Arizona Improperly Claimed Some Child Care and Development Targeted Funds

Of the $29.4 million of Child Care and Development Fund (CCDF) targeted fund expenditures that we reviewed, the Arizona Department of Economic Security (State agency) complied with Federal requirements for the use of $27.2 million. However, the State agency improperly obligated $2.2 million of fiscal year 2009 targeted funds after the obligation period had ended. The State agency did not have written policies and procedures addressing the monitoring of the obligation and liquidation of the targeted funds. Without necessary policies and procedures, the State agency could not identify which specific expenditures would be allowable for a particular fiscal year.

We recommended that the State agency (1) refund to the Federal Government $2.2 million for CCDF targeted funds that were not properly obligated and liquidated and (2) develop and implement policies and procedures to address the monitoring of the obligation and liquidation of CCDF targeted funds to ensure that the funds are properly obligated and liquidated. The State agency indicated that it would not challenge our finding that it had improperly obligated

$2.2 million of targeted funds. However, the State agency did not concur with our recommendation to refund this amount. The State agency concurred with our other recommendation.