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Hiring private audit firms constitutional, judge rules: State auditor plans appeal

A Ramsey County judge ruled a statute allowing Minnesota counties to hire private firms to conduct annual audits does not violate the state constitution.

State Auditor Rebecca Otto
State Auditor Rebecca Otto

A Ramsey County judge ruled a statute allowing Minnesota counties to hire private firms to conduct annual audits does not violate the state constitution.

The summary judgment was issued Friday as part of the civil lawsuit filed by State Auditor Rebecca Otto, who contended the law threatens funding of her office and usurps its constitutional authority. Otto was vocal in her opposition to the GOP-sponsored legislation before its passage and has not wavered in her criticism since.

"Counties act as arms of the state government and expend billions of dollars of taxpayer funds each year on behalf of the state," the lawsuit stated. "Auditing counties is the primary core function of the OSA (Office of the State Auditor) and has always been the exclusive responsibility of the executive department of the state government."

In her ruling, Judge Lezlie Ott Marek acknowledged auditing counties is an "essential core function" of the OSA, per the state constitution. Marek further ruled the law at issue does not threaten that function and instead modifies one of the office's duties.

"Although different, this modification does not attack the state auditor's core function as the accountant of the state," the ruling stated. "The state auditor would continue to function as the taxpayers' watchdog by setting strict auditing standards, thoroughly reviewing outside audits and having the authority to intervene when intervention is determined to be 'in the public interest.'

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"While the court can posit several reasons why giving private CPA firms the ability to conduct county audits is not advisable, reasonable trepidation about how a piece of legislation may operate is not enough to declare a law unconstitutional."

In a statement released Tuesday, Otto declared her intention to appeal the court's decision.

"Unfortunately, the district court also permitted counties to hire private CPA firms at their discretion to conduct an 'initial audit,'" Otto wrote. "We respectfully disagree with this aspect of the district court's decision. It will result in an unacceptable diminishment of the protection this constitutional office provides on behalf of the taxpayers of this state. As a result, to fulfill my oath of office and duty to both current and future taxpayers, I will appeal the court's decision."

Crow Wing County reacts

Crow Wing County Administrator Tim Houle said Wednesday the court's ruling was the one he expected. In June, the county board approved sending a letter to Otto's office noting the county's intention to seek proposals from private firms for an audit of the fiscal year ending December 2017.

Houle said seeking proposals in accordance with the new state law does not mean the county will select a private firm over the state auditor's office for its auditing needs. Houle said he hoped the state auditor would submit a proposal for conducting the county' initial audit.

Houle noted seeking outside bids on an audit could result in cost savings for the county, but would not ultimately diminish the state auditor's importance.

"There is an important role for the state auditor to play in reviewing the audits to make sure they've been done in accordance with the state standards," Houle said. "I think that is still an important strategic role to play."

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Houle said he wished following the court's decision, the focus of the state auditor's office would shift to performing this role rather than prolonging the battle in the courtroom. He said although the state auditor "has the right to challenge the decision as far as she wishes," the taxpayers are ultimately on the hook for the court costs on both sides of the lawsuit.

Related Topics: CROW WING COUNTY
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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