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Josh Gallion

Audit finds North Dakota PSC let bonding lapse, creating risk amid potential employee theft

BISMARCK — A state audit released Monday, Oct. 14, found that the Public Service Commission had a 17-month bonding lapse, which put the agency at risk if an employee were to have stolen from the commission during that time.

The state auditor’s office isn’t aware of any unlawful activity that occurred during the gap in bond coverage from January 2018 through May 2019. The issue was discovered by the office earlier this year during the course of a routine audit, which found no other problems in its review of the PSC, which regulates such things as utilities, telecommunications, railroads and oil pipelines.

State law requires agencies to maintain a blanket bond that essentially acts as insurance, should an employee embezzle or commit theft, while the legal case against the worker makes its way through the court system, State Auditor Josh Gallion said. The North Dakota Insurance Reserve Fund administers state agencies’ bonds, while the state insurance department maintains control over the funds.

Gallion said he believes an email about renewing the PSC bond came to him, as he previously worked for the PSC as its chief finance officer and was involved in making sure the commission complied with state bonding requirements.

“I thought I forwarded it to them, but clearly it’s something that fell through the cracks,” he said. “It’s one of those unfortunate things. We had the wrong point of contact.”

Audit Supervisor Kristi Morlock said the auditor’s office notified the PSC of the lapse when it discovered the problem, and the commission is now in compliance.

PSC Chairman Brian Kroshus said the commission doesn’t recall receiving a renewal notice, but it corrected the issue upon learning of the lapse and has taken steps to make sure the right people are notified when the bond comes up for renewal again.

In its official response included in the audit report, the PSC said it now lists a group email as the contact for bond-related notices, which will notify multiple individuals in the future.