State Auditor Otto calls privatization measure a 'backstabbing' behind closed doors

A measure passed by the Legislature Monday that would allow counties to hire private firms to perform audits drew the ire of Minnesota State Auditor Rebecca Otto, who said the move is could result in layoffs for her office.

The measure would also require the Legislative Auditor to perform a review of the State Auditor's office, which is responsible for reviewing the finances of counties. It signed off in the wee hours Monday by the State and Local Government Finance conference committee. Otto said she understood the only provision would be the study by the Legislative Auditor, and said the addition of privatization was a "backstabbing."

"When you're told by people that are part of the process that all that's going to be in there is a study and suddenly there's privatization, that's being stabbed in the back," she said. "That is unexpected and uncalled for and there are some real integrity issues there. This is why this work should not be done in the middle of the night."

It passed the Senate 44-21 and is currently under debate in the House. Otto said Gov. Mark Dayton told her Saturday that he would veto a bill that carried such a provision. Dayton's office did not immediately respond to a request for comment.

Otto, a DFLer who is serving her third term, said the overnight deal was lawmakers "pulling a fast one on the taxpayers of Minnesota behind closed doors."

"We don't have a profit motive, they do. There's a difference," Otto said Monday. "We are truly an independent audit shop and we are always there for the taxpayers' best interest."

But proponents say a third of Minnesota counties already hire their own private auditors, at significantly cheaper costs and faster turnarounds. On the Senate floor, Sen. Carla Nelson, R-Rochester, called the bill an important step forward, while Sen. Julianne Ortman, R-Chanhassen, questioned the narrow scope of audits performed by Otto's office. The sentiments were the same in the House. Rep. Jeff Howe, R-Rockville, said a private audit would cost Goodhue County $38,000, compared to $60,000 by the state.

"When it comes to the issue of allowing counties to do this, this is the same courtesy we already grant to 28 counties in the state of Minnesota," said Rep. Sarah Anderson, chair of the House State Government Finance Committee who was among the chief authors of the legislation. "We don't require Hennepin County to be audited by the State Auditor. We don't' even require our cities or school districts to be audited by the state auditor. This is a situation of what's good for the goose is what's good for the gander."

Otto said that when a private company does an audit, their client is the governing body, bringing in a risk of favorable results regardless of the numbers. Counties currently audited by private sector, are reviewed by the State Auditor. That will end, Otto said.

"I ask people, when you are audited would you like to be audited by your neighbor down the street that has the skills or the IRS? Do you know what people pick 90 percent of the time? The guy down the street." She said. "Do you know why? The IRS comes as a representative of government following the laws. We are the government making sure the taxpayers' best interests are being served."

Otto's office was backed by some lawmakers, who feared privatization could bring about favoritism and incompetence.

Rep. Joe Atkins, DFL-Inver Grove Heights, said he was concerned that a measure of such gravity wasn't more closely vetted.

"This makes me awfully nervous," Atkins said. "We're talking about (billions) of dollars that have been through a process for 153 years or so, and I'm a little leery about some tiny provision on a really large bill that says you can hire anyone you want to come in and take a look at your finances when you're the one paying the bill."