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Members of a legislative committee stood by the Governor's Office of Economic Development (GOED) on Wednesday as agency officials responded to State Auditor criticisms that they manipulated job and wage numbers in offering incentives to businesses to expand in Utah.

But words of support for the work GOED has done to promote the state's economy were accompanied by warnings from several lawmakers concerned about what State Auditor John Dougall's team found. Sen. Brian Shiozawa, R-Cottonwood Heights, for one, pledged to watch closely to ensure GOED fulfills pledges to rectify problems identified in the audit.

"As long as you're a state organization, you have to follow the rules," he said at a meeting of the Economic Development and Workforce Services Interim Committee.

Summarizing the audit released last month, performance auditor Chris Otto told lawmakers that GOED had acted "inconsistently and with broad discretion" in applying its formulas for determining which companies qualified for incentives — and how much.

He said auditors found instances in which health benefits were added to compensation equations to help companies comply with incentives' requirements to pay salaries above the local county average. The auditor challenged the way contract employees are counted and the inclusion of existing employees in calculating wage scales.

A wholesale repeal of the incentive program is not necessary, Otto said, but more legislative oversight is needed to make the process transparent and accountable.

Val Hale, who replaced Spencer Eccles as GOED executive director several months ago, said there were "gray areas" in the law that his agency and the State Auditor interpret differently. More than half of the State Auditor's 31 recommendations fall into this category, he said, contending they will be resolved by the GOED board's adoption of new policies, procedures and administrative rules that will formalize processes.

But Hale and Theresa Foxley, GOED's managing director of corporate sales and recruitment, said economic development would be hurt by recommendations restricting the agency's latitude to work with prospective employers on the length and size of post-performance tax rebates.

"It would definitely diminish our ability to recruit companies," Hale said.

Several committee members seemed to concur with Sen. Stuart Reid, R-Ogden, a former economic-development official in Ogden and Salt Lake City, who called the incentives "a critical tool for the success of the state. … The real purpose in using these tools is to be competitive."

At the same time, he added, "I don't want to diminish the auditor's enthusiasm" because oversight is needed and there are valid philosophical objections to the state providing any incentives at all. To avoid attacks from those detractors, Reid advised GOED to "be in compliance and you can protect your program."

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