Legislative Joint Auditing

Eventually joined auditing committee is your back called to order. Chair sees a core on the first order of business is the adoption of the minutes from the november ninth twenty twenty three meeting. Should have a copy of those minutes in your packet and would give everybody moment to review those. The. Do I see a motion to approve the adoption of the minutes of the november ninth twenty twenty three meeting as the emotion representative right second senator bright all those in favor say I all those oppose. As habit motion carries the minutes have been adopted next at him on the agenda is the adoption of the reports of the executive and standing committees i'm gonna rain as my co chair senator wallace this time to read the executive committee report. Mission chair the executive committee met thursday december seventh per harbour day twenty twenty three the staff report to the committee the audit special investigative in shortage reports scheduled to represent it to the standing committees in the four legislative joint audit committee this morning in new business the committee approved the following two motions for the staff to. Preparing report concerning funny of state district courts. In conduct a review of severe county medical center expenditures of six point two million of our for funds with no additional business to discuss the mini was a joint journal the next meeting of the committee is scheduled for thursday january eleventh twenty twenty four in a move for the adoption of this report. Cinder wallaces move the the adoption of the report do I see a second second representative dalby all those in favor c eye all those opposed. Report has been adopted next we have the standing committee on counties and municipalities i'll recognize representative right to read the report. The committee adopted the minutes of the meeting here november eighth twenty twenty point three very considerable questions from the towns of jericho and dash to repay less than ten percent of general revenues for amounts o to the straightforward as required bark so code annotated twenty seven seventy two o seven the committee deferred days for quest and directed staff to work with the towns to submit written plans to repay their street finds at the meeting to be held genuinely the level twenty twenty four. The committee reviewed a deferred reports in sixty three current reports officials from six energies. Were present to address repeat findings for the previous deferred report for filed and forward so that officials can address repeat findings or staff can gather a question information. Of the sixty three current reports reviewed one was certified to the governmental bond board in seven were referred to prosecution tourneys and the attorney general. The committee filed fifty nine current reports and deferred for four so they're officials can provide adequate responses to findings or attendant january meeting to address unsolved findings. Staff notified the committee that the city of gold is in substantial non compliance with the municipal accounting law and recommended to begin into the process outlined in arkso code annotated fourteen fifty nine dash one one seven the commercial voter to begin this process and saying written notification to the mayor in city council that they're records or in substantial nine compliance with the ministry accounting law the mayor in the city council members testify regarding the efforts taken to complain. Pursuant to the motion passed at the october twelfth may in the garden or mayor attended the median and explained the lack of timely audits by private accounting firm. Michel chair I moved for adoption this report sir. Thank you representative representative right has moved for the adoption of the report to see a second. Second senator love all those in favor say I all those opposed. The report has been adopted next we have the standing committee on educational institutions i'll recognize representative of hodges this time. Taking a share the committee reviewed a total of eleven auto reports which consisted of two higher education reports and one school district report for the year ended june thirty twenty twenty three and three higher education reports and fight school district reports for the year ended june thirty twenty twenty two. The utter report for necessary circumstance community college had a repeat finding and a representative of the college was present and answered questions from the committee related to the finding the auto report for lead county school district which is currently classified as being in fiscal distressed by the state board of education was presented with no findings. Representatives from eighty e and the school district were present and answered questions from the committee related to the school district's fiscal distress death status. The other report for national part colleges referred to the pricing attorney and the attorney general the committee filed the eleven utter reports that were right before it mister chairman I moved for adoption of this report. Representative hodges is moved for the adoption of the report do I see a second. Second representative right all those in favor say I although suppose yes have it the report has been adopted next we have the standing committee on state agencies senator bryant you're recognized thank you mister chair by reports were on the committee's agenda yesterday four reports with findings were presented the order of state incurred iris penalties due to errors and dating with holdings forms and had fraudulent claims for unclaimed property the department of human services had findings related to unrecorder bank accounts incorrect postings of investment activities to foster care accounts contract overpayments process through medicaid management information system receipts that were not deposited and stay hospital employees paid for hours not actually worked the department of inspector general did not deposit checks timely did not maintain logs for all checks received and it should want some payments and properly various agency staff members are present to report on how the agencies intended to address these findings and answer our questions during the committee the committee filed off I reports mr chairman to adopt this report cynical bride has moved for the adoption of the report does see a second. Second representative cooper all those in favor say I all those opposed. Report has been adopted. Next item on the agenda's review that reports will start with a special report regarding the cost benefit analysis of selected economic incentive projects from january one twenty twenty twelve through december thirty one twenty twenty two. I recognize mr met at this time to give the rep. Thank you mister chair this is our annual review of the consolidated in senator. The objectives are of our report were to evaluate controls over the awarding and issue it's of ci and centers and to determine the overall effect