Audit finds state economic development agency fails to comply with several policies

A recent report from the Legislative Audit Bureau (LAB) found that the Wisconsin Economic Development Corporation (WEDC) failed to comply with several of its policies and has not implemented recommendations made in previous years. 

WEDC, which is a public-private agency designed to help with business development and innovation through loans, grants, tax credits and technical assistance programs, was started in 2011 under Gov. Scott Walker. The agency has faced issues with transparency and performance since its creation. However, the last audit of the agency found that WEDC’s performance was improving.

The most recent audit report, which analyzed fiscal years 2020-21 through 2022-23, found that WEDC did not adopt several recommendations from previous reports and was failing to comply with policies in several areas. The report made 26 recommendations for the agency.  

Auditors found that WEDC violated its policies by failing to post approved meeting minutes online and that procedures for awarding tax credits were inconsistently applied. 

WEDC gave five grants between March 2020 and June 2023 that totaled $50,000 to ineligible recipients. WEDC did not require eight grant recipients to repay $64,300 in supplemental federal funds that had been used to cover expenditures that were incurred outside contractually specified time periods or not verified. 

The auditors recommend, as they had previously, that the WEDC improve its administration of economic development programs by modifying procedures to require the agency to award program tax credits only for the wages paid to employees for services performed in an enterprise zone in Wisconsin. 

The report also recommended that WEDC revoke tax credits in a timely manner, after auditors found that the agency didn’t revoke $2.6 million in tax credits from 20 award recipients that didn’t meet their contractual obligations. 

Two previous reports suggested that WEDC improve how it assesses the results of its programs by assessing awards that are closed and use the information to consider changes to its program policies. Auditors found WEDC still hasn’t implemented that recommendation. 

Auditors also discovered that WEDC’s online data contained inaccurate information, including about the number of contractually required jobs created and retained as a result of awards. 

The report also said WEDC’s available funding exceeded its payments from July 1, 2020 through June 30, 2022 with the agency not allocating $13 million of $69.7 million available by the end of June. Federal money made up 61% of WEDC’s total revenue in 2021-22, while state money made up 39% of the budget. 

WEDC Secretary and CEO Melissa Hughes responded in a letter to the report, saying the agency appreciates the professionalism and cooperation the LAB has exhibited during the review. She said the report will help WEDC with the creation and maintenance of program guidelines and procedures and that the agency is “committed to transparency and to providing its data in a meaningful, accessible manner for stakeholders and the public to understand.” 

Hughes also pointed out that an independent audit of WEDC’s fiscal year 2022 financial statements conducted by Sikich LLP resulted in a clean audit opinion and found no internal control deficiencies in the agency’s financial reporting. The agency also received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers’ Association of the United States and Canada for a tenth year in a row.

The LAB recommends that WEDC report on its efforts to implement the recommendations to the Joint Legislative Audit Committee by Dec. 6, 2023. Hughes said the agency plans to formally discuss the report with WEDC’s audit and budget committee and board of directors and provide a plan for addressing the recommendations to lawmakers by the prescribed deadline.