Audit criticizes lack of transparency in job creation fund

Topeka — The Kansas Department of Commerce has no written guidelines governing a fund designed to promote job creation and sometimes awards money to groups not clearly associated with economic development, according to a new audit.

The department oversees the Kansas Job Creation Fund, which receives about $3.5 million annually from state income tax payments. It has provided 71 awards totaling $25.6 million during the past five years.

An audit released Monday said the agency sometimes provides awards without requiring an application and requires some companies to produce measurable economic activity to receive funds but doesn’t have the same requirements for other companies, The Wichita Eagle reported.

The commerce secretary and governor control the program.

“This is why there’s a lack of trust in government right now. Because we have $25 million of taxpayer money that is in the hands of two people and it’s been that way for a long time,” said Sen. Julia Lynn, an Olathe Republican who chairs the Senate Commerce Committee.

Democratic Gov. Laura Kelly said Monday that she had not seen the audit but that the state is reviewing all incentive programs.

“There just hasn’t been an evaluation process for each of them to make sure we’re getting our bang for our buck,” Kelly said. “And so the job creation fund is just one more we’ll take a good, close look at.”

The auditors reviewed five awards in detail, including a $90,000 award to the Renwick school district in Sedgwick County to create a Future Farmers of America chapter and agricultural education program and $80,000 for the Kansas Business Hall of Fame in Emporia, which used the funding as matching dollars to build the hall.

Other awards — such as $70,000 given in 2015 to New York-based Genesis Corporation, a technology firm, for construction costs and to help create 200 new jobs — appeared to more closely meet the goals of the fund.

In three of the five cases, the agency awarded money without requiring the organizations to produce jobs or other economic activity.

Auditors said decisions on awarding the funds are largely left to the expertise of Commerce Department staff because the agency doesn’t have a formula or written guidance to determine how much money to give a company.

Commerce Secretary David Toland, appointed by Kelly, said in a letter to auditors that all the projects that were reviewed complied with Kansas law. He said the fund helped create 12,916 jobs and retained 20,196 jobs between 2014 and 2018.

“This program helps attract new business to our state, retain and grow existing business and foster economic development. The program is structured to be flexible which allows us to meet the needs of the businesses we serve,” Toland said.

An agency official acknowledged Monday that some employees questioned the awards to Renwick schools and the Kansas Business Hall of Fame, which were awarded under previous secretaries.

“The reason I mention that is that they were done against the objection of multiple staff members who feel it did not meet the required provisions or intended goal of what JCF was for. They were carried out regardless,” David Soffer, public service executive at the agency, told lawmakers.

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