A report released today from the West Virginia legislative auditor found a loan program to venture capital firms for generating economic development in the state fell short of its goals, and state auditors struggled to determine what impact the program did have due to a lack of record-keeping.
“In summary, it is the legislative auditor’s opinion that the loan program did not achieve the intended outcomes and what was achieved is difficult to quantify,” the report found.
The loan fund was established by the legislature in 2002 through the Economic Development Authority (EDA) and gave loans totaling $24.5 million to seven venture capital firms.
According to the audit, two of the companies received $8 million through the EDA and did not invest any of the funds within the state.
The legislation creating the loan programs was intended to create jobs and businesses in West Virginia. The legislative auditor questioned how this goal could be met without guarantees to spend within the state from the companies given the money.
Another four companies were placed under the control of a court-ordered independent party before the completion of the program. As a result of the lack of return on investment, 99 percent of the loan fund remains unpaid.
The audit also found that the EDA did not effectively keep proper records as required by law. As a result, the audit could not quantify whether the program created jobs or businesses while the program likely did.
“The EDA did not utilize accounting methods capable of adequately and efficiently documenting the transactions for the $25 million loan program, nor did the EDA effectively generate and maintain hardcopy source records,” State auditors found in the report.
In a response to the audit, members of the current agency leadership said they did not know why their predecessors made the decisions they did. Based on data the agency collected, they said the program created 409 jobs in West Virginia.
The legislative auditor recommended the EDA move to comply with the law regarding record-keeping, and future investment programs have clear guidance on the expected outcomes.
The EDA’s response said the agency has purchased new account software and would welcome the other recommendations of the audit.