The state's top jobs agency will no longer oversee a key community development block grant program after federal officials raised concerns about whether it was following the law.
The announcement Tuesday was made during a meeting of the board of the Wisconsin Economic Development Corp., in which board members also discussed a pair of audits detailing serious problems at the quasi-private agency and finding a new head to lead WEDC.
Criticism from the U.S. Department of Housing and Urban Development is just one of a series of problems that have plagued the agency, which also failed to track millions of dollars in overdue loans.
The State Journal first reported in September that HUD warned the state agency it was not following federal law or its own policies in administering federal economic and community development grants.
WEDC was created in July 2011 and was meant to be the flagship agency to help Gov. Scott Walker, who serves as chairman of the board, in his efforts to create 250,000 jobs by the end of his first term.
But Mike Huebsch, secretary of the state Department of Administration, told the board Tuesday that his agency will take over responsibilities for the economic and community development program, including underwriting, data reporting, and contract and fiscal management.
Huebsch said in a memo to the board that the change was needed "to meet the resolution that HUD requires."
He added that WEDC would continue its role in "communicating, marketing and serving as a liason with communities and businesses on facilitating these grant opportunities."
The DOA is in the process of making the transition, said agency spokeswoman Stephanie Marquis.
The board also learned about the results of a pair of reviews conducted by independent auditors from Schenck SC and the Financial Institution Products Corp., a subsidiary of the Wisconsin Bankers Association, both of which detailed a number of problems at WEDC.
The Schenck report, released Monday, raised concerns about sloppy accounting practices, poor monitoring of loans and an exodus of employees, including high turnover among top management officials.
The second audit, released Tuesday, said many of WEDC's problems were due to its hasty creation and incomplete infrastructure, and cited problems ranging from a lack of formalized policies and antiquated software systems to failure to create well-defined credit risk management policies.
But both reports indicated the problems could be addressed and resolved.
Agency officials said WEDC was already making changes to better track loans and fix other problems.
And Walker told the board that while there are challenges that need to addressed, "the vast majority of people are doing exceptional work" at the agency.