an agency’s
administrative rules received during the previous 5 years. Based on auditors’
review of a random sample of five rule review reports that GRRC received in
fiscal year 2005, GRRC’s review of these reports conformed to its policies.
Additionally, although GRRC does not have a statutorily required time frame for
completing its review of these reports, based on auditors’ review of the random
sample of five rule review reports, it took GRRC 90 days or fewer to review and
approve all five of these reports. Finally, while GRRC cannot require agencies to
proceed with the plans they develop for making needed revisions to their rules,
it has taken steps to encourage agencies to do so.
Office of the Auditor General
page iii
State of Arizona
page iv
Office of the Auditor General
TABLE OF CONTENTS
1
13
4
10
Introduction & Background
Sunset Factors
Agency Response
Figure:
1 Administrative Rulemaking Process and
GRRC’s Specific Role in Process
Table:
1 Governor’s Regulatory Review Council
Schedule of Revenues and Expenditures
Years Ended or Ending June 30, 2004, 2005, and 2006
(Unaudited)
page v
State of Arizona
page vi
GRRC has final
approval authority for
proposed administrative
rules, except for those
exempted from the
rulemaking process.
1 The Governor’s Regulatory Review Council was established within and continues to be a part of the Department of
Administration. However, GRRC has its own sunset date.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
The Office of the Auditor General has conducted a performance audit and sunset
review of the Governor’s Regulatory Review Council (GRRC) pursuant to a May 24,
2005, resolution of the Joint Legislative Audit Committee. This audit was conducted
as part of the sunset review process prescribed in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
History and composition
GRRC was established by executive order in 1981 to examine proposed administrative
rules that state agency directors determined would have an economic impact on any
state, county, city, or town agency; community college district; or school district.1
Administrative rules are agency statements of general applicability that implement,
interpret, or prescribe law or policy, or describe the agency’s procedure or practice
requirements. In 1986, GRRC was created in statute and given statutory authority to
examine all proposed rules. In 1995, the Legislature made sweeping changes to the
rulemaking process that significantly expanded GRRC’s role. First, it received final
approval authority over all proposed administrative rules, except those that are
exempted from the rulemaking process. Second, GRRC was provided with staff to
assist in its enhanced rule review function. Lastly, the Legislature moved GRRC’s review
and approval to the end of the administrative rulemaking process so that it could
approve rules in their final form. Currently, GRRC defines its mission as assisting
agencies in fulfilling their rulemaking responsibilities under statute.
GRRC consists of six members who are appointed by the Governor and one ex-officio
member representing the director of the Department of Administration, who
also serves as the GRRC chair. A.R.S. §41-1051(A) requires that GRRC be
composed of the following:
􀁺􇩁 At least one public interest member,
􀁺􇩁 At least one business community member,
􀁺􇩏 One member from a list of three nonlegislators recommended by the President
of the Senate,
􀁺􇩏 One member from a list of three nonlegislators recommended by the Speaker
of the House, and
􀁺􇩔 Two at-large members.
Additionally, A.R.S. §41-1051(A) requires that at least one of the GRRC members be
a licensed Arizona attorney. Members serve staggered 3-year terms.
Importance of administrative rules
According to the Office of the Secretary of State’s Arizona Rulemaking Manual,
administrative rules are a necessary part of the legislative process for several
reasons:
􀁺􇩉 Implementing legislative policy—Administrative rules help agencies implement
the broad public policy prescribed in statute. Specifically, statute can direct state
agencies to provide services or perform specific regulatory functions, while
administrative rules detail the requirements or processes for doing so. For
example, A.R.S. §32-1606(B) directs the Board of Nursing to license
professional and practical nurses. Administrative rules adopted by the Board of
Nursing explain the specific requirements for licensure, such as how to apply for
a license.
􀁺􇩃 Communicating with the public—Administrative rules allow agencies to
communicate statutory requirements to the public. For example, A.R.S. §36-594
gives the Department of Economic Security (DES) the authority to revoke or
suspend the license of a home for developmentally disabled adults. However,
DES administrative rules explain under what circumstances this can occur and
the process a home must take to appeal this action.
􀁺􇩓 Setting standards and limits—Administrative rules set standards and limits for
government. For example, DES administrative rules identify the information that
its Adult Protective Services Division (APS) must request from the person or
entity reporting neglect and/or abuse of a vulnerable adult. As a result, all APS
staff have clear guidelines for the information they need to collect regarding
allegations of abuse or neglect.
The factors listed above not only make administrative rules necessary, but common.
Arizona’s state agencies issue hundreds of administrative rules each year to achieve
goals such as ensuring that the public has safe food, clean air, and licensed health
care providers. For example, GRRC reports that for fiscal year 2005, it approved the
adoption, repeal, amendment, or renumbering of 1,183 administrative rules from 39
state agencies, including the Departments of Agriculture and Environmental Quality
and the Board of Nursing.
State of Arizona
page 2
Important Definitions
Statute—A law established by
a legislative body such as the
Arizona Legislature.
Rule—An agency statement
of general applicability that
implements, interprets, or
sets law or policy, or
describes an agency’s
procedures or practices.
Policy—An agency statement
that defines its internal
policies or procedures.
Source: A.R.S. §41-1001, the Arizona
Rulemaking Manual, and Black's Law
Dictionary.
In fiscal year 2005,
GRRC approved the
adoption, repeal,
amendment, or
renumbering of 1,183
administrative rules from
39 agencies.
Office of the Auditor General
page 3
Administrative rulemaking process
The administrative rulemaking process is statutorily defined and specifies the steps
agencies must undertake to adopt rules, as well as certain exceptions to this process.
State agencies have several responsibilities in the administrative rulemaking process
before GRRC becomes involved, such as determining if an administrative rule is
needed, drafting the administrative rule, and soliciting public comment regarding the
proposed rule. After agencies have completed all of these steps, GRRC is required
to review an agency’s proposed administrative rules to ensure they conform to
several statutory criteria, such as whether the administrative rule is clear and concise
and in compliance with the agency’s legislative mandate. Additionally, statute
provides for certain exceptions to the administrative rulemaking process.
