MADISON, Wis. (AP) -- Poor record keeping, a lack of basic accounting controls and high staff turnover all contributed to problems in the first year of Wisconsin's premiere job-creation agency, according to an independent audit released Monday.
The semi-private Wisconsin Economic Development Corp. was created in July 2011 by Gov. Scott Walker and his fellow Republicans to help boost the state's job creation efforts. Walker promised during his 2010 campaign to create 250,000 new jobs, and the WEDC — with an $81 million annual budget — was the entity charged with spurring economic development.
But it has been beset with a series of high-profile missteps and departures of top officials.
One of its board members and frequent critic, Democratic Rep. Peter Barca, told a state Senate committee on Monday that if problems have not been fixed within a year, WEDC should be dismantled.
"WEDC needs to be on a short leash," he told the Democratic-controlled Senate committee, which is looking at organizational changes to the agency.
His testimony came about an hour before the release of an audit by accounting firm Schneck SC that highlighted several reasons for WEDC's problems, including a lack of basic internal accounting controls over tracking $56 million in loans. Borrowers have fallen behind on payments on loans that are now worth more than $12 million.
The audit found that loan activity was recorded in a separate software system to monitor collections and balances of individual loans. However, the system was not routinely compared to loan disbursements and payments, and loan agreements did not always contain approved staff or performance reviews, according to the audit.
The majority of resources at the start of WEDC were devoted to development of economic development programs. That, coupled with the departure and reassignment of many employees, left key financial positions vacant, the audit said.
Interim WEDC head Reed Hall, who has repeatedly acknowledged mistakes were made in the startup of the WEDC, said findings of the audit weren't unexpected given that staffing at the agency dropped from about 300 to around 50. Hall told the Senate committee that more staff would have to be hired and new computers were needed.
"We're all dedicated to making sure this is corrected and we can all move forward with the next chapter of this agency," Hall said during discussion of the audit with WEDC board members at a meeting, which followed an earlier meeting with the Senate panel.
The audit was scheduled to be taken up by the full WEDC board on Tuesday, along with a separate independent review of the agency's operations by Financial Institution Products Corp., a subsidiary of the Wisconsin Bankers Association.
In its response to the audit, the WEDC detailed procedural and internal changes that were being made to better track the loans and fix other problems noted, such as improper accounting journal entries and deficient credit card policies for employees.
Ironically, WEDC said it was turning to practices of the Commerce Department — which it replaced on the premise that it was an ineffective agency — for guidelines on how to update its loan policy.
The audit also said the departure of many Commerce employees at the time of the transition played a significant role in the lack of accurate financial transactions and internal controls. Financial transactions were either not recorded or were recorded improperly throughout the year and not detected by WEDC employees, the audit said.
There has also been turnover at the top of the WEDC.
The initial head of the agency, former Green Bay Mayor Paul Jadin, resigned at the end of October, as did WEDC's chief financial officer. Hall, the former executive director of the Marshfield Clinic, has agreed to serve as interim chief executive officer until a permanent replacement is found.
Barca, who is Democratic leader in the Assembly, said high turnover in leadership of the state's economic development efforts was one of the things that WEDC was designed to stop. He cited that, and other missteps by WEDC as evidence that it has largely failed to meet its goals and its progress needs to be closely watched.
Barca called WEDC a "very sad commentary on our goal to operate like a well-run business. Unfortunately it's done anything but that."
WEDC also has run into problems with federal officials who recently raised concerns that the agency spent nearly $10 million without legal authority for eight months. And this summer, the state had to suspend and then restart bidding on a state contract after the WEDC offered one bidder, Skyward of Stevens Point, tax credits if it won the contract.