Department of Economic Development
An Audit Report on The Department of Economic Development
January 2000
Report Number 00-008
Overall Conclusion
Gross fiscal mismanagement of the Smart Jobs program prevents the Department of Economic Development (Department) from meeting its objectives and using state funds appropriately. The Department does not provide adequate fiscal and administrative oversight of Smart Jobs contracts or keep accurate financial records of the $201 million Smart Jobs fund balance. These problems place state funds at great risk of waste and abuse by employers who receive contracts to train employees. Smart Jobs is the Department's largest program, representing approximately 57 percent of the Department's budget for the 1998-1999 biennium.
The Department acknowledges the seriousness of these issues and has taken immediate actions intended to correct the problems, as outlined in its response.
Key Facts and Findings
- To meet its objectives, the Department must effectively manage Smart Jobs contracts awarded to Texas employers. However, serious problems hamper all critical elements of the Department's contract management practices. These problems include loopholes in the contract provisions and significant weaknesses in the practices the Department uses to select contractors, establish contract rates, and monitor contractor performance.
- The Department owes the Texas Workforce Commission's Unemployment Compensation Fund as much as $63 million because it has not complied with state laws or kept accurate financial records of the $201 million balance in the Smart Jobs Fund. The Department's failure to transfer the excess funds could increase future unemployment taxes assessed against Texas employers.
- State resources have been wasted and abused in other agency operations. The Department paid a contractor nearly $540,000 to develop a database that it never received. Also, a former employee appears to have been able to use a donated airline ticket for personal business.
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