Agencies’ rulemaking responsibilities—State agencies have several
responsibilities in the formal administrative rulemaking process, which can be time-consuming
to complete. For example, once an agency has drafted its rules, the time
frames specified in statute to complete the required reviews and public notice
requirements total approximately 10 months. These include maximum time frames for
some steps that could be completed more quickly than the indicated time frame.
Additionally, there are many factors that can influence the overall amount of time it
takes for agencies to complete this process, including the complexity of the
proposed rules and the amount of time and resources an agency can devote to the
administrative rulemaking process.
As illustrated in Figure 1 (see page 4), the steps an agency must complete within the
administrative rulemaking process, including statutory time frames for these steps,
are as follows:
􀁺􇩄 Determining if an administrative rule is needed—Before an agency begins the
administrative rulemaking process, it must determine whether an administrative
rule is needed. For example, statute requires agencies to adopt administrative
rules in order to set licensing time frames, establish licensing requirements, and
collect administrative fees. In other instances statute may permit, but not require,
an agency to write a rule. For example, A.R.S. §36-502(C) indicates that the
Department of Health Services, Division of Behavioral Health may adopt rules
concerning leaves, visits, and absences of patients from evaluation agencies
and mental health treatment agencies. However, no state agency has been
charged with the responsibility to ensure that agencies have adopted all the
administrative rules required by statute or necessary to carry out their legislative
mandates.
􀁺􇩏 Opening a rulemaking docket—State agencies begin the formal administrative
rulemaking process by opening a docket. Agencies maintain a docket or public
record to provide information to the public about the rule’s subject, the time
Time frames in statute
require approximately
10 months to complete
the administrative
rulemaking process.
State of Arizona
page 4
Figure 1: Administrative Rulemaking Process and
GRRC’s Specific Role in Process
Rulemaking docket—Provides
information about the rule’s
subject, time frame for
administrative rulemaking, and
the proposed rule’s status.
Automatically terminates 1
year after the notice is
published if the agency does
not proceed with the process.
Agency drafts final administrative rules and addresses
all formal public comments. Final draft administrative
rules must be submitted to GRRC within 120 days
after close of public comment period.
Agency determines an administrative rule is
needed.
Agency opens a rulemaking docket and files a
notice with the Secretary of State, who then
publishes it in the Arizona Administrative Register
(Register).
Agency drafts proposed administrative rules and
economic impact statement and may obtain
informal public comment.
Agency publishes draft of administrative rules in
the Register and opens formal public comment
period. Agency has 30 days to receive formal
written comments and may hold a public meeting
to receive oral comments. This step may occur
more than once if the comments result in
substantial changes to the rules.
Source: Arizona Rulemaking Manual, GRRC training materials, and A.R.S. §41-1001 et seq.
Agency Process GRRC Process
GRRC has 90 days to review the final administrative
rule package, including the economic impact
statement, against statutory criteria and either
approve or return the rule package to the agency.
If GRRC returns the rules and:
Minor revisions are required, the agency can make
GRRC’s revisions and resubmit the revised rules to
GRRC.
Substantial revisions are required, the agency must
publish a notice of Supplemental Rulemaking in
the Register and allow for a second public
comment period. After making revisions, the
agency must then resubmit the revised rules to
GRRC.
If approved, GRRC files a final copy of rules with
the Secretary of State. The rules then become
effective in 60 days. Rules can become effective
immediately if the agency requests and two-thirds
of GRRC voting members present approve the
rules.
Economic impact statement—
Describes how the proposed
rule will affect the regulated
community, small businesses,
and consumers.
frame for the administrative rulemaking process, and the
rule’s status. When an agency opens a docket, it must file a
notice with the Office of the Secretary of State, which then
publishes an announcement in the Arizona Administrative
Register (Register). An administrative rulemaking docket
automatically terminates 1 year after the notice is published if
an agency does not proceed with the administrative
rulemaking process. Once the agency opens a docket, it can
begin to draft its proposed rules, which should include a draft
of the rule’s economic impact statement.1
􀁺􇩓 Soliciting public comment—After opening an administrative
rulemaking docket, the agency solicits public comment on its
proposed administrative rules. This occurs in two phases.
First, while drafting its administrative rules, an agency may
meet informally with stakeholders to solicit feedback on
suggested language and subject matter. Then, once it
completes its draft of the proposed administrative rules and
publishes this draft, also known as the Notice of Proposed
Rulemaking, in the Register, it has 30 days to receive formal
written comments on the proposed administrative rules. If an
agency receives a written request for a public meeting during
this 30-day period, it must hold a meeting to receive oral comments from
interested parties. This meeting cannot be held less than 30 days after its
location and time are published in the Register. Although an agency does not
have to hold a public meeting unless requested, GRRC recommends that
agencies routinely hold such meetings and include the dates in their Notice of
Proposed Rulemaking. This provides the public with a forum to provide
comments regarding the proposed rules and avoids delays in the process if a
meeting is requested. An agency would have to go through the public comment
period a second time if the first comment period resulted in substantial changes
to the rules published in the Notice of Proposed Rulemaking.
􀁺􇩄 Drafting final rules—Following the close of the administrative rulemaking record,
which is the last date on which the agency will receive public comment, it can
begin drafting its final administrative rules. In doing so, it must address all
comments provided during the formal public comment period by either
modifying the administrative rule or preparing an explanation as to why the
administrative rule was not changed. Within 120 days of closing its public
comment period, an agency must submit its final administrative rules to GRRC
for review.
1 According to A.R.S. §41-1055(D), agencies are not required to prepare an economic impact statement for certain
proposed rules, including when the proposed rule decreases monitoring, recordkeeping, or reporting burdens on
agencies, political subdivisions, businesses, or persons, unless the agency determines that increased costs of
implementation or enforcement may equal or exceed the reduction in burdens.
Office of the Auditor General
page 5
Economic Impact
Statement (EIS)
Definition—The EIS describes how the
rule will affect the regulated community,
small businesses, and consumers.
An EIS must include:
􀁺􇩁 An identification of the persons who
will be directly affected by the rule.