in this of c I programs and selected ci projects. This chart which appears on the bottom of page three of the report shows the distribution of ca fines by region over the last ten years. There are also additional breakouts on page three of the report summarizing the distribution of finds by county tears for the same time period. The. On page five of the report you can see the distribution of ca fines over the last ten years by program tie. It's broken out by statutory and discretionary statutories interest are awarded if a company applies and meets the requirements that are set for them law while the discretionary incentives are awarded at the discretion of adc. On page seven of the report you can see our conclusions reached on the overall effectiveness of programs based on projects we have reviewed over the last ten years. As you can see by the green warding on the side three of the four statutories centers as well as creator ebay which is a job creation discretionary incentive resulting in a positive cost benefit to the state the three and conclusive discretionary programs are not is actively used and more incentives will have to be awarded and reviewed before conclusions can be drawn. The two programs that we have concluded resulting a negative cost benefit to the state are the statutory and discretionary r&d programs. Uh these research and development programs were altered with legislation in two thousand and nineteen and some of the key changes that came on that legislation where that the statutory randy program was changed to a discretionary program. And it is now. An award of up to a maximum of twenty percent instead of an automatic twenty percent. Also probably the biggest change was the supply expenses are no longer allowed uh supply expenses later to some of the larger incentives that we saw on the past and now the only eligible expenses are wages and benefits. Yeah. So in order to draw conclusion on the overall programs we look at individual projects and this slide summarizes the projects we looked at this year we looked at a total of seventy two projects and they covered a total of six of the different incentive programs. We reviewed both investor and non investor projects. With over two billion dollars by these companies on eligible program costs and over seven hundred and fifty no jobs create. The. Okay next i'm going to cover the two findings that can be found on pages ten and eleven of the report. The two rnd programs are the only two ci programs for which adc is responsible for the verification of data submitted by participating companies bearing tested. During testing we note in an adequacies where they're verification process that resulted in ineligible or undocumented company expenses being allowed to count towards income tax credits awarded. On the first bullet point you can see one company that was awarded one point two million dollars in state and come tax credits based primarily on three and a half million dollars in stock transactions. The documentation available for review does not establish that they stock transactions were in actual expense to the company or how they were directly tied to r ind which is a requirement of the program. In addition the company operated as an l c which has neither stocks are stockholders. The second wallet point shows two point three million dollars in income tax credits or awarded to two companies with no item as expense listing available only category descriptions such as least infrastructure cost of suppliers or wages for qualified services where provid. Bullet number three shows that three hundred and twenty five thousand dollars of state income tax credits were rewarded to a company for wage expenses for positions such as sales legal marketing and administrative staff positions. Without adequate documentation to verify that these wages were directly tired to research and development activity. And the force boy point shows there were four hundred and thirty eight thousand dollars and stayed income tax credit they were rewarded to five companies for which adc had no supporting documentation on here. Is the result of these phones we recommend the ADC reevaluate the process used to award tax credit to ensure that expenses are valid accurate and allowable company expenses should be substantiated by supporting documents and establish a direct research in development activities. Uh edc may also consider a second review of previously approved tax credits. To ensure that submitted expenses were encouraged properly documented and met program eligibility requirements. Finding number two. Discusses. A calculation where ABC awarded a company eighty nine thousand dollars and staying in contacts courtesy above the amount allowed and we recommend the adc notified the failed desire so their action may be taking to recover any loss to the state. Thank you mister chair that concludes my presentation management responses from adc are provided in appendix the of the report and their officials here from adcentive and the faith to answer any committee questions. Thank you mister met who do we have here from adc. If you guys would come forward at. Suspect the committee may have some questions. Good morning it's both it both you would identify yourselves for the record high good morning clint only all executive director adc hello jitter for emercent w director. All right was recently told by mister area that when we have witnesses who come for this committee that were actually supposed supposed to swear i'm all in which in the past we have kind of swarned some folks in and not smart others in as. We can uh per our discretion but based on what mister arey has told me it appears that we're going to have to swear everybody in so. Feature view would stand and raise your right hands. Yeah. The. Do you swear firm that the testimony you're about to give will be the truth the whole truth that nothing about the truth. All right thank you. So i'm an open it up for questions at this point is there anyone on the committee looks like we've got several in the queue senator hammer. It a question you're recognized thank you miss scheer could we just hear a verbal response from them first of all if to the report can we give that opportunity first of all. The. Thank you center hammer if I would if if I could i'll make a few remarks and then loud jennifer to walk into the management response which I think would be helpful and so. Overall happy to get into incentives around the state and how meaningful this has been around the state to help with job creation the various programs are happy to walk through case studies even some of the recent projects that have announced. This week in what incentives have have meant if that would be helpful I think as as was presented. There are discretionary and stature programs and within those some changes that have been made since the time period of this ten year look back most notably the investor program which is noted as the the largest payout program