Audit criticizes Commerce handling of filmmaker grants

An audit of the North Dakota Department of Commerce questions the application period for a filmmaking grant and flags issues with purchase card use. (Michael Achterling/North Dakota Monitor)

A recent audit of the Department of Commerce said the bidding process for the agency’s controversial 2023 film grant broke from standard procedure in a way that may have disadvantaged some applicants.

The audit report, published online , focuses on the Department of Commerce’s financial activity during the 2021-2023 biennium. The State Auditor’s Office is required by law to audit state agencies every two to four years.

Concerns about the Department of Commerce’s 2023 film grant was one of two major findings highlighted in the audit.

The grant was first brought to the public’s attention last year when 25 North Dakota filmmakers wrote a letter to Gov. Doug Burgum expressing frustration about the program. The group accused the grant — as well as a similar award administered by the Department of Commerce in 2021 — of being rigged in favor of one film company, the Bismarck-based Canticle Productions. Canticle Productions was the sole recipient of both grants.

While the bidding process for the 2023 grant broke no laws, the application window was unusually short, the audit found.

The grant made $600,000 up for grabs to North Dakota filmmakers.

The point of the program was to support films that show off North Dakota’s natural features, history and culture, according to the report. Applicants had to be based in North Dakota and have a track record of distributing films about the state. The grant money also had to be used exclusively on in-state filming and production.

The Department of Commerce announced the grant online on July 21, 2023, and closed the application window on July 31, 2023 — 10 days later.

That’s much shorter than normal, the report notes. According to the audit, 12 other grants issued by the agency in 2022 and 2023 had application windows ranging from 28 to 84 days.

The report says this could have made it difficult for film companies to meaningfully compete for the money.

“Eligible applicants may not have had time to properly collect, organize and submit the required information in time to apply,” the audit states.

The Department of Commerce disputes those findings in a response included in the report.

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“The methodology used appears flawed as it fails to consider the inherent differences between grant programs,” the agency argued. “We implemented a competitive RFP process, ensuring objective evaluation and merit-based selection of the strongest application.”

The Department of Commerce also claims that, had it made the application window longer, it would have given the award recipient less time to develop its film. The grant period ends June 30, 2025, according to its website.

“An audit finding that criticizes timely awarding of the most qualified project seems misplaced,” the agency wrote.

The Commerce Department received four applications for the grant. Just days after the application window closed, the agency on Aug. 4 awarded the full $600,000 to Canticle Productions.

The company is owned by Daniel Bielinski, who also chairs the University of Mary’s theater program.

“We tell powerful stories of sacrifice, faith, and perseverance that honor the land, history, and people of North Dakota,” Canticle Productions states on its website.

Bielinski did not respond to a request for comment about the audit report by publication time.

State Auditor Josh Gallion said that, even though the Department of Commerce’s bidding process wasn’t unlawful, it’s important that North Dakotans have an equal opportunity to apply for state grants.

“We really wanted to bring this forward, to kind of spur the Legislature to have that discussion, ‘Should there be a minimum time frame that things need to be opened?’” Gallion said.

Matt Fern, who led the group of filmmakers that authored the letter to Burgum, said he still has unanswered questions about the grants but appreciates that the audit report validated his concerns about the 2023 bidding process.

He said he hopes the state government will continue probing into the program.

Fern said he’s particularly curious about the differences between how the 2021 and 2023 grants were handled. Unlike the 2023 version, the 2021 grant — which was for $100,000 — was not open to public bidding. Canticle Productions received the grant with no opportunity for competition.

Meanwhile, Legislative Council records provided by the Auditor’s Office indicate that lawmakers created both grant programs with Canticle Productions in mind.

A footnote in a summary of the 2023-2025 Department of Commerce budget, for example, describes the $600,000 grant appropriation as, “Adds funding for a motion picture production and recruitment grant to be provided directly to Canticle Productions.”

Fern said he wonders why there was a bidding process in 2023 if the Legislature had already made up its mind on who would be awarded the money.

“Why did they open it for bidding in 2023, but not 2021?” he asked.

The Department of Commerce, in a statement to the North Dakota Monitor, said that the 2021 and 2023 grants were administered differently because the agency “received different interpretations from legal counsel on how to disperse the funds based on legislative intent.”

Purchase cards

The other major finding highlighted in the audit report states that the Department of Commerce violated state finance regulations by improperly using purchasing cards.

The agency gave purchase cards to 33 of its 91 employees during the 2021-2023 audit period. Those employees spent more than $916,000 using the cards, according to the report.

The Auditor’s Office analyzed a sample of 34 transactions and found the following violations:

• Two purchases didn’t include itemized receipts
• Two purchases involved buying alcohol for employees and board members
• Five meal purchases exceeded per diem rates

Those three violations were made by the North Dakota Development Fund.

The report says that each of these improper purchases by employees were approved by their respective supervisors.

In another violation by the agency included in the report, six transactions weren’t reconciled to their respective purchase card statements — the process of making sure the card statements match receipts.

The Department of Commerce didn’t dispute these findings. In the report, the agency stated it has canceled all purchasing cards for the Development Fund, and that the fund has reimbursed the department for everything the cards were used to buy.

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The Auditor’s Office said that it does not know the dollar amount the Department of Commerce was reimbursed for.

The Department of Commerce also said in the report that it  will be expanding training requirements to employees who hold, supervise or review purchasing card transactions.