"Can you find out the nuclear flaw in the Foxconn
deal?” a woman asked me. She was referring to words leaked out of secret
negotiations between the state and a Taiwanese billionaire.
Lawmakers, who recently voted in favor of the Foxconn deal,
did so without seeing any contract. They put faith in a state operation known
as Wisconsin Economic Development (WEDC).
Despite being paid for entirely with public funds, the $3
billion contract with Foxconn is not public. Nor do lawmakers who approved the
plan know what problems exist in the draft contract. As the saying goes, the
devil is in the details. Lawmakers and the public cannot see the details and
are asked to trust WEDC negotiating the deal and later overseeing the Foxconn’s
compliance.
But is WEDC worthy of our trust?
For years, the nonpartisan Legislative Audit Bureau (LAB)
reported concerns about WEDC’s administration and oversight of economic
development programs.
In 2013, nearly two years after WEDC was created, auditors
could not report on state dollars spent by WEDC because their financial and
accounting systems were not adequate. Members of the Joint Legislative Audit
Committee learned spending was tracked largely by credit card statements. To
remedy this serious problem, legislators passed a new law that included an
independent audit of all WEDC financial statements. Financial statement
preparation should be basic for any state agency.
At an October 2013 Audit Committee public hearing, WEDC
leaders promised they had complied with all the LAB recommendations. However, a
year later, auditors reported many problems related to basic operations and the
tracking of money. For example, auditors found some spending not recorded in
the accounting system and found past due loans that were missing.
By 2015, auditors discovered a larger than necessary cash
balance at WEDC. By the end of June 2015, WEDC had accumulated in excess of $85
million as reported in a 2017 audit.
Losing loans and not properly accounting for internal
expenses are problems associated with the operation of a troubled agency. But
the problems WEDC could encounter in overseeing a large project like Foxconn
are related to the independent evaluation of the company’s promises compared to
their actual records.
Four years after WEDC was established auditors finally could
report that WEDC made ANY effort to obtain information about jobs were actually
created. However, further review by auditors showed the attempts made by WEDC
only compared a company’s own promises to report and the reports a company
itself filed. WEDC made no effort to verify the information submitted.
In its most recent audit, the LAB reported WEDC paid an
outside consultant $24,900 to do the work they were required to do since their
existence in 2011. Auditors found concerns including that the contractor’s work
was limited and did not include grants.
In the LAB’s own evaluation of completed economic
development projects, auditors’ findings included: companies gave money for job
creation without any contract requiring such, companies quitting before the end
of their contract period without delivering promised jobs, contracts to create
jobs were written with no specific number of jobs to be created, WEDC forgave
loans even though the company created or retained a lower number of jobs than
required, and WEDC counting twice the number of jobs created by a company.
If Wisconsin taxpayers cannot be confident after seven years
and the investment of hundreds of millions of state dollars that promised jobs
were created, how can we possibly be confident WEDC can negotiate and oversee a
$3 billion contract?
No local government would ever agree to spend money without
seeing a contract. No banker would agree to loan funds without a contract. No
businessperson would ever commit funds without a contract.
Lawmakers bought a pig in a poke – an unknown deal.
WEDC has not earned lawmakers trust, nor that of the public.
Lawmakers can and should do more to oversee this project.
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