The North Dakota State Investment Board on Friday endorsed new audit specifications to examine financial performance and management fees paid for troubled state pension and investment funds.
The action, which followed growing concerns of the original audit ordered after the suicide last month of state investment director Steve Cochrane, was called a step forward by critics who still are reserving judgment as the audit unfolds.
"You've got a full-blown performance audit being done that was put together with consultation with the state auditor's office," said Lt. Jack Dalrymple, chairman of the investment board.
The purpose of a performance audit is to examine compliance with state laws as well as to look for possible fraud and abuse. Auditors must try to independently verify the information they review, including financial documents, e-mails, memos and computer hard drives.
Among other areas, the audit will examine Cochrane's management as well as fees paid to private fund managers in light of the "prudent investor rule" to determine if they were appropriate.
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Separately, the state auditor's office is conducting a routine financial statements audit of the North Dakota Retirement and Investment Office, which manages pensions and other funds totaling about $4.8 billion.
"I think we've made good progress on it," said Rep. Merle Boucher, D-Rolette, a legislative leader who has called for a thorough performance audit of state investments.
Legislators from both parties will study the new audit objectives and watch closely as it unfolds - mindful that pension shortfalls potentially approaching $1 billion could result in requests for a taxpayer bailout, he said.
"My reaction would be it's going a step in the right direction," said Dustin Gawrylow, executive director of the North Dakota Taxpayers' Association, another proponent of a tougher audit than the original.
Readers can reach Forum reporter Patrick Springer at (701) 241-5522
