Most counties opt against state auditor for reviews

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State Auditor Rebecca Otto talks to reporters June 3, 2015 in St. Paul.

UPDATED 2 p.m. with Otto comments.

Counties may be abandoning the Minnesota state auditor in droves and are serving notice they will pursue private contracts for their annual financial reviews, according to a court filing by State Auditor Rebecca Otto in her legal fight against the law allowing more outside audits.

An 89-page document filed Wednesday by Otto's attorney said 44 counties gave "opt out" notices prior to an Aug. 1 deadline. That was when a new law took effect to permit counties to look elsewhere for reviews of their finances. Some have already signed contracts with private firms for 2017 or beyond, while others indicated they were giving notice to retain flexibility.

Besides the 44 counties that gave notice, another six had previously won permission to hire private auditors, meaning well over half of the 87 counties could eventually turn away from the state auditor. In suing to overturn the 2015 law, Otto has said the statute undermines a core function of her office and could make it difficult to retain quality auditors going forward.

Otto said in an interview Thursday that she is "confident that the judiciary will protect the constitution and this office for the benefit of taxpayers. In the meantime, this office is focused on working hard on behalf to the people of Minnesota."

Her office has spent hundreds of thousands of dollars on a private law firm to challenge the law.

A Ramsey County District Court judge heard arguments in Otto's lawsuit in June but has yet to rule in the case, which claims the new law is unconstitutional. Sponsors of the law have argued that Otto's county audit power isn't spelled out in the state constitution. They said the change will save counties money by letting them put the work out for competitive bid.

The new court filing includes letters from counties. Some are perfunctory notices, while others explain that opt-out was provided to retain options.

For instance, Polk County Board Chairman Nick Nicholas writes that fellow commissioners and county staff "are quite pleased" with the services Otto's office has provided and the decision "had little to do with the quality of the service the county is receiving."

But Nicholas went on to say the "imposed deadline forces the board to consider potential auditing costs beyond the term of this board and without regard to future budget realities." The board has paid the state auditor between $45,000 and $51,480 in recent years for its reviews.

Sherburne County Auditor/Treasurer Diane Arnold encouraged Otto's office "to also place a bid for Sherburne County's 2017 audit."

Otto said that her office could be constrained in providing a competitive bid to counties.

"The way we are structured financially is created by the Legislature and we are required to charge for our cost of the audit, and so that's set in statute," she said.

Several counties said they had already retained firms to provide the work at a better price.

Lyon County Board Chairman Charles Sanow wrote that his county's decision to switch was unanimous. But, he added, "We appreciate the service and efforts of the regional team that has performed our audits up to now and wish the Office of the State Auditor the best moving forward."

The state auditor doesn't always audit every county. Under the old arrangement, every three years the office would decide which will get state audits and which can put the work out for private bid. In 2015, 61 counties had audits conducted by Otto's office.

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