Lansing – — Michigan’s top economic development official Wednesday defended his agency after state auditors flagged it for not verifying job creation data submitted by companies getting grants and loans.
Michael Finney, head of the Michigan Economic Development Corp., told lawmakers media coverage of the recent audit was misleading. He said too much attention was paid to an instance when companies getting grants under one 21st Century Jobs Fund program met 19 percent of employment projections instead of the 75 percent figure reported to legislators.
“We did not overstate any job numbers,” Finney said during a hearing before the House Commerce Committee. “We provided accurate information at the time the reports were submitted to the Legislature.”
The audit released in September concluded the Michigan Strategic Fund’s processes for awarding grants, loans and contracts were effective. But auditors found the fund — which uses the MEDC to run 21st Century Jobs program — was only moderately effective in monitoring recipients’ compliance with requirements and evaluating if the programs actually work.
“Is there room for improvement? Absolutely,” Finney said.
He said he and Gov. Rick Snyder decided previously some “lower-performing” 21st Century Jobs Fund programs would go away. They were created under a previous administration, he said.
“The audit released last month was of programs operating years ago. These are not programs that represent the MEDC of today,” Finney said.
But Democrats on the committee noted the audit also covers Republican Snyder’s time in office, and problems identified by a 2010 audit were not fixed after he took over and hired Finney.
“Almost all of these problems came up in a prior audit,” said Rep. Jim Townsend, a Royal Oak Democrat, suggesting state agencies only adequately fix problems found by auditors 25 percent to 30 percent of the time. “I’m not auditor. I’m not an accountant. But it seems like that’s an awfully low batting average and we ought to be doing something about it.”
The 21st Century Jobs Fund was signed into law in 2005 by Democratic Gov. Jennifer Granholm to boost research, high-tech jobs and advanced technology. When Snyder took office, he signed a law expanding the scope of the fund.
Slightly more than $1 billion has been appropriated or allocated to the fund in seven years.
Auditors discovered recipients in one program reported they met only 390, or 22 percent, of their 1,742 projected jobs.
Finney said the back story is “legacy” programs that have since been changed under his watch were initially designed to help startups commercialize new technology and products, so job creation was a secondary goal.
“It didn’t always work. But that’s not uncommon when you’re trying to make bets on things that show high potential,” he said.
Some Republicans appeared suspicious of the state’s economic development efforts. One asked what would happen if the MEDC did not exist, to which Finney responded Michigan would be overtaken by other states trying to lure away companies.
Another Republican, Rep. Jeff Farrington of Utica, estimated spending in two programs subject to the audit equated to $72,000 to $100,000 per job created.
“For God’s sake, I hope we do better in the future,” he said.