State auditor sues over private audits

Published 9:09 am Friday, February 5, 2016

ST. PAUL — State Auditor Rebecca Otto filed a lawsuit Thursday challenging a new state law that diminished her office’s powers, a long-awaited step that will add to the state’s growing legal tab on the issue.

The Legislature passed the measure last year, allowing all 87 Minnesota counties to bypass the state auditor and hire private firms for financial audits. It drew the ire of Otto, who was first elected in 2006, as well as Gov. Mark Dayton, who threatened to veto the larger budget bill before relenting in end-of-session negotiations.

Otto had already racked up more than $100,000 in legal fees as she explored possible litigation, and the state could be on the hook for much more. Her complaint targets several counties plus the state of Minnesota, meaning taxpayer dollars will fund both the defense and the plaintiff.

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In an interview, Otto said she didn’t relish the potential costs but viewed the lawsuit as a necessary step to protect her office’s critical role of auditing local governments — a function she says is best fit for her office and not an outside company. And she placed blame at the Legislature’s feet for not heeding her warning that the law could prompt a lawsuit.

“They forced me into a position I’d rather not be in,” the third-term auditor said. “This is bad policy. It’s reducing accountability and transparency with taxpayer money.”

Dayton backed Otto’s lawsuit in a statement, calling the law he signed an unwise and improper breach into the auditor’s duties. The Democratic governor held the position in the early 1990s.

Normally a low-profile position, the auditor’s office has been in the political crosshairs off and on since Otto was elected in 2007. Two years ago, she angered lawmakers from both parties by opposing exploratory drilling for copper and nickel mining.

She declined to say Thursday whether she viewed the 2015 law as politically motivated.

Rep. Sarah Anderson, a Plymouth Republican who spearheaded the measure, said it was merely a cost-saving measure that allows counties to choose who looks through their books. “It’s frivolous. I think it’s a waste of taxpayer time and money,” Anderson said of Otto’s lawsuit.

At least 50 counties have opted to hire a private firm — including some that were previously allowed to use external vendors, such as the massive Hennepin County.

The complaint filed in Ramsey County District Court argues that the auditor’s office should be allowed to continue reviewing counties it deems necessary, or else toss out the 2015 law as unconstitutional. It lists three Minnesota counties now contracting with private vendors for audits as defendants. The state was also initially a defendant, but in a stipulation dated Thursday, Otto said it was unnecessary for the state to be a party, and she agreed to voluntarily dismiss her claims against it.

Otto declined to address how losing county business could impact her office’s budget, citing the ongoing lawsuit, but the complaint notes that about 60 percent of its budget comes from county fees.

A review by the Office of the Legislative Auditor released this week found some counties have saved money by using private firms, but couldn’t say whether those savings were justified. It also noted several unidentified counties balked at Otto’s efforts to sign them up for three-year contracts after the Legislature passed the law last May.

Fredrikson and Byron, the Minneapolis law firm that Otto’s office paid $106,000 between June and September as she considered legal action, filed the lawsuit on her behalf. Otto’s office will pay its attorneys between $246 an hour and $416 hourly, according to an agreement provided to The Associated Press.