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FOR
IMMEDIATE RELEASE
August 15, 2006
Rebecca Otto finds another $201 million
in State Auditor errors
Some mistakes have "partisan overtone"
Errors latest in a series Otto has discovered
SAINT PAUL – State Auditor
Patricia Anderson’s report on Minnesota Special District Finances,
released August 8, contains more accounting errors, says Rebecca Otto,
the DFL Party-endorsed candidate for the job. “She keeps putting out
reports, and I keep finding accounting errors,” says Otto.
Otto says she has not found errors in reports put out by prior State
Auditors of either party, including Judi Dutcher, Mark Dayton, or Arne
Carlson. “Anderson’s press release says more accountability is needed
for Minnesota’s ‘Hidden Government,’” said Otto. “Under my leadership,
there will be more accountability in the State Auditor’s office.
Minnesotans need to be able to rely on the numbers coming out of that
office.”
Otto says the report, which details the revenues and spending of 520
special purpose districts such as housing and redevelopment authorities,
airport commissions, transit authorities, hospital districts, and
others, contains “numerous accounting errors” that range from
inconsistencies between the working data and the Auditor’s published
report, to what appear to be misrepresentations of numbers for partisan
political purposes.
The inconsistencies include a $180 million understatement of
non-operating revenues from enterprise operations such as hospitals and
electric agencies. The Auditor’s report states non-operating revenue for
enterprise districts was $389 million, however when non-operating
revenue raw data is added up the total is actually $569,245,020. “Under
my leadership, we’ll make sure the numbers will actually add up,” said
Otto.
An error that Otto says “doesn’t pass the smell test” for impartiality
is the State Auditor’s singling out of the Metropolitan Council Bus
Transit enterprise’s operating losses. “The State Auditor highlights the
enterprise in her report and her press release, reporting that the
operating loss of roughly $165 million ‘is equal to about 46 percent of
the total operating losses for all special district enterprises,’” but
Otto says that number is “actually only 36%.”
“The State Auditor’s figure for ‘total operating losses’ actually mixes
in almost $100 million in operating gains. Total operating losses and
net operating loss are not the same thing and they’re $100 million
apart. When you calculate the percentage correctly, the Met Council Bus
Transit was 35.94% of the total operating losses, not 46%. Considering
that the Taxpayer’s League is a known opponent of Transit initiatives,
and she is a signer of their pledge, one has to wonder.”
Partisan or not, Otto says the error is just one of “literally dozens”
in the report that add up to hundreds of millions of dollars. For
example, Otto discovered a variance of $19,805,370 between total
revenues in the State Auditor’s published report, and total revenues in
the actual data tables. “The list goes on. I’ve detailed them all in a
correction to the State Auditor’s data tables that I’ve published on my
web site.” All told, the errors add up to $201,627,116, said Otto. “The
size is substantial, but even if it was only $201, it’s the State
Auditor’s job to catch errors, not make them. Under my leadership we’ll
put into place some more quality control, so legislators will have
accurate numbers when making important spending decisions.”
A HISTORY OF ERRORS
The Auditor errors are not the first Otto has discovered. In April she
found $12 million in missing school revenue for the Department of
Education, and later that month she discovered dozens of accounting
errors in a State Auditor report on Minnesota counties.
Additionally, Otto points to the theft of three laptops in June from the
State Auditor’s office, deemed an inside job. The laptops contained
sensitive personal identity information and were not encrypted, even
though a similar theft had happened just one month earlier. “You could
say that’s just bad luck – if the same thing hadn’t happened a month
before,” said Otto. “It’s the pattern of not addressing these problems
or taking responsibility that concerns me. It’s not prudent management.”
PARTISAN LANGUAGE
Otto, who has called the current Auditor “partisan and punitive,” said
she is also concerned by what she says is a pattern of “unnecessarily
partisan and inflammatory language designed to alarm rather than inform”
readers. “For example, in this report, the State Auditor says special
districts function similarly to private businesses and taxes were used
to ‘cover losses’ of many of these operations. This shows a clear
misunderstanding of their purpose,” said Otto. “Unlike for-profit
enterprises, many if not most public enterprises were never intended to
generate net income from operations. You don’t expect to make money from
running a watershed district. Otherwise, for-profit companies would
likely be providing the service already. Generally public enterprises
are instead designed to fulfill a public need that is unmet exactly
because it is not profitable, but is still a necessary public service,
like sewage treatment, or a rural hospital. Rather than fully subsidize
it, the enterprise responsibly asks users to pay a fee to help offset
some of the cost of operation. The balance is sought from federal, state
or local grants, property taxes, and other sources of revenue. These
sources are not sought to ‘cover losses’ as claimed by the inflammatory
language of the State Auditor, but to complete the revenue pie of an
enterprise not designed to generate profits, but to provide a public
service. We need sewage treatment, and we need rural hospitals, whether
or not they make money from operations.”
A copy of the correct data tables detailing the errors can be found at
http://www.rebeccaotto.com/downloads/specialdistrict_04_tables_CORRECTED.xls
The State Auditor’s report is archived at
http://www.rebeccaotto.com/downloads/specialdistrict_04_report.pdf
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