􀁺􇩁 A cost-benefit analysis.
􀁺􇩁 A statement of the rule’s probable
effect on state revenues.
􀁺􇩁 A description of any less-intrusive or
less-costly alternative methods for
achieving the purpose proposed in
the rule.
Source: A.R.S. §41-1055.
GRRC’s rulemaking-related responsibilities—Within the administrative
rulemaking process, GRRC has a specific responsibility to ensure that proposed
rules satisfy several statutory criteria before they can be approved. Thus, GRRC is
required to review proposed rules against statutory criteria, including criteria which
require that:
􀁺􇩔 The language of the administrative rule must be clear, concise, and
understandable,
􀁺􇨠 The agency has statutory authority to make the administrative rule, including
authority for new or increased fees and for requests that a rule become effective
immediately,
􀁺􇩔 The administrative rule does not conflict with existing law,
􀁺􇩔 The probable benefits of the administrative rule outweigh its probable costs,
􀁺􇩔 The administrative rule contains a generally accurate economic impact
statement,
􀁺􇩔 The economic impact statement describes the probable costs or benefits of the
administrative rule,
􀁺􇩔 The economic impact statement includes statements on the administrative
rule’s probable effects on small businesses and state revenues, and
􀁺􇩔 The agency adequately addressed public comments on the administrative rule.
GRRC has 90 days from the date it receives an agency’s rule package to review and
approve or return an agency’s final rules. During that time, GRRC staff works with the
agency to revise the administrative rules so that they conform to the statutory criteria.
As part of its monthly public meetings, GRRC members vote on whether to approve
the administrative rules or return them to the agency for further changes. If the rules
are returned, the agency can make GRRC’s indicated revisions and resubmit the
revised rules to GRRC. However, if the returned rules require substantial changes, the
agency must publish a Notice of Supplemental Rulemaking in the Register and allow
for a second public comment period. After it addresses any additional public
comments and makes the necessary revisions to the rules, the agency must then
resubmit them to GRRC.
According to GRRC, in fiscal year 2004 it approved the adoption, repeal,
amendment, or renumbering of 1,330 individual rules and only returned 3 individual
rules to their respective agencies. Agencies later resubmitted 2 of the 3 rules for
GRRC approval in that fiscal year. In fiscal year 2005, GRRC approved the adoption,
repeal, amendment, or renumbering of all 1,183 of the rules it reviewed. If GRRC
GRRC has 90 days from
the date it receives an
agency’s rule package
to review and approve
or return an agency’s
final rules.
State of Arizona
page 6
approves the rules, GRRC staff file a final copy with the Office of the Secretary of
State. The administrative rules become effective 60 days after this filing. If an agency
requests and demonstrates the need, a rule can become effective immediately if two-thirds
of the GRRC voting quorum present approve the rule.
Alternative administrative rulemaking procedures—While most agencies
must follow the statutorily required administrative rulemaking process to adopt rules,
statute provides for exceptions to this process. As specified below, these exceptions
may or may not require GRRC’s review and approval of the proposed rules.
􀁺􇨠 Exemptions—An agency with an exemption may adopt administrative rules
without following any of the steps in the administrative rulemaking process, other
than submitting the final administrative rule to the Office of the Secretary of State
for publication in the Register. Through statute, the Legislature has permanently
exempted several agencies in full or in part from the regular administrative
rulemaking process, including agencies such as the Arizona Board of Regents,
the Arizona State Board of Education, the Arizona Corporation Commission, and
agencies headed by a single elected official. However, the Arizona Board of
Regents and the Arizona State Board of Education are statutorily required to
receive public comment on their proposed rules, and the Arizona Corporation
Commission must adopt rules under a substantially similar rulemaking process.
The rules of agencies headed by a single elected official and the Arizona
Corporation Commission are reviewed and approved by the Attorney General.
Additionally, statute permanently exempts administrative rules that cover certain
subjects from the regular administrative rulemaking process, including the
regulation of motor vehicle operation and the use of public works, including
streets and highways.
State agencies can also receive specific exemptions from the administrative
rulemaking process. For example, in 2004, the Legislature granted the Arizona
Healthcare Cost Containment System (AHCCCS) a year-long exemption from
the rulemaking process for the purpose of drafting rules related to the agency’s
ability to qualify trusts created pursuant to the Federal Social Security Act.
According to a GRRC official, agencies might request exemptions from the full
process or part of the process to more quickly adopt rules. The Attorney
General’s Office is responsible for reviewing and approving rules that are
exempted under A.R.S. §41-1057, including rules adopted by agencies headed
by a single elected official and the Arizona Corporation Commission. However,
rules made under other exemptions are not reviewed for appropriateness by an
outside agency.
􀁺􇩓 Summary administrative rulemaking—In addition to exemptions, A.R.S. §41-
1027 provides for a summary administrative rulemaking process that allows
Agencies can receive
specific exemptions
from the administrative
rulemaking process.
Office of the Auditor General
page 7
state agencies to repeal obsolete administrative rules and/or administrative rules
that repeat statute verbatim. This process significantly shortens the
administrative rulemaking process, but still requires that GRRC review and
approve rules that an agency is proposing to repeal. Summary administrative
rules temporarily take effect after the agency has a proposed summary
administrative rulemaking published in the Register. The agency then has 90
days to receive informal public comment and submit the final summary
administrative rules to GRRC for review and approval. According to a GRRC
official, since this process is typically used to repeal rules where the agency no
longer has the authority for the rule, public comment is usually not provided.
GRRC can then either hold a hearing on the administrative rules or approve
them through a consent agenda at its monthly public meetings. Consent
agendas are typically used as a time-saving device and include agency items
that are minor or unlikely to generate controversy. Typically, one vote is taken to
approve or disapprove all of the items on a consent agenda. After GRRC
approves the administrative rules, it files a final summary administrative rule
package with the Office of the Secretary of State. This process cannot be used
by agencies to adopt new rules.
