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Amid legal battle over state auditor’s role, 44 Minnesota counties opt to hire private firms to review finances

Counties have that option after a controversial 2015 law change, which allows the local units of government to be audited by certified public accountants instead of the state auditor.

State Auditor Rebecca Otto argues the Legislature violated the separation of powers and infringed on the core responsibilities of a constitutional office.
MinnPost photo by Briana Bierschbach

More than half of Minnesota’s 87 counties want private accounting firms to check over their financial records instead of the state auditor, according to notices sent to the office.

Counties have had that option since a controversial 2015 law change, which allows the local units of government to be audited by certified public accountants instead of the state auditor. The auditor’s office, which is enshrined in the state’s Constitution, has been reviewing county books since the 1970s. Before the change, only six counties — including the state’s largest, Hennepin County — had the option to seek private firms. 

Under the new law, which took effect on Aug. 1, counties had to provide written notice if they planned to stick with the auditor or go a different route. By the deadline, 44 counties had notified the state they would be using a private firm. 

The change is currently being challenged in court, where DFL State Auditor Rebecca Otto argues the Legislature violated the separation of powers and infringed on the core responsibilities of a constitutional office. Counties, on the other hand, say the power to audit local governments is not a core constitutional function of the office, but was actually directed to the auditor by legislators back in 1972. 

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Otto said she’s waiting on the ruling from Ramsey County Judge Lezlie Marek, who previously denied a motion from counties named in the lawsuit to dismiss the case. 

“Right now we are waiting for the judge’s decision. That’s what the judicial branch does for us. If there’s confusion with a law, that’s what they are here for,” Otto said. “I took an oath to defend the Constitution and that’s what I’m doing.”

The auditing change was passed in the final hours of the 2015 session, when it was tucked inside a large state government funding bill. In the lawsuit, Otto said the new law could make it difficult to retain quality auditors going forward, but counties say CPA audits will help them save money and time. On average, a state audit costs about $50,000 for counties, but some have already signed contracts with private firms for cheaper audits.

If the courts reject Otto’s case, she said she has the option to appeal. With the possibility of a drawn-out legal battle, there could be plenty of confusion about who’s supposed to be auditing whom. 

“I contend that we continue to have the authority to audit these counties,” Otto said. “There’s been confusion that has arisen, which I told the Legislature was going to happen. I testified in committee that this would cause chaos.”