which was taken off the books starting with two thousand seventeen and some some applications to follow after that legislation was taken off the books and then an adjustment with the orange credits which have significantly helped with with the controls furthermore as general outline in our management response some of the internal protocols that we put in place in twenty twenty one that will help with with some of the issues outlined. Thank you yep just to glence point in twenty twenty one we did recognize that we had some an adequate inadequacies and our internal controls and have taken some steps to address those inadequacies we have formed a committee of internal employees to go over these reports as they are submitted by instead of recipient so that we make sure there are or many eyes on these before we issue tax credits going forward so as you'll know that that started right after these inadequacies have word noted also we have been in touch with the department of financial administration working with them to do. To lean on their ability to charge back some of these tax credits within the time period that's allowed and then we've also been in contact with these projects that you see listed to try in get additional documentation from them we do not believe that any of these act credits were actually issued without documentation we do believe that we had staff that failed to properly record that documentation so organ we were asking these companies to either to resubmit it and to back it up with additional details and we have already reached out to everyone we've gotten some responses already and we're continuing to do that over the following weeks and then anyone that we do not hear back from we are going to give that less to definite so that they can help us potentially reclaim some of those tax credits. A couple questions mischer now they've had that option you're recognized like mission point references some of this is carry over from proceeding administration is that correct. That's correct is there okay and then the second thing I want draw your attention to a statement that's made on page. Two. And it's down under background. There may be some as was cleared up in legislation I just need a education as you were says discretionary incentives are awarded at the discretion of adc's director in competitive situations would you explain to me your share with me the process by which if it all falls on the edc director that the determinations are made or could you just educate me in that area please. Yes sir. So we consider a competitive situation one and which we know that were working with the company doing a multi state location analysis we look at projects. In three areas internally that's where jobs come from onto for newers existing companies expanding and recruiting new companies. So the competitive situations that we find ourselves in most often times are with the expansion in the attraction projects so this could be a scenario where an existing company that has three or four manufacturing facilities across the country they say we're gonna add a line in one of our facilities and arkansas being considered for that or then you have a project where a company does not have a location in arkansas and they're doing a multi state location analysis in their considering arkansas for one of those so for example we had an announcement earlier this week in line rock with the norwegian firm called illow pack and they outlined their process they said so so about a year ago we received an RFI a request for information. From a site selection consulting firm representing yellow pack saying that arkansas was one of many states being considered for this project it's then our job to respond to that rfi along the lines of helping the company identify the real estate option that could work. Work force information development work force development type institution connections to give them the confidence that they can succeed with the workforce here painting the picture of the business cost and how or can someone would be a good place to do business and then we hosted four site visits where you drop around you make connections you look at the softer side the quality of life and and help them to to create a vision on how they could be successful here so that particular project came down to three locations we were given the opportunity to put an instead of proposal on the table for consideration we knew that some of the deficiencies for that particular project were in infrastructure so they are a rail user and to get rail to their site would cost about one point five million dollars from where it was currently at the port of line right. So knowing the competition knowing that we needed to put a comparative incentive proposal on the table we always work with our local community partners so in this case the city of line rock they did a property tax abatement for illegal pack they also contributed a portion of that one point five they're contributed two hundred and fifty thousand we use the governor's quick action closing fund for the balance of that one point to five million and then a program in here called create rebate so that that's all put through an inplanned model a cost benefit analysis where internally we have a team looking at. What is the return to the state and then what are those protections so with create rebated to performance based program if they never create that payroll they would they would not see those benefits. And then with the governor's quick action closing fun it's an upfront reimbursement but then an agreement where they would would require them to create and maintain those jobs for a period of ten years so we take a look at all of that we take a look at the cost benefit have an internal discussion for all of those programs with the exception of the governor's cook action closing fund that's that set my discretion obviously the quick action is that the discretion of the governor bring those together put an incident proposal on the table and in in just with our incidents philosophy we want to we want to support companies for sure but when it comes to incentives we want to win projects for the least amount necessary and so that that's the framework of of of how we look at it so ultimately it's the director then it makes the final colon that what's all that process has been assimilated is all late on the desk and the directors one has the sole control of making that decision yesterday okay all right i'll go on the queue thank you. Cindergeal more in your recognized leg of his chair and thank you for being here today. So first of all i'd like to say I appreciate how edc works with local communities i've been a part of that process several times and I think you'll do generally a good job with that and so clean appreciate you and your for doing that I would like to talk about just a little bit though how the county tier system works and if you could just sort of outline some of the criteria that you