Kansas report points to transparency gaps on economic development database

TOPEKA — State auditors reported the Kansas Department of Commerce wasn’t fully complying with a five-year-old law mandating maintenance of a public database tracking more than 100 economic development incentive programs.

The transparency database was conceived by the Kansas Legislature to offer a means of reviewing how hundreds of millions of dollars in incentives were handed out by state officials to city, county and businesses recipients. The statute authorizing the accessible, searchable and printable database limited the required disclosures to incentive awards valued at more than $50,000 per year.

The Legislature’s auditing agency concluded the commerce department’s database didn’t include all economic development programs. In addition, auditors said, there were shortcomings in the database due to missing information on incentive programs and unreported details on recipients of incentives.

The auditors drafted a list of 60 incentive programs offered by the state, and discovered 13 were absent from the database. In a separate assessment, auditors said five programs studied in detail lacked about half of 11 state-mandated disclosures, including information on compliance rates and return on investment.

The online database contained most statutory information for 24 recipient records reviewed by auditors, but some incentive benchmark information was inadequate.

Most significantly, the database didn’t provide easy access to information on the STAR bond program, which provides one of the state’s major tax breaks for developers. Commerce department staff told auditors the STAR bond program was “unique and difficult to standardize into the recipient table format” of the database, the audit report said.

Commerce agency personnel told auditors technical hurdles existed that made it difficult to compile all required incentive information. In addition, the agency said some information missing from the database could be found by the public at other online locations.

Sen. Mike Thompson, a Johnson County Republican on the Legislature’s auditing committee, said lawmakers should work on a bill that more explicitly laid out requirements of the database and that encouraged commerce officials to close remaining gaps.

“The reason for that database, ostensibly, is so anybody can go in there and track anything that’s going on,” Thompson said. “I’m a little bit discouraged that in the report commerce contends they fully fulfill statutory requirements by providing information at other locations on the website.”

Auditors said in the report distributed to legislators this week that the commerce department should flag missing information and offer explanations to online users about impediments to data collection.

Sen. Caryn Tyson, a Parker Republican and chair of the Legislature’s audit committee, said she was pleased the commerce department had taken steps to expand availability of information on incentive recipients. She lauded the addition of a feature on the database website that allowed users to search economic development awards by House and Senate district, in addition to city and county summaries.

“This is a massive change to what was available,” Tyson said. “It’s much appreciated.”

However, Tyson said it would be necessary for the Legislature to grapple with missing information on the estimated return on investment of individual projects.

“There’s always a way to calculate and figure that,” the senator said. “That is very important for us to know whether some of these programs should continue or not.”

Rachel Willis, director of legislative affairs at the commerce department, offered the agency’s rebuttal to the analysis produced by the state division of Legislative Post Audit.

She highlighted deficiencies in methods relied on by auditors and argued the audit report didn’t reveal the scope of efforts to comply with the transparency law.

“Unfortunately, (state law) lacks the specificity and clarity needed for our agency to truly meet these goals. Without that clear statutory guidance, Legislative Post Audit has developed new unknown standards and made certain assumptions in areas where the statute is too broad,” Willis said.

She also said the commerce department’s compliance challenge was exacerbated when the Legislature provided only partial funding of a budget request that would have been dedicated to the database.

The audit findings were “insufficient and not all encompassing,” Willis said, because auditors arbitrarily reviewed 60 incentive programs despite the database containing information on 106 programs. She said auditors randomly selected a handful of grant programs to examine in detail, but ignored more than 40 other state grant programs.

“The audit reviewed 24 recipient records, which is less than 0.001% of the recipient records in the database,” Willis said.

She said the database’s spreadsheet had 13,000 rows and nearly 225,000 cells of data. Commerce compiled the information through collaboration with four state agencies and updated the information twice each year.

The idea of documenting incentive benchmarks or return on investment was a challenge because records varied greatly, she said. It would be “impossible” to gather that information in a format offering a consistent, digestible language accessible to all users, she said.

“Transparency will always be a priority for the agency,” Willis said. “The database has been a work in progress as we navigate a broad statute that attempts to use a cookie-cutter approach to a wide variety of programs.”