Audit critical of Tennesee’s economic incentive program after companies failed to create promised jobs

Nine companies lured to do business in Tennessee with generous economic incentive packages have been referred to the Tennessee Attorney General for possible legal action after failing to live up to their end of the bargain, Economic and Community Development Commissioner Bob Rolfe told lawmakers this week in response to a critical audit of the program released this week.

The companies, altogether, received more than $11 million in so-called FastTrack incentives tied to promises to create jobs and invest in local communities but didn’t fully deliver. An additional 17 companies also overpromised and underdelivered in job creation, according to their agreements with the state. State collections efforts against those companies have resulted in the return of $18.4 million in taxpayer-funded dollars, Rolfe said.

An audit by the Tennessee Comptroller found that Rolfe’s department failed to “establish written policies and procedures to govern the FastTrack program objective and goals,” and that “management has not established adequate controls over the accuracy and completeness of the (businesses receiving incentives) self-reported information.”

“Without proper internal controls and procedures that ensure compliance with the grant’s purpose and contract terms, management cannot ensure that FastTrack grants were awarded and administered as intended to create jobs,” the audit found. “Management’s inability to effectively measure contract performance also increases the risk of noncompliance, fraud, waste, or abuse of state funds.”

Rolfe, who appeared before lawmakers Tuesday, conceded there were ongoing problems with the program and said his department has “doubled down” on efforts to ensure companies receiving taxpayer dollars are held accountable

“We’ve not done our job in monitoring, crossing T’s and dotting I’s,” Rolfe told members of the General Assembly’s Joint Government Operations body. A staff member hired 18 months ago to bring greater scrutiny to the program “fell down on her job,” he said. She is no longer in the position, he said. 

“We have doubled down on our efforts to make sure these accountability agreements,” he said. The accountability agreements spell out company obligations as a condition of receiving incentives, Rolfe said. 

But Rolfe pushed back against a suggestion by Sen. Kerry Roberts, R-Springfield to revive that lawmakers’ efforts to pass legislation to codify into law the agreements companies enter into with the state, which would have the result of making it a crime to not comply.

“We’re fully capable of ensuring these legal agreements are enforceable,” Rolfe said. “We have a contract that is legally enforceable.”

Tennessee’s FastTrack program was designed to recruit companies to do business  or expand their operations in Tennessee — particularly in rural areas — with incentives tied to the number of jobs created that are, on average $4,500 per job.

Over three years, the state spent more than $250 million in these economic investment dollars, getting commitments of 88,179 new jobs for Tennessee residents.