look at because specifically look at my district which is on page three if you look at the graph you'll see the dark blue area and a lot of that is my counties that I represent so you can argue we say that we need to see a lot of economic growths in that area so if you would just talk about some of the the county to your system and how that rankings done sure so the county to system set up many years ago as a four tier system so based on poverty repopulation growth per capital income and unemployment rate with a tier one county's being the lower property rate the the higher per capital income counties would receive a lower benefit as a example for a program we have called benage are concerned would receive toral payroll times one percent as a benefit of income tax credits where on down the list tier two three and then four counties being those with the higher poverty rate higher unemployment rate lower per capital income. The company would receive a greater benefit for doing business in those counties so in it tell in a in a tier for county in that scenario with the vanger consultant would receive four percent of their total payroll in income tax credits so this is a mechanism put in place years ago by the general assembly to recognize that we want to provide greater benefits for those counties that the the find themselves in that scenario so projects that are locating there have a greater advantage when it comes to. Business attraction projects I would say that. It's noted that the higher benefits but there are so many variables that go. In two cost of utilities cost of labor cost of real estate logistics supply chain where you customers rap where your vendors are at one of the work forces coming from that it's it's it's it's pretty rare for a company to. To to factor that in on a business attraction type project although I am sure that if that's the scenario to find themselves in for projects in tier two three and four counties it's a you know certainly a nice perk to have there follow up mister. You're right now thank you and claim thank you for the explanation because the reason the reason I point that out and I i've done this previously and when this reports been informed this committee as you said there's a lot of factors and certainly recognize that and again I think generally you guys try to do a a good job of being fair and working and trying to bring jobs to areas that need it and then you know but when you look at the disbursement you know it's eleven percent compared to other parts of the state that have thirty three percent and arguably it's easy to put investment where there's a lot of growth happening but I also think we should look out and prior to investment one in areas that need to see more gross generally so that's something that i've said before and will continue to say because again I have to represent my area and so look forward to working with you guys to see how we can improve that thank you thank you clinton. The. The. Representative ray you're recognized thank you mister chairman my question is i'm looking at page seven on the research and development incentives it looks like there was a twenty nineteen act that I wasn't here in twenty nineteen so can can someone explain what changed there because it looks like. I mean if i'm just guessing that it was changed because there were twenty three projects reviewed and zero of them showed a positive cost effectiveness is that what happened there. Yeah quick comment and then i'll jennifer yet so the with with the cost benefit analysis of the orndy tax credits it's really a different framework than the traditional incentive so it's it's it's a challenge to make it an apples to apples on this with the project like the one that I didn't find it earlier you're looking at job creation and investment and then you're running that through a model where you were putting in the implant model if if company x creates certain number of jobs at a certain average wage at a certain capital investment we know the location which sometimes factors in leakage and other variables we factor in the industry which sometimes it has a higher multiplier value than others. We're coming up with a cost benefit that it's pretty clear if we provide. This in incentives this is what we're getting back and and if everything works out over ten year period so it's a three to one pay back to the state or a four to one it's it's a a lense of which we look through those cost bent and analysis. With research and development tax credits. It is in a way similar to investor so investor was an incredibly expensive program and so but II don't think anybody's asking to bring back investor in the way that it was but investment did recognize that investment into facilities. Means that a facility is not getting array to close down and if you know for company has multiple facilities we want them to be investing in arkansas facilities that's going to lead to greater stability greater job retention and expansion in the future so with the orange tax credits it is you know we want research and development to take place in arkansas. But it's not always a if we do this that's going to lead to net new job creation and investment and allows to look through the cba in the same model but. And thank you for that and took your appointment two thousand nineteen we did change the rules to where cause it research and development tax rate it's used to be based on supplies and payroll that was towards research and development now it is just payroll and benefits the supplies you know you're talking about. It could can't be anything it can be the materials that they're testing and it could be beaters than and test tubes and things like that so we took out the supplies to where it would just be the payroll so we're really focusing on building those rendie jobs and the state and that was a a major change for us in two thousand and nineteen and kind of reduced the burden of the program okay appreciate that so it looks like they're since the change there haven't been any projects reviewed i'm guessing that's just because the change. Was in twenty nineteen. Is that was that right. Okay so would the changes that happen in two thousand and nineteen we don't look at these projects until they're completed and with these band five year projects you know and we have it looked at any so that's why we broke him out in this exhibit to kind of show there is this difference that is gonna take place and will we want to segregate them so that when we look at the the ones that have happened after the law it'll kind of start a new tally of the projects and how they come back that thank you that makes sense so for adc on these on these particular incentives is there a specific industry that tends to receive these are they. Carriaged in one sector how does it typically play out. We have the targeted industries and I can I don't I don't think I could list them off the top of my head but they do tend to be more kind of your your