􀁺􇩅 Emergency administrative rulemaking—If an agency determines that one of
several emergency situations exists, A.R.S. §41-1026 allows it to undertake an
emergency administrative rulemaking. Instances when agencies may adopt
emergency rules include those that involve the protection of the public’s health,
safety, or welfare, and to avoid violating federal law. By using this process to
adopt an administrative rule, an agency forgoes the formal public comment
period and GRRC’s review and approval. Instead, the Attorney General reviews
and approves the emergency administrative rules and then submits them to the
Office of the Secretary of State for publication in the Register. However, an
agency cannot receive approval for an emergency administrative rule if the
emergency situation is the result of its own delay or inaction. Emergency rules
expire after 180 days and may only be renewed for one additional 180-day
period. An official with the Office of the Secretary of State reported that between
January 2000 and December 2005, agencies have filed 33 emergency rules.
GRRC’s additional duties
In addition to its responsibilities within the administrative rulemaking process, GRRC
has the following responsibilities:
􀁺􇩁 Approving agencies’ 5-year reviews of their administrative rules—GRRC is
responsible for maintaining a list of agencies that need to conduct a 5-year
review of their administrative rules, as well as reviewing and approving agencies’
reports on their reviews. According to A.R.S. §41-1056(A), at least once every 5
State of Arizona
page 8
years, each agency must review its administrative rules to determine if any rules
need to be amended or repealed and then as necessary, develop a plan for
making needed revisions. Agencies must prepare a report documenting their
review and submit it to GRRC, which ensures that the agency’s assessment
complies with statute. GRRC then approves or returns the report to the agency
for changes. If an agency has substantially revised an administrative rule within
2 years of its scheduled 5-year review, it does not have to complete an analysis
of that rule.
􀁺􇨠 Hearing appeals on certain agency practices—A.R.S. §§41-1033, 41-1056.01,
and 41-1081 require GRRC to receive and consider hearing appeals on three
areas of agency practice. The first type of appeal may occur after an agency
denies an individual’s petition regarding an existing agency practice or policy
that the individual believes constitutes an administrative rule. The second type
of appeal may occur after an agency denies an individual’s petition that the
economic impact statement accompanying a rule either did not estimate or did
not adequately estimate the economic impact. Finally, the public may also
submit appeals to GRRC regarding an agency’s decision to enter a delegation
agreement, which allows for the delegation of an agency function to a political
subdivision. For example, the Department of Environmental Quality (DEQ) has
delegated specific water quality management responsibilities to Apache County.
Appeals must be submitted to GRRC within a specified period of time following
the agency’s decision.
Once an appeal has been received, GRRC then decides whether it will consider
the appeal at a public meeting. GRRC does not have to hear all of the appeals
it receives. In fact, an appeal can be put on GRRC’s monthly public meeting
agenda only if within 2 weeks of its receipt, three or more GRRC members
indicate that it should be heard. In fiscal year 2005, GRRC reported receiving
only two appeals, each concerning different agency policies that were not
reflected in administrative rule, but which members of the public felt constituted
an administrative rule. One of these appeals involved an AHCCCS policy
regarding changes to an administrative overhead allowance calculation that a
healthcare organization thought should be reflected in administrative rule.
GRRC heard and denied this appeal. While GRRC placed the second appeal on
its public meeting agenda, which concerned DEQ not following one of its
administrative rules, GRRC dismissed the appeal as it lacked jurisdiction to hear
it.
􀁺􇩐 Preparing compliance reports—GRRC compiles reports based on information it
annually receives from agencies regarding their compliance with specific
statutory mandates. First, GRRC receives annual updates and compiles a report
on the status of agency efforts to revise their rules under the 5-year review
process. GRRC then must list the agencies that report a lack of progress on
revising their rules on its Web site. Second, any agency that issues a license
Office of the Auditor General
page 9
must provide GRRC with information on its compliance with its overall licensing
time frames. The Governor, the President of the Senate, and the Speaker of the
House of Representatives receive copies of GRRC’s report summarizing this
information. Third, all agency heads must certify to GRRC that the agency is in
compliance with statute by maintaining a directory summarizing the subject
matter of all current applicable rules and substantive policy statements, and that
the directory, rules, and substantive policy statements are available to the public.
GRRC must then note the agencies that are not in compliance with this
requirement on its Web site. Finally, GRRC includes all of this information in its
annual report.
Staffing and budget
In order to fulfill its responsibilities, GRRC has seven full-time staff positions, two of
which were vacant as of December 2005. The positions include an administrator
responsible for overseeing the agency’s day-to-day operations; four staff attorney
analysts who assist in the review of administrative rules; an economist responsible
for assessing each administrative rule’s economic impact; and an office manager
who oversees GRRC’s files, meeting agendas, and other administrative activities.
GRRC does not have a line-item in the state budget. Instead, it receives monies from
the State General Fund through an appropriation made to the Department of
Administration. Table 1 illustrates GRRC’s actual revenues and expenditures for fiscal
years 2004 and 2005, and the estimated revenues and expenditures for fiscal year
State of Arizona
page 10
Table 1: Governor’s Regulatory Review Council
Schedule of Revenues and Expenditures
Years Ended or Ending June 30, 2004, 2005, and 2006
(Unaudited)
2004 2005 2006
(Actual) (Actual) (Estimated)
Revenues:
State General Fund appropriations $454,160 $480,800 $505,900
Expenditures:
Personal services and employee related 411,138 441,624 462,325
Professional and outside services 2,813 2,884 3,000
Other operating 32,295 36,035 40,575
Equipment 189
Total expenditures 446,246 480,732 505,900
Excess of revenues over expenditures $ 7,914 $ 68 $ -0-
Source: Auditor General staff analysis of financial information provided by the Department of Administration from its
Arizona Financial Information System for the years ended June 30, 2004 and 2005, and department-prepared
estimates for the year ending June 30, 2006.
2006. For fiscal years 2004 and 2005, GRRC spent approximately 91 percent of its
budget on staff salaries and related employee expenditures. This trend is expected
to continue for fiscal year 2006. In fiscal year 2006, both revenues and expenditures
are estimated to be approximately $506,000.
