May 2, 2018 — The Minnesota Supreme Court recently upheld 2015 legislation that authorizes counties to exercise the option to have their audits performed by either the Office of the State Auditor (OSA) or a certified public accounting firm (CPA). The ruling follows three years of litigation that ultimately ends with counties remaining on the list of entities that are able to have their audit conducted by a CPA firm. Up until the 2015 legislation, the list included cities, townships, and school districts.
Pursuant to Minn. Stat. § 6.481, subd. 7 (https://www.revisor.mn.gov/statutes/?id=6.481), counties must notify the State Auditor by August 1 of even-numbered years in order to solicit and utilize the services of a certified public accounting (CPA) firm. Upon notice, the following calendar year will be the first year's records that will be subject to an audit by the new entity. The statute also indicates that upon notice (to change either to or from the services of the State Auditor), the county will be subject to two annual audits conducted by the new entity.
While notice is only required every two years (even-numbered years) when changing auditors, it has been recommended by some parties that counties should provide notice every year of their intent to remain with, or change, their auditor. This helps ensure the county builds a consistent notification process to avoid missing the declaration date while providing clear and consistent communication to the Office of the State Auditor.
While the statue does not outline the specific communication channel or process for declaring intent to change auditors, some counties are passing resolutions and submitting signed letters regarding the passing of the resolution—and their intent to solicit the services of a CPA firm.
If you have any questions about the Minnesota Supreme Court decision, next steps, or your specific audit needs, you can reach out to David Mol, Partner and Government Industry Team Leader.