On August 25, Representative David Cook (LD7) sent a letter to Jennifer Toth, Director of the Arizona Department of Transportation, stating the following:
“Request for Immediate Investigation of Third Parties, Suspension or Cancellation of High-Risk Third Party Companies’ Authorization to Perform MVD Functions, and Revised Procedures for Motor Vehicle Division’s Oversight of Third Parties.”
The reason for Rep. Cook’s letter is that on August 24, the Arizona Auditor General sent to the Arizona Legislature, the governor, and the Arizona Department of Transportation, a letter outlining issues that were found with the Motor Vehicle Division’s (MVD) Oversight of Third Parties.
For readers who may not be familiar with the Arizona Auditor general, here is an overview of their activities as stated on their website:
“The Arizona Auditor General serves as an independent source of impartial information concerning State and local governmental entities and provides specific recommendations to improve the operations of those entities. To fulfill its statutory duties, the Office must:
- Ascertain whether public entities are making wise use of their resources—public money, personnel, property, equipment, and space.
- Determine whether public entities are complying with applicable laws, regulations, and governmental accounting and financial and reporting standards.
- Define standards and establish procedures for accounting and budgeting, as the Legislature requires.
- Provide technical assistance to State and local governmental entities.
The Office has audit responsibility for State agencies, counties, universities, community college districts, and school districts. The Office also completes highly specific research and investigative projects in response to legislative requests.
The Joint Legislative Audit Committee, which oversees all audit functions of the Arizona Legislature, provides direction for the Auditor General’s Office. Subject to approval by a majority vote of both legislative houses, the Committee also appoints the Auditor General for a 5-year renewable term.
The Auditor General is assisted in fulfilling office responsibilities by a Deputy and nearly 220 employees organized into 5 operating divisions: Accountability Services, Financial Audit, Financial Investigations, Performance Audit, and School Audits. These divisions are supported by a chief of staff, legal counsel and administrative, information technology services, and quality control groups.”
The letter from the Auditor General to the Department of Transportation contained four main components:
Audit purpose:
To determine whether MVD effectively oversaw third parties to ensure they issued vehicle titles, driver licenses, and identification (ID) cards only to qualified and authorized individuals/entities.
Key findings:
• Issuing vehicle titles, driver licenses, and ID cards to unqualified or unauthorized individuals/entities can put public safety and welfare at risk. For example:
○ Unqualified drivers who receive driver licenses may pose safety risks on public roadways.
○ Unauthorized and/or fraudulent vehicle title transfers increase the risk of vehicle theft.
○ Fraudulently obtained ID documents may facilitate fraud, identity theft, terrorism, and other crime.
• Statute authorizes Department to contract with private companies (third parties) to provide some MVD services at retail locations throughout the State; Department is required and the contract allows for MVD to oversee third parties to ensure they provide these services to qualified and/or authorized individuals/entities, and MVD requires third parties to self-review their transactions and correct identified errors within 7 days.
• Third parties lacked documentation confirming individuals/entities were qualified and/or authorized to obtain a vehicle title, driver license, or ID card for 25 of 130 transactions we reviewed; some third parties inaccurately reported to MVD these transactions were error free when they were not, and others had identified but not timely corrected the errors.
• MVD has not sustained monitoring and oversight processes consistent with our previous recommendations made in 2015 to hold third parties accountable for identifying and timely correcting erroneous transactions or held third parties to the same quality assurance standards as MVD employees who provide similar services.
C. Key recommendations MVD should:
• Ensure third parties issue vehicle titles, driver licenses, and ID cards only to qualified and/or authorized individuals/ entities by developing and implementing written policies and procedures for monitoring and overseeing third parties, including to ensure they identify and timely correct errors that can put public safety at risk.
• Modify and implement its third-party quality assurance process to more closely align with its quality assurance process for MVD employees.
D. Six specific recommendations. MVD should:
1. Ensure its third-party contract performance measurement attachment includes clearly defined performance requirements, including outlining in the attachment:
• How and when accuracy rates will be calculated and measured.
• Time frames for correcting performance deficiencies.
• How performance findings will be communicated to third parties.
2. Ensure third parties issue vehicle titles, driver licenses, and identification cards only to qualified and/or authorized individuals/entities by developing and implementing written policies, procedures, and guidance for its third-party quality assurance process, including but not limited to:
a. Procedures and required time frames for monitoring third-party completion of self-reviews. 33 According to MVD’s third-party contract, potential enforcement actions can include verbal warning, letter of concern, probation, suspension, and contract cancellation. 34 AAMVA, 2021. 35 AAMVA, 2021. Arizona Auditor General PAGE 10 Arizona Department of Transportation—MVD’s Oversight of Third Parties | August 2023 | Report 23-105
b. Procedures for selecting transactions completed by third parties for MVD’s review, including outlining how and what MVD staff should review, and how to track the results of MVD’s review, including documenting any identified errors.
c. Procedures and required time frames for communicating the results of MVD staffs’ reviews to third parties.
d. Procedures and time frames for following up with third parties to ensure errors and other performance deficiencies are resolved.
e. Procedures for taking enforcement action in response to third-party noncompliance, including steps to escalate enforcement actions based on repeated/continued noncompliance.
f. Procedures for requiring additional training for third parties that require further guidance on its third-party quality assurance process or the minimum standards, such as for third parties that have repeat transaction errors or noncompliance with MVD’s quality assurance process.
g. Procedures outlining MVD management’s review of its third-party quality assurance process to ensure time frames are met and identified performance deficiencies are corrected.
3. Develop and implement training on its quality assurance policies and procedures for all applicable MVD staff who support the third-party quality assurance process to ensure adherence to established oversight policies, procedures, and guidance.
4. Develop and implement training for all third parties or their authorized representatives, and verify their completion of the training, including:
a. Initial training on the quality assurance process, quality assurance expectations, and available enforcement actions to address noncompliance.
b. Ongoing training when necessary because of changes in law, policies, and procedures, and ensure any new information is incorporated into initial training for new third parties or their authorized representatives.
5. Conduct an initial analysis of transactions the third parties were provided for self-review dating back to February 2022 to assess third-party compliance with statutory minimum quality standards and MVD’s quality assurance process, and continue to complete a monthly analysis thereafter up until MVD implements a revised third-party quality assurance process as described in Recommendation 2, and:
• Identify the lowest performing third parties.
• Conduct a comprehensive review of the transactions processed by those identified third parties, and work with those identified third parties to resolve transaction errors.
• Work with its Assistant Attorney General to take appropriate enforcement action against third parties that are not complying with the statutorily required minimum quality standards and MVD’s quality assurance process.
6. Identify and implement changes to align its third-party quality assurance process more closely with its quality assurance process for MVD field offices, including conducting a staffing and workload analysis, and taking action as needed to ensure sufficient staffing resources are allocated to third-party oversight.
The response from the Department of Transportation to the Auditor general stated that there was “full agreement” with all six recommendations, and included the steps that are being taken to implement those recommendations.