Counties square off against Otto over audits

As interest groups reboot lobbying efforts for the special session in hopes of having a second shot at getting their top priorities passed, a statewide organization representing counties is pushing Gov. Mark Dayton and legislators to preserve a new law that was just put on the books.

The Association of Minnesota Counties (AMC) is concerned about a provision in the state government funding bill recently signed by Dayton that would allow counties to hire private firms to conduct annual audits.

Executive Director Julie Ring said her office will be working in the next few weeks to make sure the new law survives the special session.

"Many of our members will say this is an issue of fairness and competitiveness for counties to have the option [of private audits]," said Ring. "But that said, they're comfortable working with the State Auditor's office and don't see a change in law as something that would automatically result in making a change away from the State Auditor."

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The counties have long asked the legislature for the flexibility included in the provision, and this year Republican legislators in the Minnesota House, including Rep. Sarah Anderson, R-Plymouth, who chairs the State Government Finance Committee gave it to them.

Now, the issue has become a flashpoint between State Auditor Rebecca Otto, who has taken to Twitter and the media to express her outrage over the provision, and counties that want the flexibility.

Dayton just signed the state government funding bill, but says he wants legislators to repeal the new rule because it undermines the role of Otto's office. (Dayton served as Minnesota's State Auditor in the 1990s, and vetoed similar legislation in 2011.)

"This is a core function of this office," Otto said, pointing out that counties have millions of taxpayer dollars running through them every year.

Unlike most Minnesota cities, towns and school districts, counties are required to have the state auditor's office conduct annual audits unless they get an exemption from Otto's office.

Ring said the requirements for an exemption are opaque and confuse counties because they are required to audit with the state some years and allowed to outsource the work in others.

But Otto said the requirements to get an exemption are clear: Her office keeps a closer eye on counties who display red flags, Otto said, pointing to a driver diversion program in Wabasha County that raised concerns with the Auditor's office and the courts.

Another county concern is cost. Some counties - especially smaller ones - say they can get a better deal by using a private firm because there's competition for the business and because the price is fixed each year.

Otto's office charges for the work, too, but she says private firms aren't working for the taxpayer.

"When private sector auditors audit, their client is the county board, not the taxpayer," Otto said.

Pine County Administrator David Minke said he might save money by using a private auditor. But timing and value are bigger concerns.

Typically, the state auditor's reports come back in September, which is too late to use the information to help plan for the coming budget year.

"I may pay $48,000 for a state audit, but it only becomes a tool we put in a filing cabinet," Minke said. "It's not a management tool because it's so untimely."

Otto said counties that get audit results late in the year often aren't trained or prepared to help her staff get an earlier start.

"There's nothing we can do about that unless the county gets their act together," Otto said.

Otto stressed that the audits aren't a money maker for her office. But she said that if enough counties choose private auditors, her staff will inevitably be cut because there won't be enough work.