The state's jobs agency has improved its administration of grants, loans and tax credits but still cannot accurately measure how many jobs it has created, a new audit found.
The Wisconsin Economic Development Corporation "cannot be certain about the numbers of jobs created or retained as a result of its awards," the nonpartisan Legislative Audit Bureau reported Wednesday in a biennial review of the agency's operations.
"A cloud will continue remain over the agency until they can accurately verify data being received from award recipients," said Joint Audit Committee co-chairman Sen. Robert Cowles, R-Green Bay, in a statement. "While WEDC has significantly improved in several areas relating to the administration of its programs, Wisconsin needs to have a precise understanding as to which programs are most beneficial to our economy."
The audit bureau analyzed 133 awards made by WEDC, along with its revenues and administrative expenditures. The report found:
- The agency improved its handling of tax dollars during the first six months of fiscal year 2016-17.
- The agency did not require recipients of grants and loans to submit information that would allow it to track how many jobs were created or retained. It also did not collect information about companies' existing employees to measure job creation in future years.
- The balance of potentially uncollectable loans with repayments 90 days or more past due jumped from $1.3 million at the end of 2014 to $11 million by the end of 2016.
- WEDC did not comply with state law that requires it to annually verify jobs-related information submitted by award recipients.
- The agency's cash and investments balance increased by $36.8 million from 2012 to 2016.
WEDC secretary and CEO Mark Hogan thanked the LAB for acknowledging the improvements the agency has made in the last two years. The agency is "committed to providing the highest levels of transparency and accountability," he said.
"We welcome LAB’s recommendations and look forward to reviewing and implementing all of them, just as we have with the recommendations in LAB’s prior audits," Hogan said in a statement. "The recommendations in this audit are part of that ongoing process and will play a key role in continuing to make WEDC a stronger organization."
The audit bureau's recommendations include requesting reports by February 1, 2018, on the agency's efforts to improve its administration of grant, loan and tax credit programs; oversight of economic development programs and financial management.
The report also offers two statutory changes lawmakers could make: clarifying that the governing board should report on "only created or retained jobs that meet statutory policy requirements," and requiring WEDC to deposit all tax credits repaid to it with the state Department of Administration within one week.
The audit found that WEDC had retained $5.3 million in repaid tax credits before depositing the money with DOA in March 2017, "shortly after (the Legislative Audit Bureau) asked about these funds."
Joint Audit Committee co-chairwoman Rep. Samantha Kerkman, R-Salem Lakes, said WEDC is succeeding in improving the state's economic climate.
"A strict accounting of jobs created or retained is not the only yardstick by which to measure the success of economic development programs," Kerkman said in a statement. "Clearly, Wisconsin’s efforts are attracting business and facilitating growth and WEDC programs are a significant factor in that success. I look forward to continued improvement by WEDC in its administration of grant, loan, and tax credit programs."
The Legislature's Republican-led Joint Finance Committee voted last week to allow WEDC to start issuing new loans again, and removed a requirement in Gov. Scott Walker's budget proposal that those loans be funded solely with repayments of other loans. The agency would also not be able to issue forgivable loans.
The 2015-17 state budget took away the agency's ability to loan money to businesses after an audit found the agency did not independently verify whether businesses receiving tax dollars created the jobs they promised.