tech based or bio sciences those those type of industries that that are really heavy in orange we do have some larger manufacturers that are in the the twenty percent program because they are working on rdin on just your commodities and products like that but it is a mixed bag but on the targeted side for orange which is the thirty three percent which is the bigger kind of a bigger burden for us that is does tend to be more of your kind of what you think i've traditional research and development your buyer sciences engineering data sciences and things like that. Okay alright thank you. Senator bright you're recognized thank you mister I wanted to go back and look at them the findings specifically finding one and just see you is there a what is a constructual expectation for a company that were or allowing these incentives too as far as i'll look back period. For the for the contractual part of it with our own great so there are five year programs we don't as far as we're concerned we're able to go back and ask them for details the tax law will only allow us three years back to charge back if necessary so I would probably the the best answer to your question there is going to be three years three years okay so. Based on our what is a timeline that you're looking for to get a response from these companies that you're asking for further documentation so we've been asking and reaching out over the past few weeks since we you know have gone through a decided process I would like to have it. A pretty good answer before the next couple of weeks so that we can go ahead and give that information to the department of finance and administration before the end of the year okay and then if if because back as a valid that you'd better eighty the department was correct in these charges were and properly given tax credits for are you asking for a lump sum from these companies are you put them on a payment plan like what what are we going to do to honestly I would have to to ask the department of finance administration cause they were it it wouldn't come back to us it would come back to them okay alright thank you. Representative ray you're recognized yet thank you miss chairman could we go back a couple of flags. Maybe one or two. The. Little bit further. No show it was the part that mentioned that eighty eight thousand dollars. In this finding too to the eighty eight eight eighty three. In the state income tax credits. When there is overshot like where is that made up. This. Will take answer a question at limit kind of tell you what happened so normally and we did kind of change this with some legislation a few years ago but what we call the base line of how we determine someone's rd expenditures that are eligible for tax credit like your wine to in three that they sign is whatever they had and and what will call your zero and usually it's it is zero and then from year for your force tax credit that is based on the expenditures they had in your three as their baseline unfortunately we did just have a miscalculation to where you're for wasn't calculated that way it wasn't just. Someone didn't know how to use the calculator they just based it on your zero instead of your three and it was honestly a mistake that I think this committee. Addressing it and coming up with these new controls that's how we're going to make sure we don't let that happen again but that is just to kind of give you a a back story that is how that happened and this is another one of those or will just go and either back to the company see if they had any other expensive expenditures if they didn't it definitely it we're going to lean on them to charge that back from the company follow up please. Yes may but the eighty eight thousand were that actually come out of state finding its a tax credit yes them but would where would we lose their rate mail. If if they were able to use it then it would just be taxes that they didn't have to pay so that's where I couldn't tell you you know how those funds would be allocated but that would just be the company at taxes they would not have had to pay thank you thank you missed german representative brown recognized thank you mister chair thank you for this report I am curious about something i'm looking out on page three tier one which is policy counting and I represent a portion of pulaski county portions of share win and jacksonville in both those communities have identified hub zones which I think are identified to the spa does do you work with the sba on but because these hub sounds easier. You know these are not. Need an economic economically depressed and in the they give special incentives are you working with the SBA because I know jackson bill has a rail had and it would be nice if we can bring some industry into these areas with these hub sounds they're already identified in their additional incentives available to communities that bring companies in. What we do work with the sba there's local spa office here that we have good relationships with having said that there's no formal overlap between a hub zone and state instead of programs to it to leverage additional state internet programs or anything like that it's my understanding hub zones facilitate a greater opportunity for small businesses in those zones for government contracts. And in terms of how that overlaps with consolidated incident programs. That there's there's not an overlap there but if there was a project an industrial project for example that qualified for incinents that the state and they were leveraged with federal hub zone incentives through spa we would we certainly be interested in working with them but there's there's no formal arrangement there tell. Do you think that there should be I mean do you think that we should be trying to encourage and help develop these serve depressed areas in our state that do have assets that are quite you know could be attractive to a business is at one a locate here i'd be interested in learning more about the opportunity and jackson bill II don't guess I know as much as I should about hub zones it's my understanding that a lot of these are for small business to small businesses to get government contracts and and I don't know that there would you be a lot of overlap opportunities II think that hub zones can be utilized we're gardless of whether there is job growth net new jobs that that might have incidents here but if if there were opportunities there we would certainly want to look at that I think that you know it's it's the the structure by which we're working with on the tier system plasky county being a tier one. You know they are entitled to to certain benefits on the formulate basis for statutory programs that the the projects in which there is a need for infrastructure assistance and and things like that for for the rail which you mention that that would go into the area of discretionary programs which can get away from the tier system if if there's a project that we really want to compete