The state's top budget agency official on Friday said he is concerned over the "strong possibility" that Minnesota might miss a financial reporting deadline, potentially jeopardizing federal funds.

Minnesota Management and Budget Commissioner Myron Frans in a letter to Legislative Auditor Jim Nobles said his agency is worried that auditing work currently underway by Nobles' office would be done too late.

"We are very concerned about your office's potential failure to complete your audit work in time for us to meet the March 31 reporting deadline to the state's single-audit report," Frans wrote.

The financial report is an annual report to the federal government on how the state spent and accounted for federal funding, which includes various grants and their respective terms, according to a budget agency spokeswoman.

"Your staff indicated there is a 'strong possibility' this deadline will be missed," Frans said. "We would like your assurance that this critical deadline will not be missed."

Nobles in a statement said he was "surprised that the administration decided to make the federal audit a matter of public controversy at this time."

He added: "The Office of the Legislative Auditor is committed to doing all that we can to complete the federal audit by the federally imposed deadline. We are also committed to ensuring that our work is thorough and meets audit standards."

Frans in his letter said the state had previously missed a reporting deadline because of the implementation of a new accounting system. Frans said that the missed deadline for fiscal year 2012 resulted in sanctions that included "heightened cash monitoring" for the Minnesota State Colleges and Universities.

The letter by Frans comes a day after Nobles' office issued a finding that state budget officials should have discussed with his office the disclosure of a recent IRS tax penalty. Frans said that after initially consulting with bond experts and examining industry practices, officials determined the disclosure was not material enough to include. It was added later after Nobles temporarily revoked his approval last December of a financial report by the budget office.

Frans on Thursday announced new procedures to avoid future tax violations and to improve financial reporting transparency. 

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