State audit critical of Iowa Values Fund reporting procedures

State economic development officials have been inflating the number of jobs they claim were created using the Grow Iowa Values Fund, the state auditor said Wednesday.

Auditor David Vaudt called for changes in how the Iowa Department of Economic Development reports job creation under the 10-year $500 million fund.

Vaudt said a report released by IDED in June indicated 30,732 jobs had been pledged between July 1, 2003, and June 30, 2006. Of those, 14,285 were promised in contracts signed between the agency and businesses, the IDED report said.

However, Vaudt said thousands of those jobs were created using other funding, including federal money and did not meet the hourly wage criteria spelled out in the law creating the fund. Other jobs counted in the IDED June report were still in negotiations.

Vaudt's audit found signed contracts to create 343 jobs and retain 52 existing jobs from the values fund. The state awarded $5.5 million to 21 companies to create the jobs. The auditor's report concluded that as of June 30, just 80 jobs actually had been created and 28 retained.

The information was obtained from the companies involved and was not verified by the IDED, Vaudt's report said.

IDED spokesman Shawn Rolland said department officials were reviewing the report and planned to release a statement later.

Iowa Values Fund critic Ed Fallon, a Democratic candidate for governor last year and a former lawmaker, said the report validates his concerns that IDED has been inflating job numbers.

"It think it's very disingenuous," Fallon said. "I think they became so focused on trying to show success, to be quite frank, success for the governor, success for the director of the department, success for the Legislature that put it together. They became so focused on trying to show success that they didn't take the time to give us as clear a picture as we deserved."

Fallon would like to see the values fund program eliminated because he said it's wrong for states to give money to companies to create jobs because it disrupts the free market.

Vaudt would not say whether he thought IDED officials were intentionally misleading the public.

"It's impossible for me to measure what their intent was, but I can definitely say as a person standing back and looking at the data, here's a clearer way to present the numbers so people can interpret them appropriately," he said in a telephone interview.

The values fund was a priority for former Gov. Tom Vilsack, who left office in January after serving two terms.

The fund was created by the Legislature in 2003 but was struck down by the Iowa Supreme Court in 2004 after a lawsuit was filed by a group of Republican lawmakers. It was re-established during the 2005 legislative session.

For much of the time covered in the audit report Mike Blouin was IDED director. Blouin left the department in 2005 to launch a failed attempt to win the Democratic nomination for governor. Blouin returned to the department briefly last year, but is now president of the Greater Dubuque Development Corp.

Blouin said in a telephone interview that reports issued by IDED do break down job creation figures by the program. He said the values fund has prompted hundreds of companies to consider locating or expanding in Iowa.

"It's still the most successful four-year stretch of economic development this state has ever seen," he said.

He said many of the jobs created in the past few years are related to the values fund, which pays for all of IDED marketing to attract companies to consider Iowa. He said Vaudt may have a philosophical issue with programs like the values fund.

"In reality, all of that started with the values fund and I think it's fair to call it values fund results," he said. "Those are semantics and if he doesn't like the law he can recommend that it be changed. That's his prerogative."

Vaudt said IDED status reports should specify which fund was used to create a specific job and he said officials should develop a way to track whether jobs were filled by new workers moving into the state or simply people moving from one job in Iowa to another.

Among other findings in the report, Vaudt said:

The average cost per job created through the Iowa Values Fund is $13,967. Many of the projects were also eligible for tax credits. Including those benefits, an average job cost was $25,420.

The values fund law requires average annual wages of created jobs to be equal or greater than 130 percent of the average county wage. Vaudt said the IDED frequently includes salary and benefits in its calculation to reach the 130 percent threshold, which could mean the job's salary is actually lower than the law requires.

On the Net: Iowa Department of Economic Development: http://www.iowalifechanging.com/

Iowa Auditor David Vaudt: http://auditor.iowa.gov