Office of the Legislative Auditor - Financial Audit Division

Report Summary
Minnesota State Arts Board
Arts and Cultural Heritage Fund Grant Expenditures

 

Financial Audit Division Report 15-14

Released November 20, 2015

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The Office of the Legislative Auditor conducted this audit to determine whether the Minnesota State Arts Board had adequate internal controls over its grant programs and complied with applicable legal requirements when spending money from the Arts and Cultural Heritage Fund. We audited the board’s expenditures from the Arts and Cultural Heritage Fund from July 1, 2012, through February 28, 2015.

The Arts and Cultural Heritage Fund is one of the four funds created when voters approved the “Legacy Amendment” to the Minnesota Constitution in 2008. The amendment increased the state’s sales tax by three-eighths of 1 percent for 25 years and dedicated 19.75 percent of the additional revenue to the Arts and Cultural Heritage Fund.

For fiscal years 2013, 2014, and 2015, the Legislature appropriated approximately $77.4 million from the Arts and Cultural Heritage Fund to the Minnesota State Arts Board. As of February 28, 2015, the board had spent over $71 million from these appropriations.

Conclusion

For its competitive grants, the Minnesota State Arts Board had generally adequate internal controls and generally complied with applicable legal requirements. However, the board did not follow up on concerns it had about two competitive grant recipients. In addition, the board had several internal control weaknesses in the way it administered noncompetitive grants it was required by law to make to regional arts councils.

For the nongrant Arts and Cultural Heritage Fund expenditures we tested, the board generally complied with applicable legal requirements. However, the board may not have complied with the requirement that money from the Arts and Cultural Heritage Fund not be used to pay for costs traditionally paid for with other revenue sources.

The board partially resolved a prior audit finding related to monitoring grant recipients. ¹

Audit Findings

• The Minnesota State Arts Board did not establish adequate internal controls to ensure that regional arts councils used $22 million in grants from the Arts and Cultural Heritage Fund in compliance with legal requirements. This is a repeat finding.
• The Minnesota State Arts Board used money from the Arts and Cultural Heritage Fund for administrative expenditures that it traditionally paid for with money from other funding sources. We believe this does not comply with the Legacy Amendment’s requirement that Legacy money must not be used to substitute for traditional sources of funding.
• The Minnesota State Arts Board did not challenge two grant recipients when it questioned whether costs met grant requirements. Despite the board identifying these questionable costs, it made an additional payment to one of these grant recipients.

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¹ Office of the Legislative Auditor, Financial Audit Division Report 12-19, Minnesota State Arts Board, Finding 1 (St. Paul, MN, September 20, 2012).