BISMARCK, ND — Government records for the North Dakota Development Fund were quietly altered to remove references to a performance audit that found missing or incomplete documentation for millions of dollars in transactions. The deleted language involved board discussions of Eide Bailly’s draft findings, according to archived copies of May and June meeting minutes reviewed by the Tribune.
The changes came after the minutes had already been approved by the board. A Commerce Department spokeswoman said the references were redacted after officials were told the board should not have discussed a pending audit in open session.
How the meeting minutes changed after approval
Archived versions of the minutes on Publicnow.com show that the original May and June documents included details about the board’s discussion of the draft audit. Those references are no longer visible in the publicly posted versions.
The Tribune compared the archived records with the current minutes and found no board action authorizing the edits. The Commerce Department did not answer questions about who made the changes or when they were made.
The North Dakota Development Fund, or NDDF, is a state-administered financing program under the Commerce Department. It provides loans and equity investments to help new or expanding businesses in North Dakota.
Open-records lawyer says the edits could be serious
Jack McDonald, a longtime media attorney and open-records law expert, said changing approved minutes without a board vote would likely violate state law. He said approved minutes are the official government record of a board’s actions.
North Dakota Century Code 12.1-11-05 says a person commits an offense if they knowingly, without lawful authority, destroy, conceal, remove or otherwise impair the verity or availability of a government record. McDonald said that kind of edit is not a minor matter when it involves the only official record of what the board did.
He noted that the law treats the offense as a Class C felony for a public servant with custody of the record, or a Class A misdemeanor for someone else. Those penalties can include prison time and fines.
What the deleted passages said about the draft audit
The removed material focused on the board’s reactions to Eide Bailly’s draft findings. In the original May minutes, NDDF CEO Brian Opp discussed the audit’s concerns about a lack of formal policies and procedures, as well as charge-offs, which are losses written off by the fund.
Those minutes also recorded concern from board members about how the findings would be received publicly. Board President Jim Albrecht said the auditors’ wording would affect how audiences understood the report and that the message needed to be clear.
Opp also said the findings needed a stronger distinction between current staff and prior staff, according to the original minutes. In June, a board member asked about changes to the section dealing with the time it took to process applications, and Opp said the audit team made favorable adjustments to address applicant responsiveness.
What remained in the public version of the minutes
Even after the edits, some references to the draft audit stayed in the meeting minutes. The May minutes still say NDDF staff planned to give feedback on the draft audit by May 15 and submit a redline, meaning a draft with proposed edits, to Eide Bailly.
June minutes also show senior analyst Samantha Mattson telling the board that Eide Bailly had accepted most of the NDDF’s suggestions. She said the changes put the audit “in a much better place than where they started,” though the minutes do not make clear whether she was referring to Eide Bailly’s draft or the NDDF’s position.
The Tribune has requested the redline the NDDF sent to Eide Bailly to see what changes the fund proposed.
Audit found major documentation gaps across loans and investments
Eide Bailly’s Sept. 4 performance audit found widespread problems in the fund’s recordkeeping and internal controls. It said the NDDF relied on informal practices rather than written policy when it came to lending, investing and monitoring taxpayer money.
Among the findings, the audit said 16 of 40 reviewed applications, representing $6.1 million, did not have documentation showing how long the applications took to process. It also said 40% of loans and investments approved during the five-year audited period carried the highest risk rating, which requires the fund to reserve an amount equal to the full value of the loan or investment.
The audit also cited missing or incomplete documentation for more than two dozen loans and equity investments. In 11 cases, worth about $4.4 million, records did not show that required board review or approval had actually happened.
State auditor says pending audits are confidential
North Dakota State Auditor Josh Gallion said officials are not allowed to discuss a pending audit in an open public meeting. He said his office found the references to the audit in the board minutes in late July and then notified the Commerce Department.
Gallion pointed to state law governing the auditor’s working papers, which says a preliminary audit report is confidential and can be shared only by the Legislative Audit and Fiscal Review Committee. He said that while the audit is ongoing, his office does not discuss its contents.
Commerce Department spokeswoman Kim Schmidt said the board was unaware of the procedural requirement when the May meeting was held, which is why the reference appeared in the public minutes. She said no one from the department or the NDDF was available for an interview about the audit findings.
Gallion also said the fund’s recordkeeping was unusually weak. In one area, he said Eide Bailly had suggested to him that the NDDF’s documentation problems were among the worst it had seen for a program like this.