LANSING – After audit findings last month that the Michigan Economic Growth Authority was not necessarily ensuring credits were being given for promised job numbers or wages, the Senate Finance Committee told auditors it would be seeking a follow-up audit to be sure recommended changes were implemented.

And auditors said the request would be added to the to-do list.

The audit last month was the first in the 14 years the program has existed, and officials with the Office of the Auditor General said they found a number of material weaknesses in the program, which automatically triggers a follow-up audit of the program.

Committee chair Sen. Nancy Cassis (R-Novi) said the audit findings showed, if nothing else, a need for more follow-up. “One does not make a pattern, but when you uncover this, it does raise the need to know,” she said, noting the one company auditors said had provided very little of the information required to back up its tax credit application.

Of particular concern was the record number of MEGA grants issued in 2008-09, Ms. Cassis said. Lisa Mazure, who oversaw the audit, noted those were not included in the current report because many of the companies had not yet filed for those credits.

Cassis said it was essential that those filings be audited.

And she said the report added to concerns that had already been raised about the efficacy of the tax credit program. “We’re talking thousands, if not millions of dollars, going out to companies where there are potentially extreme gaps in the data reporting,” she said. “It raises a question to me without this audit whether these errors would have been found, whether the Strategic Fund would have reported this to Treasury.”

Mazure said the Michigan Economic Development Corporation had not completed its own audits of the credits granted during 2007 at the time her audit report was completed, so she did not know what information had been provided to the Department of Treasury, which houses the Strategic Fund and the MEGA. She said MEDC was waiting until it had completed all of the audits before sending the information on to the department.

But she noted that the MEDC had agreed with nearly all of the auditors’ findings and said it was working to implement the changes.

Because some of the findings were of material weaknesses, policy said there would automatically be a follow-up audit on at least those findings to see what changes had been put in place.

But Deputy Auditor General Scott Strong said it was unclear when that follow-up would happen. In addition to having to come behind audits required under state and federal law, it would also have to wait for the MEDC to take some action.

“There’s no sense in us going back in and using our resources until they say they’ve addressed the issues,” he said. “It remains to be seen when we can go back in and review.”

Sen. John Pappageorge (R-Troy) said the committee also needed to be sure that any issues the MEDC did not address after the follow-up audit become the subject of legislative investigations, and potentially of statutory changes.

He recommended that the committee go a step further and conduct hearings on all refundable tax credits, not just MEGA.

Sen. Gilda Jacobs (D-Huntington Woods) urged a broader look at all tax credits.

But she also called on Appropriations members to try to find more money for the auditor general. “In part, it’s the Legislature’s fault for not giving you the tools you need to do the job,” she said of the delay in the first audit and the potential delay in any follow-up.

Sen. Gretchen Whitmer (D-East Lansing) argued the tenor of some of the questioning was inappropriate given the witnesses. “They are not prosecutors; they are expert witnesses,” she said.

But Cassis said all of the questions had been appropriate for the auditors. “I think we being very professional here today,” she said. “The report has uncovered a material problem. That is very serious.”

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

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