LANSING — Michigan's economic development arm should better ensure that businesses receiving cash incentives create and keep promised jobs, according to a state audit.
Auditors reviewed Michigan Business Development Program incentives that were awarded over a nearly three-year period ending in mid-2017. They found that the Michigan Strategic Fund's process for awarding hundreds of millions of dollars in grants and loans to companies was sufficient, while the monitoring of compliance was "moderately effective."
Auditors highlighted three reportable, or less serious, findings – including that the state should strengthen how it verifies that businesses have added enough new jobs to qualify for funding.
The Strategic Fund, they said, did not require companies to provide sufficient employee information – such as names or Social Security numbers – so it could check through an independent source like the secretary of state's office or the Unemployment Insurance Agency. Data supplied by the businesses is not impartial, according to the audit.
The Strategic Fund disagreed with that finding and others, defending its process for collecting and verifying worker information as "robust." Accessing information at other agencies would pose significant legal and confidentiality concerns, according to a response to auditors that said the state uses multiple sources to confirm employees are actively working.
"This audit confirms the overall execution of the program is fundamentally sound and delivers a highly successful return on investment," said Otie McKinley, spokesman for the Michigan Economic Development Corp., which recommends projects to the fund. "MBDP has led to more than 29,000 jobs and delivered more than $7 billion in capital investment to communities across Michigan since its creation in 2012, targeting highly competitive projects that face strong competition from other states. The audit also highlights additional opportunities for improvement, many of which are in the process of being adopted."
The audit found problems with an annual report submitted to the governor and lawmakers, and recommended that the state improve efforts to evaluate the economic impact and overall benefit of the incentives. About $387 million in grants, loans or other economic assistance was spent or committed between December 2011 and May 2017.