A discussion with Rebecca Otto, the Minnesota state auditor
The Minnesota Office of the State Auditor (OSA) is a key player in the state’s oversight of cities and other local governments. But what exactly does the OSA do? Minnesota Cities talked to State Auditor Rebecca Otto to get the inside scoop.
Minnesota Cities: How long have you been the state auditor and what is your background?
Rebecca Otto: I am in my eighth year of being the Minnesota state auditor, and I am honored to serve Minnesotans in this capacity. I have a small business background, having founded and managed a business in the service industry with my husband. We built the company up to 50 employees and then sold it. After leaving the business, I obtained a master’s degree in education and taught in the public schools for five years. My experience in public service began at the local level as a school board member for the Forest Lake Area Schools and continued at the state level as a state representative.
MC: Can you briefly explain the purpose of the OSA and how it relates to cities?
RO: The OSA is charged with providing oversight of local government finances for the people of Minnesota. Our oversight work with cities includes conducting audits, collecting and reviewing city financial information, and publishing annual summary finance reports on city finances. We also follow up on mandatory reports of allegations of theft or misuse of public funds by city elected officials, city employees, and private CPA firms that audit cities. In addition, the OSA certifies cities that are eligible for local government aid (LGA) to the Department of Revenue when they have successfully completed all statutory reporting requirements.
Education is an important part of our work. We educate city officials and public auditors on new government accounting and auditing standards and legal compliance issues. We issue educational materials on a variety of city finance topics, we provide training opportunities, and we publish the free electronic weekly E-Update. We also improved the OSA website to make it more user-friendly so that city officials can find what they are looking for in short order.
MC: Why is the OSA needed?
RO: The OSA is an independent office that serves the taxpayers’ best interest by providing oversight of taxpayer dollars at the local level. Our legacy of strong oversight in Minnesota is one of the reasons we do not see corruption in government like you do in other parts of the country or the world, and why we have a reputation of being a good government state. The OSA’s existence serves as a deterrent to misuse or theft of public funds.
We are the office that cities and public auditors must contact if they have evidence of theft or misuse of public funds. We are the office taxpayers can call if they have a question regarding their local government’s finances or if they want to report a concern.
The OSA maintains long-term financial data that has been audited and is comparable on all cities and other local governments in Minnesota. The data we house is used and relied on as an independent source by many, including the Legislature, state agencies, the media, and researchers.
The OSA also issues the Audit and Legal Compliance Guide, which all public auditors are required to use when they audit cities and other local governments.
MC: What are the main divisions of the OSA that deal with city finances?
RO: The Government Information Division (GID) is the division that cities will work with most frequently. GID collects annual finance information from cities, and the audits conducted by private CPA firms. The division reviews the reported information and uses it as the basis for our annual statutory summary finance reports. GID also annually certifies cities that are eligible for LGA to the Minnesota Department of Revenue. For cities using our Small City and Town Accounting Software (CTAS), GID staff provide support for the program.
The Legal/Special Investigations Division deals with legal compliance issues for city finances and is the division elected city officials and staff would contact with a statutory mandatory reporting requirement if they have any evidence of theft or misuse of public funds.
MC: What are the Statements of Position issued by the OSA, and how can they help city elected officials?
RO: The OSA prepares Statements of Position (SOPs) to provide an educational resource to city officials, city auditors, and city residents. SOPs address topics that have arisen or may arise as a result of our oversight. SOPs are developed after careful review of current state law.
MC: Can you explain CTAS, the software that the OSA provides to help small cities properly keep track of city finances?
RO: CTAS was developed over 20 years ago because there was a need for a simple accounting program for very small Minnesota cities and townships that had few financial transactions. CTAS is being used by over 1,300 small entities in Minnesota. It allows entities to maintain their financial records on the computer.
MC: We hear about misuse of public funds. Is this common? What does the OSA do about it?
RO: The good news is that Minnesota has a legacy of good government. We have less fraud and abuse in Minnesota than in many other parts of the country. Regular financial reporting to the OSA and audit requirements are important parts of that.
The mandatory reporting requirement for city officials and employees serves as a deterrent to theft/misuse, and allows the office to make sure the public’s best interests are served. In 2013, we received 63 mandatory reports from local government officials or their staff, with 16 of the 63 reported by cities. Many of those reports required follow-up, but did not involve theft or misuse of public funds.
MC: If a city employee suspects misuse of public funds, what must they do?
RO: The law requires that the employee promptly report to law enforcement and promptly report in writing to the state auditor a detailed description of the alleged incident or incidents. A form is provided under “Contact Us” on the OSA website. The identity of local government employees and officials reporting a possible theft of public funds or property to the OSA is considered not public information, under Minnesota Statutes, section 609.456. An OSA review file becomes accessible to the public when the review or investigation is completed and allowed by law. However, certain information within a completed review file may still be considered not public information.
MC: What does the OSA have to do with pension plans and whose pension plans are these?
RO: We oversee almost 700 volunteer fire relief associations and certify them for fire state aid. Most of the relief associations that we oversee are affiliated with city fire departments, but are considered separate entities. Local fire relief associations exist to pay a service pension for their volunteer firefighters. Each relief association is governed by a board of trustees, which includes three municipal representatives. Cities may be required to approve a relief association’s pension benefit level, and also may be required to make contributions to fund relief association pension benefits.
MC: What information does the OSA have on tax increment financing (TIF)? How does the OSA get involved in TIF?
RO: The OSA oversees the use of tax increment financing by development authorities. The Legislature provides TIF as a tool for development authorities to use, and we are here to make sure that its use is in compliance with state law. We also provide a variety of educational materials on TIF and will soon be providing statewide training sessions on TIF.
MC: What newsletters and trainings does the OSA provide for city staff?
RO: We issue the weekly State Auditor’s E-Update, which contains deadline reminders, training and educational opportunities, and other information. We also publish newsletters on TIF, pensions, and CTAS. We also offer the OSA Annual Training for city finance officers, and we present at the League of Minnesota Cities’ annual Clerks’ Orientation Conference.
MC: Is there anything else you’d like cities to know about the OSA?
RO: If there is ever anything city staff or elected officials would like us to add to our website, or a Statement of Position on a particular topic that you would like us to develop, please do not hesitate to contact the office. My vision is to help all of you be successful in your work, and continue our legacy of good government in this state.
For more information about the OSA, visit www.osa.state.mn.us.
Read the July-August 2014 issue of Minnesota Cities Magazine
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