'Public safety risks': Audit reveals issues with Arizona MVD's third-party contractors

A contractor authorized to work for the state Motor Vehicle Division issued a REAL ID travel identification to a foreign national without U.S. citizenship, and without verifying the person's Arizona residency or visa status as required by federal law.

At least eight times, contractors issued Arizona driver's licenses to people without records indicating the person had taken a driving test, a vision test, or both.

And five public school districts that test bus drivers were past due, from 56 to 356 days, for a state inspection to make sure their programs followed commercial driver's license requirements.

That trio of public safety problems were among the findings of two recent reports from the Arizona Auditor General's Office, which evaluated the Motor Vehicle Division and its third-party service providers and found a potentially dangerous lack of oversight and a light touch when it came to enforcement.

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One audit warned that the division's shortcomings increase "public safety risks such as unsafe drivers, vehicle and identify theft, fraud, and terrorism."

The Arizona Department of Transportation, which houses the Motor Vehicle Division, agreed with many of the findings and outlined changes underway, including a new program that launched in June that requires state employees to review the third parties' in-house quality checks.

"ADOT remains committed to ensuring these (third party) locations adhere to security and safety processes, while providing the public additional locations and hours of services," department spokesperson Bill Lamoreaux said in a statement.

While in its official response to the auditor ADOT agreed with the findings, the department's statement to The Arizona Republic touted an in-house review that occured after the audit and suggested more of a paperwork retention issue than a serious public safety one.

"The Department found that none of these cases involved a credential being given to someone other than the verified customer, a vehicle transferred to someone other than the proper owner, or a license provided to someone without passing the required written, driving and vision tests," the statement reads.

As to the foreign national, ADOT said in the statement that its own review found the person was seeking renewal of a license and had previously proven their identity. The agency said it was a "technical need" to present the passport and paperwork documenting entry into the country.

"Neither the person’s status nor their identity were in question, but as a result of missing supporting documentation, the license was canceled," the statement said.

The state Motor Vehicle Division contracts with 96 third parties that operate 175 locations across the state to offer services such as driver's licenses, identification cards, vehicle registration and titles. Those offices, which are often open on weekends, processed over one-third of all motor vehicle transactions in the 2021-2022 fiscal year, or more than 6.1 million transactions, according to the report released by Auditor General Lindsey Perry.

Motor Vehicle Division employees have oversight authority of those third parties, including certification of workers and requiring each third party to review 3% of daily transactions for compliance with state laws and rules. The auditor general reviewed a sample of 130 transactions from eight months in 2022 and found problems with one in five, such as vehicle sales without the seller's signature on the title, missing documents that affirm an odometer has not been changed, and people being licensed without passing driving tests.

Part of the problem, the auditor general found, was that the Motor Vehicle Division implemented recommendations for oversight from a 2015 audit but then changed its quality assurance process in 2022 to be out of line with the prior audit. The state had not routinely monitored whether those third parties were completing self-reviews, and as of January, 120 of 175 total third-party locations had not been inspected by the Motor Vehicle Division in more than four years.

ADOT did not directly answer a question about what caused the deficiencies highlighted by the audits. The agency said it was "conducting a thorough review of the areas that can be improved" both internally and for the third parties.

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The report recommended the Motor Vehicle Division clearly define performance measurements for third parties and develop policies to set time frames for the self-review process and evaluation of it, and implement training for third parties and their staff on the compliance process.

It recommended reviewing the third parties to identify the lowest performing three, and said ADOT should work with the Attorney General's Office to consider "appropriate enforcement action."

ADOT said after its own audit of all third parties — the auditor general evaluated just a sample — it would take "appropriate corrective action consistent with statute and (third party) contracts, up to and including cancellation."

Second audit finds risks to student safety

A second audit, published on Aug. 25, examined the Motor Vehicle Division's oversight of third parties that provide commercial driver's license testing. Federal regulations require the providers of those licenses granted to truck and bus drivers be inspected every 2 years.

As of December, almost 20% of third parties and more than one-half of the individual examiners working for them — 56% — had not been inspected within two years by the state, according to the auditor general. Five third parties were public school districts, and 29 employees that test prospective school bus drivers, were well overdue for an inspection.

"MVD attributes some inspection delays to staffing, but data discrepancies and lack of inspection tracking and monitoring contributed to untimely inspections," the auditor general's report says. The auditor raised issue with the department providing advance notice an inspection would take place and not conducting required covert inspections.

In one instance, the auditor general's report says, an examiner who worked for a community college noted violations during a CDL test and recommended additional training but passed the applicant anyway. That driver received a CDL and three months later was involved in a single-vehicle crash while hauling hazardous materials.

"MVD’s failure to timely inspect CDL providers and examiners to identify and prevent potential violations, including not conducting unannounced and covert inspections, may jeopardize the safety of drivers, pedestrians, and commercial vehicle passengers, including schoolchildren, in Arizona and nation-wide," the audit reads.

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It noted that the state couldn't identify the total number of active CDL providers and examiners it was required to oversee because of data discrepancies between two information technology systems and a tracking spreadsheet.

As in the first audit, the auditor found the state didn't hold third-party providers accountable for violations or ensure retraining was completed. The out-of-compliance third parties are not identified by name in the audit, and neither the auditor general nor the Department of Transportation provided those names.

The transportation department said on Wednesday that all examiner locations and 86% of examiners have been reviewed within the past two years, and that number would increase to all examiners evaluated by the end of the year.

It also has begun using a single information technology application, ADOT said.

Both audits examined a period before Democratic Gov. Katie Hobbs took office, replacing former Gov. Doug Ducey, a Republican who touted efforts to shrink the size of government bureaucracy.

Hobbs appointed Jennifer Toth, who previously was the head of transportation in Maricopa County, to lead the state agency in January. The audit noted that several changes had not yet been implemented during Toth's tenure.

The audits drew the attention of Republican state Rep. David Cook, of Globe, who urged Toth to react immediately to the "astonishing results." Cook, who leads the Transportation and Infrastructure Committee in the Arizona House of Representatives, asked the department to cancel the contracts of three third parties that had high-risk violations, among other requests.

“When state agencies outsource their important government functions to third parties, and those third parties fail to meet their legal obligations and are not properly supervised as required by law, Arizonans suffer the consequences,” Cook wrote to Toth.

“In this instance, those consequences are particularly severe and threaten the public safety.”

Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669.

This article originally appeared on Arizona Republic: Audit reveals issues with Arizona MVD third-party contractors