Michigan audit: Some companies given job-focused tax credits didn’t comply with state temss

Mich. audit: Some who got tax credit didn’t comply

LANSING, Mich. — Some companies given millions of dollars in Michigan tax credits to create jobs or invest in the state didn’t always live up to their agreements on how much they would pay workers and other requirements, according to an audit released Monday.

The report by the state’s auditor general also said the Michigan Strategic Fund, which oversees tax credits awarded by the Michigan Economic Growth Authority board, didn’t have the right procedures to check whether companies were doing what they needed to do to win the credits.

To get the multiyear credits, companies must agree to create or retain a certain number of jobs, pay workers an agreed-on weekly rate and make capital investments in Michigan. But the report said workers at the fund too often accepted incomplete reports and the companies’ word that they had complied.

Its “procedures to audit the approved MEGA tax credit certificates were not effective,” the audit reported, adding that it “should require companies to submit more detailed payroll data at the time of their request for MEGA tax credits.”

The MEGA board and the public-private agency that oversees it, the Michigan Economic Development Corp., were embarrassed last month after a convicted embezzler out on parole snagged a $9.1 million MEGA credit for a business he said he planned to base in Flint. The credit was rescinded before RASCO CEO Richard Short got any money; he ended up in jail.

The audit was conducted last summer and covered the period from Jan. 1, 2005 through October 2009.

The Michigan Economic Development Corp., the state’s main economic development arm, largely agrees with report and found the recommendations valuable, spokeswoman Bridget Beckman said in an e-mail. She said many of them already have been put into place.

Beckman added that the report’s suggestions for improving data collection and validation, continuing to audit and reconcile award data with the Treasury Department and modifying future MEGA agreements to more precisely reflect board policies will be followed.

The auditor general’s review of 15 out of 27 MEGA tax credits awarded during fiscal 2008-09 found that two-thirds of the companies didn’t submit complete data needed so the Strategic Fund could validate the tax credits claimed. It also found that a quarter of the nearly 4,800 employees counted toward the jobs totals companies were required to meet were potentially ineligible, resulting in companies getting tax credits they likely shouldn’t have received.

The fiasco last month involving the RASCO credit caused the MEDC and Gov. Jennifer Granholm to require background checks on some applicants for the tax credits. Granholm also shuffled who sits on the MEGA board.

Since then, the Economic Development Corp. has began conducting pre-audits before issuing any tax credit certificates. It also has hired a certified public accounting firm to help audit all MEGA tax credits issued for 2006 through 2009 to make sure no credits were handed out inappropriately.

Lawmakers have been working on bills to provide more oversight.