Audit scope and methodology
This performance audit focused on GRRC’s responsibilities within the administrative
rulemaking process and its process for reviewing and approving agency reports
related to 5-year rule reviews. GRRC’s performance was also analyzed in
accordance with the 12 statutory sunset factors. This report presents information on
the administrative rulemaking process, as well as GRRC’s performance relative to its
responsibilities within the responses to the 12 statutory sunset factors.
Auditors used a variety of methods to study the issues addressed in this report.
These methods included interviewing GRRC members, its former administrator, and
staff; and reviewing statutes; GRRC’s monthly meeting minutes from fiscal year
2005; the Secretary of State’s Arizona Rulemaking Manual; and GRRC’s policies and
procedures.
In addition, to evaluate GRRC’s timeliness in reviewing rule packages and the
agency’s 5-year rule review reports, the consistency with which it applies its policies
and procedures, and the customer service it provides, auditors reviewed and
conducted an analysis of a random sample of 10 of the 97 administrative rulemaking
packages GRRC received between September 2004 and August 2005 and a random
sample of 5 of the twenty-four 5-year agency reports submitted to GRRC between
July 2004 and June 2005. Auditors also interviewed rule-writers from 6 state agencies
and reviewed all 78 of GRRC’s customer service surveys returned in fiscal year
2005.1
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to GRRC’s members, former
administrator, and staff for their cooperation and assistance throughout the audit.
1 Auditors interviewed rule-writers from the Department of Agriculture, the Arizona Health Care Cost Containment System,
the Board of Nursing, the Department of Insurance, the Lottery Commission, and the Radiation Regulatory Agency. These
agencies were selected based on their varying sizes and the differing complexity of their administrative rules.
Office of the Auditor General
page 11
State of Arizona
page 12
In accordance with A.R.S. §41-2954, the Legislature should consider the following 12
factors in determining whether the Governor’s Regulatory Review Council (GRRC)
should be continued or terminated.
1. The objective and purpose in establishing GRRC.
GRRC was established by executive order in 1981 to examine proposed
administrative rules that state agency directors determined would have an
economic impact on any state, county, city, or town agency; community college
district; or school district. Administrative rules are agency statements of general
applicability that implement, interpret, or prescribe law or policy, or describe an
agency’s procedure or practice requirements. In 1986, GRRC was established
in statute and given authority to review all proposed rules. In 1995, the
Legislature made sweeping changes to the rulemaking process that significantly
expanded GRRC’s role. First, it received final approval authority over all
proposed administrative rules, except those that are exempted from the
rulemaking process. Second, GRRC was provided with staff to assist in its
enhanced rule review function. Lastly, the Legislature moved GRRC’s review and
approval to the end of the administrative rulemaking process so that it could
approve rules in their final form. Currently, GRRC defines its mission as assisting
agencies in fulfilling their rulemaking responsibilities under statute.
A.R.S. §41-1052 requires GRRC to ensure that no agency rule becomes
effective unless:
􀁺􇩔 The language of the rule is clear, concise, and understandable,
􀁺􇩔 The agency has statutory authority to make the rule, including authority for
new or increased fees and for requests that a rule become effective
immediately,
􀁺􇩔 The rule does not conflict with existing law,
􀁺􇩔 The probable benefits of the rule outweigh its probable costs,
Office of the Auditor General
page 13
In 1995, the Legislature
significantly expanded
GRRC’s role within the
rulemaking process.
SUNSET FACTORS
􀁺􇩔 The rule contains a generally accurate economic impact statement,
􀁺􇩔 The economic impact statement describes the probable costs or benefits
of the rule and its probable effects on small businesses and state revenues,
and
􀁺􇩔 The agency adequately addressed public comments on the rule.
In addition to reviewing agency rules, GRRC has the following three statutory
responsibilities:
􀁺􇩒 Reviewing 5-year reports—A.R.S. §41-1056(B) requires GRRC to review
and approve or return the reports that agencies submit documenting their
internal review of their administrative rules. A.R.S. §41-1056(A) requires that
agencies complete reviews of their administrative rules every 5 years to
determine if any rules need to be amended or repealed and to develop a
plan for making the identified revisions.
􀁺􇩒 Receiving and hearing appeals—GRRC also receives and considers
appeals from members of the public on various agency practices, including
an agency’s decision to deny an individual’s petition regarding whether an
existing agency practice or policy constitutes a rule.
􀁺􇩒 Reporting on certain agency practices—GRRC must annually prepare
reports based on information it receives from agencies regarding their
compliance with specific statutory mandates. These mandates include
requiring agencies to update GRRC on their progress in completing the
administrative rule revision plan they included in their 5-year review report;
requiring agencies that issue licenses to provide GRRC with information on
their compliance with licensing time frames, which GRRC compiles in a
report and sends to the Legislature and Governor’s Office; and requiring
that all agencies certify to GRRC that they maintain a directory summarizing
the subject matter of all current applicable rules and substantive policy
statements, and that the directory, rules, and substantive policy statements
are available to the public.
2. The effectiveness with which GRRC has met its objectives and purpose and the
efficiency with which it has operated.
GRRC has generally met its objectives and purposes by effectively reviewing
and approving agency rules and by reviewing and approving agency 5-year rule
review reports. Specifically:
State of Arizona
page 14
􀁺􇩇 GRRC’s review of administrative rules consistent with statute—GRRC has
established various policies, procedures, and mechanisms to help ensure
that its required review and approval of proposed administrative rules
complies with statutory criteria and time frames. According to A.R.S. §41-
1052, GRRC must review proposed administrative rules submitted by state
agencies for compliance with various statutory criteria. As previously
mentioned, some of these include whether the language of the
administrative rule is clear and concise, whether the agency has the
statutory authority to adopt the administrative rule, and whether the benefits
of the administrative rule outweigh its costs. GRRC has established various
policies and procedures to help ensure that its review of proposed
administrative rules appropriately encompasses these criteria. For
example, GRRC analysts must prepare memos that document their
analysis of each proposed administrative rule and complete a checklist that
documents their response to several questions regarding whether the
proposed administrative rule complies with the criteria. Based on auditors’
review of a random sample of ten proposed administrative rules submitted
to GRRC between September 2004 and August 2005, GRRC’s review of
these proposed administrative rules conformed to its policies and
procedures.
