DCI: State Auditor's Recommendations

Let's take a closer look at the state Auditor's report on the Department for Innovation and Commercialization (DCI). As the report uncovered yesterday, the state has spent over $147 million (!) on "New Economy" initiatives since 2001. Our recent posts have raised the question of whether Kentucky's taxpayers have seen any real return on that investment.

The Auditor's report doesn't go directly to that question but does reinforce a couple of issues we have pointed out - primarily accountability and reporting. Or in the case of DCI - the lack thereof.

Here are the recommendations:

1. There are no regulations, official internal policies, or other formal

written guidelines to document the criteria and process used in

administering the High-Tech Construction Pool and High-Tech

Investment Pool. DCI should document the administrative process and

requirements used for the high-tech pools in an administrative

regulation to ensure transparency and consistency in government.

2. Annual reports produced by DCI are not sufficient to demonstrate the

effectiveness and return on investment of projects funded through the

High-Tech Investment Pool and the High-Tech Construction Pool.

Current reports do not provide updated information on previously

funded projects that would demonstrate the outcomes from the millions

of dollars spent through the high-tech pools. DCI should increase the

amount of information in their annual reports.

3. The Kentucky Economic Development Finance Authority does not

produce statutorily required annual reports for completed projects

funded through that agency. Annual reports should be produced as

required to provide sufficient information and accountability on the

outcomes of projects funded with state funds.

4. There is no documentation that DCI conducts regular on-site reviews to

determine whether funding recipients are meeting the requirements of

the funding agreements. A physical presence provides another step in

the monitoring process that ensures state funds are being used for the

required purpose. DCI should begin performing formalized and

documented on-site visits to all funded projects.

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Bottom line: DCI and the Cabinet for Economic Development aren't providing a) the statutorily required reports to gauge the effectiveness of the program or b) enough information through the reports that they do produce to determine if there is a sufficient ROI from the investments.

We wrote earlier this week about the weakness in the annual report posted on DCI's website. The data is from 2001 - 2005. Last we checked it was July 2009.

Given that they have been given guidance from the Auditor's office and seemingly have failed to comply with it - perhaps its time for an interim committee  to call the Economic Development Cabinet for a hearing to explain just where that $147 million has gone and what it has produced.