Office of the Legislative Auditor releases stunning report on IRRRB investments

At the request of the state legislature, the Office of the Legislature conducted a review of the Iron Range Resources and Rehabilitation Board (IRRRB) and the result wasn't pretty.

The headlines generated by the Legislative Audit Commission - Evaluation Subcommittee meeting on Friday paint the broad strokes of the issues. KARE 11 reported Auditor issues scathing review for IRRRB. John Myers at the Duluth News Tribune reports Audit criticizes IRRRB's structure, financial controls. The Mesabi Daily News blasted out IRRRB blistered in state report.

Fox 21 in Duluth/Superior reported Constitutionality of IRRRB Board Questioned in Audit.The Star Tribune? Harsh audit questions Iron Range agency's accountability, constitutionality.

Ouch.

Far afield, the Charlotte Observer picked up Kyle Potter's report for the Associated Press with the most painful headline of all for the unemployed workers on the Range suffering through the downturn in the nation's steel industry: Report: Iron Range investments may not create many jobs.

Range blogger Aaron Brown includes some wonderful historical photos about the agency in his post about the document, Report details serious problems at IRRRB, only with this conclusion:

. . . By its very nature, the OLA report could not be overly specific about each deal, but the general tone is clear: the IRRRB must reform its process of distributing money, and improve transparency and accountability in its decisions.

From a political science standpoint, the IRRRB is one conservative wave election away from being gutted. For that matter, change could even come from within the DFL. The Iron Range is losing political clout, population and influence at a rapid pace. That’s why, in my opinion, responding in good faith to fair criticism now is vital to the future of the Iron Range. . . .

Read the news reports beyond the headlines and as always, read everything Mr. Brown writes.

Here's the Youtube of the Legislative Audit Commission - Evaluation Subcommittee hearing on the release of the Office of the Legislative Auditor Report on the Iron Range Resources and Rehabilitation Board (IRRRB).

The OLA summarized Evaluation Report Summary's Key Facts and Findings:

The Iron Range Resources and Rehabilitation Board (IRRRB) provides loans and grants for economic development in its northeast Minnesota service area. It also owns the Giants Ridge Recreation Area and the Minnesota Discovery Center museum.
Overall, IRRRB oversight and evaluation of its loans and grants are inadequate.
IRRRB did not adequately specify objectives—such as job growth—in many loan contracts we reviewed, and it collected insufficient evidence on how well loans met their objectives. Whether IRRRB provided loans to certain applicants that may not have needed them was unclear.
IRRRB does not require most companies to report the number of jobs they create using IRRRB subsidies. For companies that do provide job data, IRRRB relies solely on their self-reported data.
The database IRRRB uses to maintain information on loans is inaccurate and outdated. It lacks needed information, such as number of jobs created, to allow the agency to evaluate loans or their impacts.
For IRRRB grants, many files we reviewed that referred to job creation contained only vague estimates of job growth and had little evidence of achieving objectives.
Some of IRRRB’s grant programs did not consistently follow agency policies on reviewing applications, monitoring projects, or issuing payments to grantees.
From 2006 to 2014, Giants Ridge operating losses increased by more than 500 percent. IRRRB has subsidized operating losses with an average $1.9 million yearly. IRRRB has not set sufficient targets to measure how well Giants Ridge meets its stated goals.
State statutes on IRRRB’s governance structure are vulnerable to a constitutional challenge.

IRRRB has not adequately overseen the use and impacts of its loans and grants.

Key Recommendations:

IRRRB should explicitly analyze to what extent loan applicants can complete projects without IRRRB funding.

IRRRB should take steps, such as specifying in loan contracts the numbers of jobs that companies are to create, to ensure its loans actually help create jobs. It should also improve how it measures job creation.
IRRRB should more consistently determine how well its grants meet their stated objectives, including job creation.
IRRRB should ensure that all of its grant programs comply with agency policies.
IRRRB should regularly analyze the collective impact of its loan and grant programs on the area it serves.
IRRRB should measure Giants Ridge’s performance against its stated goals and determine whether the resort remains consistent with the agency’s mission.

Here's the full report:

OLA Evaluation Report Iron Range Resources and Rehabilitation Board (IRRRB)

Photo: It was all downhill at the Giant's Ridge ski resort, which received loans repeatedly from the IRRRB but suffered massive losses.

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