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Nobles Rips State Auditor Otto for Treatment of CPAs

Lori Leysen and Jim Nobles, Office of Legislative Auditor. Paul Battaglia photo

Maybe the latest embarrassment to hit State Auditor Rebecca Otto in her feckless quest to force Minnesota counties to use her office’s over-priced services will convince her to give it up. After all, Otto has lost repeatedly in the courts and marketplace, where more counties have turned to private accounting firms that often charge less than half as much as the State Auditor.

Most recently the embattled Otto took a direct hit in a new legislative auditor’s report released this week at a committee hearing covered by Session Daily.

A report released last year by State Auditor Rebecca Otto’s office that looked into private CPA firms’ reviews of county finances broke generally accepted auditing standards, according to the Office of the Legislative Auditor, and critics say it harmed firms trying to compete both in Minnesota and across the country.

2015 law allowing every Minnesota county to hire private-sector accounting firms has created an elongated political battle between Otto and the Legislature. In response to that law, Otto’s office released a report last year examining those private-sector county audits, claiming there were major inadequacies in how CPAs reviewed counties. And in response to Otto, last year’s Legislature issued a special directive to have its investigative arm – headed by Legislative Auditor Jim Nobles – dig into Otto’s office.

Turns out Otto, who’s also running as the most leftwing DFL candidate for governor, allegedly broke the rules in her determination to punish the counties and private firms that dared challenge her.

On Tuesday, the legislative auditor’s office explained its findings to the House State Government Finance Committee, telling lawmakers that Otto’s office didn’t properly back up its previously reported claims and that it didn’t treat private CPAs with due process or “professional courtesy that is normally practiced” in the industry.

Additionally, Nobles and others questioned if a review of private CPAs, like the state auditor’s, has ever been public.

“This is what’s unusual, is this kind of a report,” Nobles said.

Otto skipped the oversight hearing. But her private sector competitors showed up swinging.

Geno Fragnito, the Minnesota Society of CPAs’ legislative relations director, said Otto’s report “seemed to have a predetermined outcome” that “calls into question” the state auditor’s objectivity.

“It is neither objective nor accurate,” Fragnito said.

Otto also failed to give the targets of her critical audit the standard courtesy of a response to her findings, according to Nobles.

These reports usually allow responses from the audited party, according to Nobles, audit director Lori Leysen and Fragnito. The 2016 report released the names of private firms, key findings and conclusions, but didn’t allow for those responses.

“They had no idea there was going to be a published report,” said Leysen, who was in charge of this special review.

Otto’s tenure is turning out to be the Dayton administration’s latest case study of state government running roughshod over Minnesotans without being held accountable. The Minnesota Supreme Court will likely rule on the constitutionality of the 2015 law allowing counties to use private sector CPAs instead of Otto’s office sometime this summer.

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