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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
VETOED
budget procedures; late filing penalty
Purpose
Prescribes penalties for an organization's failure to submit accurate and complete financial statements to the Arizona Department of Administration (ADOA) to comply with federal single audit requirements and deadlines. Caps the total penalty assessed in any fiscal year at $8,000,000 or at one percent of the organization's state General Fund (GF) appropriation for the fiscal year in which the penalty is assessed.
Background
ADOA, in accordance with generally accepted governmental accounting principles, must develop and prescribe for the use of a uniform accounting system for all budget units to ensure compliance with all legal and constitutional requirements, including requirements for receiving, spending and accounting for public monies. ADOA must maintain complete, accurate and current financial records for state monies and other public monies in the state treasury that are available to, encumbered by or expended by each budget unit in a manner consistent with the uniform state accounting system to prepare statewide financial statements. Each organization that is included in the state's reporting entity must submit all necessary financial statements or information to ADOA on a basis of accounting that is consistent with generally accepted accounting principles and that is in accordance with the policies and procedures of ADOA (A.R.S. § 35-131).
The federal
Single Audit Act established standardized audit requirements for states, local
governments and Indian tribal governments that expend $750,000 or more in
federal awards during a fiscal year. Entities subject to the federal single
audit requirements must annually prepare a single audit report and implement
procedures to ensure an accurate and complete single audit (GAO;
31
U.S.C. § 7501 et seq.).
There is no anticipated fiscal impact to the state GF associated with this legislation.
Provisions
1. Requires each organization that is included in the state's reporting entity to submit all necessary, accurate and complete and final federal expenditure or program information to ADOA to meet the federal single audit requirements and deadlines.
2. Requires ADOA, if an organization fails to submit accurate and complete final financial statements or information by October 31, to:
a) assess a penalty of one twelfth of one percent of the organization's state GF appropriation for the ensuing fiscal year for every 30 days that the submission is late; and
b) withhold the penalty amount from the organization's state GF appropriation allotment schedule for the ensuing fiscal year.
3. Requires ADOA, if an organization fails to submit accurate and complete final federal expenditure or program information by December 31, to:
a) assess a penalty of one twelfth of one percent of the organization's state GF appropriation for the ensuing fiscal year for every 30 days that the submission is late; and
b) withhold the penalty amount from the organization's state GF appropriation allotment schedule for the ensuing fiscal year.
4. Caps the total penalty that may be assessed in any fiscal year at $8,000,000 or one percent of an organization's state GF appropriation for the fiscal year in which the penalty is assessed, whichever is less.
5. Requires the maximum total penalty to be annually adjusted by the percentage increase or decrease in the maximum amount of monies available in the state GF for legislative appropriations as determined and published by the Economic Estimates Commission.
6. Makes conforming changes.
7. Becomes effective on the general effective date.
Governor's Veto Message
The Governor indicates in her veto message that state agencies provide critical services to Arizonans and should not be punished for leveraging a once in a generation influx of federal funding.
House Action Senate Action
GOV 1/28/26 DP 4-3-0-0 GOV 3/25/26 DP 4-2-1
3rd Read 2/25/26 31-22-7 3rd Read 6/9/26 16-12-2
Vetoed by the Governor 6/19/26
Prepared by Senate Research
June 23, 2026
AN/KP/ci