New Missouri law expands state auditor’s powers to dig into local governments

By Rudi Keller

Missouri Independent

On July 23, State Auditor Scott Fitzpatrick released an audit detailing how a former mayor of Excelsior Estates improperly paid himself more than $37,000 and funneled more than $200,000 to a business he owned.

During the course of their work, auditors found that the records for the village of 209 people on the border of Ray and Clay counties were in “total disarray with missing financial records (and) other vital city records stored in a makeshift camper trailer made from the bed of a pickup truck…”

The audit was conducted at the invitation of the village Board of Aldermen after an investigation of a whistleblower complaint showed possible wrongdoing. Without the board’s consent, the auditor wouldn’t have had the authority to conduct the probe.

But not every local governing body is so cooperative. And as of Wednesday, when a new law took effect, Fitzpatrick’s office will have the power to initiate audits of local agencies when an initial investigation shows “improper government activity” — including fraud, waste of resources or violations of law — or when a county prosecutor or law enforcement agency requests it.

Missouri lawmakers gave the auditor’s office power to investigate reports of improper actions by local government officials in 2013 but withheld the authority to force those officials to open their accounts for a full-scale audit. The only way for the auditor to follow up on the investigation was to convince the governing body of the political subdivision to request an audit, like in Excelsior Estates, or for a resident to gather enough signatures on a petition to force an audit.

The new law eliminates those restrictions.

“This is not designed to give us unfettered access to auditing any political subdivision for any reason,” Fitzpatrick said. “It was to make things easier for taxpayers. If they’ve made a credible whistleblower complaint to us that there’s a problem somewhere that we investigate, that we could then initiate the audit instead of forcing somebody to have to go gather a bunch of signatures.”

The bill, passed unanimously in the second year it was introduced, originated with concerns about cost overruns at the new Francis Howell School District high school in St. Charles County, said the sponsor, Republican state Rep. Phil Christofanelli of St. Peters.

A school district was the only local government entity that the state auditor had discretion to audit, he said. The auditor’s office is legally obligated to audit every county without a county auditor.

If the cost overruns had been at a municipal construction project, Christofanelli said, only the willingness of the governing board or the determination of citizens to complete a petition drive could bring the auditor in.

For a small community like Excelsior Estates, the petition would have to include signatures from 25% of the city’s registered voters. For a city the size of St. Peters, the requirement would be 10% of the votes cast for governor in the most recent election, with a minimum of 750 signatures.

“The idea of doing something like this in a city like St Peters, for instance, is completely impractical, and you’d have to have a remarkable campaign put together to do it properly,” Christofanelli said.

During work on the bill, he said, he was told that up to 90% of petition audit attempts are unsuccessful.

The state auditor’s office will be taking on the new powers at a time when Fitzpatrick is trying to rebuild his staff, which had shrunk to 89 full-time employees – out of 167 authorized in the budget – when he took office.

Fitzpatrick was elected auditor in 2022 after four years as state treasurer and six years in the Missouri House, where he was chairman of the House Budget Committee.

In recent years, the audit output of the office, especially detailed audits of state agencies and programs, has declined significantly.

During the first eight months of 2004, the office issued 27 audits and reviews of state agencies and programs ranging from elected official offices to tax credit programs and agency operations in determining Medicaid eligibility and the acquisition of highway right-of-way. In the same period of 2014, the number of state agency audits and reviews was 10.

This year, through Wednesday, the total was three – the operations of the attorney general and secretary of state’s offices and how the Missouri State Highway Patrol uses highway fund money.

The two factors limiting the number of individual agency and program audits are time devoted to the annual audits of the state financial report and the federal funding awards. Work that once took 18,000 to 20,000 staff hours in a year is now approaching 50,000, Fitzpatrick said.

That workload, combined with the staffing shortages, has reduced the number of individual agency and program audits. There are 10 agency or program audits in process, including the Department of Conservation, pandemic food programs and the cannabis programs within the Department of Health and Senior Services.

“It’s a huge report,” Fitzpatrick said of the cannabis program audit. “It’s going to be, in terms of the number of staff hours, what will probably be the largest performance audit that’s been done in the auditor’s office in recent history.”

The cannabis program audit should be released early next year, he said.

The routine work of the auditor’s office includes checking tens of thousands of local property tax rates against the legal maximums, receiving and publishing reports of spending by local taxing agencies and auditing counties that do not have an elected auditor.

To help rebuild staff, lawmakers have added $4.2 million to the auditor’s budget over the past two years, increasing it to $13.5 million. That increase, he said, recognizes that the pay raises given by his predecessor, Democrat Nicole Gallaway, to retain staff is the salary level needed to attract new talent as well.

“They were adjusting the salaries to try to be more competitive, which needed to happen,” he said.

The new authority should not interfere with the statutory responsibilities of the office, Christofanelli said.

“Just because we give the auditor the power to initiate new investigations does not necessarily mean that if there are other matters that are not discretionary, that he would have to pursue those audits,” he said. “It just provides him the authority to do it, should the need arise.”