Report cites two examples of clawbacks
That is according to state Auditor General Eugene DePasquale, who on Tuesday gave an update on his 2014 performance audit of the Department of Community and Economic Development. He had made 13 recommendations to provide more oversight in the state’s job-creation incentive program.
DePasquale indicated that most of his recommendations were adopted.
“Every dollar invested should be doing what the taxpayers expect, which is getting the biggest bang for the buck,” he said.
The auditor general highlighted DCED’s use of “clawback provisions,” citing two examples of companies that were penalized and forced to repay grant funding they had received for projects.
CEVA Logistics received $150,000 in grant funding that was recaptured in 2017 after the company closed a project site in Carlisle.
Also, Kraft Food Group received $200,000 in grant funding that was recaptured in 2016 due to the company closing a project site in Upper Macungie Township, Lehigh County.
The clawback provisions were requested by the auditor general and also came at the direction of Gov. Tom Wolf. According to one provision, if a company commits to creating jobs in the state and fails to make progress toward creating those jobs, it isrequired to repay the grant amount based on the jobs actually created versus those pledged to be created.
The department also enhanced enforcement of a provision that requires full repayment of a grant, as well as a 10 percent penalty, if a company receives states assistance and later leaves the state.
Another clawback provision says that companies receiving state economic development grants are required to maintain any job they create for no less than five years and to maintain operations within the state for no less than eight years after the grant was received.
However, there were a few areas where DCED chose not to comply with the auditor general’s requests. The department decided not to establish additional annual goals and performance measures for grant recipients.
According to DCED’s statement in the status report, the Pennsylvania First and Pennsylvania Industrial Development Authority programs are designed to be flexible programs that can respond to the needs of businesses in rapidly changing economic conditions, and adding additional goals would limit that flexibility.
Also, DCED decided not to impose a financial penalty on businesses that repay loans early if they do not meet their job creation requirements. However, if a loan is paid off early but the company does not create the projected number of jobs, that company could be denied a future loan by the PIDA board.