MADISON (WKOW) -- An independent audit of financial practices at Wisconsin's lead, economic development agency flagged problems with record-keeping and approvals from large loans to the use of credit cards, and cited inadequate staffing to carry out institutional controls, as the public-private corporation took over functions of the former, state commerce department.
The findings of the accounting firm Schenck SC were discussed Monday by members of the audit committee of the Wisconsin Economic Development Corporation.
Separately, WEDC interim chief executive officer Reed Hall provided testimony to a state assembly committee on economic development.
WEDC was created under Governor Walker to be a more nimble, economic development tool and to help spur job creation.
Hall says WEDC staff shrunk to fifty as the three-hundred employee commerce department was disbanded, with its functions beyond economic development parceled out to different state agencies.
The audit says former slots to monitor financial record-keeping went unfilled. "The gap in employment for these financial positions played a significant role in the lack of accuracy of financial transactions and internal control processes," the audit says.
The audit highlights a flaw revealed earlier this year: the lack of follow-up on delinquent loans state officials awarded to businesses. It also says entering important, financial data was sloppy or non-existent, and says the potential for fraud was created with the failure of a system of approval for as many as a quarter of the credit card transactions of WEDC employees.
Hall tells 27 News the audit's findings, and recommendations of adoption of industry best practices confirm work already under way at WEDC to correct problems.
"We're going to look more like a bank than we do now after these things are done," Hall tells 27 News.
While Hall stressed to lawmakers monitoring practices more in-line with the private sector's financial industry will be in place, the mission of WEDC remains to partner with entrepreneurs who may not qualify for traditional bank loans, but are worth risks to potentially boost the state's workforce.
The audit says $19 million of a $51 million dollar portion of WEDC's loan portfolio is comprised of $15 million in forgivable loans, and $4 million in loans that may not be collectable.
Assembly minority leader Rep. Peter Barca (D-Kenosha), a member of the WEDC Board of Directors, says WEDC's structure retains promise, but has failed so far to meet objectives.
"WEDC needs to be on a short leash," Barca says.
The accounting firm and the Wisconsin Bankers Association are consulting WEDC leaders to help with a revision of internal control practices.
Wisconsin is one of at least eight states, including Michigan, Ohio and Virginia, to transition economic development efforts from state agencies, to entities with private sector involvement and aspects of private sector governance.
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