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Minnesota state auditor goes after 2 private county audits

State Auditor Rebecca Otto takes part in a Minnesota Executive Council meeting this summer when the group approved a 30-day disaster declaration for flooded counties. Don Davis / Forum News Service

ST. PAUL — The Minnesota state auditor says Roseau and Hubbard county financial audits conducted by private accountants need to be done again, but a report containing the recommendation has received plenty of pushback.

"We are watching out for the taxpayers," Auditor Rebecca Otto said in a Tuesday, April 4, interview.

The report she issued has page after page of what she said are problems with audits in eight counties of the 26 that use private auditors instead of her office.

"This is the worst that I have seen since I have been here," said Otto, who has been auditor since 2007 and is running for governor as a Democrat in 2018.

In most cases, existing audits can be reworked to meet her office's requirements. But she said the Hubbard and Roseau audits contain "enough issues that they will have to have their audits totally re-done."

That is not going to happen, said Colleen Hoffman of the Thief River Falls-based Hoffman, Phillips and Knutson accounting firm that conducted those two and six other audits of Minnesota counties.

"It is absolutely a hoax; a terrible, terrible injustice," Hoffman said.

Hoffman worked in the state auditor's office for nearly 20 years, leaving well before Minnesotans elected Otto.

Hubbard County Auditor Kay Rave and Hoffman said they think Otto's office did not see all the documents on a computer USB flash drive.

"We are convinced she just missed it," Hoffman said.

Rave added: "I am hoping we can resolve this by re-reviewing the documentation."

Hoffman blames the situation on a dispute between Otto and legislative Republicans.

The GOP got a provision inserted into a 2015 bill that gives counties more freedom to hire private auditors to check their financial records each year. Before, the auditor allowed some counties to get private audits, but retained control of which ones did not need to use her office.

Otto fought the bill, and now is in the middle of a court battle to overturn the law, saying it takes authority away from her constitutionally established office. She sued Ramsey, Wright and Becker counties for using private accounting firms.

The auditor said that under the old law, problems her office found in recently reported 2015 audits would have resulted in her office taking over Roseau and Hubbard county audits the next three years, locking out private firms.

"We no longer have the authority to say to counties, 'We take you back,'" she said. "The counties get to choose."

Otto has claimed since the 2015 legislation emerged that less expensive private auditors do not conduct as thorough audits as her office.

"We need to understand what a low-cost audit is," she said Tuesday.

Rave said Hubbard County pays the Hoffman firm about $30,000, while Otto would charge at least twice that.

"I have the utmost faith in our (private) auditors," Rave said, although Otto said her office has more experience than private auditors.

Otto's office checks every private audit, but some are selected for a more comprehensive review. That is what happened with Hubbard, Roseau, Marshall, LeSueur, Fillmore and Hennepin counties this year.

Hoffman complained that the state office only looked over documents submitted, but did not talk to her firm. Had they talked, Hoffman said, any problems probably could have been worked out.

She said private accountants "are just reeling with disgust" over Otto's allegations of mistakes and release of the information. "It is an ethical travesty."

Otto said the information is public and the her office did nothing different than usual other than release a document. She said that the document was prepared because the audits were the worst she has seen; she did not link the release to her lawsuit.

Hoffman said she is unsure of her next step. She and Rave said Otto has not contacted them to demand a second audit be conducted.

"She is just saying we did not have enough verbiage," Hoffman said.

House State Government Chairwoman Sarah Anderson, R-Plymouth, said she has heard from county auditors and private accounting firms who think Otto was being punitive.

Anderson said she plans to call Otto to testify on the issue when House and Senate negotiators work on a state government finance bill later this month. Otto said she would be there.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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