Arizona – May 26, 2010

The content below was excerpted from the Arizona Appendix (PDF, 32 pages) of GAO's most recent bimonthly review of the Recovery Act.[1]

What We Did

We reviewed four specific program areas—education, justice, clean water and drinking water, and public housing—funded under the Recovery Act. We selected these program areas primarily because they have received and are in the process of obligating Recovery Act funds. Our work focused on the status of the program area's funding, how funds are being used, methods used by the programs to monitor projects to ensure proper use and safeguarding of Recovery Act funds, and issues that are specific to each program area. (For descriptions and requirements of the programs we covered, see appendix XVIII of GAO-10-605SP.) For education programs, we spoke with Arizona Department of Education officials and visited a local educational agency (LEA). For the criminal justice programs, we spoke with the Arizona Criminal Justice Commission and visited two localities receiving criminal justice funds. For Clean Water and Drinking Water State Revolving Funds, we spoke with the Water Infrastructure Finance Authority of Arizona and visited five clean water and drinking water projects. As part of our review of public housing, we met with five public housing agencies. Our work in Arizona also included monitoring the state's fiscal situation and visiting the cities of Mesa and Flagstaff to review their use of Recovery Act funds. We chose to visit Mesa and Flagstaff because they represent different sized cities that are both facing budget shortfalls due to declines in state funding for programs, tax revenues, and fees.

To gain an understanding of the state's experience in meeting Recovery Act reporting requirements[2], we examined documents prepared by and held discussions with the Governor's Office of Economic Recovery (OER), the Maricopa County Housing Authority, and the Mesa Unified School District 4. Further, we spoke with 19 state and local agencies in the accountability community that have oversight responsibilities for Recovery Act funds.

What We FoundBack to top

Education

The U.S. Department of Education has made approximately $1.2 billion in Recovery Act funds available to Arizona for the State Fiscal Stabilization Fund (SFSF); grants under the Individuals with Disabilities Education Act (IDEA), as amended, Part B; and grants under Title I, Part A of the Elementary and Secondary Education Act of 1965 (ESEA), as amended. A large percentage of these funds are being used to pay employee salaries. Existing monitoring programs for non-Recovery Act funds have identified problems with LEAs' use of funds; these illustrate the importance of closely monitoring Recovery Act funds, but the responsible monitoring groups face staffing issues that affect the amount of coverage they can provide.

Department of Justice grants

The U.S. Department of Justice's Bureau of Justice Assistance has awarded about $25 million directly to Arizona in Recovery Act Edward Byrne Memorial Justice Assistance Grant program funding. The Arizona Criminal Justice Commission, which administers the grants, said they passed through about $18.7 million to localities to support the state's drug task forces and tandem prosecution projects, about $4.2 million for statewide criminal justice projects, and retained about $2 million for administrative purposes. In addition, 13 local governments received a total of about $12.6 million in Recovery Act Community Oriented Police Services Hiring Grants and will use the funding to pay salaries and benefits for 56 police officers for fiscal years 2009-2011.

Clean Water and Drinking Water State Revolving Funds

Arizona received a total of approximately $82 million in Recovery Act funding for its clean water and drinking water projects, which the Water Infrastructure Finance Authority of Arizona (WIFA) used to help finance 46 projects. WIFA has had difficulties monitoring its Recovery Act funded-projects, but WIFA is taking steps to strengthen its monitoring.

Public Housing Capital Fund

Arizona has 15 public housing agencies that received a total of $12.1 million in Recovery Act funds. All 15 housing agencies obligated 100 percent of their funds by the March 17, 2010, deadline. However, the Department of Housing and Urban Development (HUD) field office had to work extensively with the state's two troubled housing agencies to obligate their funds in time. According to HUD field office officials, they are anticipating new monitoring requirements; however they do not know the potential impact of this new monitoring on their capacity to carry out those requirements.

Arizona's fiscal condition

Despite receiving about $1.3 billion in Recovery Act funds in fiscal year 2010, Arizona faced a $2 billion shortfall, which was resolved with spending reductions and by acquiring additional debt. Facing continuing economic problems, Arizona's fiscal year 2011 budget was balanced with reductions in education, health, and other programs and a voter-approved 1-cent temporary increase in the state's sales tax. Economic forecasters estimate Arizona's revenue will not recover to the 2007 level until 2015.

Cities' use of Recovery Act funds

Of the $57.5 million in Recovery Act funds awarded to Mesa, federal agencies provided approximately $16.5 million directly, while the remainder was awarded to state agencies that in turn passed the funds to the city. Flagstaff received approximately $2.6 million directly from federal agencies and the remainder of the total $4 million through state agencies. Officials in both Mesa and Flagstaff said that Recovery Act funds have helped to deliver services they otherwise would have been unable to fund, as well as employing local workers. Additionally, the funds are expected to provide long-term benefits to the cities.

Accountability

State agencies recognize the importance of monitoring Recovery Act funds to protect against fraud, waste, and abuse, but current practices vary significantly, sometimes due to staffing shortages. Comprehensive audit activities just began in 2010 because most entities had expended only a fraction of the Recovery Act funds in 2009. The Single Audit is a significant tool used to oversee expenditures of Recovery Act funds. The results of the Arizona Auditor General's fiscal year 2010 Single Audit, scheduled to be released in 2011, will be a more comprehensive first look at Recovery Act funding. Some local governments are also conducting their own audits specific to Recovery Act funds.

Full May ReportBack to top

Recovery Act: States' and Localities' Uses of Funds and Actions Needed to Address Implementation Challenges and Bolster Accountability
GAO-10-604
Recovery Act: States' and Localities' Uses of Funds and Actions Needed to Address Implementation Challenges and Bolster Accountability
(Appendixes)
GAO-10-605SP
  • [1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
  • [2] Recipients of Recovery Act funds are required to report quarterly on a number of measures, including the use of funds and estimates of number of jobs created and retained. Recovery Act, div. A, § 1512. We refer to the reports required by section 1512 of the Recovery Act as recipient reports.
GAO Contact
portrait of of Eileen R. Larence

Eileen R. Larence

Director, Homeland Security and Justice

larencee@gao.gov

(202) 512-6510