General Obligation Bond Expenditures
Internal Control and Compliance Audit
Financial Audit Division Report 08-34
Released December 5, 2008
Generally, the Department of Finance and other entities had adequate internal controls over their use of proceeds from general obligation bonds. These controls ensured that the entities safeguarded resources, complied with applicable finance-related legal requirements, and produced reliable financial data. However, all of the entities could have benefited from additional guidance and oversight from the Department of Finance.
Most of the expenditures we tested (selected from a population of $385 million of expenditures) complied with applicable legal requirements; however, tested transactions totaling approximately $1.5 million of expenditures did not or may not have complied.
- The Department of Finance did not sufficiently oversee projects funded with bond proceeds to ensure compliance with all legal requirements.
- State agencies and other Minnesota government entities used approximately $806,000 for project costs that were not appropriate uses of bond proceeds.
- The Minnesota Zoo may not have complied with restrictions on bond funds designated for asset preservation for some expenditures, and did not submit reports on asset preservation projects to the Legislature, as required by statute.
- Some entities used bond funds for internal project management costs without clearly connecting those costs to authorized capital projects.
- The Minnesota State Colleges and Universities’ use of general obligation bond proceeds for the purchase and lease-back of a building may not comply with state constitutional and other legal requirements.
Audit Objectives and Scope
- Internal Control and Legal Compliance
- Capital project expenditures through March 31, 2008, that were authorized by Laws of Minnesota 2006, Chapter 258, and administered by multiple executive branch agencies, other Minnesota government entities, and the Minnesota Historical Society.
Laws of Minnesota 2006, Chapter 258, authorized approximately $1 billion in spending for capital projects. In accordance with the Minnesota Constitution, these projects were typically for construction of new buildings, bridges, and roads; purchase or betterment of publicly owned land by state agencies and political subdivisions; or asset preservation projects to maintain the buildings and land already owned.