State Auditor Rebecca Otto has been in activist mode since the legislature passed a bill that would allow Minnesota counties to hire private auditing firms instead of being obligated to use the auditor’s office for their needs. The auditor’s office has oversight of the billions of dollars that local governments spend every year, but unlike Minnesota cities and school boards, the counties were required to pay the state office for annual audits.
Governor Dayton has already signed the state government bill that would enact the changes, but an upcoming special session may cause the issue to be revisited as Dayton has stated that he wants legislators to repeal the provision.
The Association of Minnesota Counties (AMC) supports the new law as it will save taxpayer money. Counties that they’ve informally surveyed stated savings in the “thousands to tens of thousands” annually. Flexibility is equally important to local officials since state reports can come as late as September which doesn’t mesh well with a county’s budget-planning timeline that begins in July-August.
Some counties already contract with private firms, but it is done via exemption approved by the State Auditor’s office and that process has lacked consistency. The law change ensures that any county can competitively bid out their audit services. Counties may also choose to continue using the State Auditor’s office, and the law will require that all audits still meet the standards set by that office. According to Matt Hilgart, Government Policy Analyst for AMC, it’s a matter of choice and consistency. “Our counties are looking for the same ability that Minnesota cities and school boards have to choose. A city the size of Rochester can use a private auditing firm while a small county like Koochiching must go through the state. It doesn’t make sense.”
According to the Auditor’s office, they only employ 89 people, but many of the staff are highly paid due to the skills required to oversee financial audits. If the law remains intact, inevitably some of these jobs would go away and move to the private sector.
Otto has been vocal in the press about the change saying that she believes that it was a”backstabbing.” The fact that the bill passed the DFL-lead Senate has caused some to believe that Iron Range Democrats sought to take away some of the auditor’s power as payback for her opposition to the Polymet copper-nikel mining project in Northern Minnesota. In 2013 she was the only one on the state’s Executive Council to vote “no” for moving the project forward citing environmental concerns. Otto has been rapid-fire on Twitter making this into a personal cause, but the change has been on AMC’s agenda before Otto took office. “It’s been on our platform for a decade,” says Hilgart.
Otto was recently quoted in the Star Tribune on the need for the state auditor to conduct county audits:
“I ask people, when you are audited would you like to be audited by your neighbor down the street that has the skills or the IRS? Do you know what people pick 90 percent of the time? The guy down the street.” She said. “Do you know why? The IRS comes as a representative of government following the laws. We are the government making sure the taxpayers’ best interests are being served.”
The fact that Minnesota cities and school boards are already audited by their state-licensed CPA “neighbors” seems to be lost on Otto. How hard Dayton goes to bat on the issue– with a $42 billion budget at stake– remains to be seen. With little overall reform that passed in the many spending bills, it would be unfortunate for Minnesota taxpayers to lose one small cost-savings measure.