Minnesota's Legacy money, which could total $7.5 billion over the next quarter century, is being adequately monitored, but there are worries that it sometimes simply plugs holes in state budgets and goes to groups with conflicts of interest.

Those findings, outlined Wednesday by the state's legislative auditor, came in the first in-depth look at the spending of money generated by a state constitutional amendment that voters approved in 2008. The Legacy Amendment money goes beyond regular state funding and funnels hundreds of millions annually to the outdoors, clean water, parks and trails, arts and cultural heritage.

Legislative Auditor James Nobles said the Legacy money, coming at a time when many budgets in the state are reeling from funding cuts, gives state officials and private groups "the opportunity, of course, to spend money -- a lot of money." He also said that, in some instances, "there are interest groups that sort of lay claim to 'their' fund."

But Nobles generally praised those overseeing the funds, saying that of the problems that exist, many were caused by a labyrinth of contradictory policies. In presenting his findings, he also praised the Lessard-Sams Outdoor Heritage Council, an advisory group that recommends Legacy outdoors spending and has been the subject of conflict of interest questions.

However, the report singled out the Clean Water Council, another advisory group that helps disburse Legacy funding, because it "had not paid close attention to conflict-of-interest concerns." The council "asserted that conflict-of-interest concerns are not relevant" for it because it funds "broad programs" and not specific projects, the report said.

The audits did find several questionable accounting practices, including one case in which a Department of Natural Resources employee kept a $716,400 check in a locked desk for five-plus months as a Legacy-funded project faced delays. "How in the world does something like that happen?" asked Sen. Ann Rest, DFL-New Hope.

Nobles' report comes at the end of a politically charged year for Legacy spending. House Majority Leader Matt Dean, R-Dellwood, caused a stir in May when he called Neil Gaiman, a noted author, a "pencil-necked little weasel who stole $45,000 from the state of Minnesota" after Legacy money was used to pay Gaiman's speaking fee. Dean later apologized.

Earlier in the year, Rep. Rick Hansen, DFL-South St. Paul, said he was removed from the Lessard-Sams panel for not supporting questionable projects. On Wednesday, Hansen said the Legacy money's goal of protecting and enhancing the outdoors and the arts had led to an outcome that "has so far been murky."

In some cases, Legacy money has been used to fund small, offbeat projects -- $7,000 was spent to study the history of a Jewish long-term health care system, $4,620 went to catalog 7,500 black-and-white photos taken from 1955 to 1957 of nearly every home in Richfield and $2,914 went to compile an oral history of psychiatry in Minnesota.

Rep. Dean Urdahl, R-Grove City, chairman of the House Legacy Funding Division, defended giving Legacy money for oral history projects. "Some might have the opinion that, you know, how's it worth $7,000 to sit down and talk to some old guy about history?" he said Wednesday. "But there's much more to it than that."

Judy Randall, a coordinator in Nobles' office, agreed. "A lot of [art and cultural heritage spending], by its nature, is subjective," she said. Randall added that there may be "differences of opinion that we all may have to live with."

The Legacy amendment was passed three years ago. The amendment authorized an increase in the state sales tax of three-eighths of 1 percent. Thirty-three percent of the money goes to clean-water projects, 33 percent to outdoors projects, 19.75 percent to arts and cultural heritage projects and 14.25 percent to parks and trails projects.

In fiscal year 2010, the first year the sales tax money was collected, the amendment raised roughly $230 million.

Almost from the beginning, Legacy money has tempted those wanting to fund a diverse lists of projects. Even now, as the debate continues over how to help fund a new Vikings stadium, some politicians -- including Dayton -- have briefly explored using Legacy money.

Nobles' report also targeted the issue of a constitutional requirement that the money be used to supplement, not substitute for, regular funding sources. "This is one of those nagging issues that is important but isn't clear," Nobles concluded.

In focusing on conflict-of-interest issues, the report said Legacy spending has shown "that there can be significant differences of opinion about what constitutes a conflict of interest." Part of the problem, the report said, is that the state's conflict-of-interest laws "vary to some degree."

The controversy has led to several high-profile episodes. While Scott Rall served on the Lessard-Sams panel, recommending that $30 million be given to Pheasants Forever, Rall also served as president of the Nobles County Pheasants Forever chapter.

But Rep. Steve Simon, DFL-St. Louis Park, a member of the legislative audit commission that heard Nobles describe the report on Wednesday, said many of the conflict-of-interest claims had little merit. "More often than not, it's not well-founded," he said.

Mike Kaszuba • 651-222-1673