Board of criticized North Dakota business financing program plans meeting to address audit

Officials overseeing a state-backed business financing program that drew critical audit findings and a sharp response from lawmakers plan to meet in coming weeks to address the situation.

The North Dakota Development Fund Board met Thursday in a special meeting by videoconference, two days after the Legislature’s audit committee voted to recommend the full Legislature shut down the program and to refer the audit findings to the attorney general for investigation.

Audit findings included a lack of documentation for millions of dollars in transactions, unverified job data reported by borrowers and inconsistent conflict of interest procedures. Commerce Commissioner Chris Schilken told lawmakers improvements are underway or complete and emphasized the problems predate his and Gov. Kelly Armstrong’s tenures. Sen. Jeff Magrum, R-Hazelton, who chairs the audit panel, called the findings a disaster and said nothing has changed.

Fund Executive Director Brian Opp announced a planned “strategic session, in-person meeting” in upcoming weeks for the fund’s board of directors to address the audit findings in depth, “where we’ve been, where we are and where we’re going with those items.” 

It’s unclear when that meeting will occur. Fund staff will schedule it to align with board members’ availability, Board President Jim Albrecht told the North Dakota Monitor. Parts of that meeting will be public and other portions might be closed in an executive session, he said.

The board’s next monthly meeting is scheduled for Oct. 8 by videoconference. 

Opp also complimented the board and staff on “the work that has been done in the past couple of years,” specifically the improved collection and retention of conflict of interest forms, improvement of the form itself and a policy prohibiting “related-party loans.” 

The 2019-2024 performance audit found nearly $4 million in funding for five organizations that had relationships with one or two fund board members.

“Today the Development Fund has no related-party transactions, loans or investments,” Opp said.

Lawmakers seek AG probe after audit finds problems with North Dakota business financing program

Board Member Lyndsay Ulrickson said she looks forward to the future discussion and added it will be important to share with the public how the board has made improvements, such as the fund’s partnership with the state-owned Bank of North Dakota for the bank’s expertise. 

From there, the board moved into an executive session and closed the meeting for about one hour and 45 minutes. Reporters were moved into a virtual waiting room just as board member Joel Brown asked whether the board should make a motion to enter the executive session.

To enter an executive session and close a meeting, a board must first meet openly, then cite the legal authority for closing the meeting and what topics will be considered during the closed session, according to an attorney general webpage on closed meetings and executive sessions.

Some reporters were removed from the meeting during the board’s discussion of the executive session motion. It’s unclear what topics the board discussed. Albrecht called the matter “a simple timing thing” he said was a mistake on his part to not have the sequence in order. 

Later, the board returned to a public meeting and took three votes on items related to businesses. Those matters were not listed on the board’s agenda posted to the Secretary of State’s website. The public portions of the meeting lasted about 18 minutes.

The board president told the Monitor the Development Fund has provided value to the state, but he said the direction for its future is ultimately left to the Legislature and the governor. He referred the Monitor to Commerce for comment on the audit findings.

“We’re trying to do what we’ve been asked to do for the state of North Dakota, and hopefully we’re doing it in a way that is fulfilling what the mission is,” Albrecht said. 

Attorney General Drew Wrigley told the Monitor he has not received anything regarding the Development Fund audit. 

The Development Fund was created in 1991 and offers loans and investments as gap financing to new businesses that might not be able to obtain loans from traditional banks. The fund touts having aided more than 900 projects and created more than 9,000 jobs in its existence.

Reach North Dakota Monitor reporter Jack Dura at [email protected]