Audits raise red flags on Legacy programs

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Programs funded through the state’s Legacy Amendment need better documentation and closer financial oversight.

Those are among the conclusions of a pair of reports from the Office of the Legislative Auditor. The Legislative Audit Commission heard testimony from Legislative Auditor Jim Nobles and his staff on the reports’ findings. No action was taken.

In 2008, Minnesota voters approved a constitutional amendment to raise the sales tax by three-eighths of 1 percent and dedicate the money to environmental and cultural programs. The amendment is projected to generate between $240 million and $300 million annually for the next 25 years, to be distributed among four separate funds.

The first report, a high-level overview of the program, identifies several “ongoing concerns” with regard to Legacy money. Among them is the basic issue of how it can constitutionally be spent: the amendment states that the funds must be used to “supplement” and not “substitute” existing funding streams, but Nobles said there’s no clear standard as to what that language means.

“From the very beginning, legislators had differing opinions on what the language meant,” he said, adding, “We cannot discern, from the language or the history, an enforceable standard.”

Other issues identified in the report include:

  • uncertainty as to whether Legacy programs can achieve their desired outcomes, and whether the outcomes can be adequately measured;
  • lack of clear policies among state agencies regarding reimbursement of administrative costs; and
  • apparent or potential conflicts of interest with regard to the advisory councils who hold sway over which programs get funded.

Rep. Steve Simon (DFL-St. Louis Park) said he thought the conflict-of-interest issue is “not well founded” because the Legislature doesn’t have to abide by the advisory council’s recommendations on how to spend money.

“In the end, we don’t have to do what they say,” Simon said.

The second report is a financial audit of three of the four legacy funds. Deputy Legislative Auditor Cecile Ferkul said the report is overall positive, but that several “internal control weaknesses” and “instances of noncompliance” were found at three agencies: the Department of Natural Resources, the Pollution Control Agency and the Board of Water and Soil Resources.

Specifically, the report finds that all three agencies did not ensure that certain costs paid with Legacy money “complied with the restricted use of those funds.” It further states that the PCA and BWSR made “unauthorized advances of Legacy money to grantees.”

Responding to the report, BWSR Executive Director John Jaschke said he agreed with the report’s findings.

“We’re agreeing with all of them and implementing them already in most cases,” he said.

Overall, Nobles said many of the challenges identified in the reports are likely to remain ongoing.

“It’s a lot of money,” he said. “We are going to have to show results — measurable results.”