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Washington State Auditor’s Office
Troy KelleyI n d e p e n d e n c e • R e s p e c t • I n t e g r i t y
Performance Measures in Economic Development
Opportunities to Enhance Transparency and Improve Processes
Joint Legislative Audit and Review CommitteeOctober 15, 2014
Sara del Moral, Senior Performance AuditorJason Hennessy, Performance Auditor
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 2
State leaders want to know if economic development dollars have the desired impact.
Statute requires the Department of Commerce to maintain performance measures for the economic development organizations they support with grants.
The performance measurement system has not given legislators meaningful information on results.
Why we did this audit
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1. Is it technically feasible to isolate the effect associate development organizations (ADO) have on economic outcomes?
2. Are the performance measurement practices used by Commerce to manage ADO contracts aligned with statutory intent?
3. Are the performance measurement practices used by Commerce to manage ADO contracts aligned with leading practices?
Audit questions
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 4
ADO grants are the state’s primary means of supporting local economic development
$3 million annually in state support (GFS)
Distributed to 34 ADOs, serving all 39 counties
State supports local economic development through grants
Local partners, federal aid and private supporters also help fund ADOs.
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 5
ADOs deliver a range of economic development services
Direct assistance to businesses, including: Market their areas to
attract new companies
Provide site location and selection assistance
Refer companies to available resources
Support regional planning efforts, including: Help coordinate job skills training
Help develop county economic development plan
Help implement strategies to attract new industry sectors
ADOs carry out two broad areas of work:
1 2
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 6
Does the program deliver the expected results?
What to measure
• Annual targets• Annual information sent to Commerce• Report to Legislature every 2 years
How to measure
• Information system• Definitions• Consistent measures statewide
State law includes requirements for:
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What we did
1. Determined if ADO impact is measurable Literature review Interviews with experts and stakeholders Statistical analysis
2. Compared Commerce performance measurement with statute and leading practices
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e
1. It is not feasible for Commerce to measure ADO impact
Why is it so difficult to isolate the effects of ADOs?
8
Washington state economy
$300 billionADO grant funds
$3 million
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What does it mean for an ADO to “cause” a job?
Technical expertise
Availability of capital
Interest rates
Cost of inputs
Labor marketRegulatory
environment
Local need or demand
Prevailing wage
Business owners consider many factors when making decisions to relocate, invest or expand.
Assistance from local
ADO
"Should I hire more employees?"
9
Business owner“Should I hire more
employees?”
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e
Aspects of the performance measurement system do not align with statutory intent. Measuring outcomes for planning and research is difficult.
Measures vary greatly among ADOs.
The performance measurement system has produced undesirable consequences. The requirement to report annually on ESD statistics does not
inform users about ADO performance.
2. Measures are not working as statute intended
10
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 11
3. Commerce does employ some leading practices
Prepare• Developed some
program goals• Trained ADO
staff
Develop• Assigned
additional staffer to improving measures
• Clarified definitions
Manage• Implemented
information system
• Data accuracy checks
• Encouraged ADOs to follow definitions
Report• Biennial report
clearly presented information on progress
Commerce has improved its performance measurement system, following the four key steps identified in leading practices.
But following more leading practices, especially by clarifying program goals in statute, could help.
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Clear goals are the basis for effective performance measures
Example goal, outcomes and associated measures
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Recommendations for Legislature
1. Clarify goals
2. Reform reporting requirements: Require measures be aligned with goals Reduce information required in annual reports Allow descriptive reporting for some activities
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 14
The audit report provides additional resources on performance measurement.
Recommendations for Commerce and ADOs
3. Improve performance measures, following applicable leading practices:
Align measures to goals
Reduce number of measures
Add efficiency and quality measures
Clearly define
measures
W a s h i n g t o n S t a t e A u d i t o r ’ s O ffi c e 15
Contacts
Chuck Pfeil, CPADirector of Performance Audit,
(360) [email protected]
Website: www.sao.wa.gov
Troy KelleyState Auditor
(360) [email protected]
Lou Adams, CPADeputy Director of Performance Audit,
(360) [email protected]
Sara del Moral
Senior Performance Auditor(360) 725-5612
