Latest WEDC audit finds continuing problems
5/13/2019

The latest Legislative Audit Bureau report on WEDC finds continuing problems with how the state jobs agency tracks the performance of award recipients.


The LAB report shows the Wisconsin Economic Development Corp. gave tax credits for jobs that weren’t filled by Wisconsinites, and didn’t record the number of positions created or retained by companies that received funding from the state.


In one stark example, WEDC awarded $462,000 in tax credits for job creation to a recipient that didn’t add employees but instead lost 17 jobs. As of February 2019, the audit found, WEDC had not revoked these tax credits, even though the contract ended in October 2017.


“It’s disappointing that while WEDC makes progress in certain areas LAB continues to find new emerging issues audit after audit,” said Sen. Robert Cowles, a Green Bay Republican and co-chair of the Joint Audit Committee.


In another example, WEDC awarded one recipient $61,100 in Enterprise Zone tax credits for creating 261 jobs that were filled by residents of 36 different states that don’t share any borders with Wisconsin.


Cowles said WEDC’s failure to comply with state statutes and guidelines has “put taxpayer funds at risk.”


“This isn’t just an issue of unaccountability, but shows the desired outcomes of these programs have not been consistently achieved,” he said in a release.


In fiscal year 2017-18, WEDC allocated $3.1 billion in tax credits; awarded $25.6 million in grants and $4.5 million in loans; and authorized local governments to issue $65.7 million in bonds, according to the audit.


The audit also found 68 recipients of tax credit and loan awards that ended in that period created 34.9 percent of contractually required jobs, and 60 of those recipients retained 58.8 percent of required jobs.


But since WEDC did not collect sufficient jobs-related information from awards recipients, LAB says the agency cannot know how many jobs were created or retained as a result of awards that have ended.


WEDC only completed one verification effort in a two-year period, falling short of statutory requirements, according to LAB.


And LAB found WEDC removed information from its website related to how many jobs had been created or retained by award recipients, making it difficult for both legislators and the public to assess the effectiveness of award programs.


In a section focused on closing awards, LAB also found WEDC could have saved the state money by revoking $414,400 in previously awarded tax credits, and by requiring loan recipients to repay $4 million.


The audit shows WEDC forgave $3.3 million in loans to five recipients that had created or retained fewer jobs than was outlined in their contracts. WEDC determined those five recipients had created 372 fewer jobs than required and retained 513 fewer jobs than required. After making that determination, LAB found WEDC “forgave amounts in ways that did not comply with its contracts.”  


Still, LAB notes WEDC has improved “a number of aspects of its program administration” since the last audit, and has complied with most of its recommendations.


In his response to the report, WEDC CEO Mark Hogan noted the number of LAB recommendations have decreased from 24 in its 2015 report, to 19 in 2017, to 10 in the latest audit.


And he pledged to work to establish a timeline for implementing the audit’s recommended changes, which he wrote could be “substantially implemented” before the end of the year.


The Joint Audit Committee’s other co-chair, Rep. Samantha Kerkman, says WEDC making previously recommended changes is “great news,” calling the agency a “powerful tool” in the effort to retain and attract employers to Wisconsin.


“I look forward to WEDC continuing to fine-tune their operations to meet legislative intent,” the Salem Lakes Republican said.


In its report, LAB makes a number of recommendations related to fixes for the issues identified.


LAB suggests legislators consider modifying state law surrounding WEDC in several ways, including specifying that funding be provided to WEDC “based on WEDC’s actual needs.” LAB also suggests lawmakers require WEDC’s governing board to separately report on award recipients’ ongoing job creation and retention as well as on results of contracts that have ended.


See the full audit: http://legis.wisconsin.gov/lab/media/2861/19-6full.pdf


 

--By Alex Moe
WisBusiness.com 




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