for that needs infrastructure assistance we wouldn't necessarily be looking at the tier system we would be looking at that cost benefit of of what it takes to win that project for the least amount necessary using infrastructure funds that we have at our disposal such as governor's quick action closing fine or funds that we utilize through our office. Thank you for that explanation I would just like to encourage you to work with the spa and you all partner to help encourage development in these have zone areas you know jacksonville is right there on rock air for space and we would like to have as much development there is possible to incentive as act of duty military when they retire to remain in the area and are we need jobs. We need jobs right there where they've already bought a home so it would please me greatly if you could work with the sba and see if you all can't partner on some of these projects. Thank you thank you. Senator hammer recognized that the shell cleaner want draw attention to the letter that you put offered up in response for a couple of questions first fall how long you been in your how long you been in your job in my duty is executive director since january of this year I was previously with. Adc from well to give him a whole history two thousand seven to two thousand eleven it's a project manager two thousand eighteen until january as deputy director so would it be fair to say you're doing some clean appear from previous administration from perk and what i'm trying to draw line between what you're having to sit here and explain today and previous administration is that a fair statement. It is it goes back to the previous administrations attend your look back with with staff turnover through there as well okay the the questions I want to ask around a couple of your statements you said that we recognize the c says we do not believe that any. Of the tax credits were issued without proper documentation submitted as that would be the violated but and i'm trying to get my mind around the conversation that now you're having to go back to some businesses if I understand it right and you're having the ashful at documentation in order to support what we have already allowed them in the way of tax credit to my is that fair is that accurate statement it is yesterday okay then I wonder how it is. Harmonies the fact that we're having to go ash what I would interpret his money back from these businesses. When the proper documentation should have been there all all before we ga. Yet so I think what I try to do with a letter and as you could see is is take ownership of that that's something that was a mistake internally regardless of whether I was there at the mistakes made at adc but we do believe that. When current staff at that time were processing those that we would not have been in a position to just. Allocate funding without that documentation however as we've changed over software systems that we've changed staff it was a mistake on our part at atc to not have that proper documentation so to categories that first one is one in which we're going out assuming positive intent asking companies to help us validate that it can be frankly an embarrassing situation but to say would you please resubmit this to us and then there is another finding in which a a calculation error to place and in that scenario where we're looking at working with department of finance and administration to actually rectify the situation financially okay how many companies are you talking about do you have a estimated total value of the dollars that we're talking about. The. And maybe that's in the report and I just didn't get it. Without I didn't see it so on page turn. Uhm mr meant did a good job of kind of laying that out for you and at the bottom as far as the verification process and making sure we had that documentation there's a four bullet points that showed the amounts okay amer and goes over to page eleven. And that spread out among a major different companies as I don't there somewhere number just mission and I can tell you. I've got nine companies on my list of the ones that were reaching back out to. Okay and so far of those nine hundred back out to you I have received. We have received response from three of them. In the last week are they being pretty cooperative for AR yesterday or at so you could one thing I wouldn't want to cause a repercussions with businesses that we have now that would look at this and say yet I wouldn't want to be a deal breaker that they would walk away from anything and then the last question is on page two. On the awarding and issue and should sha fun. There's a statement there says this and hours expected to raise for this period because a delay exist between when the incentive requirement is met and when the recipient. May file a claim for themselves do we have any idea what the. I get the impression that statement that there is a dollar impact that is coming in my misinterpreting ladder misreading that if if not do we know anticipate what that's going to be. Just read it wrong. So you're in that that first of all in an issuing of cia funds is that right or the second sentence it's on page to its third ball block down awarding an issue of ca phones it's the middle settings in that. Yet so you know I think this is more of a general number and we do report annually on how much we've approved on our side but because this is a ten year look back and a lot of these projects will take anywhere between two three five four five years to can I come to fruition to where the companies go back and apply for these benefits once they've made the capital investment or created the jobs I think that's that's kind of just the comment to yes that number is going to rise over time because it does take a lary in amounts of time for them to complete their projects so that six hundred and sixty seven point one million versus the six hundred forty four point four million we may see those two numbers come closer to each other as those numbers come in that up correct interpretation okay thank you thank you sure. Represent debating your recognized. Thank you mister chaired client over here one I want to echo the community so i've seen to give more as far as appreciation for the work that adc. Performance in and you in your position we benefit from that quite afternoon in in my area and cross it and and the foundation that I saw around so thank you there couple of questions wanted to point out on page three exhibit two where you've got the graphical representation of the state and you've got the the the regions identified and and you highlight the population. To point out southeast and southwest arkansas being the the least populous regions of the state. Add the. Would you say that the economic development dollars and incentives that she provided there the benefit are buying for the buck it's greater. Then the bang for the bark investigating the more populous areas of the state. I would say so represented if