PoliGraph: Truth elusive in state auditor claims

By now you have probably heard of Minnesota’s State Auditor.

That’s because a change in the state auditor’s responsibilities was, at least for a few days, the main reason legislators hadn’t met yet for a special session.

Because of a law that passed during the regular session, counties can outsource their audits to accounting firms instead of having the state auditor’s office do the work.

Rep. Sarah Anderson, R- Plymouth, who sponsored the state government funding bill, which included the change, said the idea is to save counties money.

State Auditor Rebecca Otto says the change will gut her office, and she plans to take the issue to court.

  1. Listen PoliGraph: June 12

PoliGraph looked at claims on both sides of the issue and found a concrete answer to be elusive.

The Evidence

The new law allows counties the option of hiring a CPA to conduct annual audits, but they can still choose Otto’s office, too. The law also preserves Otto’s authority to double check audits provided by outside firms.

poligraph-inconclusiveStill, Otto says that the language guts her office.

She points to several pieces of evidence.

First is the bill language itself, which Otto says not only strips her authority over county audits, but also over auditing Minnesota’s major cities and other entities until next year.

Bill sponsor Anderson showed PoliGraph legislative language that will fix the issue during the special session.

Otto also said that her office’s audit division takes 75 percent of her annual budget and 75 percent of the division’s hours are dedicated to county auditing.

A separate fiscal note tells a somewhat different story, assuming that the audit division’s workload would drop by about 20 percent, and staff would be reduced by seven people.

But in a “worst case scenario, a large majority of counties could choose to be audited by a private CPA firm. In this scenario, the Office of the State Auditor would have to significantly reduce audit staff,” the fiscal note reads, leading to larger audit costs for the branches of local government that continue to opt audits from Otto’s office.

In short, there’s some uncertainty in how dramatically the change will impact Otto’s office.

Otto plans to argue in court that the new law is unconstitutional because it takes away too much of her office’s responsibilities.

Constitutional lawyer Eric Magnuson said he sees strong arguments on both sides. But the question of whether the change effectively razes the state auditor’s office will hinge on whether the courts agree that county audits make up the bulk of Otto’s work.

Magnuson said the change represents a significant incursion on the office, but that the courts “have to look at the basic function of the state auditor and just how many duties you can take away before you’ve basically eliminated the office.”

Indeed, the auditor’s office does lots of other things, including reviewing nearly 700 pension plans, investigating allegations of misuse of public funds, and analyzing local government financial data, among other things.

Meanwhile, Anderson argues the change will mean taxpayer dollar savings, because going with an outside firm could be cheaper than using the state auditor’s office.

She pointed to Swift County, which is west of the Twin Cities near Willmar. It’s among the counties that have an exemption from the State Auditor’s office to hire a private firm.

poligraph-false“They saw a significant cost savings,” Anderson said during an interview on MPR News. “They’re paying half of what the surrounding counties are paying for their audits.”

Anderson made a similar statement in the Pioneer Press.

Anderson’s claim comes from legislative testimony earlier this year from Kimberly Saterbak, who is the Swift County Auditor. She said one reason the county asked for the exemption was because they weren’t getting the reports quickly.

“Due to this long delay in receiving our audit information, we felt there was very little value left by the time the report was completed,” she said in legislative testimony earlier this year.

Saterbak went on to say that Swift County is paying half of what surrounding counties are paying the state auditor. She said to use Otto’s office next year would cost the county an additional $30,000-$40,000.

But in an email, Saterbak said the comparison “was not a formal comparison.” She said it was a personal observation based on a discussion regarding how much other counties were paying for their services.

“Each county is unique and the discussion was not detailed regarding billing breakdown, but there several similar counties to Swift involved,” she wrote.

Saterbak said Swift County paid about $55,000 for its latest audit.  That’s roughly half of the $100,000 nearby Kandiyohi County paid for its most recent audit with Otto’s office.

But surrounding counties, including Big Stone, Chippewa and Lac qui Parle paid less. And Pope and Stevens counties paid just a bit more than Swift.

For her part, Otto said it’s difficult to compare county-by-county costs because counties vary in population, construction projects and other factors.

Kandiyohi County has a population of roughly 42,000 while Swift County has a population of roughly 9,500. Meanwhile Stevens County, which has a similar population to Swift County, paid about $60,000 for its audit.

The Verdict

Both these claims are difficult to score.

While Otto makes a fair argument that her office may lose some strength because of the law change, it’s not clear to what degree. It could be significant if many counties decide to use outside CPAs.

Or, it may be that the “worst case scenario” fails to materialize.

And given that the courts will decide whether the move is unconstitutional, PoliGraph gives Otto’s claim an inconclusive.

Meanwhile, PoliGraph doesn’t dispute Anderson’s underlying claim that some counties may see savings if they go with a private auditor. For Swift County, that’s been the case.

But the specific example Anderson uses is on shaky ground. Counties near Swift are paying only a few thousand dollars more or, in some cases, less. Those variations may have more to do with the demographics and priorities of the county, not whether a CPA or the state is doing the audit.

And the one nearby county that’s paying twice as much as Swift has more than four times more people living there.

Anderson makes a significant overstatement that’s backed up by sparse facts, so PoliGraph says Anderson’s claim leans toward false.

  • Jeff

    This entire article boils down to two things…first does a county save money by using a private auditor? Second, would most counties choose a private auditor which would cause the state auditor to lose most of their yearly auditing power?

    They depend on each other 100% don’t they? If counties save money then most counties would switch to a private auditor and then Otto would lose many counties…if it doesn’t save counties money then most will still choose Otto’s office and she has nothing to fear. See how this works?

    Either counties would save money, and choose a more efficient private auditor (thus a good thing for tax payers) while Otto loses a bit of power/staff. Or Otto is within the same price range as private auditors and most counties stick with the state auditor and she has nothing to fear (which doesn’t hurt tax payers either). I fail to see why tax payers should care one bit about Otto’s power/staff, the most efficient system should win, which is what the new legislation allows for!

  • Jeff

    BTW, do the basic research in the article, check with the Swift County auditors and see how much the cost of auditing changed when they went with the state auditor and when they went with the private auditor…seems like the simplest thing to research in the world…it involves sending a single e-mail! You claim FALSE without even verifying that very simple thing to research.