A routine financial-compliance audit of the Public Service Commission released this month flagged issues regarding commissioners’ compliance with state travel policy and raised concerns about the integrity and competence of certain PSC commissioners and staff.
The Legislative Audit Division’s report said auditors encountered situations “indicative of an unhealthy organizational culture and ineffective leadership” and uncovered actions taken by PSC staff grave enough to constitute “abuse,” which the report defines as “behavior that is deficient or improper when compared with behavior that prudent person would consider reasonable and necessary business practice.”
Auditors found instances where “certain 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 state business to book the most affordable airline seats available, and to generally select the most economical and efficient means of travel. Auditors question whether that policy was followed by commissioners. The audit highlights a $1,414 “comfort class” flight one commissioner took from Great Falls to Washington D.C. that was nearly $900 more expensive than a flight booked by another commissioner from Helena to Washington D.C.
According to the report, two commissioners failed to get another commissioner to sign off on their travel as directed by PSC policy in 13 instances. Those expenses amount to about $15,000. Auditors also found evidence of a commissioner seeking reimbursement for personal travel expenses like seat upgrades and beverages. Auditors found enough evidence of potential misuse of funds that they broadened the scope of their review to include all of the commissioners’ out-of-state travel, which totaled about $47,000.
The report also found that there were no receipts 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 course of the audit, one member of the PSC’s management staff attempted to provide auditors with falsified documentation to support a $185 charge incurred a year and a half prior, an act that auditors describe as 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 had management sign and back-date the missing receipt form. Management then asked another staffer to sign off on the missing receipt form, and that staffer alerted auditors to the issue.
Overall, the report found a lack of leadership and accountability for implementing internal controls at the PSC, and notes an appearance that “no one at the department is taking responsibility for compliance with procard, travel, inventory or accounting policies related to receivables, even for issues we have communicated in the past.” (A procard is a credit card used by state employees.)
“Collectively, the results of our audit procedures cause us to doubt the integrity and competence of certain members of management and the commission,” the report reads.
The report does not specify the names of individual commissioners or PSC staffers responsible for the noted issues. It covers the activity of the PSC and its staff during the 2019 and 2020 fiscal years, a period ending June 30, 2020. The makeup of the all-Republican commission during that 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 on the PSC during that period.
The report notes that new commissioners assumed an active role in the audit process and identified an opportunity for them to improve department culture and develop internal controls.
The PSC has been beset by a series of scandals in recent years stemming from interpersonal conflicts between individual commissioners and staff. One such conflict boiled over into a $2.5 million lawsuit brought against the PSC by Koopman. Concerns about such conflicts occasionally came up during the legislative session, with lawmakers questioning the PSC’s ability to fulfill its duties in the midst of such controversy.
The PSC is primarily funded by fees levied on the regulated utility companies it oversees. Those fees are based upon a percentage of the gross operating revenue of all activities that fall under the PSC’s purview. The Department of Revenue collects the fees, and the Legislature appropriates them. The 2021 Legislature approved a PSC budget of about $4.8 million per year.
The PSC supports 37.5 full-time equivalent positions, including the five commissioners. Commissions are elected to serve four-year terms. The position is among the highest-paying in state government, with commissioners earning a base salary of $109,000 in 2020.
The audit was sufficiently muddled by disregard for state policies and management override of controls that chief legislative auditor Angus Maciver wrote in the report that he can’t vouch for the accuracy of the PSC’s financial schedules or note disclosures for the past two fiscal years.
Per the Legislative Audit Committee’s rules, Maciver declined to discuss the findings of the report with Montana Free Press until the committee meets to discuss the audit on June 7. Twelve legislators serve on the committee, which is chaired by Rep. Denise Hayman, D- Bozeman.
This article was originally posted on ‘Situations indicative of an unhealthy organizational culture and ineffective leadership’