WEDC Audit Raises Concerns

Wisconsin’s non-partisan Legislative Audit Bureau has released an audit of the Wisconsin Economic Development Corporation (WEDC) detailing multiple compliance issues in the state’s main jobs agency. WEDC has faced repeated criticism for poor financial controls since its creation in July 2011. The latest audit confirmed many of the earlier concerns still exist and also highlighted new issues.

Brief Summary of LAB’s Findings & Recommendations
LAB found numerous concerns regarding a lack of accountability and overall insufficiencies at WEDC.

WEDC did not have sufficient policies to administer its grant, loan, and tax credit programs effectively, including some that are statutorily required. It also had no policies for handling delinquent loan amounts. In addition, LAB noted some awards were made to ineligible recipients or for ineligible projects, and some award amounts exceeded limits specified in statute.

LAB noted that selected award recipients submitted only 45 percent of required progress reports. Furthermore, WEDC did not conduct any statutorily required verification of the performance information submitted by grant and loan recipients. LAB also found that some information included in WEDC’s annual program report to the Legislature was incomplete and inaccurate. The LAB was thus unable to assess the effectiveness of WEDC’s economic development programs.

In reviewing WEDC’s financial and personnel management, LAB found that WEDC did not monitor the amounts spent on each of its programs, did not have sufficient purchasing policies in place, and did not have personnel policies in place.

The LAB also has concerns with WEDC’s decision to create a nonprofit foundation to solicit donations to promote economic development.

LAB provided numerous recommendations to help ensure the effective administration of WEDC programs in the future.

We include recommendations for WEDC to:

establish all statutorily required policies for its tax credit programs, as well as sufficient additional policies to administer its grant, loan, and tax credit programs effectively; award grants and loans and allocate tax credits only to eligible recipients, for eligible projects, and for amounts allowed by program policies; and manage and oversee grant, loan, and tax credit contracts appropriately (pp. 33 and 47);

monitor expenditures of its divisions and programs, establish an accurate annual budget, finalize its financial accounts in a timely manner, and provide annual audited financial statements for inclusion in the State of Wisconsin’s Comprehensive Annual Financial Report ( p. 64 ); develop procurement policies ( p. 67);

limit the number of staff who have purchasing cards, close the accounts of unused or seldom used cards, and develop purchasing card policies (p. 73); and

develop policies for tracking and handling gifts received by its staff ( p. 88).

We include recommendations that WEDC’s governing board:

comply with statutes by developing expected results for each economic development program, ensure award recipients submit contractually required progress reports, annually verify performance information submitted by a sample of recipients, and ensure the annual economic development program report presents clear, accurate, and complete information on each program’s results (p. 58);

assess WEDC’s personnel administration and procedure manual, as well as certain WEDC personnel practices, and determine whether changes are needed (p. 83); and

ensure all statutorily required reports to the Legislature are submitted on time and contain the statutorily required information (p. 90).

We include recommendations for WEDC’s governing board to report to the Joint Legislative Audit Committee by July 15, 2013, on its plans to create a nonprofit foundation (p. 92) and by October 1, 2013, on:

the status of all outstanding economic development loans for which it was responsible from January through September 2013 (p. 93); and

the status of its efforts to comply with certain statutory requirements (p. 93).

In a response letter included in the audit report, WEDC chief executive officer Reed Hall said the agency was making progress in addressing LAB’s concerns, “LAB’s evaluation of WEDC’s first year of operations provides a valuable, third-party perspective on the challenges faced by WEDC in FY2012. We respect the findings of the audit with the recognition that WEDC has made significant progress in addressing operational shortcomings. The vast majority of issues raised by LAV have already been identified by WEDC and other parties, and substantive solutions are already in place or are in the process of being implemented.”

Legislative Response
The co-chairs of the Joint Legislative Audit Committee have released a statement calling for reform.

“This audit shows there is a significant disconnect between our expectations of WEDC and the reality of their performance with regard to transparency and accountability,” stated Senator Robert Cowles (R-Green Bay). “WEDC needs to take this audit seriously and correct these deficiencies immediately. There is no excuse for breaking state statutes,” continued Senator Cowles.

“The results of this audit undeniably show that there is much more work to be done at WEDC to ensure that taxpayer funds are spent in accordance with statutory requirements and that the state realizes the returns of its investments to grow Wisconsin’s economy,” said Representative Samantha Kerkman (R- Randall).

The Audit Committee has scheduled a public hearing on the audit findings for Thursday, May 9th at 9:30AM at the State Capitol.

Additional Resources
Audit, including WEDC response
Joint Legislative Audit Committee Chairs Response
WEDA Response
WMC Response