WEDC takes hits over audit findings

Democrats slammed the Wisconsin Economic Development Corp. for an audit that found deficiencies in financial management and transparency of the organization, while WEDC officials argued most of the issues laid out in the report have already been fixed.

Assembly Minority Leader Peter Barca said Wednesday the organization should have a follow-up audit next year to make sure it has truly fixed the problems.

The Kenosha Dem, who sits on the WEDC’s Board of Directors, said WEDC may have to transition back to the old Commerce Department structure if the issues are still present by that point.

“By any means by which you would study how successful WEDC has been, you’d have to say by now that it’s been a complete disaster,” Barca said.

The new audit from the Legislative Audit Bureau found the WEDC lacked proper policies to manage its loan, grant and tax credit programs effectively.

The report, released Wednesday, alleges that some of the economic development assistance went to “ineligible recipients, for ineligible projects, and for amounts that exceeded specified limits.”

For instance, WEDC approved $2.5 million in Jobs Tax Credits to a company without requiring it to create any jobs, as is mandated by statute. Instead, it requested an investment in employee training and a mutli-million dollar capital investment. The company backed off the capital investment, and the terms of the contract were amended to not require the capital investment. However, while the amount given to the company was reduced, the audit finds “It did not declare the business to be in default of the contract” or try to recover any of the tax credit funds.

The audit also shows the corporation had no policies to award funds for programs such as the Capital Catalyst program, the Minority Revolving Loan Fund or WEDC Partner Operations Assistance programs.

Several economic development award recipients also failed to follow-up with financial statements and status reports. The report says that of the 14 loan and grant recipients it surveyed, 12 had not submitted verified financial statements and that only 45 percent of required progress reports had been submitted from July 2011 through Dec. 2012.

In addition to broader management concerns, the LAB report also criticized WEDC for the contracting process used for a previous audit. The LAB noted auditing firm Schenck S.C. that the agency picked previously had negotiated with WEDC on behalf of a firm for hundreds of thousands of dollars in tax credits and grants.

Bill Goodman, the president of Schenck S.C., stood by the audit his company performed and said that the company had maintained “professional independence” from the management decisions of its clients.

In a response to the audit, WEDC CEO Reed Hall said the “vast majority of issues raised by LAB have already been identified by WEDC and other parties, and substantive solutions are already in place or are in the process of being implemented.”

Hall said the organization has written and approved 19 policies covering everything from personnel issues to conflict of interest to credit card usage. The agency expects to have the remaining policies completed by the middle of the summer.

Related links:

See the LAB’s highlights from the report

See the full report

See the WEDC response