During fiscal year 2005, the State
spent $9 billion of federal monies. As
shown in the chart to the right, seven
entities spent 97 percent of these
monies.
Overall, expenditures increased $700
million, or 8 percent, from the $8.3
billion expended in fiscal year 2004.
The largest increase occurred in
programs for indigent medical care,
food stamps, child nutrition, loan and
loan guarantee programs, and
research and development.
Combined expenditures for these
programs increased by $703 million
from the prior year. This increase was
attributable to expanded eligibility for
indigent medical care, inflationary
increases in healthcare costs,
additional funding for university
student financial aid loans and
research and development projects,
and other loan programs. The largest
increase, $530 million, occurred in
federal monies expended for indigent
medical care at Arizona Health Care
Cost Containment System. As shown
in the graph to the right, expenditures
of federal monies have increased
$1.5 billion between fiscal years 2003
and 2005. Expenditures for indigent
medical care and food stamps
accounted for $1.26 billion of the
2005 increase.
Year Ended June 30, 2005
State of Arizona
Subject
The State of Arizona spent $9
billion of federal monies for
1,318 federal awards
administered, in whole or in
part, by 44 state agencies. The
largest awards were for
education, health services,
highway construction, research
and development, student
financial aid, and welfare. The
State must be accountable for
its use of both federal and
state monies, maintaining
strong internal controls, and
complying with federal
program requirements.
Our Conclusion
The State maintained
adequate controls over
financial reporting. During the
compliance audit, 24 federal
programs were tested,
including 8 program clusters.
The State maintained
adequate internal controls over,
and complied with, the federal
compliance requirements for
12 of the 24 federal programs
tested. However, for 12 federal
programs tested, auditors
found that the State did not
maintain adequate internal
controls or comply with one or
more of the compliance
requirements. See page 2 for
for further information.
REPORT
HIGHLIGHTS
SINGLE AUDIT Expenditures of Federal Monies
Increased by $700 Million
State Agencies that Administer 2005 Federal Awards
(In Millions)
Other Agencies
$300
Transportation
$513
Education
$796
Economic Security
$1,729
University System
$985
Water Infrastructure
Finance Authority
$217
Health Services
$284
AHCCCS
$4,190
Federal Programs Expenditures
Fiscal Years 2003-2005
$9,014
$8,314
$7,525
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
2003 2004 2005
(In Millions)
Auditors identified and tested 24 federal
programs, including 8 program clusters,
under the guidelines established by the Single
Audit Act. Audit tests included evaluating the
State’s compliance with each program’s
federal regulations generally related to
expending, monitoring, matching, and
reporting federal awards. Weaknesses in
internal control and instances of
noncompliance were noted for 12 of the
programs tested. Auditors found material
internal control weaknesses and material
instances of noncompliance for the Food
Stamp Cluster, Child Nutrition Cluster,
page2
Child and Adult Care Food Program,
Homeland Security Grant Program Cluster,
Title I Grants to Local Educational Agencies,
Special Education Cluster, Rehabilitation
Services—Vocational Rehabilitation Grants to
States, Even Start—State Educational
Agencies, Temporary Assistance for Needy
Families, and Social Services Block Grant
programs.
The table below identifies the findings
reported in our audit by program, responsible
department, and type of compliance
requirement.
The State Did Not Always Comply
with Federal Program Requirements
Type of Compliance Requirement
Program Responsible Department Activities1 Cash2 Costs3 Eligibility4 Match5 Monitor6 Period7 Report8 Special9 Procurement 10
Child Support Enforcement Economic Security X X
Food Stamp Cluster Economic Security X X
SSBG Economic Security X
RS Economic Security X X X
TANF Economic Security X X X X
Unemployment Insurance Economic Security X X X X
Child Nutrition Cluster Education X X X X X
CACFP Education X X X X X
Even Start Education X X
Special Education Cluster Education X X X X X
Title I Grants Education X X X X X X
Homeland Security Cluster Military Affairs X X X
SSBG – Social Services Block Grant
RS – Rehabilitation Services–Vocational Rehabilitation Grants to States
TANF – Temporary Assistance for Needy Families
CACFP – Child and Adult Care Food Program
1Activities: Federal monies were expended for unallowable activities.
2Cash: Federal monies requested and received were in excess of, or not sufficient for, immediate program needs.
3Costs: Federal monies were expended for unallowable costs.
4Eligibility: Benefits were awarded to ineligible participants.
5Match: Federal monies were not matched with state monies, or a specified level of service was not maintained.
