State - Audit faults SPARK's actions while Snyder on board No money went missing and no findings point to any illegal activity

By Kathy Barks Hoffman

AP Political Writer

LANSING, Mich. (AP) -- The Ann Arbor economic development group gubernatorial candidate Rick Snyder helped create in 2005 kept such faulty records its first few years that an audit found it couldn't adequately report how it was spending all the hundreds of thousands of dollars it received in public funds.

Snyder, one of five Republican candidates, co-founded Ann Arbor SPARK in 2005 and was chairman of the organization until 2009. No money went missing, and none of the audit's findings pointed to illegal activity. Snyder, who remains on SPARK's executive committee, told The Associated Press the problems were merely growing pains.

Yet while Snyder boasts on his website of SPARK's success at attracting talent and investment to the Ann Arbor area, a 2008 audit of the organization's 2007-08 contract with the Ann Arbor-Ypsilanti SmartZone Local Development Finance Authority found that SPARK didn't have adequate internal controls, submitted invoices late, provided services for companies that weren't eligible because they weren't in Ann Arbor and billed for services even when they hadn't fulfilled the contract's terms.

A subsequent audit by the same firm covering July to December 2008 found the problems largely had been fixed.

Snyder argues in ads and campaign literature that, as a businessman, he'd be able to run the state better than the GOP "career politicians" he's running against -- U.S. Rep. Pete Hoekstra, Attorney General Mike Cox, Oakland County Sheriff Mike Bouchard and state Sen. Tom George.

The former CEO of computer maker Gateway Inc., Snyder ran a successful Ann Arbor venture capital firm, Ardesta, while he was on SPARK's board. He said there was room for improvement in SPARK's early operations, but contends none of the problems were major.

"It was a fast-growing organization that had to grow and develop and things, and as part of that process, its systems didn't totally keep up with the growth," he told The Associated Press in a recent interview, referring to the shortcomings as "just part of the natural growth curve."

"In the end, the substance of the real issues there were not that large," he added. "Today, there are good systems in place."

The finance authority paid SPARK $2.5 million from 2005 to 2009 and provides about a fifth of SPARK's annual budget. During the period covered by the first audit, it gave SPARK nearly $870,000.

The audit came a year after a 2007 review by Ann Arbor financial officials suggested LDFA make sure SPARK met the terms of its contract.

Michael Reid, a Snyder supporter, resigned as LDFA treasurer in October 2008, telling the Ann Arbor City Council in his resignation letter that the audit revealed "conditions where misuse of public funds or outright fraud could easily go undetected."

The certified financial planner told the AP that he left because he didn't think the LDFA board took the audit findings seriously enough.

Reid complained in his letter that SPARK should have been well past the stage for "growing pains" by the time the audit was done.

Besides the record-keeping problems, the audit found undisclosed conflicts of interest and said SPARK had offered assistance to companies outside the geographic boundaries agreed to in the contract, in effect using Ann Arbor tax money to help businesses in other areas. In one case, the services were provided to an Ypsilanti company by a SPARK employee "who appears to be the son of the CEO," the audit found.

However, Reid said "it would be patently wrong to call this a lack of oversight on the part of Rick Snyder."

He thinks much of the blame for SPARK's problems should fall on the organization's president and CEO, Mike Finney, who was hired in late 2005 and still runs SPARK's day-to-day operations. Reid hasn't been involved with LDFA since he resigned and didn't want to comment on how the SPARK contract is being handled now.

Finney accepted responsibility for SPARK's shortcomings, which he said were resolved quickly once the audit came out. He agreed with Reid that the organization's board members were not involved in the day-to-day record-keeping faulted in the report and said the board wanted the shortcomings fixed quickly.

"Their message was, 'Be as transparent as possible and resolve it as efficiently as possible,' and that's exactly what we did," Finney said last week.

David Dulio, an Oakland University associate political science professor, said Snyder's campaign may not take much of a hit if the candidate wasn't responsible for the deficiencies found by the audit. But he said Snyder could lose favor with some voters if his business credentials lose some of their shine.

It's not the first instance where questions have arisen over an organization's actions while Snyder was involved. He has had to fend off criticism that Gateway laid off thousands of workers after he stepped down as CEO but was still on the board.

Snyder and Michael Tyler, who worked as Gateway's chief legal and administrative officer from 2004 to 2007, have said the board was not involved in moving many of Gateway's manufacturing operations to Mexico and countries in eastern Europe and Asia. Gateway is now a subsidiary of Taiwan-based Acer Inc.

Published: Thu, Jul 8, 2010

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