(The Bismarck Tribune) – A five-year performance audit of the North Dakota Development Fund found missing or incomplete documentation for more than two dozen loans and equity investments, including millions of dollars worth of transactions requiring board review or approval that have no evidence of board authorization.
The North Dakota Development Fund, or NDDF, is a state-administered financing program under the Commerce Department designed to provide loans and equity investments to help new or expanding businesses in the state.
The performance audit, performed by Eide Bailly, an auditing company based in Fargo, analyzed 40 of the 126 approved loans and equity investments made from 2019 to 2024. Those 40 total approximately $61 million, or 75% of the total approved transactions by dollar value for the fund over the five years audited.
NDDF’s missing and incomplete documents
Of the 40 transactions, 25 had documentation problems, according to the audit.
As a result, Eide Bailly said it “could not consistently verify the basis for funding decisions or determine whether required reviews and approvals occurred in accordance with policy.”
- 11 of the 40 transactions requiring review or approval from the NDDF’s board, representing roughly $4.4 million, lacked documentation showing that the board reviewed or authorized the funding decision.
- 13 of the transactions, worth roughly $4.4 million, had missing or incomplete application, underwriting or approval documents. This includes risk-rating documents, due diligence support documents and financial analysis documents.
- Six of the transactions, representing approximately $2.4 million in refinances, restructuring, extensions of loan terms or additional funding to existing borrowers, lacked updated financial analysis, eligibility determinations or revised credit assessments to support the continued funding decision.
- 16 of the 40 applications reviewed by Eide Bailly, representing roughly $6.1 million, could not demonstrate how long applications took to process or whether they were handled consistently across the review period.
On top of these missing or incomplete documents, the NDDF maintained no formal tracking of denials and appeals for its financing programs, meaning it could not produce documentation supporting reasons for denying applicants, the number of denials issued or what direction was given to denied applicants. Eide Bailly said the NDDF relied on informal practices that were not supported by written policy.
“These gaps reduce transparency, hinder management and Board oversight, and increase governance risk as program scale and transaction complexity grow,” Eide Bailly wrote in its audit.
The lack of documentation for loans and equity investments is part of a greater trend of missing records identified in the audit. Eide Bailly also noted that the NDDF did not retain conflict-of-interest forms for its board members for fiscal years 2020 and 2021, and retained only one board member’s conflict-of-interest form in 2022. There are eight members on the NDDF board.
The audit also found the NDDF lacked sufficient documentation to show when delinquent loans or higher risk accounts were reassessed or reported to the board. As a result, it could not demonstrate that similar delinquency or risk conditions were monitored, documented and escalated consistently.
NDDF and Commerce response to audit
In its response to the audit, NDDF management said many of the detailed documentation problems took place early in the audited time frame and that there has been significant leadership turnover since.
“Since then, NDDF has already implemented stronger governance, improved record-keeping practices, and enhanced Board oversight,” the Commerce Department told the Tribune in a statement Thursday.
Eide Bailly’s 2025 fiscal audit of the NDDF, which is separate from the 2019-24 performance audit, found seven material weaknesses, which are severe flaws or failures identified in an entity’s financial controls.
NDDF management also said in its response to the 2019-24 performance audit that the practice of delegated lending authority, the ability for staff to make lending decisions that would then be reviewed by the board after the fact, has been ended. Management indicated that ending delegated lending authority reduces documentation concerns identified by the audit.
The Commerce Department told the Tribune that despite the identified gaps in documentation, the NDDF has “continued to function by relying on rigorous underwriting practices, Board review, and program policies.”
“However, we agree that standardized documentation is essential for full transparency and consistency and we are acting accordingly,” Commerce said.
Beginning in the last quarter of 2026, Commerce said, the NDDF will formalize updated policies, strengthen record retention requirements and establish clearer processing standards and denial and appeal documentation.
The audit will be presented to lawmakers at the next meeting of the Legislative Audit and Fiscal Review Committee on Sept. 22.
The North Dakota State Auditor’s Office did not immediately reply to a Tribune request for comment.
Past issues
It’s not the first time in recent months that the Development Fund has been in the news. The Tribune late last year documented that the fund had bought out an investment in a company called LandTrust by North Dakota’s Wonder Fund — another state economic development fund — after the investment conflicted with federal rules dealing with inside investing.
The Wonder Fund operates independently of the Development Fund but is under its umbrella. One of the Development Fund board members managed a fund that had invested in LandTrust before the Wonder Fund did. The Development Fund self-reported this conflict to the Treasury Department, according to Commerce.
Commerce did not provide the Tribune with the name of the Development Fund board member with the conflict.
The development came to light as the Tribune looked into an unrelated federal fraud lawsuit against Wonder Fund overseers. A judge later dismissed the lawsuit on a technicality.
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