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Madison — The bad loans held by the state's top jobs agency have declined in value by nearly $8 million, though much of the decrease was from loans being written off rather than salvaged, a new audit shows.

The report released Friday by the Legislative Audit Bureau looked at the loans held by the Wisconsin Economic Development Corp. that taxpayers made to Wisconsin companies in an effort to create jobs.

The agency drew criticism for its handling of loans in the fall of 2012, when WEDC disclosed to the Milwaukee Journal Sentinel that it had failed to systematically track millions of dollars in bad loans. As a result, it put in place a series of stricter financial controls, which the audit acknowledged.

Friday's audit found that the troubled loans held by WEDC dropped from 49 loans totaling $13.2 million as of June 2013 to 30 loans totaling $5.5 million as of December 2013.

Of the $7.7 million decrease in troubled loans held by WEDC, the biggest chunk — $3.2 million — came from loans that were written off by WEDC because they were 90 days past due.

For the state to proceed with the collection process, those loans had to be transferred from WEDC to the Department of Administration. So by itself that change is just a bureaucratic shuffle, not a gain for taxpayers.

The audit didn't examine what had happened to the loans after they went to the administration department.

The next biggest chunk of past due loans, worth $2.1 million, had their contracts rewritten by WEDC to delay repayment by the borrowers and $1.3 million in loans were forgiven by WEDC in whole or in part.

Rep. Samantha Kerkman (R-Salem), co-chairwoman of the Legislature's Joint Audit Committee, said the report showed that WEDC still had "ground to cover."

"I am concerned that the bulk of the reduction in potentially uncollectable loan balances was not due to collection efforts, but rather from shifting past due loans to the Department of Administration and amending loan contracts to defer repayments," Kerkman said in a statement.

WEDC, a quasi-public authority, was created in July 2011 by Gov. Scott Walker and lawmakers as a replacement for the former state Department of Commerce. Most of the loans examined in Friday's audit were made by the Commerce Department, not WEDC.

In a statement, WEDC Chief Executive Officer Reed Hall said the audit showed the agency is on the right track.

"Today's LAB audit highlights the significant progress WEDC has made in reforming its internal fiscal controls, processes and procedures while fulfilling its mission of working with businesses and communities to create jobs and grow Wisconsin's economy. We remain committed to full transparency and accountability in all aspects of our operations," Hall said.

In their report, auditors recommended WEDC develop a better way to calculate its rate of loan delinquency. WEDC determined that as of the end of 2013, it had $1.7 million in delinquent loan payments, or 2.7% of the total outstanding loan balance of $62.2 million in its portfolio.

But auditors noted that takes into account only the portions of loans that are not current, and not the full amount of those loans that potentially won't be recovered. Using the methodology, WEDC had $5.5 million that potentially could not be collected, or 8.8% of the total loan balance.

Auditors called WEDC's methodology "limited" and said the agency should use both ways of calculating delinquent loans.