State auditor race heats up as challengers to Rebecca Otto claim a conflict

Minnesota State Auditor Rebecca Otto is facing new criticism from political rivals for hosting a national state auditors' convention in St. Paul that was sponsored by accounting firms doing business with local governments.

The race for Minnesota state auditor has quickly blossomed into the most contentious, bare-knuckle campaign of the election season. Auditor candidates are already launching television ads — even before most gubernatorial candidates — and bashing each other with a zeal not yet seen in more high-profile races.

The latest flare-up came as Otto released her first television ad of the campaign Thursday, a 30-second spot touting her as a nationally recognized leader among state auditors, including serving as president of a national state auditors' association.

Rivals say her role with the national auditors' group signals a troubling and too-cozy relationship with major accounting companies whose work the auditor's office often reviews.

"The people being regulated should not be paying for lavish events for those doing the regulating," said Dave Colling, a spokesman for rival DFLer Matt Entenza. "Attending parties and events thrown by firms the auditor is supposed to be watchdogging is not how Matt Entenza will run the office."

Not only does Otto face a Republican rival in her quest for a third term, she first must get past Entenza in a hotly contested DFL primary. A former legislative leader, Entenza spent millions in an unsuccessful run for governor four years ago and is showing a similar willingness to dig deep this time.

Entenza released his first ad last week and expects to begin airing it soon. Otto's campaign is pouring $100,000 into its first television ad and for the first time is hitting the airwaves before the primary.

This newest political skirmish surrounds Otto's role as president of the National State Auditors Association, which brought 125 auditors from around the country to St. Paul in June for the annual convention.

The event featured four days of presentations, programs and events, often sponsored by government accounting giants such as KPMG, Bronner Group and CliftonLarsonAllen.

Otto said her challengers' criticism shows they do not understand the role of the office they are seeking.

"This is an oversight office. It's not the governor, it's not the Legislature," Otto said. "People mistake this position for a position it is not. They promise a lot of stuff, and it sounds really good, but it is just not this office."

The Minnesota auditor oversees and reviews $20 billion in spending of various local governments, from cities and counties to school districts and pensions. The office does not review state agencies, individual income taxes or property taxes. Many local governments do not use the auditor's office, instead hiring private accounting companies to conduct their annual audits.

Otto points out that the state auditor's office has no role in hiring the accounting firms that local governments use, the same ones that often have a sponsorship role at the convention. "There is no conflict of interest," she said.

The conference is part of required continuing education classes that help auditors keep up with the latest laws, regulations and trends. The big accounting firms that sponsored meals or presentations did not get special access to any of the auditors, she said.

State auditors work closely with major accounting firms all the time, often the ones that helped write the laws the state must comply with. "If they are questioning these firms being involved in professional discussions, then they have no clue what the job is," said Otto, whose term as president ended after the conference. "This is not a scandal. It is what we do."

The executive director of the group that runs the association said sponsorships cost $2,500 for each company and include two conference registrations worth $1,500. The rest goes to reduce the cost of the conference for attendees.

"We try to partner with the private sector because they are often the subject-matter experts," said Kinney Poynter, executive director of the National Association of State Auditors, Comptrollers and Treasurers. "We feel like we don't have a conflict of interest or anything of that nature."

Republican auditor candidate Randy Gilbert said there is just enough of a whiff of doubt that he would stay away from the conference.

"I look at this and say maybe it is right, maybe it is wrong, but there's perception versus reality," Gilbert said. "I don't need somebody else paying for my lunch. The people of Minnesota need to know you have their best interest first and foremost."

The political fireworks come in a race for a post that has been a springboard to higher office, a chance for aspiring political leaders to be tested in a statewide run. DFL Gov. Mark Dayton and former GOP Gov. Arne Carlson took a turn as state auditor.

A former state auditor dismissed the controversy over Otto's role with the national group. "It might be a stretch to construe any type of wrongdoing as the state auditor's office has no direct relationship" with the accounting companies, said former State Auditor Judi Dutcher, who served as a Republican and a DFLer. "I always believe that the more the state auditor participates with other CPA professionals — even if it is at a conference — the better."

Of the political intrigue over Otto's role with the conference, Dutcher said, "it strikes me as a yawner."

Even so, Colling said, "when Matt is auditor, it will not be allowed."

Otto dismissed the attacks, saying accounting is a heavily regulated industry and she has nothing to fear. "I am squeaky clean," she said.

Baird Helgeson • 651-925-5044