Archive for Wednesday, September 11, 2013

Audit finds problems in Kansas Department of Commerce handling of economic development programs

September 11, 2013, 11:07 a.m. Updated September 11, 2013, 5:03 p.m.


— A state audit released Wednesday found numerous problems in the Kansas Department of Commerce’s handling of major economic development programs, including exceeding the statutory cap on tax incentives by $1.5 million in the past fiscal year.

The audit also found that the Department of Commerce has made commitments exceeding that legal cap by $22.5 million over the next 10 years.

Republicans on the Legislative Post Audit Committee defended the administration, saying it is doing a good job using the economic development programs to develop jobs.

Sen. Julia Lynn, R-Olathe, said that while the Commerce Department may have fallen behind on providing reports on the programs, the department was luring companies to Kansas, and that’s what is important.

“I question whether we’re looking at the right things,” Lynn said.

The audit said assessing the benefits of the program called Promoting Employment Across Kansas, or PEAK, was “difficult because the Department of Commerce has not completed meaningful information on the program.”

The audit said data for the program were incomplete and had inaccuracies.

Commerce was more than one year behind in reporting PEAK outcomes to the Legislature, and the Kansas Department of Revenue’s tax incentive information was incomplete, the audit said.

In his response, however, Commerce Secretary Pat George said that the agency “has the ability to create several types of PEAK reports and has prepared between 30 and 40 reports showing program level data.”

PEAK allows companies to retain employees’ state withholding taxes in exchange for creating new jobs or retaining existing jobs.

The audit said Commerce had exceeded the statutory cap intended to limit the growth of PEAK. The Legislature capped the program at $6 million but Commerce had authorized $7.5 million in the last fiscal year.

Rep. Marvin Kleeb, R-Overland Park, said the $6 million cap was unintended and subject to interpretation. And George said the agency would seek legislation to allow it to provide the higher spending.

The audit said PEAK “on the best information that we could compile” generated 5,200 jobs in exchange for $21 million in forgone withholding taxes through December 2012.

Participating companies projected investing $1.4 billion in capital improvements when they initially qualified “but actual information was not available,” the audit said.

The audit also looked at the High Performance Incentive Program, or HPIP, which provides sales tax exemptions and tax credits for certain companies that make capital investments and train their workforce.

Participating HPIP companies reported making $310 million in capital investments, creating 1,100 jobs and retaining 5,800 jobs in 2010. They claimed $19 million in capital investment tax credits, and $2 million in training tax credits in 2010.

But the audit said the tax credit data under that program might not be reliable.

“For example, companies do not have to report outcome data to receive the tax credit and department staff do not audit or verify self-reported outcome data,” the audit said.

And the audit said that a review of four other economic development programs found that the Department of Commerce did little to enforce reporting requirements, which limited its ability to identify under-performing companies.

Secretary George disagreed with many of the assertions in the audit.

He said the PEAK program had experienced robust growth and some internal processing functions had to be improved. He said the agency “has never done anything the Legislature would not be proud of.”


Paul R Getto 4 years, 8 months ago

The audit said the tax credits under that program "may not be completely reliable.

I bet this turns out to be true. Muscular Sam's numbers often don't add up.

Shelley Bock 4 years, 8 months ago

My gut feeling without any support is that this program hasn't had any oversight and we'll eventually find massive errors and a lack of real economic improvement because of these programs.

I hope I'm wrong, because that would benefit the State. I believe the facts will show that Brownback's programs have had little if any impact, other than enriching the super rich while damning the poor.

James Nelson 4 years, 8 months ago

What we will never see is just how many of the new jobs would have been created anyway without the program? Unemployment in Kansas has never been as bad as other states during recessions to start with. This idea was just an idea to pad the rich man's pockets with more money courtesy of the poor and middle class who have to make up the difference with higher taxes.

I feel so sorry for the duped poor and middle class republicans in Kansas. Standing by their man is clobbering them.

veggiegirl 4 years, 8 months ago

"PEAK allows companies to retain employees' state withholding taxes in exchange for creating new jobs retaining existing jobs."

Create new jobs to retain existing jobs? What does this mean?

William Enick 4 years, 8 months ago

The Kansas Department of Commerce...handling economic development projects...conceived by the monied interests (Corporations & Financial Industries)...and carried out by the Government because we the people don't have the cash flow to lobby. Close more schools...

Richard Heckler 4 years, 8 months ago

"But Republicans on the Legislative Post Audit Committee defended the administration, saying it was using the economic development programs to develop jobs."

Joke of the century and a lie.

"But state Rep. Marvin Kleeb, R-Overland Park, said the $6 million cap was unclear in the law."

Perhaps he should have asked questions instead of allowing the reckless spending ALEC Brownback government to move forward.

Catalano 4 years, 8 months ago

I thought it would be cool to be able to click on the phrase "state audit" and have a link to take me to:

But, nope. Had to waste time searching for it myself.

HutchSaltHawk 4 years, 8 months ago

How long will it be before the Legislature or Governor decides to eliminate LPA for not promoting the Republican line. Hats off to LPA for reporting on what they found, despite getting so much criticism from the Legislature.

William Enick 4 years, 8 months ago

Our economy is sick. An economy that allows 95% of it's profits to go to the richest 1%, can only be called sick. (Repeat until sick.) Hit home yet??

Thomas Bryce Jr. 4 years, 8 months ago

Privatize Profit, Socialize Debt: The Neo Conservative Mantra at work.

Richard Heckler 4 years, 8 months ago

Perhaps the entire spending habits of the ALEC Brownback administration should receive an audit as a measure of maintaining accurate fiscal records. Protection for taxpayers and the spenders as well.

1southernjayhawk 4 years, 8 months ago

Geez, this kind of reminds me of what is happening at the federal level ......only with a logrithemic multiplier and under a democratic administration. Forget Brownback or Obama, government is incompetent and, as has been shown at the federal level, corrupt. Smaller and less government!

Richard Heckler 4 years, 8 months ago

Is government incompetent or are elected officials corrupt then blaming government? Brownback admin people represent corporate America. The revolving door syndrome.

How about the spreading scourge of corporate corruption?




Why would any taxpayer want to turn a government service over to corporate America the most reliable source of corruption?

oldexbeat 4 years, 8 months ago

seems yet again that Liar Sammy's Krew will lie as well -- just a matter of time before Commerce gave away the bank to buddies and then denies it -- liles, lies, liar - -from Sammy to Regent to Commerce to KKris -- wow -- nothing is working but everything is OK. Just don't ask questions.

Joe Hyde 4 years, 8 months ago

Funneling millions in public tax dollars to politically connected private companies; crippling the government's inspection system so that it can no longer impose money penalties for contract non-performance; rigging the game by empowering private companies to judge their own contract compliance and quality assurance...this, folks, is the hallmark of Performance-Based Contracting. This type of hands-off contracting, especially when it involves multi-million contracts, is a menace to good government whether the administration using it be Republican or Democrat.

tomatogrower 4 years, 8 months ago

And if you are watching the political ads on TV, Missouri wants to be just like us, because we are supposedly expanding our tax base, while our schools thrive. According to the Missouri conservatives we are rolling in the dough. It would be a laugh, if it wasn't such a huge lie.

voevoda 4 years, 8 months ago

It seems that the HPIP program cost the people of Kansas $19,090 for every job created because of it ($19 million + $2 million in tax credits, divided by 1,100 new jobs). Surely there are more cost-effective ways of creating jobs.

Bob Reinsch 4 years, 8 months ago

Same with just have his minions change the law to bring him into compliance, and make it retroactive.

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