Report: Job-creation data provided to state Legislature was inflated, inaccurate

A state audit released today says the Michigan Strategic Fund gave the Legislature inflated job-creation data in April about companies that received millions of dollars in grants through a state program.

The Legislature was told April 1 that companies that received grants under the 21st Century Job Trust Fund’s Centers of Energy Excellence Program created 75% of the jobs they promised when they applied for the grants, according to the report by Auditor General Thomas McTavish.

In fact, those companies — not counting one that went bankrupt — reported creating only 19% of the jobs they promised, the report said.

RELATED : Read the MSF audit (PDF)

The fund’s failure to update its report to lawmakers with information it knew, combined with its failure to verify job creation numbers reported by the companies that received the grants, “may have negatively impacted the Legislature’s ability to correctly evaluate program results,” the report said.

According to the report, the Michigan Strategic Fund — administered by the Michigan Economic Development Corp. — attributed the inaccurate jobs report to “an oversight.”

The MEDC “is committed to transparency and takes very seriously our responsibility to keep citizens informed about programs and incentives supported by their tax dollars,” CEO Mike Finney said in a statement released to the Free Press this morning.

Under the Centers of Energy Excellence Program, one of eight programs the auditor reviewed which requires annual reporting to the Legislature, the Michigan Strategic Fund had distributed about $64 million in grants to 12 companies as of March 31, the report said. The recipients promised to create about 1,746 jobs.

Grants to eight of the companies were completed prior to the annual report required by the Legislature on April 1. The fund reported those companies had created 75% of the jobs they promised, based on information the companies provided to the fund on Sept. 30, 2012.

The fund “could not provide any documentation or support demonstrating that (it) verified the reported information to ensure that the data was correctly reported in the legislative report,” the audit said.

Also, the fund “did not adequately disclose current events affecting jobs reported,” the audit said.

One grant recipient reported in September 2012 that it had created 12% more jobs than it originally promised. The fund provided those numbers to the Legislature in April. In fact, that company went bankrupt last October and was sold to another supplier in January — information the Legislature didn’t receive.

The bankrupt company isn’t named in the report, but state officials today confirmed it is A123 Systems, the lithium-ion battery company that opened plants in Romulus and Livonia.

“We determined that the completed grants, excluding the bankrupt company, met only 19% of the original jobs projection,” based on unverified self-reporting by those companies, the report said.

The fund told the auditor it agrees with his recommendation about verifying information and making accurate and up-to-date reports to the Legislature. It will “take steps to consistently report accurate program information,” it said in its response to the audit.

Finney said the agency supports legislation that would consolidate 12 required annual reports into one.

“This will greatly assist the MEDC in producing a more complete and understandable legislative report on these programs,” he said.