The “film tax credit” report is out

At 11:19 a.m. this morning, the Iowa Department of Economic Development’s staff emailed/released the “program review” of the Iowa Film Office which was conducted by the Clifton Gunderson accounting firm.   Read it here.

UPDATE:  A statement from the Attorney General was released at 11:24 a.m.  Read it below.

Statement of the Attorney General’s Office
Monday, October 5, 2009

The Attorney General’s Office, Polk County Attorney’s Office, State Division of Criminal Investigation and State Auditor are undertaking a criminal investigation related to the Iowa Film Office tax credit program.

We are not permitted by ethical rules to discuss the possible subjects, focus or other details of the investigation.  We are permitted to provide information about other aspects of our ongoing review of the Film Office tax credit situation, which was requested by Governor Culver.  We are working intensively on this review.

The Attorney General’s Office will work to recover any tax credits or funds obtained illegally or not in compliance with the Film Office statute.  Approximately $32 million in tax credits have been issued, and we will review them in detail and seek recovery wherever they were obtained in violation of the law.

The preliminary, outside review has been completed by the Clifton Gunderson firm, and we understand the State Auditor will undertake a full examination of the Film Office tax credit program.  The Attorney General’s Office continues to coordinate and work closely with the Governor, the State Auditor, the Dept. of Revenue, and the Dept. of Economic Development in reviewing the overall matter.

The Governor handled this well by acting quickly and decisively, referring the matter to the other state agencies, taking the personnel actions he took, and freezing the tax credit program.

The Film Office Tax Credit program, which was suspended by the Governor on Sept. 18, remains suspended.  Given the problems that we have encountered, and the amount of money at stake, it was imperative that the Governor suspend the program on Sept. 18, and continue to suspend the program.

The Attorney General’s Office has found the statute regarding tax credits was not implemented properly in at least several ways:  investment tax credits were not calculated according to the statute; expenses were not adequately vetted and verified; projects were not justified in terms of their economic benefit to the State compared to their cost; and the definition of “investment” sometimes was improperly applied.

UPDATE:  at 12:30 p.m. the governor issued a statement.  Read it below.

DES MOINES – Governor Chet Culver issued the following statement today after the release of the Clifton Gunderson review of Iowa’s film tax credit program:

“The Clifton Gunderson report is an important preliminary step in reviewing Iowa’s film tax credit program, providing clear examples of how it has been both mismanaged and abused over the past several months. This report also underscores why quick action had to be taken, including the departure of staff; appointing Fred Hubbell as interim IDED director; asking for a complete review by the Attorney General, Auditor, and Department of Revenue; and temporarily suspending the program. To let this program continue without significant changes and appropriate oversight would have been unfair to Iowa taxpayers.

“Given the serious issues identified in this report, I have directed Public Safety Commissioner Gene Meyer to assist with the criminal investigations. In addition, after reviewing this report, the film tax credit program should not move forward until interim director Hubbell and the Economic Development Board have received clear direction on the appropriate interpretation of the film program statute and the proper controls and oversight that must be followed. Finally, I will work with legislative leaders on any changes that should be made in the law so the program is an effective investment in our state’s economic development and is creating real jobs for Iowans.

UPDATE:  at 2:25 p.m. the top Republican in the Iowa House issued a statement.  Read it below.

(DES MOINES)—House Republican Leader Kraig Paulsen (R-Hiawatha) issued the following statement in response to the program review of the Iowa Film Office:

“It is outrageous that the executive branch has been administering this program for two years in violation of the laws passed by the Legislature. 

“Regular Iowans are not allowed to sidestep the law and state government cannot be allowed to either.

“This is another example of why House Republicans offered proposals last year to provide a more open and transparent state government.  Regrettably, these were defeated in the Senate.”

UPDATE:  at 4:29 p.m., House Speaker Pat Murphy (D-Dubuque) issued a statement.  Read it below.

STATEMENT FROM HOUSE SPEAKER PAT MURPHY ON FILM OFFICE REPORT
 
“In light of today’s report and pending criminal investigation, it’s clear Governor Culver took appropriate action last month and suspended the film program.  As noted in the report, it appears the program was not being implemented as directed by the Legislature.  We will continue to work with Governor Culver, Attorney General Miller and Auditor Vaudt to hold those who abused the program accountable and ensure taxpayer dollars are spent responsibly.”

UPDATE:  Sometime this afternoon, a Republican Senator who serves on the Legislative Oversight Commtitee issued the following statement, included in the news release below.

DES MOINES – Results were released today from a report on the Iowa Film Office from the consulting firm Clifton Gunderson, a certified public accounting firm, saying many areas still need clarification and incomplete records were kept.  This comes on the heels of the Iowa Attorney General’s Office launching a criminal investigation of the Iowa Department of Economic Development and the Iowa Film Office’s practices of granting tax credits to film makers.

Senate Republican Oversight Committee member Ron Wieck (R-Sioux City) released the following statement:

“While the release of the report is the first step to ensure taxpayer confidence in Iowa government, the Governor should now release all communications between his office and the Iowa Department of Economic Development in an effort to let taxpayers know exactly how their money was spent on this effort.

“Only full sunshine will restore Iowans’ trust in government after the CIETC scandal.  I look forward to seeing the Attorney General’s results from the criminal investigation and hope that a program like this is not abused in the future.”