New ND land commissioner says department making progress after critical audits
BISMARCK—The North Dakota Department of Trust Lands continues to address problems identified in state audits released almost two years ago, the agency's new leader told legislators Wednesday, Jan. 10.
Land Commissioner Jodi Smith, who took over late last year, updated the Legislative Audit and Fiscal Review Committee on the department's progress, but said many issues will require technology upgrades.
The department was the subject of three critical reviews in 2016 from the state auditor's office, which scrutinized how it administered oil impact grants, found mineral tracts were assigned to the wrong trust and highlighted the practice of employees accepting free meals and drinks from investment entities under contract, among other findings.
The land commissioner at the time, Lance Gaebe, disagreed with some of the findings and defended his department during a lengthy legislative audit committee meeting in April 2016. The Land Board, chaired by Gov. Doug Burgum, opened applications for Gaebe's position last year and ultimately hired Smith, who formerly worked as vice president of the western region for Sanford Health Foundation.
Asked whether the audits helped prompt the leadership change, Burgum's spokesman Mike Nowatzki referred to previous statements in which the first-term Republican governor said members of his Cabinet were asked to reapply for their positions. Burgum wasn't governor when the audits were released.
"I think the governor's comments were that any time new leadership comes in, that it's good to evaluate current leadership structure," Nowatzki said.
Gaebe, who recently joined Clearwater Communications, said Wednesday the audits identified issues that needed to be addressed but in some cases failed to recognize the rapid growth in responsibilities and assets in recent years. He said questions about whether the audit reports factored into the leadership change were better suited for the "folks who made that decision."
In an interview this week, Smith lauded department staff who were overwhelmed by the Bakken oil boom but said there's "certainly opportunities for improvement." She hopes to boost public perception of the department.
"I do see where there are some areas where we can come in and work with the team that we have to create a better functioning department," Smith said from her office just north of the Capitol.
The Department of Trust Lands manages the permanent educational trust funds and assets under the Land Board's control. It also operates the Unclaimed Property Division and the Energy Infrastructure and Impact Office.
Smith hopes for major software changes that will improve department operations. She said almost three-fourths of the "opportunities within the department for improvement" identified by a consultant depend on implementing new technology.
The state Legislature budgeted $3.6 million for an information technology project in the department during last year's session.
In ensuring tracts were assigned to the right trust, Smith said a staff review has made it through 13 of the state's 53 counties, focusing on the heavy financial implications of western North Dakota. So far, .7 percent of the tracts were wrongly assigned.
Legislators last year approved several one-time corrections due to a "misallocation of prior mineral revenues."
"There's really not much of an excuse for the errors that were in the system, and we will continue to work our way through across the state of North Dakota," Smith said. "But that will probably take us at least another year, if not longer, to complete."
Smith's department is also working to adopt human resources policies from the Office of Management and Budget with some modifications. She said it's important to have "guardrails" in place to ensure employees know what's allowed.
State Auditor Josh Gallion said his office will likely follow up with the Department of Trust Lands this year on the audit recommendations.