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Legislative audit makes three recommendations to PSC to improve structure, retention – Daily Montanan [1]

['Blair Miller', 'More From Author', '- January']

Date: 2024-01-24  

Montana Public Service Commission President James Brown, who just announced a run this year for state auditor, drew issue with some of the findings of a Legislative Audit Division report on the PSC’s organizational structure and retention efforts during a presentation to the Legislative Audit Committee on Wednesday.

In 11 pages of a written response to the audit and about half-an-hour of testimony to the committee, Brown said he felt the commission did not get enough credit from auditors for the work they have done to make positive changes in the agency’s structure and operations since a 2021 financial compliance audit raised broad concerns about both.

Further, he said that lawmakers need to take his concerns to heart because the commissioners believe that some of the recommendations made by auditors, including potentially reclassifying positions for management and funding positions at competitive salaries to cut down on turnover, are intricately tied to how the PSC is structured by lawmakers and how much they provide the agency in the biannual budget.

“I’ll start my response by gently saying we disagree with the representation that was made by the auditor as to the structure of our agency, because I don’t think it encapsulates really how the agency runs. I think there might be some misunderstanding as to how we operate the agency,” Brown told lawmakers.

Minutes later, Legislative Auditor and Division Director Angus Maciver stepped in to clarify that the audit division does not have a misunderstanding with the PSC but rather a disagreement.

“We didn’t really misunderstand how they see this; we just see it differently,” Maciver said. “It’s a good faith disagreement, I think, on both parts. We have a different view of this. We think that those division-level positions should not be exempt, appointed positions. They should be permanent classified provisions, and Commissioner Brown and the rest of the commission thinks differently.”

The disagreement stems from the second of three recommendations the audit made to the PSC, which suggests it “consider and revise the appropriate classification for management level positions.” The first says the PSC should further define a code of conduct for the agency and commissioners and provide continuing education on it, while the third says the PSC should address turnover and retention by asking the Legislature for ways to fully fund the agency’s pay plan and increase salaries.

The core of the disagreement on the second recommendation involves different views between the PSC and auditors on what role the executive director, a job created as part of a strategic plan remodel in response to the 2021 audit, plays within the structure of the PSC in statute and in reality, and whether management should serve only at the pleasure of commissioners.

The audit said the agency had clearly improved its internal policies and defined a chain of command and expectations in the new organizational structure, but said the PSC should further strengthen the chain of command to be sure misconduct that happened in the past does not happen again.

The audit says that the executive director was established to serve as the chief administration officer of the PSC and the administrator of the Centralized Services Division, one of three divisions of the agency, in administrative rules that put that person “above the other management-level positions in the organizational structure.”

But the audit says the new structure did not change the authority for the executive director or other appointed management positions. The result is the division administrators assessing the performance of their staff and the commissioners – not the executive director – reviewing the performance of the appointed staff.

“The Executive Director is tasked with monitoring the performance of the agency without formal tools or authority to do so. Recently commissioners have described a vision for the position to serve in an advisory rather than a management role to the other management level positions, and as such do not feel it requires additional authority over department staff and operations,” the audit says. “This inconsistency has created ambiguous lines of authority within the organizational structure and threatens the effectiveness of the position.”

The report says some staff interviewed were concerned that appointed management was serving at the commission’s pleasure, and if that might affect their ability to “address inappropriate behavior in the department.” It says some staff hoped the management positions could be switched over to be nonexempt rather than appointed.

“It is difficult for staff to feel confident in management’s ability to address issues with commissioners because those appointed positions do not provide job security,” the report says.

State law allows the PSC up to six personal staff positions that act as managers. Five of them include the executive director, business manager, commission secretary, external affairs manager and the chief regulator. The chief legal counsel is the lone nonexempt management position at the agency, and the report says that only three of the five personal staff positions are currently filled. Personal staff are defined as staff members appointed by the commission in management positions, who serve at their pleasure, rather than those employees hired by the department and not appointed.

But the audit said that the executive director should be the chief of staff and department manager who oversees management staff and the Centralized Services Division of the PSC. Due to vacancies, staffers, managers and commissioners have all taken on extra roles at times, the audit and Brown both said.

