Audit Finds West Virginia Economic Development Authority Loan Program Wasted Money and Sent Funds Out of the State | WV news
CHARLESTON, W.Va. (WV News) – An audit of a $ 25 million state loan program shows funds were being given to overseas companies and there were no tracking mechanisms in place to determine if the money brought new businesses and jobs to West Virginia.
A report released Tuesday by the Legislative Post-Audit Division of the West Virginia Economic Development Authority’s $ 25 million non-recourse loan program said it had been less than $ 700,000 since the Fund was set up by the Investment Monetary Board in 2002 of the capital have been repaid.
The audit also found that two venture capital firms selected by the program, which received a total of $ 8 million in funding from the EDA, did not invest any of the money in West Virginia.
Four other companies that received funds filed for bankruptcy prior to the completion of the program.
The EDA did not keep adequate records, nor did it use an accounting system sufficient to document the Fund’s transactions in accordance with the requirements of the State Code as set out in the audit.
“The EDA was unable to find evidence of source documents and general records for loan program transactions for two years,” the audit said. “The EDA paid various audit and accounting fees for the loan program with non-program funds and then booked the expense as a liability to WVEAC. However, the EDA allowed the account to accrue from 2002 to 2015 before the $ 59,713 balance was finally settled in 2020. ”
Because the EDA did not collect the correct data for the $ 25 million loan program, the auditor found the legislative auditor unable to quantify the jobs and businesses created or maintained in the state as a result of the loan program.
“All of the investments the EDA made in venture capital companies under the $ 25 million loan program were written down to $ 0, and four of the seven venture capital firms were in bankruptcy prior to the completion of the program,” the audit said. “Two companies selected for the $ 25 million loan program, Anthem Capital II and Toucan Capital Corporation, received a total of $ 8 million from the EDA and did not invest in the state.”
According to the audit, the EDA repaid a total of $ 674,222 in principal and $ 3,092,301 in interest, leaving $ 24,325,778 in unpaid loan amounts from the state’s consolidated fund.
As a result of its findings, the audit formulates three recommendations.
“The statutory auditor recommends the EDA to comply with the W.Va.-Code §5A-8-9 by keeping appropriate and proper documentation of the agency’s organization, functions, guidelines, decisions, procedures and essential transactions. In addition, when warranted, the EDA’s Legislative Auditor recommends that an accounting system be used that is adequate to record the financial activities of the programs it operates, such as the loan program discussed in this report. “
“If additional funds are required for this, the EDA should inform the legislature of these needs and apply for the necessary funds. The Legislative Reviewer recommends that the EDA follow best business practices and pay expenses within a reasonable time from the point at which they are incurred. “
“The Legislative Auditor recommends that the Legislature provide clear and concise legal guidance to the authorities on the expected outcomes of a program and guidance on the management and monitoring of investments made with government funds for any programs similar to those made by WV-Code §12-6-9e have been approved (f) which can be established in the future. ”