6Monitor: Subrecipients were not monitored to ensure they administered awards in compliance with federal requirements.
7Period: Federal monies were not expended during the period allowed, or excess funds were carried forward.
8Report: Financial information reported to federal grantors was not accurate or timely.
9Special: Unique program requirements were not complied with.
10Procurement: Procurement and suspension and debarment regulations were not complied with.
The Arizona Department of Education
administers the Child Nutrition Cluster and
Child and Adult Care Food Program.
Reimbursement payments are issued to
eligible subrecipients that provide meals to
attending eligible children or adults in their
service area. The Department manages these
programs through a Web-based application
system named CNP Web that the Department
developed itself. Through the CNP Web
system, eligible subrecipients are able to
submit their program applications and
reimbursement claim information to the
Department through the Internet. Auditors
reviewed the internal controls over the CNP
Web system and noted several deficiencies
associated with the system. For instance,
auditors noted several security deficiencies
covering areas such as software security patch
management, password management, network
vulnerability, basic security awareness, user
access and privileges, and intrusion detection.
These deficiencies put the Department’s CNP
Web system and information at risk of potential
theft, manipulation, or misuse.
page3
In addition, auditors examined system access
rights for external users and determined that
access rights granted were not restricted to
only authorized Local Educational Agency
employees. For 28 of 45 external users tested,
the Department was unable to provide
documentation that the users had been
approved and authorized to submit program
applications and claim information. While the
Department has a tracking mechanism for
changes made to the CNP Web system, the
Department had not updated comprehensive
systems documentation to reflect changes
made since placing the CNP Web system in
operation. Finally, system programmers had
direct access to the database and were able
to make data changes. Cumulatively these
deficiencies constitute a material weakness in
internal controls for the Child Nutrition Cluster
and Child and Adult Care Food Program.
Auditors performed sufficient analyses and
tests to determine that no material instances
of noncompliance occurred.
The Department of Education’s
On-Line System for Administering
the Child Nutrition Cluster and
Child and Adult Care Food
Program Had Security Deficiencies
Single Audit Fact Sheet
! No weaknesses in financial reporting internal
controls.
! Twenty-seven findings identifying weaknesses in
federal compliance internal controls, 15 of those
noted material weaknesses.
! Twenty-six findings identifying violations of federal
program compliance requirements, 14 of those
noted material violations.
! Program costs totaling $701,120 were questioned
as a result of our audit.
State of Arizona
REPORT
HIGHLIGHTS
SINGLE AUDIT
Year Ended June 30, 2005
The Arizona Department of Economic
Security, Division of Benefits and
Medical Eligibility, administers the Food
Stamp Cluster and the Temporary
Assistance for Needy Families (TANF)
programs. Our report indicates that
these programs had material internal
control weaknesses and instances of
material noncompliance with the
programs’ requirements for the last
three years.
Food Stamps and TANF—Issuance of
EBT Cards
The Division of Benefits and Medical
Eligibility, Family Assistance
Administration offices did not request
identification or document a recipient’s
identity before issuing an EBT card,
destroy damaged or inactivated EBT
cards, document eligibility
determinations in the eligibility
computer system prior to awarding
benefits, or review EBT card
reconciliations. In addition, employees
manipulated the eligibility computer
system and awarded themselves
$31,206 in cash assistance and
$24,487 in food stamps benefits. As a
result, auditors were unable to
determine that the Department
materially complied with special tests
A copy of the full report
can be obtained by calling
(602) 553-0333
or by visiting
our Web site at:
www.azauditor.gov
Contact person for
this report:
Rick Meyer
TO OBTAIN
MORE INFORMATION
page 4
and provisions compliance
requirements for the Food Stamp
Cluster or the activities allowed or
unallowed, allowable costs and cost
principles, and eligibility compliance
requirements for the TANF program.
TANF—Case Management
The Division of Benefits and Medical
Eligibility, Family Assistance
Administration offices did not always
retain recipients’ case files that
contained all required data to ensure
that the compliance requirements were
followed for activities allowed or
unallowed, allowable costs and cost
principles, and eligibility. This weakness
resulted in known questioned costs of
$8,325.
Food Stamps—Cash Management
The Division of Benefits and Medical
Eligibility, Family Assistance
Administration offices did not always
update and maintain recipients’ case
files for income, shelter costs, and rent
expense to ensure that compliance
requirements were followed for special
tests and provisions. This weakness
resulted in known questioned costs of
$2,460.
The Department of Economic Security
Did Not Correct Previous Audit
Findings for the Food Stamp Cluster
and the Temporary Assistance for
Needy Families Program