“The Executive Director should act as the top of the chain of command for the department and mediates between the commissioners and department staff,” the report says.

It noted that the executive director position has seen turnover and extended vacancies. Brad Tschida was in the position for about eight months before leaving in September, and the PSC announced Friday they had hired David Sanders to fill the position. The audit says that having someone in that position for a longer term would likely benefit long-term operations and staff turnover, which has also put more pressure on the existing staff.

In his responses, Brown contended that the executive director indeed has “extensive management authority” contrary to the audit report’s representations. He said that included doing performance evaluations of management positions, making recommendations to commission leadership on discipline or raises, and several other administrative duties.

And, since the personal staff is appointed by the commissioners, Brown said the executive director does not have direct authority to make any employee decisions, which Brown says is a better setup so one unelected person cannot make unilateral personnel decisions.

Despite the objections, Brown said the PSC was open to further consideration of reclassification of the positions but somewhat skeptical.

“After three years of work on the strategic plan, the Commission understands careful analysis of the pros and cons of designating which agency jobs should be filled with personal staff must be weighed carefully before making additional changes,” Brown wrote in his response.

On the audit’s first recommendation, that the PSC further define a code of conduct and give commissioners and staff continuing education on the code, auditors found in a survey of PSC staff that they believed about 60% of staff thought managers always exhibited high ethical values, but only 23% of commissioners. The audit said ensuring that the commissioners can hold themselves accountable since they are elected and not appointed would be easier with a defined code of conduct.

In response, Brown said the strategic plan has already led to 22 new policies, primarily in the operations manual, which includes sections on ethical standards, employee conduct, and agency travel policy, and that the full batch of new internal policies, including a new internal ethics policy, would be finalized this spring.

Finally, the audit found that the large number of staff that turned over primarily in 2021 and 2022 said in exit interviews that they were frustrated with the duties they had to perform outside of their job descriptions, and 50% of staff in a separate survey reported looking for other jobs to get a better work-life balance, to advance their careers, to seek higher pay, or to feel their careers were more worthwhile.

Since the PSC staff’s work is technical and employees need specific experience and knowledge, being overworked and taking on too many duties were also reported to auditors by employees who worried about turnover and a perpetual cycle, the report says.

And the pay is much better, they reported, in the same positions in the private sector. The audit notes that the commission has slimmed down its budget requests in the 2021 and 2023 sessions to restore its favor with lawmakers, and that the PSC felt during the session it could not request the full budget it wants to increase pay and retention.

The final recommendation was for the PSC to propose new ways for the Legislature to increase pay for agency employees.

Brown noted that some of the turnover after he became chairman involved getting rid of underperforming employees, and during the past couple of fiscal years has kept positions unfilled just to stay in the black in their budget. But lawmakers only funded two of the four positions the commission had sought this past session and continued to impose vacancy saving requirements, which Brown said left them hamstrung despite the state employee base salary increase lawmakers approved.

“The agency calculates that it will take an additional $206,071.42 to bring all staff up to market rate. The PSC has no ability or authority to raise its own budget,” Brown wrote in his response. “Therefore, Recommendation #3 can only be implemented if the 2025 Legislature fully funds the agency’s proposed ‘methods’ for funding the state pay plan and increasing position funding for competitive positions.”

Brown told the legislative committee that he believed the audit properly explained that employee pay would need to be increased in order to retain staff, but added: “But we can only work within the confines of what you as the legislature gives us in terms of size of the agency and the amount of budget we have in order to pay the people we require.”

Committee chairman and Senate President Jason Ellsworth, R-Hamilton, closed the hearing by saying that the audit not only was a look into the internal PSC operations in the wake of the 2021 report and what changes have been made, it helps the lawmakers get direction on things they could do better to help the PSC.

“It’s certainly not an attack or criticism. I do appreciate you being very thorough in your answers,” he said. “But I felt when I read some of them, I think you were feeling potentially frustrated or what have you. And that’s not what we do here. We were just trying to find what we can do and identify to potentially help you.”

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