State of Arizona June 30, 2006 Single Audit

Az Auditor General

Informations

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• Langue: English

Extrait

A REPORT
TO THE
ARIZONA LEGISLATURE
Financial Audit Division
Single Audit
State of Arizona
Year Ended June 30, 2006
Debra K. Davenport
Auditor GeneralThe 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.
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 • [phone]
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov














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State of Arizona
Single Audit Reporting Package
Year Ended June 30, 2006


Table of Contents Page

Comprehensive Annual Financial Report

Issued separately

Single Audit Section

Report on Internal Control over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Basic Financial Statements Performed
in Accordance with Government Auditing Standards 1

Report on Compliance with Requirements Applicable to Each Major Program
and on Internal Control over Compliance in Accordance with OMB Circular A-133 3

Schedule of Expenditures of Federal Awards 7

Schedule of Findings and Questioned Costs

Summary of Auditors’ Results 47

Financial Statement Findings 49

Federal Award Findings and Questioned Costs 56

Appendix

State of Arizona Agency Codes 82

State Responses

Corrective Action Plan 85

Summary Schedule of Prior Audit Findings 121Independent Auditors’ Report on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Basic Financial
Statements Performed in Accordance with Government Auditing Standards


The Honorable Janet Napolitano, Governor
State of Arizona

The Honorable Timothy S. Bee, President
Arizona State Senate

The Honorable James P. Weiers, Speaker
Arizona House of Representatives

The Honorable Ruth V. McGregor, Chief Justice
Arizona Supreme Court


We have audited the financial statements of the governmental activities, business-type activities,
aggregate discretely presented component units, each major fund, and aggregate remaining fund
information of the State of Arizona as of and for the year ended June 30, 2006, which collectively comprise
the State’s basic financial statements, and have issued our report thereon dated May 25, 2007. Our report
was modified to include references to our reliance on other auditors and for an emphasis of a matter
regarding the Healthcare Group of Arizona. We conducted our audit in accordance with U.S. generally
accepted auditing standards and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the
discretely presented component units (except for the Water Infrastructure Finance Authority) and the
fiduciary fund financial statements of the Arizona State Retirement System, Public Safety Personnel
Retirement System, Corrections Officer Retirement Plan, and Elected Officials’ Retirement Plan were not
audited by the other auditors in accordance with Government Auditing Standards. In addition, other
auditors audited the financial statements of the Arizona Department of Transportation, Arizona Health Care
Cost Containment System, Arizona Lottery, and Water Infrastructure Finance Authority, as described in our
report on the State’s financial statements in accordance with Government Auditing Standards. This report
includes our consideration of the results of the other auditors’ testing of internal control over financial
reporting and compliance and other matters that are reported on separately by those other auditors.
However, this report, insofar as it relates to the results of the other auditors, is based solely on the reports
of the other auditors.

Internal Control over Financial Reporting

In planning and performing our audit, we considered the State’s internal control over financial reporting in
order to determine our auditing procedures for the purpose of expressing our opinions on the basic
financial statements and not to provide an opinion on internal control over financial reporting. However, we
noted certain matters involving internal control over financial reporting and its operation that we consider
to be reportable conditions. Reportable conditions involve matters coming to our attention relating to
significant deficiencies in the design or operation of internal control over financial reporting that, in our
judgment, could adversely affect the State’s ability to initiate, record, process, and report financial data
consistent with the assertions of management in the basic financial statements. Reportable conditions are
described in the accompanying Schedule of Findings and Questioned Costs as items 06-01 through 06-
07.

A material weakness is a reportable condition in which the design or operation of one or more of the
internal control components does not reduce to a relatively low level the risk that misstatements caused by
error or fraud in amounts that would be material in relation to the basic financial statements being audited
may occur and not be detected within a timely period by employees in the normal course of performing
their assigned functions. Our consideration of the internal control over financial reporting would not
necessarily disclose all matters in internal control that might be reportable conditions and, accordingly,
would not necessarily disclose all reportable conditions that are also considered to be material
weaknesses. However, of the reportable conditions described above, we consider item 06-03 to be a
material weakness.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the State’s basic financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests and those of the other auditors disclosed no instances of noncompliance or other
matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we will report to various state agencies’ management in separate letters at a
future date. In addition, certain information came to our attention that has not been included in this report
because of its sensitive nature. However, this information will be provided to appropriate state officials.

This report is intended solely for your information and use and that of the Chairperson and Vice
Chairperson of the Joint Legislative Audit Committee, federal awarding agencies, and pass-through
entities and is not intended to be and should not be used by anyone other than these specified parties.
However, this report is a matter of public record, and its distribution is not limited.



Debbie Davenport
Auditor General

May 25, 2007
2 Independent Auditors’ Report on Compliance with Requirements
Applicable to Each Major Program and on Internal Control over Compliance in
Accordance with OMB Circular A-133


The Honorable Janet Napolitano, Governor
State of Arizona

The Honorable Timothy S. Bee, President
Arizona State Senate

The Honorable James P. Weiers, Speaker
Arizona House of Representatives

The Honorable Ruth V. McGregor, Chief Justice
Arizona Supreme Court


Compliance

We have audited the compliance of the State of Arizona with the types of compliance requirements
described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement
that are applicable to each of its major federal programs for the year ended June 30, 2006, except for that
portion of the federal programs administered by the Arizona Health Care Cost Containment System, the
Arizona Department of Transportation, and the Water Infrastructure Finance Authority. Those agencies
were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the compliance of those agencies with the types of compliance requirements described in the
OMB Circular A-133 Compliance Supplement, is based solely on the reports of the other auditors. The <