By Howard Fischer
Mail | Twitter: @azcapmedia

PHOENIX — Unqualified Arizonans may be getting state licenses to drive because of practices of private companies authorized by the state Motor Vehicle Division to issue them, according to a new report.

And that, according to Auditor General Linsdey Perry, means not only people on the roads who lack driving skills but also that fraudulently obtained documents “may facilitate fraud, identity theft, terrorism, and other crime.”

Perry said that’s only part of the problem her staffers discovered in reviewing the operation of the MVD and, more specifically, its contracts with third-party providers.

She said there was evidence some of those same companies were issuing titles without the necessary documentation to prove that ownership was being lawfully transferred. And Perry said there were other situations where there was no disclosure of the odometer reading, a situation she said could lead to fraud, with buyers ending up with a vehicle where the recorded mileage had been rolled back.

The report says, though, this isn’t simply a problem of these third-party sites not doing a good job.

It says MVD sets up quality assurance standards and requires these private entities to do self-reviews of the transactions they have performed. And the state agency has access to these reviews.

But auditors found the third-party firm failed to review and provide results of those self-reviews to MVD in about 12% the selected transactions in a seven-month period. More to the point, MVD didn’t catch it.

“In fact, one third party failed to review more than 5,700 transactions during this time frame,” Perry’s report says. “However, MVD inaccurately recorded that this third party has monthly accuracy rates in the high 90% range through calendar year 2022 despite lacking any information about the accuracy rate for the nearly 6,000 selected transactions.”

In a formal response to the audit, MVD Director Jennifer Toth did not dispute any of the findings. And she said recommendations in the report for better oversight will be implemented.

Arizona law makes MVD legally responsible for various services to the public, including issuing certificates of title, vehicle registration, driver licenses and identification cards. That last category can include a special category known as a “Travel ID” that allows holders access to certain federally regulated facilities and boarding of commercial aircraft after they provide extra identification.

But the law also allows MVD to contract with outside agencies that may be in more convenient locations and have longer hours but also can charge additional fees beyond what the state collects. As of last October, the state contracted with 96 third parties that operated 175 locations in the state, with 67 of those locations authorized to issue drive licenses and ID cards.

In the most recent fiscal year, those private locations issued more than a third of the titles, registrations, driver licenses and ID cards.

In a random check of 42 driver license and identification cards, Perry said her staff found eight were issued without documentation showing the customers were qualified. That includes five without documentation they had passed a behind-the-wheel skill test, two that showed no proof they had been screened visually and one where there was no evidence of either.

Perry said that’s a problem.

“These tests help protect public safety by ensuring only those individuals who are qualified to operate a vehicle are on the road,” the audit states. “Failure to verify that an individual is qualified to receive a driver's license puts public safety at risk by allowing unqualified and potentially unsafe drivers to operate motor vehicles on public roadways.”

But that, the report says, is just part of the problem of people not being properly screened before getting state-issued IDs.

“Individuals who fraudulently obtain identification documents may do so to commit other crimes, such as fraud or acts of terrorism,” Perry said.

And that is particularly true for those who are issued Travel IDs.
Then there’s the issue of vehicle documentation — or lack thereof.

“Transferring a vehicle title from one party to another without requiring a customer to demonstrate proof of ownership increases the risk of vehicle theft and other fraud that can cause financial hardships for victims,” the report said. “Victims may face financial hardships from the theft of their vehicles or from unknowingly purchasing a vehicle that was stolen through vehicle fraud.”

The other form of fraud, Perry said, is making a vehicle appear more valuable than it is by rolling back the odometer.

She cited data from Carfax, a private company that provides vehicle data to individuals and businesses, a service used by some car buyers to determine the history of a car or truck.

“According to Carfax, as of December 2022, more than 1.9 million vehicles were on the road with rolled-back odometers, including over 54,000 vehicle in Arizona,” the report says. “Further, Carfax reported consumers lose an average of $4,000 in value from unknowingly buying a car with a rolled-back odometer, which does not include unexpected maintenance costs.”

Perry said MVD began reviewing whether third parties completed self-reviews this past October and identifying those which were not. Yet even after that, she said the agency still was not holding some of these companies accountable for failing to complete reviews.