Office of the Legislative Auditor - Financial Audit Division

Report Summary

Office of the State Auditor

January 1, 2001, through December 31, 2002

Audit Conclusions:

The Office of the State Auditor (OSA) spent its state appropriation within its established authority. The office's internal controls provided reasonable assurance that assets were safeguarded and financial activities were properly recorded in the state's accounting system. Except for the finding below, the office complied with applicable legal provisions for items tested.

Finding:

• The OSA did not recover its audit practice costs in fiscal years 2001 and 2002, as required by Minn. Stat. Section 6.58. OSA audit practice expenditures exceeded audit receipts by $344,000 in 2001 and $229,000 in 2002. The office budgeted to under-recover costs by approximately $736,000 in fiscal year 2003. Minnesota statutes require the office to annually recover its audit practice costs. The auditor's practice, which was approved by the Department of Finance, has been to use prior years' over-recoveries to offset current year under-recoveries. We recommended that the OSA set its billable rates at a level sufficient to recover audit practice costs as required by statute, or seek statutory authority for its current practice of offsetting prior years' over-recoveries of costs.

The OSA was established by Article V of the State Constitution and operates under Minnesota Statute Chapter 6. Minnesota voters elect the state auditor to a four-year term. Judith Dutcher was state auditor from January 1995 through December 2002. Patricia Awada was elected state auditor in November 2002 and began her term on January 6, 2003. The mission of the OSA is to help ensure financial integrity, accountability, and cost-effectiveness in over 4,300 governmental entities throughout the state. The state auditor serves on the State Executive Council, State Board of Investment, Land Exchange Board, Minnesota State Housing Finance Agency Board, Public Employees Retirement Association Board, and Rural Finance Authority Board.

The OSA's operations are funded by state appropriations. The office's appropriation in fiscal year 2002 totaled approximately $10 million. The audit practice receipts collected from local units of government are deposited in the General Fund as non-dedicated receipts.