Audit: Governor's economic development corporation lacked documentation for spending, grants

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MADISON, Wisconsin — Wisconsin's semi-private job creation agency lacked supporting documentation justifying spending on expenses and grants during the first two years of its existence, according to a report released Friday.

The Legislative Audit Bureau's report examined the Wisconsin Economic Development Corporation's finances over fiscal years 2011-12 and 2012-13. Auditors found the agency's spending on administrative expenses such as salary, marketing and travel grew from $11.2 million in the first year to $15.1 million in the second.

Auditors reviewed 223 non-payroll administrative expenditures and found instances where spending wasn't adequately documented to show what spending occurred, whether it was reasonable or whether it was approved. Some expenditures should have been recorded in different accounts or weren't recorded consistently with similar types of spending. For example, $50,000 spent under a grant agreement was recorded as a services expenditure, the report said.

Spending on grants to businesses, economic development organizations and local governments grew from $14.7 million to $15.2 million during the time period, the report said. Auditors reviewed 44 grant expenditures and discovered errors in processing and that some supporting documentation wasn't adequate. For instance, documentation for two grant expenditures didn't include disbursement requests WEDC had approved.

The report noted the agency has corrected the processing errors and set up a new tracking system that will allow transactions to be uploaded directly into the agency's accounting system, reducing the chance for mistakes.

Gov. Scott Walker created WEDC, a public-private partnership, to replace the state Commerce Department in 2011. The agency was beset with problems from the start, including not tracking past-due loans, leadership turnover and highly critical audits that revealed mismanagement at the agency.

The report also noted the agency was responsible for $60.5 million in loans to businesses and economic development organizations over the two fiscal years. Nearly 75 percent of those loans were awarded by the Commerce Department, the report noted.

Nearly $1.7 million in loan repayments were past due as of Dec. 31, 2013. The audit said the balance of loans with past due payments totaled $5.5 million, suggesting the agency might not be able to collect that money.

State Rep. Samantha Kerkman, R-Salem, co-chair of the Legislature's audit committee, said in a statement that Friday's report shows WEDC still has "significant ground to cover."

WEDC CEO Reed Hall said in a letter attached to the audit that the agency now has a policy calling for supporting documentation for spending, has improved its account tracking and plans to review its loan portfolio.

Assembly Minority Leader Peter Barca, D-Kenosha, and state Sen. Julie Lassa, D-Stevens Point, issued a joint statement saying the audit shows WEDC is still scrambling to implement basic accountability measures and that its job creation efforts have been ineffective.

Federal data released Thursday show Wisconsin ranks 33rd in the nation in private-sector job creation for the year that ended in March.

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