􀁺􇩇 GRRC reviews and approves rules within statutory time frame—According
to A.R.S. §41-1052(B), GRRC has 90 days to review and approve or return
an agency’s proposed administrative rules. To assess the timeliness of
GRRC’s review, auditors reviewed a random sample of ten proposed
administrative rule packages submitted to GRRC between September 2004
and August 2005. Although GRRC reports that it does not determine the
timeliness of its reviews, GRRC completed its review of the random sample
of ten rule packages within the 90-day time frame required by statute. In
fact, GRRC completed its review and approval of nine of these rule
packages in fewer than 60 days.
To help ensure the timely review of rule packages, GRRC has established
a yearly schedule with monthly due dates for the submission of rule
packages and corresponding public meeting dates. If agencies submit
their rule packages on or before the indicated submission date, the rule
package should be ready for GRRC member consideration on the
corresponding public meeting date. For example, according to GRRC’s
2005 schedule, if an agency wanted to have a rule package reviewed at the
December 6, 2005, public meeting, it had to submit its proposed rules to
GRRC staff by October 24, 2005. Likewise, if the agency had to make
revisions to the proposed rules after GRRC staff reviewed them, it had to
forward the revised rules to GRRC by November 16, 2005. GRRC’s
adoption of a standardized process for reviewing administrative rules also
contributes to its ability to meet the statutory time frame requirement.
Office of the Auditor General
page 15
GRRC must review
administrative rules for
compliance with
statutory criteria,
including whether the
rule is clear and
concise.
While GRRC completed its review of the ten sample rule packages within
the 90-day time frame, in some cases this time period does not include the
time a rule package may be back with an agency for needed revisions. After
an agency submits a package to GRRC, GRRC staff will work with the
agency to make any necessary revisions before the package is sent to
GRRC for formal review and approval. If a package is returned to an
agency, GRRC does not count against the 90-day requirement the time the
package is back with the agency. For example, it took a total of 141 days
to approve one rule package in the sample of ten rule packages that
auditors reviewed. This was because the agency required additional time to
make the revisions that GRRC staff suggested. This process of GRRC staff
working with the agencies to revise their rule packages can shorten the
review process by helping prevent instances in which GRRC formally
returns a rule package, requiring the agency to resubmit it and wait for
GRRC staff to review it again.
􀁺􇩇 GRRC’s analysis of 5-year review reports follows established process—
GRRC also follows specific policies and procedures to ensure that the
reports that agencies produce documenting their internal analysis of their
own rules every 5 years comply with statutory requirements. If an agency’s
analysis determines that any of their rules require revision, the report must
also include a plan with a target date for completing these revisions.
According to A.R.S. §41-1056(B), GRRC must review these reports for
compliance with various statutory criteria, such as whether the report
includes an analysis of any written criticisms an agency’s administrative
rules received during the previous 5 years. Similar to its review of
administrative rule packages, GRRC analysts must prepare memos that
document their analysis of each report and complete a checklist that
documents their response to several questions regarding whether the
report complies with the statutory requirements. Based on auditors’ review
of a random sample of five rule review reports that GRRC received in fiscal
year 2005, GRRC’s review of these reports conformed to its policies and
procedures.
Additionally, while GRRC cannot require agencies to proceed with the plans
they develop for making needed revisions to their rules, it has taken steps
to encourage agencies to do so. GRRC indicated that some agencies
resubmit their previous 5-year report without having taken any of the
planned actions outlined in its previous report. However, GRRC has taken
steps to attempt to reform this behavior by requiring an agency that
resubmits the same report from the previous 5 years to provide GRRC with
a monthly oral progress report on its efforts to update its rules. Additionally,
in some cases, GRRC’s chairman has written a formal letter to an agency
director expressing concern with the status of the agency’s rule revisions.
Further, A.R.S. §41-1056(C) allows GRRC to decline giving its approval to a
State of Arizona
page 16
GRRC staff work with
agencies to make any
necessary revisions
before the package is
sent to GRRC for formal
review and approval.
duplicate report and instead require the agency to submit a new report in 1
year. However, GRRC indicates that it has not used this option and instead
has required the monthly oral progress reports.
􀁺􇩇 GRRC conducts review of 5-year rule review reports in a timely manner—
Although GRRC does not have a statutorily required time frame for
completing its review of these reports, GRRC also tries to complete them
within 90 days. Based on auditors’ review of a random sample of five rule
review reports that GRRC received in fiscal year 2005, it took GRRC 90 days
or less to review and approve all five of these reports.
􀁺􇩓 State agencies generally satisfied with GRRC’s performance—State
agencies generally report satisfaction regarding GRRC’s review and
approval of proposed administrative rules and 5-year review reports and
the assistance that GRRC provided to agencies during these processes.
Auditors interviewed six agency rule-writers to assess their satisfaction with
GRRC. Four of these six agency rule-writers rated GRRC’s overall
performance between a seven and a nine on a scale of one to ten, with ten
being the highest. One of the two remaining agency rule-writers rated
GRRC’s overall performance at a five on the same scale, while the other
rule-writer rated the performance of GRRC staff at between a seven and an
eight and its members at a five.1 In addition, all six of the rule-writers
reported that GRRC’s analysts were generally easy to contact, while five of
the six indicated that GRRC was responsive to their questions. Further, four
of the six rule-writers indicated that they found GRRC’s feedback
constructive, although two reported that GRRC’s proposed revisions to
their administrative rules sometimes changed the administrative rule’s
meaning. However, both of these rule-writers indicated that an agreement
could usually be reached with the GRRC analyst regarding appropriate
revisions. Likewise, while three of the six rule-writers indicated that they
would like quicker feedback from GRRC’s analysts, two of these three rule-writers
indicated that they recognized that the delays were due to GRRC’s
workload.
