MADISON, Wis. — Gov. Scott Walker’s troubled economic development agency is still struggling, failing to accurately track jobs its awards are supposed to create and retain, handing out nearly $10 million in bad loans over the last two years and failing to turn over millions in tax credit repayments to the state, an audit released Wednesday shows.
The report from the Legislative Audit Bureau amounts to yet another black eye for the Wisconsin Economic Development Corporation. The agency has faced frequent scrutiny over its operations since Walker and GOP lawmakers created it in July 2011 to replace the Department of Commerce. The agency has failed to recover loans made to troubled companies, given out $126 million without a formal review and experienced high turnover in top positions.
“There’s a cloud over this situation until we finally have accurate quantification,” Sen. Robert Cowles, a Green Bay Republican who co-chairs the Legislature’s audit bureau, told The Associated Press by phone. “Money is going out the door and we don’t know if it really works. Some of these programs may have to be terminated.”
WEDC Secretary Mark Hogan said in a news release that the agency looks forward to reviewing the audit and implementing changes. He said the agency is committed to providing the “highest levels of transparency and accountability.”
WEDC is a quasi-government agency that hands out grants, loans and tax credits to businesses, local governments and other organizations. State law requires WEDC’s board to annually report how many jobs its programs create or retain.
State auditors reviewed the agency’s administration of grants and loans over the last six months of 2016. They found that administration did improve — 36 of 37 grant and loan contracts reviewed included provisions requiring recipients to repay the funds as required by law — but WEDC didn’t contractually require recipients to supply information detailed enough to allow the agency to determine how many jobs were actually created or retained.
The agency also failed to collect enough information from applicants about existing employees and failed to follow state laws requiring it to annually verify jobs-related information that tax credit recipients submitted against actual results. As a result, the jobs-related information on WEDC’s website is suspect, the audit said.
Auditors also examined 24 awards handed out from July 2011 through September 2016 that WEDC said were expected to create or retain jobs. Three of the awards weren’t contractually required to create or retain any jobs. Thirteen ended before the contract expired, meaning recipients were no longer required to create 183 jobs and retain 1,082 jobs.
The amount of delinquent loans ballooned from $1.3 million at the end of 2014 to $11 million at the end of 2016, the audit found.
The 2015-17 state budget prohibited WEDC from issuing any new loans other than loans to develop technology starting this July, but Republicans on the Legislature’s finance committee lifted the prohibition last week, saying they thought the agency was improving.
Cowles said the committee needs to reconsider the move in light of the audit. Spokespeople for the committee’s co-chairs, Sen. Alberta Darling and Rep. John Nygren, didn’t immediately respond to an email seeking comment.
The audit also found that WEDC retained $5.3 million in repaid tax credits between July and November 2016 that should have been turned over to the state. The agency turned the money over to the Department of Administration in March 2017, shortly after auditors inquired about the money.
State law typically requires state agencies to deposit any money received on the state’s behalf to the state’s general fund within a week. That provision doesn’t apply to WEDC, however, because it’s not a true government agency. Auditors recommended that the Legislature change the law to force WEDC to deposit all repaid tax credits within a week.
The agency also spent nearly $41,000 on chauffeurs during fiscal years 2014-15 and 2015-16. WEDC staff said the agency went through a bidding process to select chauffeurs but the agency’s policies don’t include that process and don’t require staff to maintain documentation showing the spending was reasonable.
“Walker’s agency is handing out millions of taxpayer dollars without proof that our money is creating jobs or even significantly enhancing the economy,” Assembly Democratic Leader Peter Barca, a member of WEDC’s board, said in a statement. “Taxpayers deserve to know that they are getting the biggest ban for Wisconsin workers’ hard-earned bucks.”
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