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Legislative Audit Commission


November 28, 2007

Members Present:

Representative Michael Beard Senator Don Betzold
Representative Sondra Erickson    Senator James Metzen
Representative Rick Hansen Senator Ann Rest
Representative Aaron Peterson  
Representative Steve Simon  

Members Absent:

Representative Connie Ruth    Senator David Hann
  Senator Claire Robling

Other Legislators Present:
Representative Jeremy Kalin

The Legislative Audit Commission meeting was called to order by Representative Rick Hansen, Chair, at 2:02 p.m.  The purpose of the meeting was to release several Office of the Legislative Auditor reports.

Representative Hansen introduced Mr. Nobles to present the program evaluation report on Misclassification of Employees as Independent Contractors.  Mr. Nobles gave a brief overview of how workers can easily be misclassified as independent contractors.  He then introduced Deb Junod, Project Manager, to give the specifics of the report.  Ms. Junod explained the difference between an employee and an independent contractor and the obligations employers have to employees.  Misclassification affects three state agencies:  the departments of Employment and Economic Development (DEED), Labor and Industry (DLI), and Revenue (DOR).  However, there is little coordination of enforcement strategies and a lack of effective information sharing among the three agencies.  The report recommends that the agencies standardize classification criteria, establish information-sharing procedures, and coordinate enforcement programs.  The report also suggests the Legislature authorize a penalty for repeated misclassification. 

Dan Salomone, Deputy Commissioner from the Department of Revenue, introduced himself.  Mr. Salomone said that the departments of Employment and Economic Development, Labor and Industry, and Revenue do not disagree with the findings of the report; however, limitations in the agencies’ enforcement activities reflect the resource challenges each of the agencies face.  He also said that the agencies agree that a more uniform set of criteria for determining worker classification would be ideal and that they plan to develop a core set of criteria over the next several months.  Mr. Salomone also said that the agencies plan to develop processes to routinely share information related to determinations of worker classification. 

The meeting turned to the discussion of the investigation of the former director of homeland security and emergency management at the Minnesota Department of Transportation (MnDOT).  After giving a brief introduction of the report, Mr. Nobles introduced Cecile Ferkul, Deputy Legislative Auditor.  Ms. Ferkul said that the main conclusion of the investigation was that Ms. Pitt misused public funds in the amount of $26,000.  Ms. Ferkul said the department did not have adequate internal controls over Ms. Pitt’s state-paid expenses.  Mr. Nobles added that the report has been sent to the Attorney General’s Office and the Ramsey County Attorney’s Office to recover funds and to possibly seek criminal charges.

Mr. Nobles introduced Lisa Freese, Deputy Commissioner from MnDOT.  Ms. Freese said that MnDOT concurs with the findings of the Legislative Auditor.  She said that the department feels that what happened with Ms. Pitt was an isolated case and that the department is taking actions to make sure that this type of situation does not occur again.  Ms. Freese said that the department is currently working with the Attorney General’s Office to recover funds from Ms. Pitt.  Ms. Freese added that the Department of Employee Relations is investigating the lack of supervision over Ms. Pitt.

The meeting moved to the discussion of the financial audit of the Minnesota Board of Water and Soil Resources (BWSR).  Ms. Ferkul pointed out that the board had significant weaknesses in its financial management duties; problems with grant management and inspection of wetlands that had been banked as a part of a program to preserve wetlands; and noncompliance with professional/technical service contracts.  Representative Hansen noted that there seems to be a substantial number of findings in the report for a financial audit.  Mr. Nobles agreed and mentioned that he thought it would be a good idea for a member in both a House and Senate committee that has jurisdiction over BWSR to pursue resolving some of the issues.  In response to a question from Senator Betzold, Ms. Ferkul said that some of the issues can be resolved by the board itself by working with the Pollution Control Agency and that not all of the resolutions need to come through the Legislature.

Bill Eisele, Administrative Services Director for BWSR, introduced himself.  Mr. Eisele said the board agrees with the findings and recommendations in the report.  He went on to say that it is very clear to them what steps they need to take, both on a short- and long-term basis, to resolve the issues.  He also mentioned that the Legislature had provided the board with enough resources—beginning with fiscal year 2008—to make such changes as separation of duties, which will go a long way in the area of catching errors that occur when you only have one person doing the task.

The last agenda item was a discussion of a request for the Legislative Auditor to establish benchmarks for state funding of environmental programs.  Mr. Nobles suggested that the state’s financial statements, prepared by the department of Finance, should give the information that is needed to establish the benchmarks.  Mr. Nobles suggested that a group of people from the various agencies that are affected, along with Legislators who are interested and possibly some of the interest groups, should meet to discuss if this data would work for this purpose.  He went on to say that the OLA is prepared to give a presentation of the data to get the discussion started.

With no further business, Representative Hansen adjourned the meeting at 4:34 p.m.


Representative Rick Hansen, Chair

Shelly Watterud, Recording Secretary


Office of the Legislative Auditor ♦ Room 140, 658 Cedar St., St. Paul, MN 55155