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Hubbard County requests meeting with state auditor to resolve audit dispute

Eight counties, including Hubbard, are submitting a joint letter to Minnesota State Auditor Rebecca Otto, encouraging her to work with them to find "a mutually agreeable solution."

In April, Otto deemed fiscal year 2015 audit results by Hoffman, Philipp & Knutson "substandard" and grounds for her office to re-audit the eight counties that hired the Thief River Falls-based, private auditing firm.

Otto notified counties she intends to re-audit their fiscal year 2016 audits as well — even though those haven't been completed yet.

The other counties involved are Koochiching, Roseau, Clearwater, Kittson, Lake of the Woods, Pennington and Red Lake.

County Coordinator Debbie Thompson presented the letter for the Hubbard County Board to sign at their Sept. 5 meeting.

"The eight counties that have Hoffman do their audits have been trying to correspond with the OSA, offering methods that they can try and solve the issue so it doesn't create more expense to the citizens of the county because we'd then have to pay the state auditor to come in and do this over again," Thompson said.

At issue for the counties is money — it can cost twice as much for the state auditor's office to conduct the annual audit. A private firm charges roughly $30,000 while OSA's fees reach $87,000.

A 2015 state law allows counties to hire private accounting firms, rather than the state auditor's office, to do their annual audits. Since the new law was signed, about 50 of the state's 87 counties have hired private accountants.

Otto is currently waging a court battle to overturn the law, saying it takes authority away from her constitutionally established office. She calls the auditing of state books "a core function" of her office.

In late May, an Appeals Court agreed with a lower court ruling that the new law does not disturb the state auditor's ultimate authority as the state's general accountant. Otto said she will appeal the decision to the state Supreme Court.

Another concern for the counties, Thompson said, "is if the 2016 audit is performed by OSA, it will not be done in a sufficient timeline to meet the federal timeline for some of the revenue we get from the feds for social services. So they're asking OSA to take that into consideration in working with them."

The letter states, "For more than a decade, your office has approved the same annual audits that have been conducted by the same firm currently labeled as 'substandard.' As such, it came as a surprise when your office notified us alleging serious audit deficiencies. Equally concerning to counties as the surprise of the findings is the lack of ability of our private audit firm to provide the necessary documentation to support their fiscally sound audit."

The letter requests Otto's "assistance in resolving this matter cooperatively through technical assistance. Your decision to re-audit all of our counties unfairly raises questions about our financial reputations and will unnecessarily cost our county taxpayers thousands of dollars. To assist with this goal, we respectfully request a meeting between your staff and county representatives to review your findings and discuss ways to make certain your office is provided with all additional and supplementary documentation that you require."

The Hubbard County Board unanimously agreed to sign the letter.