With a “comfort class” ticket and “falsified” receipt among the abuses, the Montana Public Service Commission needs to shore up its financial controls and its culture, according to a legislative audit from June 2018 to June 2020 —recommendations with which PSC Chairman James Brown agrees.

“We had concerns about the integrity and competence of certain management personnel, due to an attempt to provide us with falsified documentation, potential waste of state resources, and disregard of state and internal policies, including management override of controls,” said Angus Maciver, legislative auditor, in a letter introducing the findings released earlier this month. “As a result, we were unable to obtain reliable management representations regarding financial activities and compliance to support our audit work.”

Brown, who took office after the audit period, declined to sign off on the report. In a written response to the audit, however, he noted the agency started addressing issues even prior to the release of the audit.

On June 7 and 8, the Legislative Audit Committee will hold a public meeting to review financial compliance. The Public Service Commission, whose members regulate monopoly utilities in the state, is on the agenda.

The abuses included a $1,414 “comfort class” ticket to Washington, D.C., (another commissioner paid just $515 for the same trip, albeit one flew from Great Falls and one from Helena); a backdated $185 receipt, although Brown advised a staff member not to approve it; expenses for which a business need wasn’t obvious; and costs without receipts such as a hotel stay, the report said.

The audit tested 26 transactions worth $17,000 and then expanded testing to include all commissioners’ out-of-state travel totaling $47,000 based on initial concerns.

“State policies change often and can be complex, but we believe the widespread noncompliance with state policy described above points to a significant deficiency in internal controls as described … because it indicates no one at the department is taking responsibility for compliance with procard (state credit card), travel, inventory, or accounting policies related to receivables, even for issues we have communicated in the past,” the audit said.

The agency also had some $100,000 of revenue and expenses “understated” in 2019, the report said. And it was improperly hiring legal services without soliciting bids from three sources, required for purchases over $5,000. The audit noted one purchase was for appeals related to utility activity.

“The department paid $85,000 in fiscal year 2019 and $109,708 in fiscal year 2020,” the report said in its discussion about the procurement of legal services. “In fiscal year 2021, the department paid $8,235 for an internal investigation.”

The audit also noted the regulatory agency failed to implement three out of six recommendations from previous audits, although the PSC did address two items, and one is no longer of concern.

Current recommendations include that the PSC improve its culture; develop and implement internal controls to comply with state policies; document internal controls to ensure completeness and accuracy of rates charged and collected on the department’s behalf (recommended twice already, according to Brown); and ensure accurate accounting records.

In his response to the audit included with the report, Brown said the PSC agrees with all of the audit’s recommendations, and the agency already has been making headway on culture and financial controls. Brown and Fielder took office in January, and he said the two incoming commissioners instituted strategic planning efforts when they took office “to improve operations, performance, culture and reputation” of the PSC.

The PSC also is hiring a CPA, converting an open communications job into an executive director position for agency oversight, and better monitoring its current policies and procedures such as those for travel, according to the agency response. (“In fact, the chairman requested that the lone commissioner who had a procard turn in the procard and utilize the proper travel process moving forward.”)

In addition to agreeing with the recommendations in the current audit, Brown also said the failure of the previous Commission to address an earlier recommendation for internal controls related to disclosures is “of great disappointment” to the current body.

“This recommendation was not carried out, thereby resulting in great confusion to the current chairman and to the current acting chief legal counsel during the current auditing process, as well as in fomenting a choppy audit process,” said the PSC’s response.

In addition to Brown, the current commissioners are vice chair Brad Johnson, Randy Pinocci, Jennifer Fielder, and Tony O’Donnell. In January 2021, Brown and Fielder replaced Commissioners Roger Koopman and Bob Lake, who were seated during the audit period. The Billings Gazette noted the commissioners are paid an annual salary of $109,000.

The response from the PSC included with the audit notes next steps the agency itself is taking.

A staff attorney for the Public Service Commission said the Legislative Audit Committee directs the agency to refrain from commenting prior to the public hearing. And Legislative Auditor Maciver said both sides will present to the Legislative Audit Committee at the upcoming meeting.