Similarly, GRRC has received favorable feedback from the customer
service survey forms it requests agencies that go through the GRRC
process to complete. The survey asks respondents to rate GRRC in seven
areas such as the GRRC staff’s professionalism and their overall
satisfaction with GRRC. Seventy-eight of these survey forms were returned
in fiscal year 2005 for a response rate of approximately 62 percent. Fifty-nine
of the respondents gave GRRC the maximum score in all survey areas
rated.
Office of the Auditor General
page 17
Over 75 percent of the
customer service
surveys that GRRC
received in fiscal year
2005 gave GRRC the
maximum score in all
survey areas rated.
1 While the interviewed rule-writers were not asked to rate GRRC staff and members separately, one rule-writer provided
separate ratings.
3. The extent to which GRRC has operated in the public interest.
Although GRRC’s operations primarily affect state agencies, some of its
activities, such as ensuring that agencies address public comments on their
administrative rules, hearing appeals regarding specific agency actions, and
providing required information on agency rulemaking activities, can indirectly
impact the general public. Specifically:
􀁺􇩇 GRRC ensures public comments addressed—A.R.S. §41-1052(C) requires
GRRC to ensure that comments from members of the public regarding
agencies’ proposed administrative rules are adequately addressed. Based
on auditor review of a random sample of ten proposed administrative rule
packages submitted to GRRC between September 2004 and August 2005,
for all ten rule packages, GRRC determined and noted whether the agency
addressed all public comments.
􀁺􇩇 GRRC hears public appeals—A.R.S. §§41-1033, 41-1056.01, and 41-1081
also require GRRC to receive and hear appeals on three areas of agency
practice, including an agency’s decision to deny an individual’s petition
regarding whether an existing agency practice or policy constitutes a rule.
As previously discussed, GRRC reported receiving two appeals in fiscal
year 2005, each concerning different agency policies that were not
reflected in administrative rule, but which members of the public felt
constituted an administrative rule. GRRC heard and denied the first appeal.
However, although GRRC placed the second appeal on its public meeting
agenda, which concerned an agency that was not following one of its
administrative rules, GRRC dismissed the appeal because it lacked
jurisdiction to hear it.
􀁺􇩇 GRRC provides required information—GRRC provides information within
its annual report and on its Web site regarding agency rulemaking activities.
Specifically, GRRC reports on the number of agency administrative rules
approved or returned, agencies that do not certify compliance with the
requirement that they maintain a directory summarizing the subject matter
of all current applicable rules and substantive policy statements, and
agencies that have reported a lack of progress toward addressing needed
revisions to their administrative rules.
Additionally, GRRC assists state agencies with the administrative rulemaking
process by conducting training seminars and informal courtesy reviews of
proposed administrative rules. Specifically, nearly every month, GRRC staff
provide training seminars on the administrative rulemaking process and various
administrative rulemaking topics to state agency rule-writers. These seminars
cover topics including methods for successfully navigating the administrative
rulemaking process and guidelines for preparing the 5-year rule review report.
State of Arizona
page 18
GRRC conducts training
seminars nearly every
month on the
administrative
rulemaking process and
other rulemaking topics
for agency rule-writers.
Additionally, when time permits, GRRC staff review an agency’s proposed rules
before the agency formally submits them to GRRC for review and approval
within the 90-day time frame. Although this is not a statutory requirement, it
allows agency rule-writers to receive feedback from GRRC staff on their
proposed administrative rules and make suggested revisions prior to the formal
submission of the proposed administrative rules to GRRC. If its workload
permits, GRRC tries to complete these reviews in 2 months or less.
4. The extent to which rules adopted by GRRC are consistent with the legislative
mandate.
GRRC has adopted rules that appear to be within its legislative mandate. A.R.S.
§41-1051(E) grants GRRC the authority to make rules. GRRC last made
substantial changes to its rules in December 2003. The 17 rules GRRC has
adopted cover several of its practices that involve the public, including the
scheduling of its public meetings, placing a rule on GRRC’s public meeting
agenda, and the receiving and hearing of appeals. Audit work did not identify
the need for any additional rules.
5. The extent to which GRRC has encouraged input from the public before
adopting its rules, and the extent to which it has informed the public as to its
actions and their expected impact on the public.
GRRC has followed all the requirements of the administrative rulemaking
process when adopting its own rules, including opening a docket for proposed
rulemaking, publishing a Notice of Proposed Rulemaking in the Arizona
Administrative Register, and soliciting and addressing public comments.
Because its operations primarily affect state agencies, GRRC officials reported
that the agency took several steps to ensure it received feedback from agency
rule-writers regarding its own administrative rules, including holding discussions
with agency rule-writers before drafting administrative rules, requesting that
several agency rule-writers review the draft administrative rules, posting the draft
administrative rules on its Web site, sending an e-mail to all rule-writers informing
them of the posting and inviting their comments, and discussing the rules at a
regular public meeting, which was conducted in accordance with open meeting
laws.
GRRC has also complied with the State’s open meeting laws. GRRC has posted
public meeting notices at least 24 hours in advance at the required location,
made agendas available to the public, maintained meeting minutes, and filed
the required statement of where meeting notices will be posted with the
Secretary of State.
Office of the Auditor General
page 19
6. The extent to which GRRC has been able to investigate and resolve complaints
that are within its jurisdiction.
GRRC does not have authority to investigate and resolve complaints.
7. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling
legislation.
GRRC’s actions are limited to reviewing and approving adopted and existing
rules established by state agencies. As a result, the Attorney General’s Office is
not responsible for prosecuting actions under GRRC’s enabling legislation.
However, members of the public can file civil litigation if they believe a rule was
not made in substantial compliance with statute, or if they question the
interpretation or application of rule. While the State Solicitor General’s Office
would represent GRRC in such cases, GRRC reports that it has not been the
subject of any civil action.
8. The extent to which GRRC has addressed deficiencies in its enabling statutes
that prevent it from fulfilling its statutory mandate.
The Legislature last enacted laws that affected GRRC in 2003 when it revised
A.R.S. §41-1051 so that GRRC no longer had to submit its annual report to the
Governor and all members of the Legislature. Instead, the revised version of the
statute requires GRRC to publish certain elements from its annual report on its
Web site and make it available to the public upon request. This information
includes a list of agency rules approved or returned by GRRC, and a list of
agencies that report a lack of progress implementing the plan described in their
5-year review report for making needed revisions to their rules.
