State Auditor Joshua Gallion released, on Monday, Oct. 14, an audit of the North Dakota Department of Commerce which shows the Department had violated state law by circumventing procurement requirements related to the “Be Legendary” logo and overall brand refresh.
The audit found two temporary employment contracts were used to stay under the purchasing thresholds that required contractor competition and continue the work from the original contract. These contracts should have been treated as one contract for services and bid appropriately following OMB procurement requirements, according to the audit. The total cost of both contracts was $87,162.50, which would require the Department to follow Level 3 procurement requirements.
The redesigned logo was unveiled in October 2018. The Legislature did not approve efforts to launch a statewide contest to redesign the redesigned logo, which had garnered much criticism statewide.
In a response to the audit, the state Department of Commerce disagreed that it had violated any laws, but conceded that it could work to ensure a clearer separation in a project's phases.
"The Department will ensure there is a clear separation between contract deliverables and temporary employment arrangements in the future and that all procurement requirements are followed," reads the response filed by the state Department of Commerce.
In 2018, a group of more than 700 North Dakotans pushed back on the logo change, which has engendered much controversy. Those who signed a letter expressed wanting the old logo restored and a better process implemented for the brand refresh.
North Dakota developed the “Legendary” brand in 2001 and used it through September 2018. This brand was primarily used for the needs of the Division of Tourism was not a unified brand across all of state government. To create a unified brand, the department entered into a contract with a Minnesota-based business on July 25, 2018, to update the official North Dakota logo into the new “Be Legendary” logo and develop digital and other mediums, including a new ND.gov website structure. This contract was set at $9,500, which only required one fair and reasonable quote, allowing the Department of Commerce to select the contractor.
Once the original contract work was underway, the department claims it underestimated the amount of work that was necessary and decided to offer temporary employment contracts to the two individuals who had been working under the original contract. The state auditor's office maintains that executing these employment contracts circumvented procurement requirements and did not allow for contractor competition.
In addition, the state auditor's office revealed that the two temporary employees were treated as contractors.
In another matter, the Department also violated its appropriation authorized by the Legislature by improperly charging $853,908 to the wrong biennium. The Department made a $310,931 payment for work completed after the appropriation period had ended and it made a $458,801 advance payment, which was unsupported and prohibited in the contract for the Enhanced Use Lease Grant program.
In its response to this portion of the audit, the state Department of Commerce did concede that payments should not have been spread over two bienniums and said it would review its procedures.
The audit also found that the Department of Commerce did not monitor contract deliverables of an entrepreneurial contract with a total cost of $253,921. As a result, contract payments totaling $123,750 were made to unapproved subcontractors.
The state Department of Commerce disagreed with this conclusion, saying it did not circumvent procurement procedures. It noted that the subcontractors were given verbal approval to proceed.
"Circumventing procurement laws and authorizing unsupported payments does not promote transparency and accountability but, instead, undermines the public’s trust in its government institutions,” Gallion said.