Louisiana Economic Development officials are taking issue with a new legislative auditor’s report that finds the agency failed to adequately monitor contracts with private companies and organizations that help promote economic development through LED FastStart and other programs.
The audit, which covered the 2019 fiscal year, looked at just a sample of LED’s contracts—25 of more than 300. Of those, seven, or 28%, totaling more than $926,000, “were not adequately monitored to verify those contract reporting requirements, including … payroll reports, cost reports, detailed invoices and progress reports were met.”
The audit does not imply that any companies that have received performance-based incentives from LED—such as IBM or DXC Technology—have been inadequately monitored or failed to meet their performance requirements.
Rather, it pertains to firms and organizations that work as subcontractors to the agency promoting workforce training programs like FastStart and various marketing initiatives.
“LED has a lot of contracts so we wanted to make sure they are ensuring that those contractors are performing the objectives they are supposed to perform,” says Beth Davis, assistant director of financial audits in the legislative auditor’s office. “We found they were not always doing that.”
LED disagrees. In its response to the audit, which is included in the report, LED Secretary Don Pierson says “no contract payments were made without required documents being received prior to payment.”
Though the report does not detail which contracts or programs were found to be problematic, LED Undersecretary Anne Villa says three of the seven contracts cited in the report were with FastStart subcontractors that do job recruitment and training, among other things.
The audit found certain payments to the subs—including, in one case, a nearly $15,000 travel reimbursement—did not receive prior approval in writing.
But Villa says written preapproval is not required and that LED is in constant communication with its contractors and subs through email and by phone.
“We direct where they go and what we need them to do,” she says. “They have to pay for their own activities out of pocket and if they don’t follow the guidelines we don’t reimburse them. That’s why we take issue with these findings.”
Still, the auditor’s office sticks by its assertion that LED needs to keep a closer eye on what its contractors are doing as they go about trying to drum up business for the state.
“We feel they need better controls in place to ensure all their contracts are being properly monitored,” Davis says.
In an unrelated but interesting finding, the audit also notes that of the nearly $400 million in tax abatements granted by LED in FY 2019, 45%, or $180 million, were for movie production tax credits. Another 36%, or nearly $142 million, were issued under the Quality Jobs Program, which provides a cash rebate to companies that create a certain number of well-paying jobs. Read the full report here.
