BISMARCK, N.D. – The North Dakota State Investment Board (SIB) has accepted the findings of an independent Governance Model Review conducted by Funston Advisory Services LLC and directed the Retirement and Investment Office (RIO) to begin working with Funston on a comprehensive update of its Governance Manual.
Commissioned to evaluate the SIB’s governance structure, policies, and operational resilience, the review identified several critical challenges, including significant understaffing, procurement limitations, and rising operational risk.
“The SIB’s success has been built on prudent management and strong investment performance. Our current governance model is no longer sustainable in the face of the growing complexity of the investment program,” said Gov. Kelly Armstrong, SIB chair. “Governance modernization is not optional—it is essential.”
Funston outlined several recommendations to strengthen the SIB’s long-term stability, transparency, and oversight of state investment assets, including:
- Modernize governance practices by streamlining policy manuals, strengthening strategic focus, improving board meeting effectiveness, and enhancing trustee onboarding, education, and accountability. Funston also emphasized stronger oversight practices, better-prepared discussions, and an updated Executive Director evaluation process.
- Adopt a long-term strategic plan and reinforce the SIB’s role as a patient capital investor. Recommendations include regular review of governance and investment policies to ensure alignment with mission, risk appetite, and long-horizon strategy; disciplined oversight; structured policy review cycles; and ensuring major decisions are supported by clear strategic options and analysis.
- Improve oversight and reporting by streamlining board materials, strengthening exception-based and root-cause reporting, and ensuring presentations clearly tie to policy and strategy. Funston also called for deeper performance and risk oversight—including enterprise operations—greater transparency in expense allocation, and annual CEM benchmarking to support data-driven decision-making.
- Significantly expand Internal Audit and investment oversight by increasing audit capacity, implementing a full Quality Assurance and Improvement Program, formalizing reporting standards, and requiring complete SOC reports with enforced corrective actions. Additional recommendations include developing an integrated assurance tracking system and conducting external governance reviews every three years.
In response, the SIB directed RIO to work with Funston to update the Governance Manual to reflect leading practices and the board’s evolving needs. The revised manual will emphasize fiduciary accountability, strategic flexibility, and strengthened oversight.
“This is a pivotal moment for the State Investment Board and the Retirement and Investment Office,” said Dr. Rob Lech, SIB vice chair and chair of the board’s Governance and Policy Review Committee. “By modernizing our governance framework, we can ensure that North Dakotans’ investments are managed with the agility, integrity, and foresight they deserve.”
The SIB developed its initial governance structure in 1995, when it oversaw $1 billion in assets. While foundational policies have been refined over the years, the Funston review represents the SIB’s first independent governance assessment. Today, the board oversees more than $26 billion in assets, including the investments of the North Dakota Legacy Fund, Public Employees Retirement System, and Teachers’ Fund for Retirement. Its activities are administered by RIO.