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Legislative Audit Commission Meeting


November 30, 2011

Members Present:

Representative Michael Beard   Senator Mike Parry
Representative Sondra Erickson   Senator Ann H. Rest
Representative Rick Hansen Senator Claire Robling
Representative Steve Simon  

Members Absent:

Representative Mary Liz Holberg Senator David Hann
Representative Phyllis Kahn    Senator James Metzen
  Senator Roger Reinert

Other Legislators Present:

Representative Steve Drazkowski
Representative Denny McNamara
Representative Paul Torkelson
Representative Dean Urdahl


Representative Michael Beard, Chair, called the Legislative Audit Commission meeting to order at 1:07 p.m. Representative Beard said the purpose of the meeting was to release the evaluation, The Legacy Amendment, and the financial audit report, Legacy Funds: Outdoor Heritage, Clean Water, and Parks and Trails.

Representative Beard introduced Jim Nobles, Legislative Auditor. Mr. Nobles explained that in November 2008, a constitutional amendment was passed for specific purposes related to the environment and arts and cultural heritage, which became known as the “Legacy Amendment.” Mr. Nobles said there has been some criticism of how the money has been and should be used. He said the program evaluation gives a broad overview of the differences in the four Legacy funds and how the money is used for each. He then added that the financial audit report gives more specific details on three state agencies regarding their use of the Legacy funds. Mr. Nobles introduced Judy Randall, Evaluation Manager, and Cecile Ferkul, Deputy Legislative Auditor, to give more details. Ms. Randall said that the constitutional amendment that Minnesota voters passed in 2008 raised the sales tax 3/8 of 1 percent and is projected to raise between $240 and $300 million annually. Ms. Randall explained that the money is managed through four separate funds for specific purposes. The four funds are Outdoor Heritage, Clean Water, Parks and Trails, and Arts and Cultural Heritage. Ms. Randall said the evaluation found four ongoing concerns in the administration of all Legacy funds: 1) ensuring that the use of Legacy money will achieve the outcomes intended by the Legacy Amendment; 2) complying with the constitutional requirement that Legacy money be used to supplement, not substitute, “traditional” sources of funding; 3) ensuring that conflict of interest concerns are adequately addressed; and 4) finding a workable approach to limiting the use of Legacy money for administrative expenses. The one recommendation to a state agency was to the Department of Management and Budget (MMB). OLA suggests that MMB provide guidance to state agencies on how to comply with restrictions on using Legacy money for administrative costs.

After some discussion, Representative Beard moved to the financial audit report of the Legacy funds, and welcomed Cecile Ferkul, Deputy Legislative Auditor. Ms. Ferkul explained that the scope of the audit was from July 1, 2009, through January 31, 2011, and focused on three of the four Legacy funds: Outdoor Heritage, Clean Water, and Parks and Trails. She explained that the financial areas audited focused on payroll expenditures, operating and administrative expenditures, land acquisitions and easements, and grants at three state agencies: Department of Natural Resources (DNR), Board of Water and Soil Resources (BWSR), and Minnesota Pollution Control Agency (MPCA). Ms. Ferkul said the audit found four key findings: 1) DNR, MPCA, and BWSR did not ensure that certain costs paid with money appropriated from Legacy funds complied with the restricted uses of those funds; 2) MPCA and BWSR made unauthorized advances of Legacy money to grantees without sufficient authorization; 3) DNR, MPCA, and BWSR paid some grantees for costs without ensuring that the costs complied with the restrictions applicable to the uses of Legacy funds; and 4) MPCA did not sufficiently monitor whether a grantee complied with statutory match requirements.

After several questions from members, Representative Beard called the representative from the Board of Water and Soil Resources to address the commission with comments. John Jaschke, Executive Director, BWSR, said that the issue of measuring water on a large scale is different than measuring it on a small scale. He said that BWSR agreed with all three findings that related to the agency and is implementing them. Representative Beard called John Pollard, Legislative and Communications Director from the Department of Management and Budget, to come forward to address the commission. Mr. Pollard said that MMB would provide guidance to state agencies on using Legacy money for administrative costs. Representative Beard welcomed Ted Landwehr, Commissioner, Department of Natural Resources, to address the commission. Mr. Landwehr thanked the work of the auditors and said that all of the recommendations would be fulfilled by January 2012. In response to Representative Hansen, Mr. Landwehr said that DNR is developing a long-range plan on how to implement what the outcome of the Legacy Amendment should look like at the end of the 25 years. Representative Beard called the representatives from the Minnesota Pollution Control Agency: Rebecca Flood, Assistant Commissioner, Water Policy; and Myrna Halbach, Assistant Director, Operational Support Division. Ms. Flood said that MPCA generally agreed with OLA findings and recommendations. In response to Representative Hansen, Ms. Flood said that work on groundwater was not being duplicated in terms of monitoring and assessment because the funds were needed to monitor the lakes and streams that had never been monitored before.

Representative Beard thanked OLA for their thoughtful and thorough work on both reports. Representative Hansen asked Mr. Nobles about the status of OLA in regards to the budget and staffing. Mr. Nobles explained that OLA was managing because the office had once again been permitted to use its carry forward money to conduct additional audits that had been added into statute. Representative Hansen also asked when the topic selection process would be, and Mr. Nobles explained it would begin early in the legislative session.

With no further business, the meeting was adjourned at 3:16 p.m.

Representative Michael Beard, Chair

Shelly Watterud, Recording Secretary


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