Grants audit shows Pa., firms falling short

HARRISBURG - Pennsylvania officials gave tens of millions of dollars to businesses without adequately checking whether the companies kept their job-creation promises and without recovering the money from failed deals, state Auditor General Jack Wagner said yesterday.

Wagner's audit period spans the administrations of three governors - Tom Ridge, Mark Schweiker and Ed Rendell - all of whom distributed money under the state's Opportunity Grant program as a way to help companies expand in Pennsylvania or to lure them to the state. Wagner released the 104-page audit at a Capitol news conference yesterday.

About 60 percent of the 360 companies that received more than $117 million in grants between 2000 and 2003 did not meet their job promises, Wagner said.

The results are similar to the findings of an Associated Press analysis of Pennsylvania's job-creation deals in 2003-04. The AP's review found that 55 percent of the companies that made some of the biggest job-creation promises in exchange for $44 million in grants, loans and tax credits did not meet their part of the bargain.

The auditor general's report said state officials typically let years go by before checking in with the companies to monitor their progress. By then, some had gone out of business, it said.

State officials also passed on many chances to get money back when companies fell short of their commitments, Wagner said. From 2000 to 2005, state officials waived more than $49 million in repayments they could have pursued against 187 companies that had received grants dating back to 1996, when the program began. They collected only $3.4 million.

Those in charge of the program never put a limit on the amount of any single Opportunity Grant that could be awarded, as was required under the law that authorized the grants, he said. And state officials relied on the companies to report their job numbers without independently verifying them, he said.

Wagner said he supported the goal of the grant program, and praised the Rendell administration's cooperation in the audit. But he also criticized the administration for the "selective" way in which officials reported on the grant program's success.

The Rendell administration embraced most of Wagner's recommendations, but the governor's economic-development secretary, Dennis Yablonsky, repeatedly emphasized data that he said showed improvement in the grant program under Rendell.

Yablonsky, who appeared with Wagner, said his department would put a ceiling on an individual grant amount and would more actively monitor the performance of grant recipients to head off problems earlier.

State Auditor General Jack Wagner did not disclose the names of all 724 companies that received a total of $214.7 million in Opportunity Grants between July 1, 2000, and June 30, 2005. Three local companies were cited as examples of various outcomes.

Successful

Merck & Co. Inc.

was awarded $1.2 million in fiscal 2000-01 for an expansion project in Montgomery County. It promised to create 1,350 jobs and actually created 2,500.

Unsuccessful

Laclede Steel

was awarded $250,000 in 2000-01 for heating equipment in its Bucks County plant. It promised to create 100 jobs and retain 120 jobs. The company went out of business, and the state assessed a $250,000 penalty, which it never collected.

Mixed result

Vanguard Group Inc.

was awarded $12 million in 2000-01 to expand an existing operation and build another building in Chester County. It projected creating 6,000 jobs. The mutual-fund firm bought land, but never built. It paid a $3 million penalty repayment in July. Vanguard said it created 2,000 jobs at its existing site.

Read the Pa. auditor general's report on the Opportunity Grant program

at

http://go.philly.com/oppgrants