Audits find oversight flaws
By SYDNEY P. FREEDBERG
Published April 10, 2005
Florida officials are emphatic: Their rules and procedures ensure that no company gets more public money in incentives than it deserves.
"The state administers these financial incentives with careful oversight and only in situations when they clearly will play a material role in convincing a targeted business to locate or expand in the state," Scott Openshaw, a spokesman for the governor's Office of Tourism, Trade and Economic Development," said in a statement.
Yet three times in the past four years, Florida's auditor general has chided the governor's trade office for not adequately monitoring the companies getting state incentives:
## In November 2000, the auditor general criticized the office for not visiting projects in rural counties getting low-interest loans. It said site inspections could reveal problems that didn't show up in paperwork.
## In January 2001, the auditor general found that the trade office approved $704,650 in tax refunds for several projects without adequately verifying companies' job and wage claims.
The audit urged economic development officials to act more like regulators: visit more companies getting incentives; request more independent reviews; use its enforcement powers to blunt "potential abuse."
## Last July the auditor general again found monitoring problems and recommended tighter internal controls.
"The absence of such controls increases the risks that checks may be diverted," the auditor general said.
The auditor general is an independent agency that scrutinizes state agencies and programs to improve their operations and accountability. While it makes recommendations, it cannot force compliance.
The trade office said it had "fine-tuned" its monitoring procedures. It now does onsite reviews of projects, and it hired an outside auditor several years ago to step up oversight.
The office also vigorously defended its process to review requests for incentive payments.
Before it sends any tax refunds, the trade office said, it carefully checks job and wage claims submitted by companies against payroll information submitted for unemployment insurance purposes. The five requests for tax refunds questioned by the auditor general all appeared legitimate, the trade office said.
It turns out that the trade office has no legal obligation to independently verify company-submitted information.
"In fact, (Florida) statute does not address the (trade office's) procedures for the review of the tax refund claim at all," the office said.
Relying on companies to self-report accurate data is not a recommended business practice. Private lenders usually perform "due diligence" before risking money; banks routinely do a credit check rather than rely on an applicant to report his or her own history.