A legislative committee has recommended only a five-year extension for the Motor Vehicle Division in response to a recent scandal involving the sale of fraudulent state IDs and driver’s licenses, as well as a nearly $10-million accounting mystery.

Under sunset law, the Legislature usually extends state agency operations for 10 years, but Sen. Carolyn Allen, co-chairman of the House-Senate Committee of Reference on Transportation, said she wants to pressure MVD to improve.

“There’s definite room for improvement, and I think that it is good to keep the pressure on MVD,” she said in an interview after the committee voted unanimously for the five-year extension on Dec. 15. “I think five years under these circumstances is the right thing to do.”

The circumstances include the indictments of 44 former and then-current MVD employees in September for accepting bribes and unlawfully brokering or providing fake state identification cards and driver’s licenses. The investigation that led to the indictments began in 2001 on a tip received by a Tucson undercover police officer.

MVD, with 1,600 employees and a $72 million budget, is one of six divisions in the Arizona Department of Transportation.

“I want to assure you that our employees at ADOT are honest and hard working,” ADOT Director Victor Mendez told the committee. “Unfortunately a few bad apples were found during that process [investigation]. It was not a happy time.”

Mr. Mendez said the department was aware of the investigation and was halfway through implementing an action plan to prevent fraud when the employees were arrested and charged. The plan should deter such crimes in the future, he said.

After the MVD scandal was made public, Governor Napolitano called for an independent review of the agency.

“We have decreased the number of acceptable documents that can be used to obtain a driver’s license and have added document-verification experts to MVD offices,” Ms. Napolitano said.

A report on the independent inspection of MVD has not been completed.

$9.5 Million Accounting Error

Meanwhile, the agency has failed to find the reason for a $9.5 million accounting discrepancy that existed for 15 years until the Attorney General’s Office approved a balancing adjustment in 2003 to clear it off the books.

John McGee, ADOT’s chief financial officer, told the committee that the discrepancy involved an imbalance in a “subsidiary” ledger, one of four accounts that records agency receipts for both the department and the state treasury.

“Government accounting is relatively complex,” he said. “The department on a number of occasions tried to go back into history and find out how that difference occurred. The evidence is not there. We cannot find it.”

Mr. Mendez said the problem could have been caused by incorrect posting of receipts, but added, “We are now able to reconcile that account to the penny.”

“It’s amazing that we just decided to write off $9.5 million dollars,” Ms. Allen said during the hearing.

“I’m shocked to hear about the $9.5 million,” said Rep. Lucy Mason, R-1. “It’s very scary to lose money like that.”

Sen. Robert Blendu, R-12, said the Legislature has failed to adequately fund MVD and should take “98 per cent” of the blame for the agency’s problems.

Sunset committees merely make recommendations to the Legislature, and agency extensions must be approved in bill form. —