North Dakota Lawmakers Want Review of Agency Spending

July 16, 2008

North Dakota legislators say the spending policies of state agencies should get a fresh look to make sure other administrators don’t find themselves facing criminal charges and prison time.

Sandy Blunt, the former director of North Dakota’s workers’ compensation agency, is awaiting arraignment on two felony charges alleging he misspent Workforce Safety and Insurance funds on employee bonuses and gifts for agency workers, including flowers, cards, balloons, restaurant gift certificates, car washes and movie passes.

A judge initially dismissed the charges, but the North Dakota Supreme Court reinstated them last month.

Members of the Legislature’s interim Industry, Business and Labor Committee have asked the state auditor’s office for suggestions on making sure that such expenses are within existing state rules that allow spending on promoting the agency and rewarding long-serving employees.

“The legislature is the watchdog for all state spending, and obviously it’s been made clear that there is not consistency throughout state government,” said Rep. Rick Berg, R-Fargo, the House majority leader. Berg is chairman of the interim committee.

“I think it’s important to … try and lay out a uniform policy as it relates to spending for all state agencies,” Berg said.

Rep. Jim Kasper, R-Fargo, said he believed other agencies have been following practices similar to WSI’s, a suggestion that Gordy Smith, a state audit manager, disputed.

“We could have a whole lot of state agency officials facing felony charges if there was similar use of state funds and it’s found to be similar to the charge against Sandy Blunt,” Kasper said.

North Dakota government departments may ask the state Office of Management and Budget for permission to spend state funds on promotional expenses, such as food and trinkets that advertise the agency.

Thirty-three agencies, from the state Dry Bean Council to the Land Department, the North Dakota State Fair and the Water Commission, have been classified as promotional agencies. The Water Commission did so to offer a special water education program for school teachers.

Pam Sharp, the state budget director, said agency administrators are asked to use common sense for promotional spending.

“Their expenditures need to be for the purpose of their business and if they have any question about it, they just need to use good judgment,” Sharp said. “When you’re using taxpayer dollars, you need to spend them on the purpose of your agency. The function of agencies isn’t to buy trinkets for their employees.”

State regulations also allow agencies to offer service award programs for their workers, and set out spending limitations for them.

A worker who has finished three years of state employment may receive a certificate or plaque, and a gift worth no more than $25, state rules say. The allowed value of a gift rises to $300 for a 30-year employee and $500 for someone who has worked for the state for 50 years.

Employees who retire may receive a gift worth up to $200 if they have worked for the state for at least 15 years, the regulations say.

“A farewell party may be provided upon agreement of the employee and the agency,” the rule says. “Retirement awards may be withheld if there are documented problems with an employee’s performance.”

Smith said he believed WSI’s spending on employee gifts, which was documented in an October 2006 performance audit, went well beyond normal agency practice for rewarding longtime employees. The workers’ compensation agency bought hundreds of gift cards for employees over two years, Smith said.

“In our opinion, you couldn’t just go and say, ‘Gordy, you’ve been a really good employee this year. Here’s a $50 card to Applebee’s,”‘ Smith said.

Documents presented to the Industry, Business and Labor Committee show some of the reward practices preceded Blunt, who served as WSI’s chief executive from April 2004 until December 2007.

“The spending that was done in Sandy’s administration was very similar to spending that was done in the prior administrations,” Berg said. “In some degree, shame on the Legislature for not catching that early.”

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