Court ruling: Counties may hire private auditing firms instead of State Auditor

A Ramsey County District Court ruled Friday that a 2015 law giving counties the option to hire private auditors to review their books is constitutional, delivering a blow to State Auditor Rebecca Otto who has vigorously fought to overturn the statute.

Judge Lezlie Ott Marek said the statute does not undercut what she called "an essential core function" of the state auditor's office: to audit state spending by Minnesota counties. The Legislature in 2015 approved the change as part of high-level negotiations between legislative leaders, including the policy change in a massive budget bill. Otto, a DFLer, also challenged the legislative process in her lawsuit.

She named three counties as defendants –– Becker, Ramsey and Wright –– contending the counties had defied her office's constitutional authority by refusing to sign to three-year contracts shortly before the law was to take effect.

"The county audit statute does not divest the (state auditor's office) of its core function of auditing counties," Marek ruled. "While the county audit statute allows counties to initially decide who performs the audit, the (state auditor's office) retains supervision and ultimate authority over all such audits."

Otto's fight against the statute began the moment legislators approved the privatizing language during a middle-of-the-night conference committee in the legislative session's waning hours. Otto argued legislators had violated single-subject law governing legislative bills by including the policy change in a massive spending bill that governed myriad of other programs and departments.

Marek said because there was no constitutional violation found, "the court need not examine plaintiff's allegations regarding legislative procedures and custom."

Marek is a 2010 appointee of former Gov. Tim Pawlenty, winning re-election in 2012.

Otto steadfastly defended the spending, saying she took an oath to defend the state constitution. She argued that giving counties the option to hire private CPA firms would weaken her office's watchdog role. Because counties pay the state auditor's office for their financial reviews, Otto said that if too many counties chose to hire private firms, her office would essentially be gutted.

"I appreciate the district court's timely and serious attention to the complex and difficult legal questions raised by this case," Otto said in a statement. "As we requested, the court recognized the core constitutional function of the (state auditor's office) to audit counties. The court also held that the state auditor's office may 'continue to exercise its constitutional authority to audit counties at its discretion and to require counties to pay for such audits.' "

Minnesota House Rep. Sarah Anderson, R-Plymouth, praised the ruling saying the law "will mean meaningful savings for counties and property taxpayers throughout Minnesota."