if we have as you know incentives can be broken down into what the formula provides and then what the discretionary benefit would provide if we're looking at number of years of create rebate or that the size of an infrastructure grant. And and you know given that it's discretionary we don't put that on the formula so would would fifty jobs and cross it be more meaningful than fifty jarms in large absolutely. II think that when it comes down to would we lean in more to when a project in an area that's losing population an area that's rural absolutely and and we do and so you know I think there are some some good opportunities as you've seen their in south arkansas we had we had a team on a site visit in south arkansas just this week on a significant opportunity we've had obviously a lot of interest in lithium in south arkansas a lot of exciting things going on in south arkansas and i'm i'm fully supportive of of leaning in doing what it takes to win those projects and just a quick parliament and the reason I was pointing that out is with the population being on that group the only way that we're going to track folks to come back into those communities and grow our communities and grow the population on on that side is with good jobs and good economic development so that's why I strist at those dollars invested in southwest and southeast arkansas are vital to you to the future of those two regions and then one quick follow up question that represent own representative device and uh question regarding the eighty eight thousand that was just a tax credit award do we have any information how much about eighty eight thousand dollars if any has actually been utilised against the tax liability that that the corporation may have had to the state of arkansas. It may be a zero effect if it hasn't been utilized but do we have any of that information. We don't have access to that information that is the department of financial administration but that's what if we don't get additional documentation from them to kind of back that up for you know help them are in that amount. That will be for them to to work on and either claw back or. If. If they're they've already used it then it would just kind of go on their their next tax bill. Yeah I mean that was my appointment just one members though it was a tax credit it may not be utilized it may have a zero effect to represent the risk question thank you thank you. I had one question with regard to. The money that was given to corporation that didn't have any stock. Or. Other documentation. How did that happen can someone explain that. The. The. So i'm i'm looking at page ten if that's at the bottom. I would love to be able to tell you exactly how that happened I don't have a a good answer for you other than. It is very possible that we had received documentation that was not properly recorded and and those are kind of the ones we're talking about where we don't think that documentation was that received we do recognize that there was a fault and how that documentation was capped and recorded and put in a place to wear it could be accessed after turnover. So i'm just reading from the report. Says arkansas secretary of state documents as well as company submitted documents indicate the company operated as a limited liability corporation which has neither stocks nor stockholders. Is that. And I mean typically an llc has like membership units and they might would call them stagger stockholders as as an llc other programs I deal with they will either call them members or owners even and I can I can almost see where. Just an employee maybe didn't have. The right education in that area and assumed that they meant the same thing and again these are those the safeguards were putting into place to where we don't just have one person looking at at these reports to make these decisions so that things like this do not happen in the future. Well once again I mean that's that's why I asked the question I don't know if that's the situation or if it's a situation that this is just like a shame company that someone gave. That the state gave one point two million and tax credits too. Uh. II mean I don't know the answer to that so if there could be some explanation on that i'd appreciate it yes sir I mean we I can look back at that exact project and follow up with additional details. All right thank you. That appears to be all the committee questions. Mr o'neal miss emerson thank you for being here today. The. Next item on the agenda is the special report of the prosecuting attorneys regarding disposition of matters referred by the legislature not any committee. For the period of january one twenty twenty two thirty december thirty one twenty twenty two and at this time I would recognize miss williams to give the report. Yeah. We're all technical different culties there chair thank you good morning as he said this report is to provide the committee. A summary of the disposition matters referred to the prosecuting attorneys in the twenty eight judicial districts for two thousand and twenty two staff is issued this report annually since two thousand and five. I can sell code requires the legislative auditor to notify the appropriate prosecuting attorney of transactions reflecting unauthorized disbursements or unaccounted for funds or property by public official or employee it should be noted this code section was amended by x six thirty two of the record session this year. The code section I also provides. There are sight to notify the ag the code section was changed to also include notifying the attorney general. The code section also directs prosecution attorneys to report to this committee by june thirtieth of each year. I. Coat also directs legislative auditor to notify the arkansas governmental bonding board of audit reports reflecting in proper transactions for which a public official officer or employee may be liable the bond more determined through their loss but the arkansas health insured fidelity bond board. This and the slidelist examples of matters that we refer to the prosecutors it's receipts not deposited missing assets are not the rise or undocumented disbursements unauthorized salary payments in proper loan of entity credit conflict of interest issues non compliance with the public purpose doctrine as well as potential violations and the speed trap law. Yeah. This largest appeals how this report is is laid out we use the twenty third judicial district as an example it shows the judicial district it shows the prosecuting attorney also is all counties that are included in you just in the judicial district we also include the year the matter was reported to the prosecuting attorney and the founding that was sent to him or her it's that is according to the prosecutor as well as any payment the bondboard might have paid. Also have an exhibit three on page six and seven that summer rises. The disposation by judicial district it shows the number of matters referred number of instances