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High court allows counties to pick financial auditors

ST. PAUL—The Minnesota Supreme Court has upheld a 2015 law that lets counties save money by bypassing the state auditor's office and hiring private accounting firms for their annual financial audits.

State Auditor Rebecca Otto challenged the law on constitutional grounds. She sued Becker, Wright and Ramsey counties, which did not agree to hire her office to check their books.

Becker County alone has spent some $80,000 on the lawsuit. Otto's office has spent more than $250,000 of tax money on it.

The state Supreme Court's opinion on Wednesday, April 18, affirmed an earlier court of appeals ruling.

"It was a good victory for counties," said Becker County Commissioner Barry Nelson, who was active in the case on behalf of the county.

Otto has refused to say why she chose to sue just Becker, Wright and Ramsey counties, saying it was part of her "legal strategy."

"Now that it's closed, I'd be interested in learning why she chose us," Nelson said.

The law will allow Becker County to save as much as $50,000 a year on its annual audit, said Darin Halvorson, a financial specialist at the Becker County Auditor-Treasurer's Office.

In 2016, the auditor's office charged $84,000 for an annual audit, while Becker County paid just $31,000 in 2012 for an audit done by Hoffman Dale and Swenson Governmental Audit Services of Thief River Falls.

Otto's office had been steadily dropping the price it charged counties for audit services while the lawsuit was still active, Halvorson said. "We figured if they won, it would go right back up again."

Becker County hopes to be reimbursed by the state for its legal expenses in the case. County Administrator Jack Ingstad has asked Rep. Paul Marquart, D-Dilworth, for help.

The Legislature approved a similar bill in the past to reimburse the three counties for their legal expenses, agreeing with the argument made by Marquart that "It is basically these three counties defending a state law ... for all 87 counties. It is fair to spread it statewide."

But the measure was part of a larger bill that was vetoed by Gov. Mark Dayton.

Otto made the best of a legal decision that didn't go her way.

"Since the 2015 law change, certain counties have actively rejected the state auditor's authority to review county finances once a private CPA conducted an audit," she said. "The Supreme Court has now made clear that the state auditor has authority and responsibility over county finances, including the authority to conduct additional examinations of a county following a private CPA firm audit, and that the counties are responsible for the costs."

In writing for the court, Chief Justice Lorie Gildea said that the state Constitution does not lay out the state auditor's duties. Rather, she wrote, the Constitution specifically leaves it up to the Legislature to define duties of constitutional offices such as the auditor. Thus, the 2015 did not violate the Constitution.

The ruling also explains that another state office, which no longer exists, originally audited county finances.

After the 2015 law passed, 50 counties notified Otto's office they would not sign contracts with her office for it to conduct audits.

The court ruling says that the auditor retains ultimate say in whether an audit was conducted correctly.

One of the authors of the 2015 law, Rep. Jeff Howe R-Rockville, said he was gratified by the Minnesota Supreme Court decision.

"It's great that the Supreme Court ruled in favor of counties and taxpayers on this case," Howe said. "State Auditor Rebecca Otto wasted hundreds of thousands of taxpayer dollars in an effort to maintain her monopoly and control over counties and their taxpayers."

State Rep. Chris Swedzinski, R-Ghent, also applauded the ruling.

"Some great news from the Supreme Court today as they ruled against State Auditor Rebecca Otto..." Swedzinski said. "Metro counties currently have the ability to contract private firms and we wanted counties throughout the state that are managed well to be able to do the exact same thing."

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