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A Utah economic development nonprofit funded largely by taxpayer money failed to file five years' worth of tax returns, costing the organization its tax-exempt status and sparking a legislative audit.

"I wish we weren't in this situation, of course, but we are, we were, and we think we've taken steps to fix it," said Jeff Edwards, president and CEO of the Economic Development Corporation of Utah (EDCUtah).

The corporation is a nonprofit that has a roughly $3.3 million annual budget, with two-thirds of it paid for by state and local taxpayers.

Its mission is to work to recruit new businesses to come to the state and help existing businesses expand, and EDCUtah touts its role in helping to create 25,000 jobs and generate $1.2 billion in business investment to the state.

Its board is a who's who of Utah businesses, with presidents and CEOs of the state's biggest corporations filling out the roster. It has more than 300 member companies.

As a 501(c)(6), EDCUtah is classified by the IRS as a nonprofit under the same section of the tax code as chambers of commerce, trade associations and, until recently, the National Football League.

But for five years, beginning in 2010, EDCUtah failed to file its annual tax returns reflecting its income, expenses and top-salaried employees. Edwards said he first learned of the oversight last October, when it was brought to his attention by someone outside the organization that the IRS had revoked EDCUtah's tax-exempt status more than two years earlier for failing to file the reports.

"It came as a big surprise to us that that had happened," Edwards said. "As the CEO, I just went about what I was doing and just assumed certain things were happening, but, in fact, they were not."

EDCUtah hired a new auditing firm to help go back and reconstruct the prior years' tax returns and filed them with the IRS in February of this year, along with an application to have the corporation's tax-exempt status reinstated. The attorney for EDCUtah was given preliminary word this week that the IRS had given its initial approval to that request.

Edwards said the organization has also taken steps recommended by the auditors to strengthen internal financial controls, such as hiring a new chief financial officer, Jill Collette. It made changes to its accounting policies to ensure expenditures are more easily tracked.

"These are things that we should have done some time ago," Edwards said.

Dean Luikart, regional vice president for Wells Fargo, became chairman of EDCUtah's board just as the tax-filing oversights had come to light.

"I can tell you I think it's being dealt with, in my mind, very well," he said.

Luikart is one of six people on a newly created finance committee, along with members with extensive financial backgrounds like Zions Bank President and CEO Scott Anderson, Goldman Sachs managing director David Lang and Workers Compensation Fund CEO Ray Pickup.

The idea is to have a smaller group with financial expertise keep a more focused watch on the financial operations of the organization.

Since the committee was created, members have met regularly to deal with the tax and audit issues.

The Utah Legislature, which appropriates $900,000 in taxpayer money — with another $1.2 million coming from local governments — each year, is looking into the financial management of the agency as well.

Members of the state legislative auditor general's staff had been doing what Senate President Wayne Niederhauser, R-Sandy, characterized as a "survey" of EDCUtah's management practices and recommended to legislative leaders that the review be expanded into a full-scale audit.

Niederhauser said lawmakers trust the auditors' judgment and voted at a meeting Wednesday to conduct the full audit, which he added should take two to three months to complete.

"Hopefully it all comes back that everything's fine," Niederhauser said, "but we are going to look and find out."

Edwards said EDCUtah has been working with the auditors for a few months. "They are looking at these same issues," he said, "and we've been completely open and transparent."

Despite the missteps, Edwards said the auditors hired by EDCUtah reported that the organization is in good financial shape, with no accounting irregularities and $1 million in reserves.

On Tuesday, the EDCUtah board voted to approve the reports from the auditors at its regular meeting.

"At the end of the day, [the responsibility] is on me. I'm the CEO. I'm the guy who's responsible for it. I'm the guy who has to sign the audit report at the end of the year, but I was working on other things, honestly," Edwards said. "I take full responsibility for it. It all rolls up to me as the CEO and I'm the guy who needed to be responsible, so I'm the guy who's been taking steps to fix it."