The Minnesota agency in charge of awarding Legacy Amendment dollars to the arts should do more to ensure its grants are spent appropriately, the Office of the Legislative Auditor argues in a new report.

The State Arts Board complies with most grant requirements, but "there is room for improvement," the office found after taking a deep look at how the board awards and monitors its coveted, competitive grants.

During fiscal 2018, the board awarded 577 grants totaling more than $23 million. The report says the board should require artists and organizations to account more closely for how they used state funds, perform more monitoring visits and follow up on questionable spending.

The office's team reviewed 125 final reports submitted to the State Arts Board, said Carrie Meyerhoff, evaluation manager for the legislative auditor's office.

"We identified some uses of state funds that we questioned," Meyerhoff told lawmakers Monday. "We weren't sure they were appropriate uses of state funds." But because those reports don't include how the grantees spent the state dollars, "we can't be more definitive," she said.

Although state law prohibits Legacy funds from being used outside Minnesota, one arts group that received a grant to help cover its operating costs trekked to Oregon for a festival — and noted in its report that "the cost of sending a full production with seven actors, a full set, and production team across the country is prohibitive; having access to general operating funding makes these projects possible."

The auditor didn't have a detailed breakdown of how funds were allocated, so "we could not determine whether the grantee spent state grant dollars on this out-of-state project," the report states.

"I don't see the transparency, the devotedness to accountability at a particularly high level with the State Arts Board," Sen. Ann Rest, DFL-New Hope, said during Monday's meeting of the Legislative Audit Commission. Like any state agency, the Arts Board has a duty to account for how taxpayer dollars are spent, she continued. "I support their mission, for heaven's sake, … But I'm disappointed at what appears to me to be a pretty cavalier attitude."

The State Arts Board wants to be "the best stewards of the public dollars that we can be," its executive director, Sue Gens, told lawmakers. In her response to the report, she noted that "we will work internally, with the regional arts councils, and with legislators, to address the recommended improvements."

The expenses the legislative auditor questioned were small — "less than 1 percent of about $729,000 awarded" in the grants it sampled, the report notes. But, the report added, "we are concerned that grantees' final reports did not show that board staff identified or investigated the expenses." Staff should document issues and conversations in grant files, even if they determine that the use is OK, it said.

Going forward, her group will do so, Gens said.

Both Meyerhoff and Gens noted that one recommendation is based on "a difference in interpretation."

Using dollars from the Arts and Cultural Heritage Funds and the general fund, the State Arts Board awards operating support grants to dozens of arts groups. State policy requires that state agencies do a monitoring visit for all grants over $50,000. The State Arts Board considers its grants to be multi­year, and thus conducts one visit per grant, not per year. But the legislative auditor's office thinks that "each year of funding … is a grant."

That would require more than twice as many visits as the board now conducts — and an increase in administrative costs, the report notes.

In one case, the legislative auditor thought the Arts Board's process was more thorough than state law. It scores grant applications through panels of volunteers who have open meetings, during which members of the public can view on computers the grant applications they're discussing.

That conflicts with the Minnesota Government Data Practices Act. The report recommends amending the law to allow "this level of transparent process," Meyerhoff said.