Credit: Eliza Wiley/MTFP

The Legislative Audit Committee delivered a blistering critique of the Public Service Commission during its review of a routine agency audit, which highlighted concerns about the competence of individual commissioners and staffers and outlined expenditures that point to a potential waste of state resources.

During a Monday afternoon hearing, the committee focused its remarks on leadership and culture at the PSC, actions that have been taken to correct abuses of official travel policies, fallout from an attempt to falsify documents, and an explanation of what it means to “disclaim” an audit.

The PSC has fielded sharp criticism since the Legislative Audit Division released the report, which arrived on the heels of a multi-year stretch of conflicts that have led lawmakers to question the agency’s efficacy and ability to perform its mission. GOP Senate Communications Director Kyle Schmauch issued a post-hearing statement highlighting some of the sharpest words lawmakers directed at the agency, including Sen. Tom McGillvray asking whether it would be appropriate for any of the commissioners to resign, and Sen. John Esp’s characterization of an attempt to falsify documents as “despicable behavior.”

Current PSC Chairman James Brown — who did not serve on the commission during the fiscal years examined in the audit — initially balked during the hearing at sharing the identity of the commissioner responsible for booking a $1,400 first-class airline ticket to Washington, D.C., but later told committee members to direct questions about that particular transaction to PSC Vice Chair Brad Johnson, who has served on the commission since 2015.

Earlier in the meeting, Brown told the audit committee that he’d asked Johnson to surrender his government credit card due to his failure to comply with a PSC policy directing commissioners to submit travel plans to a designated staff member before purchasing plane tickets. Johnson complied, he said. 

Johnson was the only current commissioner who wasn’t present in person or virtually for the hearing. (The audit covered fiscal years 2019 and 2020, during which Roger Koopman and Bob Lake served on the commission. Neither of them appear to have been present at the meeting.) 

“The most serious issues identified by the auditors reflect a lack of understanding and appreciation for the importance of internal controls and accounting practices of a few senior management members. Those lapses are intolerable, and the Commission has initiated disciplinary action and training where warranted.”

Public Service Commission Chair James Brown

Before being elected to the PSC in 2014, Johnson spent a four-year term (2005-2009) as Montana’s secretary of state. Shortly after the Census Bureau announced that Montana’s population had grown enough to garner a second representative in the U.S. House of Representatives, Johnson told NBC Montana he is considering a run for that seat, depending on how the districts are drawn. 

In reference to the document falsification, which involved an attempt to back-date a missing receipt form for an expense lacking required documentation, Brown said there’s no excuse for such dishonest conduct in personal or professional life and said he’d accepted the resignation of the responsible employee, Mandi Hinman, who was the administrator of the agency’s Centralized Services Division.

The Legislative Audit Division spent some time explaining to committee members what it means to “disclaim” an audit: essentially an acknowledgment that auditors feel uncomfortable vouching for the accuracy of the agency’s books. The attempted document falsification factored into the decision to disclaim, the division’s top auditor told the committee.

“If you’re struggling with the idea of why disclaim in this particular circumstance, that as much as anything — the accumulation of different findings and the repeated cycles that we’ve seen in this agency — is really what pushed us over the edge,” Legislative Auditor and Division Director Angus Maciver said. 

Deputy Legislative Auditor Cindy Jorgenson said auditors had to go back quite a ways to find similar situations that led the division to disclaim an audit. She noted that auditors disclaimed the 1989 and 1992 audits of the resident trust accounts administered by the Department of Family Services, as well as a 2013 audit of the state’s Beef Checkoff program, which is under the Department of Livestock. It’s a “very rare circumstance,” she said.

Brown spent much of the latter half of the two-hour hearing outlining his and fellow freshman commissioner Jennifer Fielder’s efforts to set the agency on a new course and assuring legislators that the agency’s lack of compliance with internal controls didn’t hamper its ability to perform its mission. 

“As the auditors determined, the Commission clearly has work to do,” Brown said in a statement about the audit. “The most serious issues identified by the auditors reflect a lack of understanding and appreciation for the importance of internal controls and accounting practices of a few senior management members. Those lapses are intolerable, and the Commission has initiated disciplinary action and training where warranted.”

Brown noted that other changes are in the works, including the creation of an executive director position and the recent hiring of a certified public accountant. He said these and other changes would help address concerns about the agency’s “tone and tenor at the top” and put the PSC on a “glide path to success.” He also acknowledged the importance of individual commissioners complying with policies already in place and taking personal responsibility for their actions.

Fielder said she’s been working 12-16 hour days six days a week to work on a strategic plan and otherwise assist with efforts to get the agency on track. She said she spent six straight weeks in Helena — she lives in Thompson Falls — to have more direct contact with commissioners and staff.

Brown made a point during the hearing of thanking PSC staff for their hard work and acknowledging the disappointment of finding the agency mired in the current controversy. At one point he choked up while acknowledging the hard work of PSC staffers, whom he said he’d approached individually to apologize for the situation.

Though lawmakers praised Brown for his willingness to face the issues that surfaced in the course of the audit and thanked him for his compliance, they indicated that they may take the audit report into consideration during the 2023 Legislature when it comes time to set a new budget for the PSC. 

Sen. Esp suggested that the subcommittee responsible for setting the PSC’s budget might “look at it closely when it comes to the purse strings next session.”

Brown agreed to return before the committee in October to report on the agency’s retraining efforts and changes to policies and staffing structure. The committee delayed acceptance of the audit until a later date. 

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Billings native Amanda Eggert covers environmental issues for MTFP. Amanda is a graduate of the University of Montana School of Journalism who has written for Outside magazine and Outlaw Partners. At Outlaw Partners she led coverage for the biweekly newspaper Explore Big Sky. Contact Amanda at aeggert@montanafreepress.org.