MINNCOR audit provides lessons

Stimulus adds urgency to better policing of state spending.

Last update: March 1, 2009 - 8:32 PM

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To read the legislative auditor's report on MINNCOR Industries, go to //tinyurl.com/bj8wac.

One of the most heartening aspects of President Obama's inaugural speech was its emphasis on government performance and accountability. That's precisely the right tone for the months and years ahead as badly needed reforms are weighed in areas critical to the nation's future: health care, energy and agriculture.

Even as the nation grapples with overhauls of these massive programs, it's important not to overlook opportunities for improvement in all levels of government. Especially at a time when the nation is borrowing billions and states like Minnesota face frightening budget deficits, there should be a push for accountability and performance in all programs, from the small to the large, from those that clearly need fixes to those that seem on the surface to be adequate.

A reminder of how valuable that kind of scrutiny can be came this week with a report released by the Minnesota Office of the Legislative Auditor (OLA). The report didn't garner headlines, and the program it evaluated is a relatively small one -- MINNCOR Industries, a part of the state Department of Corrections that employs inmates. Still, there are important lessons to be drawn from it.

In general, MINNCOR is a well-run program. It employs about 16 percent of adults imprisoned by the state -- one of the highest rates in the nation. Inmates make license plates, handle printing jobs, sewing and assemble or package goods for outside companies. Given a legislative mandate to be self-sufficient, MINNCOR has turned a profit for much of this decade, and its 2008 revenue was about $35 million. Nevertheless, there's room for improvement, the auditor's office found. Better accounting practices -- in particular, more transparency on reporting inmates' salaries -- would give a more accurate picture of MINNCOR's profitability. The organization also could do a better job of marketing its services to the public sector, which could help the program maintain revenue during this difficult economy. It also needs to rely more on standardized contracts. Its overreliance on purchase agreements potentially puts the state at risk for product liability. MINNCOR officials should heed the auditors' advice and make changes.

Accountability and performance are always good policy, but are especially important as billions in federal stimulus dollars begin to flow into the state. Minnesota has some work to do. Previous budgets have led to alarming cuts in staff and auditors at the Department of Finance and other state agencies, leading the OLA to conclude earlier this year that the state's auditing controls are "significantly flawed." Problems that should have been caught include $2 million claimed in overtime by nine workers at the Minneapolis Veterans Home and $300,000 in inappropriate expenses by the Department of Natural Resources on a wildlife conference.

Gov. Tim Pawlenty's budget this year includes about a $700,000 increase to help bolster audit staff. Also proposed: a major investment in software and procurement technology to better track spending. A bipartisan group of legislators, including Rep. Ryan Winkler, DFL-Golden Valley, is looking at other solutions. Among them: requiring spending for internal controls to be a certain percentage of an agency's budget. And, putting current policies and guidelines on how internal controls are performed into statute. The lawmakers' ideas and the governor's efforts are welcome. Those who run state government have a huge responsibility ensuring taxpayer dollars are well-spent. Minnesota can do better.

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