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Crow Wing County Board: 'No' to State Auditor's three-year audit agreement, board says

The Crow Wing County Board Tuesday rejected an unusual agreement proffered by the state auditor's office to extend auditing services for the next three years.

The Crow Wing County Board Tuesday rejected an unusual agreement proffered by the state auditor's office to extend auditing services for the next three years.

The agreement comes in the wake of the passage of a state law permitting Minnesota counties to hire private accounting firms to conduct annual audits beginning in 2016. The GOP-sponsored bill was a sticking point between the Legislature and Gov. Mark Dayton and was a subject of the special session this summer.

Deborah Erickson, Crow Wing County auditor-treasurer, told the county board her office typically receives information about renewing the agreement each January. This year, the letter came in July and looked no different, Erickson said, with the exception of the three-year extension and a much earlier Aug. 21 deadline, which has since passed.

"In discussion with other counties, there has been some feedback as far as asking why we've been asked to sign a three-year letter versus a one-year letter, and whether or not we can get our standard one-year letter we would typically be looking for," Erickson said. "There's been no response from the state auditor's office to any other counties with regard to that, other than to say they believe they have the authority to audit in a three-year cycle."

Historically, Erickson said, the state auditor's office has conducted Crow Wing County's annual audit, along with those of 58 other Minnesota counties. While the county has considered seeking an exemption from using the state auditor's office in the past, Erickson said no formal request has been submitted in light of indications from state officials it would not be an option.

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"We've had some discussions and we have been told we probably would not be approved to be released anyway," Erickson said.

Erickson said it isn't a matter of dissatisfaction with the state auditor's office, but rather one of inviting additional options for consideration. The law allows counties to continue utilizing the state auditor's office should they choose to do so.

"We're very happy with the relationship that we have for the most part with the state auditor's office," Erickson said. "However with the change in the law, we don't want to limit ourselves to what our ability is."

And that ability may very well save the county money. Local private accounting firms have priced a standard audit for the county in the $50,000 range, a decrease from the $65,000-$70,000 incurred through the state auditor's office. DFL State Auditor Rebecca Otto retains the authority to review private audits conducted for counties, although as of now, costs associated with reviews will not be directly passed on to counties.

Erickson asked the county board for direction on how to respond to the agreement. She noted the county is required to contract with the state auditor for review of this year's budget.

Commissioner Paul Thiede said that at a recent meeting of the Minnesota Inter-County Association, Executive Director Keith Carlson stated the organization has "definitively concluded that the auditor cannot force a three-year agreement."

"At minimum, we ought to sign the 2015 audit (agreement) and give us some options to look at for 2016 and beyond," Thiede said. "I think that's a more reasonable approach."

Chairman Paul Koering said he didn't know why the county wouldn't choose to evaluate other options with the money-saving possibilities.

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"I think just one year at a time, take it at that and we'll see how it all shakes out," Koering said. "But I think we would be neglecting our duties if we're not trying to be prudent with the taxpayer dollars."

Commissioner Rosemary Franzen agreed with Koering.

"I think we need to check into this before we do anything," Franzen said.

County Administrator Tim Houle told the county board they could choose to send back the agreement with 2016 and 2017 struck from the contract language, or they could authorize the chairman to draft a letter requesting a one-year agreement instead.

"Counties have done both," Erickson said.

Thiede made a motion to send a request letter to the state office rather than striking language from the contract.

"I think that's a better way of sending the message that we are not going to get in some kind of legal hassle," Thiede said.

Commissioner Doug Houge seconded the motion and it passed 4-0. Commissioner Rachel Reabe Nystrom was not present.

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Houle said if the auditor's office refuses to send a one-year agreement despite the county's legal obligation to complete this year's audit through the state, the county board could send another letter stating the county's intention to stick to terms previously agreed upon in past years.

"To clarify that you can come in and audit, but these are the terms that we understand them to be (and) at least to create some documentation trail of the scope of that engagement," Houle said.

The issue likely is not going anywhere as state legislators and county officials continue criticism of Otto's office. An Aug. 18 hearing of the House State Government Finance Committee focused on the three-year agreement request. Otto did not attend the hearing, according to a Session Daily article on the Minnesota House of Representatives website, although issued a statement defending the request.

"This not only allows counties and the OSA (office of the state auditor) to plan for the future, it is consistent with Minnesota law. The three-year contract is important due to the uncertainty created by the Legislature last session regarding county audits," the letter states.

More controversy was added to the mix Tuesday when the Associated Press reported Otto paid $21,000 of public money in legal fees to a firm apparently consulting her on legal recourse against the new law.

Otto has said she will not rule out a lawsuit and maintains the law will drain her office's budget and potentially result in layoffs.

CHELSEY PERKINS may be reached at 218-855-5874 or chelsey.perkins@brainerddispatch.com . Follow on Twitter at www.twitter.com/DispatchChelsey .

Chelsey Perkins is the community editor of the Brainerd Dispatch. A lakes area native, Perkins joined the Dispatch staff in 2014. She is the Crow Wing County government beat reporter and the producer and primary host of the "Brainerd Dispatch Minute" podcast.
Reach her at chelsey.perkins@brainerddispatch.com or at 218-855-5874 and find @DispatchChelsey on Facebook, Twitter and Instagram.
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