Dear Dunn Township Board of Supervisors

Office of the State Auditor
SUITE 500
525 PARK STREET
SAINT PAUL, MN 55103-2139

May 22, 2007

Dunn Township Board
P.O. Box 719
Pelican Rapids, Minnesota 56572

Dear Dunn Township Board of Supervisors,

The Office of the State Auditor received concerns about road construction contracting procedures used by Dunn Township ("Town"). Specifically, concerns were raised about the contracting procedures used by the Town in 2005 in connection with the paving of 470th Street -Boes Drive and Blyberg's Road.

Based upon our review, it appears that the Town did not follow proper contracting procedures when entering into these contracts. In addition, our review disclosed that the Town has not maintained proper records regarding these contracts.

We understand that the Town is considering at least one road construction project this summer.

We hope that the information contained in this letter will help the Town come into compliance with Minnesota law.

Town Information on the Road Projects

We requested information from the Town regarding two 2005 road projects, the paving of 470th Street -Boes Drive and Blyberg's Road. Specifically, we asked for copies of the bid advertisements, a summary of the bids received, and copies of the minutes where the sealed bids were opened and the contracts were awarded.

In response, we were provided with a document showing that the total invoice amount for the paving of 470th Street -Boes Drive was $68,426.15, and the total invoice amount for the paving of Blyberg's Road was $74,558.11. 1 We were also provided with four pages of Township Board meeting minutes.

The minutes for a May 11, 2005 meeting reflect that the Town received and accepted a petition for the paving of 470th Street and Boes Drive. That is all of the additional information that we received regarding this project. According to the minutes for a May 9, 2005 meeting, the Town's Chairman said he had obtained three "bids" for the Blyberg's Road project. However, the minutes do not mention advertising for the bids or a sealed bid opening.

We were informed that the information we were provided was all of the information that the Town was able to find concerning either of these projects. We were not provided with road construction contracts, evidence of published bid solicitations or a bid opening, or work completion certificates.

Competitive Bidding Requirements

Minnesota law requires townships to use certain procedures when entering into road construction contracts. 2 Competitive bids must be obtained if the estimated cost of the contract exceeds $50,000. For contracts estimated to cost between $10,000 and $50,000, the township may use the competitive bidding process or direct negotiations. However, if the city uses direct negotiations, the township must obtain at least two quotes, and keep the quotes on file for at least one year. For contracts estimated to cost less than $10,000, the township may either obtain at least two quotes (and keep them on file for at least one year) or purchase the goods/services in the open market. Contracts cannot be split in order to keep the dollar amount of the contract under the various threshold dollar amounts.

For road construction contracts estimated to exceed $50,000 in cost, the contract must not be let until the plans and specifications for the project are on file with the town clerk. 3 Bid solicitations for the project must be published once a week for two successive weeks, at least ten days prior to the meeting where the contract will be awarded. 4 Final payment on a road construction project for which sealed bids were required may not be made until a certification is filed with the town clerk, stating that the work was performed according to the contract. 5

It appears the estimated cost of each of the Town's 2005 road projects was over $50,000. As a result, the Town was required to use the competitive bidding process. We found no evidence that the competitive bidding process was used. Rather, from the limited information provided to us, it appears the Town Chair obtained three quotes for one of the projects, and the contractor with the lowest quote was then awarded both construction projects.

Document Retention

Minnesota law states that "[a]ll officers and agencies of ... towns. . . shall make and preserve all records necessary to a full and accurate knowledge of their official activities."6 The chief administrative officer is responsible for the preservation of the agency's government records, which include written or printed books, papers, letters, contracts, documents, computer-based data, and other records made or received pursuant to law or in connection with the transaction of public business. It is the town's duty to carefully protect and preserve government records from deterioration, mutilation, loss, or destruction. 7 The Minnesota Association of Townships recommends that towns maintain all contracting related documents for at least six years. 8

Under Minnesota law, the town clerk must keep in the clerk's office "a true record" of all town proceedings. 9 The town clerk must also record minutes of town meetings, and maintain on file all papers that are required by law to be filed in the clerk's office. 10

Based upon the Town's inability to provide us with the documentation requested, we find that the Town has not complied with its obligations for retaining records.

Recommendation

We recommend that the Town comply with Minnesota contracting law when awarding road construction projects. We recommend that the Town seek assistance from the Minnesota Association of Townships, the Town's attorney, or some other resource, prior to awarding additional road construction projects.

We also recommend that the Town comply with Minnesota's laws regarding the retention of Town records. We recommend that Town meeting minutes be signed by the preparer, and then by a designated Town Board member once they have been adopted by the Town Board as the Town's meeting minutes.

Conclusion

As required by Minn. Stat. § 6.51, a copy of this letter is being provided to the Town Clerk and the Otter Tail County Auditor. Because our review disclosed malfeasance, misfeasance, or nonfeasance in office, we are also filing a copy of this letter with the Otter Tail County Attorney, in compliance with Minn. Stat. § 6.51.

We hope that the information provided in this letter will help Dunn Township come into compliance with Minnesota law. If you have any questions about this letter or our review, please feel free to contact me at 651-297-5853.

Sincerely,
Nancy J. Bode
Assistant Legal Counsel

Enclosures
cc. Ms. Judy Sumpter, Town Clerk
The Honorable Wayne Stein, Otter Tail County Auditor (w/o enclosures)
The Honorable David Hauser, Otter Tail County Attorney (w/o enclosures)

1 It appears that the total for the two projects ($142,984.26) was later reduced by $20,000, for a total of $122,984.26.
2 See Minn. Stat. §§ 160.17 and 471.345 (copies enclosed).
3 See Minn. Stat. § 160.17, subd. 1.
4 See Minn. Stat. § 160.17, subd. 2.
5 For additional guidance on contracting procedures, we recommend that the Town review information contained on the Minnesota Association of Townships' (MAT) website, http://www.mntownships.org. MAT has numerous materials describing proper road contracting procedures. For example, Chapter 8 of MAT's 2007 Manual on Town Government reviews contracting law (copy enclosed). Pages 85 -86 of Chapter 14 of the same Manual review contracting procedures for road construction projects. In addition to MAT's Manual on Town Government, MAT has numerous informational documents that will assist the Town in complying with Minnesota contracting law. These documents include: Contracting Issues and Reminders - Work Completion Certificate for Town Road Projects - Contracts and RFP -Lowest Responsible Bidder Requirement. Each of these documents is available on MAT's website. However, we have enclosed copies of each document for your review. If the Town uses special assessments, MAT has a document on its website entitled Special Assessments: Procedures and Financing that the Town may find helpful.
6 See Minn. Stat. § 15.17, subd. 1 (copy enclosed).
7 Minn. Stat. § 15.17, subds. 1 and 2.
8 MAT's Contracting Issues and Reminders, at page 9.
9 See Minn. Stat. § 367.11 (copy enclosed).
10 Id.