According to a GRRC official, GRRC and the Department of Administration have
considered two statutory changes that should streamline the administrative
rulemaking process. The first of these is a change to A.R.S. §41-1055, which
requires agencies to submit an economic impact statement (EIS) with most
administrative rule packages. In the EIS, each agency must provide an
assessment as to whether the probable benefits from the proposed
administrative rule outweigh its probable costs. However, according to GRRC
officials, almost half of the administrative rule packages it reviews have no
economic impact beyond the cost of writing the administrative rule.
Consequently, GRRC has considered a statutory change that would allow
agencies to document that an administrative rule has no economic impact,
rather than requiring them to prepare an entire EIS. However, as part of the
State of Arizona
page 20
GRRC is considering
two statutory changes
that could result in
greater efficiency within
the administrative
rulemaking and the 5-
year review process.
proposal, if a member of the public disagrees with the agency’s assessment,
the agency would be required to complete an EIS.
GRRC is also considering a change to A.R.S. §41-1056, which requires state
agencies to conduct a review and analysis of their administrative rules every 5
years, identify needed changes to their administrative rules, and provide a report
to GRRC on this review and analysis as well as a plan for addressing the needed
changes. Currently, statute allows agencies to forgo reviews of administrative
rules they have revised in the previous 2 years. However, GRRC is proposing
that agencies not be required to include in their 5-year review and report
administrative rules that have been revised within the previous 5-year period.
This proposed change would limit the number of rules that need to be included
in an agency’s 5-year reviews and, according to GRRC, improve the efficiency
of this process.
Although GRRC is considering these changes, it does not anticipate proposing
any changes for consideration during the 2006 legislative session.
9. The extent to which changes are necessary in the laws of GRRC to adequately
comply with the factors listed in this subsection.
Audit work did not identify any necessary statutory changes.
10. The extent to which the termination of GRRC would significantly harm the
public’s health, safety, or welfare.
Terminating GRRC would not directly harm public health, safety, or welfare.
However, as previously discussed, some of GRRC’s processes indirectly affect
the general public. For example, GRRC helps ensure that agency rules
incorporate public comment and GRRC receives and hears appeals on agency
practices that potentially should be reflected in rule, but are not. Additionally,
GRRC reviews agencies’ proposed administrative rules to ensure that they
comply with statutory criteria, including whether the agency has authority to write
the rule and whether the probable benefits of the proposed rule outweigh its
probable costs.
11. The extent to which the level of regulation exercised by GRRC is appropriate and
whether less or more stringent levels of regulation would be appropriate.
The audit found that the current level of regulation exercised by GRRC is
generally appropriate.
Office of the Auditor General
page 21
12. The extent to which GRRC has used private contractors in the performance of
its duties and how effective use of private contractors could be accomplished.
GRRC does not use any private contractors in the performance of its duties.
Additionally, audit work did not identify any opportunities for GRRC to contract
any of its responsibilities.
State of Arizona
page 22
Office of the Auditor General
AGENCY RESPONSE
State of Arizona
Janet Napolitano
Governor
William Bell
Director
ARIZONA DEPARTMENT OF ADMINISTRATION
GOVERNOR'S REGULATORY REVIEW COUNCIL
100 North 15th Avenue • ROOM 402
PHOENIX, ARIZONA 85007
(602) 542-2058
February 15, 2006
Debra K. Davenport, CPA
Auditor General
2910 North 44th Street, Suite 410
Phoenix, Arizona 85016
Dear Ms. Davenport:
We have reviewed the February 8, 2006 final draft of the sunset audit report of the
Governor’s Regulatory Review Council. I would like to express the sincere appreciation
of the Council for the hard work and professionalism of your staff in performing the
audit.
As there are no findings or recommendations in the final draft, this letter serves as the
Council’s written response in accordance with Joint Legislative Audit Committee
procedures.
Again, thank you for your work in accomplishing the sunset audit of the Governor’s
Regulatory Review Council.
Sincerely,
Graham Alex Turner
Chairman
04-03 Behavioral Health Services’
HB2003 Funding for Adults
with Serious Mental Illness
04-04 Department of Emergency and
Military Affairs and
State Emergency Council
04-05 Department of Environmental
Quality—Water Quality Division
04-06 Department of Environmental
Quality—Waste Programs
Division
04-07 Department of Environmental
Quality—Air Quality Division
04-08 Department of Environmental
Quality—Sunset Factors
04-09 Arizona Department of
Transportation, Motor Vehicle
Division— State Revenue
Collection Functions
04-10 Arizona Department of
Transportation, Motor Vehicle
Division—Information Security
and E-government Services
04-11 Arizona Department of
Transportation, Motor Vehicle
Division—Sunset Factors
04-12 Board of Examiners of Nursing
Care Institution Administrators
and Assisted Living Facility
Managers
05-L1 Letter Report—Department
of Health Services—
Ultrasound Reviews
05-01 Department of Economic
Security—Division of
Employment and
Rehabilitation Services—
Unemployment Insurance
Program
05-02 Department of Administration—
Financial Services Division
05-03 Government Information
Technology Agency (GITA) &
Information Technology
Authorization Committee (ITAC)
05-04 Department of Economic
Security—Information Security
05-05 Department of Economic
Security—Service Integration
Initiative
05-06 Department of Revenue—Audit
Division
05-07 Department of Economic
Security—Division of
Developmental Disabilities
05-08 Deaprtment of Economic
Security—Sunset Factors
05-09 Arizona State Retirement
System
05-10 Foster Care Review Board
05-11 Department of Administration—
Information Services Division
and Telecommunications
Program Office
05-12 Department of Administration—
Human Resources Division
05-13 Department of Administration—
Sunset Factors
05-14 Department of Revenue—
Collections Division
05-15 Department of Revenue—
Business Reengineering/
Integrated Tax System
05-16 Department of Revenue—
Sunset Factors
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Arizona Health Care Cost Containment System—Healthcare Group