Sen. Cassis: Audit finds significant MEGA fund abuse state-wide
$3.1 million already recovered by State Treasury
August 27, 2010  MORE

LANSING, MI – The Senate Finance Committee on Thursday continued hearings on the State Auditor General’s audit of the Michigan Economic Growth Authority (MEGA) program by questioning Michigan Economic Development Corporation (MEDC) officials about the audit’s findings and what actions have been taken to address issues raised in the report.

“This audit was the first of the MEGA credit program and identified serious problems on validation – or lack of validation – by the Michigan Strategic Fund regarding critical information needed to qualify for the MEGA tax credit certificates,” said Sen. Nancy Cassis, R-Novi. “I am encouraged that the MEDC has made some corrective actions, but if not for this audit, the state would be continuing business as usual – potentially putting at risk millions of taxpayer dollars at a time when Michigan faces another billion dollar deficit.”

Cassis added: “Legislation to address the audit’s key findings is needed to protect the state’s limited financial resources and rebuild the public’s trust in the administration of Michigan ’s main economic development program.”

The state auditors found that the MSF’s procedures were not sufficient to validate the summary information detailing job claim and wage data maintained by the companies. The audit determined “that either the MSF or the company inputted formulas or standard amounts for missing data elements rather than actual data.”

“I am extremely concerned about MEDC’s inflated job creation numbers because of the strategic fund’s failure to verify job and wage numbers before giving out refundable tax credits. This results in an inability to measure the effectiveness of the program to create jobs,” said Cassis, chair of the Senate Finance Committee. “ Michigan is on track to lose a million jobs this decade. In 2009, the state awarded the most number of MEGA credits in the program’s history, yet Michigan had a net loss of 233,000 jobs last year alone. If the MEDC and the governor created 1.4 million jobs as they claim, Michigan ’s unemployment rate would be less than 4 percent instead of more than 13 percent.”

Auditors reported 10 of 15 companies failed to submit all requested information needed to verify the data for the tax credit and often relied on self-reporting for new jobs and payroll figures.

Cassis noted that the Michigan Department of Treasury has recovered nearly $3.1 million in credits that had been over-claimed, illustrating the real financial impact to the state.

“Legislators must remain vigilant and strong with our oversight responsibilities,” Cassis said. “For that reason this committee will hold further hearings in September on the RASCO and Hangar42 scandals, which also have shaken the public’s confidence in state programs, like MEGA, to be responsible with taxpayer dollars.”