02-03-2025
An embezzlement scandal rocked an AZ county. Lawmakers want to stop it from happening again
A Republican lawmaker wants additional oversight to county treasurer's offices and more in-depth audits after a former county treasurer in rural Arizona pleaded guilty late last year to embezzling nearly $40 million.
Those provisions come in legislation from Rep. Matt Gress, R-Phoenix. The bill is advancing through the Arizona Legislature as Elizabeth Gutfahr, a Democrat who served as Santa Cruz County treasurer, awaits sentencing for embezzling public funds from 2014 to 2024. Gutfahr also pleaded guilty to money laundering, and tax evasion for failing to pay income tax of more than $13 million.
The Arizona Auditor General, an office tasked by the Legislature with auditing state and local governments for years failed to discover the theft. The missing funds came to light in April after the county's bank flagged suspicious activity leading to investigations by the county, state and federal agencies.
One of the ways Gutfahr was able to avoid detection for so long was by leveraging her knowledge of which months state auditors would review bank statements.
Court records show that during the annual audit by the Arizona Auditor General, the agency reviewed June year-end financial statements from the preceding year. Gutfahr avoided diverting funds during those months.
State law already requires the Arizona Auditor General to conduct an annual financial statement audit of financial transactions and accounts kept by all counties. Gress' bill would seek to expand what the agency is required to review.
The procedural reviews required by the bill include evaluating compliance with accounting standards and administrative and accounting internal controls. Following the review, the auditors would be required to submit recommendations to the county treasurer, county board of supervisors and the Joint Legislative Audit Committee. County treasurer's offices would be required to notify the auditor general whether the office agrees or disagrees with the findings of the review, and whether it will implement the recommendations.
"I think that this really enhances oversight it also improves the county treasurer's ability to manage its affairs," Gress said at a legislative hearing on the bill. It passed the House on Feb. 18 and it is advancing in the Senate.
Coconino County Treasurer Sarah Benatar is one of the bill's supporters. Benatar was contracted by Santa Cruz County after the missing funds were discovered. She found the Santa Cruz County Treasurer's Office was not complying with standard practices and procedures by failing to author accurate reports and reconcile bank statements in a timely manner, as well as relying on screenshots of bank statements rather than original documents, according to court records.
'I also support it because the auditors aren't the police just catching deliberate bad actions," Benatar wrote in an email. "They are also a source of expertise to prevent unintentional deviations from legal requirements or best practices. Treasurers need to be able to draw on these kinds of audits to improve our offices.'
Since Benatar was first appointed to county treasurer in 2014 she has seen a change in how thoroughly the Arizona Auditor General audits treasurer departments. When she was first elected, she said auditors would meet with her department in person to conduct testing.
She said quality has decreased over time, with audits becoming less involved. Benatar said Coconino County recently hired a third-party auditing firm to specifically audit procedures used by the treasurer's office and issues state auditors don't look at.
'This bill ensures it's going to happen moving forward,' she said.
Gress said he spoke with Benatar and found there is a limited role for the Arizona Auditor General to review the county treasurer's office.
"They just take financial information that the treasurer gives them they don't actually go into the office sit down with staff and understand what the processes are and collect information about how that office works," Gress said about state auditors.
Another supporter of the bill is Craig Sullivan, the executive director of the County Supervisors Association of Arizona. He said the county board of supervisors, which oversees county operations, doesn't have direct control over the office, making the bill necessary.
"HB2369 aims to ensure these offices are adhering to statutory procedures and following proper accounting principles, and we think it improves the auditing process,' he said.
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Gress has also introduced other legislation that gives more authority to the Arizona Auditor General and requires more training for elected officials.
House Bill 2368 would give the state auditors access to financial institution records directly from the institutions.
This bill came after the Arizona Auditor General noted in a report of its investigation of Gutfahr's fraud that it lacked the authority to independently obtain the county treasurer's financial information directly from a financial institution. The county was instead required to provide the required financial information, which resulted in auditors receiving fake investment statements.
The bill was passed by the House on Feb. 18, and is being considered by the Senate.
Another Gress bill, House Bill 2433, aims to address training of elected officials. It was also passed by the House and is advancing through the Senate.
The bill would require county treasurers and boards of supervisors to complete continuing education courses.
County treasurers would be required to complete a minimum of 10 hours of continuing education courses each year while serving in office, and at least one hour per year devoted to waste, fraud, and abuse.
The board of supervisors would be required to complete at least six hours of professional development training, including courses on open meeting laws, finance and budget issues, and laws relating to county governance, among others.
This article originally appeared on Arizona Republic: AZ lawmakers want tougher audits after Santa Cruz County embezzlement
