Audit: Kansas Economic Development funds used for other purposes; some lawmakers call for overhaul of regulations and better oversight
Topeka — Only 18% of Kansas economic development funds were spent as intended in the last fiscal year, in part because there is little oversight of how money for a state economic development fund is spent, according to state auditors.
In a report released Wednesday, auditors said that during fiscal year 2018, nearly half of all spending, $20.1 million, from the Economic Development Initiatives Fund didn’t go toward programs that met requirements for receiving the funds, The Wichita Eagle reported.
In response to the audit, some lawmakers called for an overhaul of regulations and oversight of the fund.
“Of course, I was appalled by what I saw … This is just a perfect example of why we need to be looking at these things,” said Sen. Julia Lynn, an Olathe Republican who chairs the Senate Commerce Committee.
The fund, which was created in 1986, is replenished every year by lottery and gaming revenue.
It has often been used to supplement state spending rather than being used directly for economic development. The Legislature is supposed to direct money into three accounts that focus on innovative products, research and development or community infrastructure.
Instead, during the last fiscal year, $20.1 million of the $42.3 million in the fund went to the state’s general fund, with the rest going to state agencies. Only 18%, or $7.8 million, went to eight programs that met requirements for the funds, such as an agriculture marketing program, the Governor’s Council of Economic Advisors, several research and development programs administered by the Kansas Board of Regents and a housing trust fund that helps residents rent or buy homes.
Auditors said Kansas doesn’t track the performance of fund recipients or evaluate whether the fund is effective. And the auditors found state officials it approached “were unaware of what (state law) says about these accounts.”
Rep. Tom Burroughs, a Kansas City Democrat, said the audit showed lawmakers need to fund agency programs properly.
“We’re the ones that have failed on not following our own statutes,” Burroughs said.
Department of Commerce Secretary David Toland said the current law requiring that all EDIF funding was obsolete and didn’t match current economic development needs. In a letter in response to the audit, he asked the lawmakers to eliminate the current language.
The auditors said lawmakers should consider both creating an oversight body for the fund and deciding whether state law should continue to require EDIF dollars go into the three accounts.