in which charges were filed in case results of those charges instances were charges were not filed. Referrals related to potential violation of the speed trap law as well as instances in which the matter is still under review by law enforcement or the prosecuting attorney it shows that in a hundred and fifty three matters referred into twenty twenty two twenty four. Criminal charges were filed five cases are pending in court five matters were acquitted or dismissed and the remaining fourteen cases in which a conviction was found is not next slide. It's the it's the next chart on pay. And we just list at all fourteen cases in which a conviction had been filed it shows um who has filed against their top of play what the court order sent its twice time in march of incorporate carceration probation are suspended imposition of senate the number of hours of community service farms fees court cost restitution and audit costs awarded. Mister chair that concludes my presentation of this year's disposition report representatives from the office of prosecutor coordinator is here and I believe he brought a matter and of the four judicial district as well. All right. Looks like we have one person that you for questions so. Mr mcman mrperiod durat figures will come forward. The. Once again based on the advice from staff we're going to swear every witness and so tribute racial right hands. To each of your swear affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you got. Representative barrier you're recognized for questions thank you miss german and if I may it's just just a comment but it was nice to be able to see and mister mcmahon gets sworn in that sub streets me so if if I may I just want to comment I said here and I went to every page of this report and I want to command i'm not a member of the committee but I want to commend the the staff the proscured coordinator's office and the prosecutors for this is an incredible piece of work and it really it really shows how much that we need our legislative auditors in our prosecutor prosecutor coordinator to hold people accountable for the misuse of state resources so it's a if you haven't had a chance to really go through it thoroughly it's an incredible document it really sheds a lot light on a lot of the problems that we have with mismanagement of though government funds in the state of arkansas so again thanks to the staff thanks to mrperiod mack my hand in his staff and the albert auditors thank you mister german. Thank. Representative dalby you're recognized that mr chair mr mcmain mr congratulations on your election to circuit church thank you looking at this report in I too always go through this report and I know they said something like a hundred and fifty three matters referred normally twenty four were prosecuted. Are the prosecutors and i'm somewhat concerned about loan number because as we all know they're elected in their area and these are people who vote forum are they given that opportunity to go ahead and send that on to the ages office I know we refer it to the age of office but as another legislator and I were just talking before this meeting sometimes it's offly hard to bring. Charges. In a situation when their bases are we are so sorry we've made a mistake and we won't ever do it again and then they're up for reelection and so what is the process that a prosecutor could move that on so there's nothing of maybe misconducts not the right word but improvide here that they have not may be done there do diligence in cases do you understand what my question is because I mean I think that we have to be careful. Cause they are elected but is there also a way that these can be looked out other than just we're sending it on. Yeah yes representative if I give a brief kind of explanation how we we do this that will eventually eventually get the answer question but when these cases are referred to prosecuting attorneys there there are situations representative in as much many of you know where there may be a conflict of interest on the prosecutors behalf and I can probably pick one out here at some point here but I know there was a but that the normal procedure then if there is a conflict is that prosperity will usually follow motion acknowledged with the conflict is an example out uses let's say the the potential alleged defendant is a sheriff so obviously as you know the prosecutor works in hand with the share investigations they servers are witnesses and criminal cases and things like that so that's a good example but obvious conflict of interest in a situation like that prosecutor would file emotion and the procedure that we do pretty much right now throughout the state is the circuit judge acknowledges that conflict and orders much me to help and recommend somebody to handle that case I have two individuals in my office that serve as conflict attorneys and if you can see if you looked at the report sixth of the hundred and twenty cases they're actually I think a hundred and twenty cases because some of those speed trap cases didn't actually get referred as a crime so of six of those cases are referred to to my conflict attorneys to handle one of my conflict attorneys actually had a conflict one of those cases because he was from that judicial district and I referred that onto an elected prosecutor in another judicial district so that's the first way that that could happen is that we utilize the conflict attorneys in my office at terms of the conflict to reason my office have conflicts or are too busy because they get anything from capital murder cases to hot check cases in addition to audit so I can refer that to another attorney in so the attorney generals office could be deposited actually they could be deputies to handle a case and assist a prosecutor or they could survey the conflict attorney and there's a big difference there if they're deputized and they work under the authority that elected prosecutor however if they become the actual conflict attorney they are these special prosecutor and they have the full authority of that elected prosecutor. So again there's two ways the ag's office could be utilized as a deputy to assist and then also as a conflict attorney as our or conflict attorneys and then often other attorneys in the state so that I hope that answers your question that is how we do that because as everyone knows I mean the prosecuting attorney has original jurisdiction to handle these these cases pursue a dark constitution met may have something ad. All right seeing no further questions mister man mister dirt thank you for being here thank you. The. Aren't saying no new business the next meeting of the legislative joint auditing committee will be held thursday january eleventh and friday january twelfth twenty twenty four and without I would take a motion to adjourn so your motion senator love in a second. Representative right actually representative dobby all those in favor say I alright this meeting is adjourned thank you very much.