JEFFERSON CITY, Mo. — A report released by the Missouri State Auditor’s Office found little oversight on the millions of taxpayers dollars the state is spending to bring in more jobs.
The audit released Thursday looked at the Economic Development Advancement Fund, which is primarily overseen by the Missouri Department of Economic Development.
According to Auditor Nicole Galloway, the DED did not provide detailed information about the performance of a vendor that has been paid nearly $6 million to bring in more jobs to Missouri.
“It is essential that Missouri is competitive nationally, and this public-private partnership is helping meet that important goal. However, that does not mean taxpayers should give up the right to have their dollars used efficiently and transparently,” Galloway said. “In this case, the state is not doing its due diligence to ensure accountability for millions in taxpayer dollars.”
The department has an exclusive contract with the Hawthorn Foundation and its subsidiary, the Missouri Partnership, which manages nearly all of Missouri’s efforts to recruit new businesses to the state. Approximately 86 percent of spending from the EDAF goes to the contract. During the past three fiscal years, 45 percent of the Hawthorn Foundation’s income came from the EDAF. Other revenues include grants, membership dues and foreign trade office income.
Over the three-year period, the annual report submitted by the agency shows 5,372 jobs were created at an estimated cost of about $1,000 per job. The DED also did not independently verify the number of new jobs announced, which resulted in inconsistencies in these numbers, according to the report.
Galloway raised concerns about the way incentive payments were awarded by DED. Under the contract, these incentives are based on the number of jobs announced per year, but it appears the per-job performance rate was adjusted to ensure the Hawthorn Foundation received the maximum payment every year.
“When it comes to performance-based incentives, the Department of Economic Development is simply not administering the contract effectively, instead awarding the maximum payment without verifying if the results are correct,” Galloway said. “Relying on news clippings from when new businesses are announced is not an effective solution to ensure accuracy. There needs to be a better system in place.”
The report also detailed actions taken by the DED to use funding from the Missouri Development Finance Board to continue to make payments to the Hawthorn Foundation, despite funding being cut from the budget. These payments were not required to be approved by the legislature, listed on the Missouri Accountability Portal or disclosed to the public. The department reimbursed the Missouri Development Finance Board after lawmakers approved funding for the Hawthorn Foundation in a supplemental budget bill.
DED Director Rob Dixon said the agency will amend its contract to have the foundation provide auditors with more detailed expenditures in the future.
The full report on the Economic Development Advancement Fund can be found here.
