“An unhealthy organizational culture and ineffective leadership”

A financial compliance routine public service commission audit published this month flagged issues regarding commissioners’ compliance with state travel policy and raised concerns about the integrity and competence of some PSC commissioners and staff.

The Legislative Audit Division report says auditors encountered situations “indicating an unhealthy organizational culture and ineffective leadership” and found actions taken by PSC staff serious enough to constitute “abuse,” which the report defines as “deficient or inappropriate behavior in relation to behavior that a prudent person would consider to be a reasonable and necessary business practice.

The auditors found instances where “some Commissioners [overrode] certain controls” — safeguards to ensure compliance with official policy and accounting practices — leading to a potential waste of state resources.

State policy requires officials traveling on government business to book the most affordable airline seats available and generally select the most economical and efficient mode of transportation. The auditors question whether this policy was followed by the commissioners. The audit highlights a $1,414 “comfort class” flight that a purser took from Great Falls to Washington D.C. that cost nearly $900 more than a flight booked by another purser from Helena to washington d.c.

According to the report, two commissioners failed to get another commissioner to approve their travel in accordance with PSC policy in 13 cases. These expenses amount to approximately $15,000. Auditors also found evidence of a purser requesting reimbursement for personal travel expenses such as seat upgrades and drinks. Auditors found enough evidence of possible embezzlement to broaden the scope of their review to include all out-of-state travel by commissioners, which totaled approximately $47,000.

The report also revealed that no receipt was attached to the purchase of two tablets, which the auditors describe as problematic because such documentation is necessary to determine whether the purchases were made for business or personal use.

During the audit, a senior PSC staff member attempted to provide auditors with falsified documentation supporting a $185 charge incurred a year and a half prior, an act the auditors say was abuse . According to the report, there was no receipt or missing receipt form attached to the charge, as required by state policy, so PSC staff asked management to sign. and backdate the missing receipt form. Management then asked another staff member to sign the missing receipt form, and that staff member alerted auditors to the issue.

Overall, the report found a lack of leadership and accountability for the implementation of internal controls at the PSC, and noted an appearance that “no one in the department takes responsibility for compliance with pro-card policies , travel, inventory or accounting related to accounts receivable, even for issues that we have communicated in the past. (A procard is a credit card used by government employees.)

“Collectively, the results of our audit procedures cause us to question the integrity and competence of certain members of management and the commission,” the report read.

The report does not identify the names of individual commissioners or PSC staff responsible for the issues noted. It covers the activity of the PSC and its staff during fiscal years 2019 and 2020, a period ending June 30, 2020. The all-Republican commission membership during this period included current commissioners Randy Pinocci, Tony O ‘Donnell and Brad Johnson. , as well as Bob Lake and Roger Koopman, whose terms ended last year. Recently elected commissions Jim Brown and Jennifer Fielder were not part of the PSC during this period.

“Collectively, the results of our audit procedures cause us to question the integrity and competence of certain members of management and the commission.

Legislative Control Division

The report notes that the new commissioners took an active role in the audit process and identified an opportunity for them to improve the department’s culture and develop internal controls.

The PSC has been plagued by a series of scandals in recent years stemming from interpersonal disputes between commissioners and staff. One of these conflicts turned into a $2.5 million lawsuit brought against the PSC by Koopman. Concerns about such conflicts have occasionally surfaced during the legislative session, with lawmakers questioning the PSC’s ability to perform its duties amid such controversy.

The PSC is primarily funded by fees levied on the regulated utilities it oversees. These fees are based on a percentage of the gross operating revenues of all activities under the jurisdiction of the PSC. The Department of Revenue collects the royalties and the legislature allocates them. The 2021 legislature approved a PSC budget of approximately $4.8 million per year.

The PSC supports 37.5 full-time equivalent positions, including the five commissioners. Commissions are elected for a four-year term. The position is among the highest paying in the state government, with Commissioners earning a base salary of $109,000 in 2020.

The audit was sufficiently confused by the disregard for state policies and management’s circumvention of controls that Chief Legislative Auditor Angus Maciver wrote in the report that he cannot guarantee the accuracy of the schedules. PSC financial statements or note disclosures for the past two fiscal years.

Per legislative audit committee rules, Maciver declined to discuss the report’s findings with the Montana Free Press until the committee meets to discuss audit June 7. Twelve lawmakers sit on the committee, which is chaired by Rep. Denise Hayman, D-Bozeman.

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