Legislative Auditor clears Minnesota Orchestra's fund use

The state Legislative Auditor's Office has found no improprieties in how the Minnesota Orchestra Association used state money — both general operating funds and a $14 million bonding grant to help renovate Orchestra Hall.

The report, instigated at the request of 100 DFL legislators, was issued Thursday.

It said the orchestra "complied with applicable legal requirements" concerning grant money received from the State Arts Board from 2010 through fiscal 2012.

Concerning the remodeling of Orchestra Hall, the auditor said, "We did not identify any payments for costs that did not comply with applicable legal requirements."

The organization received $14 million toward the $52 million project, which is scheduled to be finished in August.

The report said it is uncertain how much money the orchestra will allowed to use from its fiscal 2013 grant from the Arts Board, an amount totaling $961,000. The orchestra and the Arts Board have "different interpretations of which costs are eligible for reimbursement under the 2013 grant agreement," the auditor's report said.

Orchestra president Michael Henson said previously that the organization would sequester state grant money during contract negotiations with musicians. At the end of the fiscal year, June 30, unused grant money must be returned. Discussions between the orchestra and the Arts Board will determine which expenses are eligible to be paid by the grant.

The report also studied Henson's 2010 testimony as he sought bonding money. Legislators had expressed concerns that Henson gave too rosy a picture of the organization's finances in order to secure the funding.

"While noting his testimony about the association's financial condition was limited and generally positive, we do not offer a judgment about what Mr. Henson should have said or what legislators should have asked," the report said. "Furthermore, it is not clear how a more complete — and less positive — presentation about the association's financial challenges would have affected the association's request."

In an interview, Legislative Auditor James Nobles said organizations seeking state money have varied approaches — sometimes pleading poverty, sometimes arguing that finances are robust.

"There isn't a standard for what people are supposed to disclose," he said. "What he did say can be substantiated with this report."

Musicians, who are locked out in an ongoing labor dispute that canceled the entire 2012-13 concert season, focused on the point about Henson's testimony concerning the orchestra's financial health.

Board member Doug Kelley said he hoped that the auditor's report would "remove one of the musicians' impediments to negotiations," he said in an interview. "They want more information on finances. They have been able to see our audits, our tax returns and now a clean bill of health from the Legislative Auditor."

Zavadil responded that the report changes nothing in that regard.

"Our position remains the same," he said. "We cannot have productive discussions when one party is locking out the other."

Musicians were locked out Oct. 1, after negotiations on a new contract expired. There has been only one meeting since then.