The Indiana Economic Development Corp. on Thursday released the results of a monthslong audit into the activities of the IEDC and related entities.
The investigation, conducted by Washington, D.C.-based FTI Consulting, was requested in April following concerns regarding transparency at the state agency and at several of its affiliates.
The auditors’ report details reviews and findings related to five organizations: IEDC; Indiana Economic Development Foundation, or IEDF; LEAP/IIP, LLC (associated with the LEAP Research and Innovation District in Lebanon—LEAP stands for Limitless Exploration/Advanced Pace); Elevate Ventures; and Applied Research Institute, or ARI. The review period covered Jan. 1, 2022, through Dec. 31, 2024.
FTI said it identified “45 unique findings and observations related to (conflicts of interest), compliance, and financial oversight, including gaps in governance and inadequate policies and procedures.”
Here are some takeaways from the 127-page audit report.
Indiana Economic Development Corp.
FTI wrote that its review of the IEDC identified 30 findings and observations that highlighted “significant gaps in governance and compliance oversight, including a lack of robust policies and procedures to ensure compliance with IEDC policy and state ethics rules.”
Many of those issues relate to weaknesses in conflict-of-interest disclosure, monitoring, reporting and oversight. Some of the issues are connected to IEDC-related entities. For instance, FTI said it observed that the Indiana Economic Development Foundation “incurs frequent and high costs associated with international business travel” and that the trips often lacked formal budgeting and approval processes.
During the period covered by the audit, FTI said the IEDC distributed more than $1.4 billion to more than 744 recipients, the audit notes, though more than a third of the total went to the LEAP project.
FTI said 34% of total distributions, or $495.1 million, went towards land purchases and other payments related to LEAP. The Indiana Finance Authority received $75 million, or 5% of total distributions, which were used to expand Lebanon’s water capacity for the LEAP project.
Another 20%, or $288.7 million, of the distributions went to the READI program.
Indiana Economic Development Foundation
Consultants also found that the Indiana Economic Development Foundation, the nonprofit arm created to support the state’s economic development efforts, operated with little oversight or internal mechanisms to report conflicts.
The lack of internal review mechanisms resulted in frequent cases of companies and individuals who donated to the IDEF receiving significant grants and tax credits from the IEDC.
IEDC personnel told auditors they perform due diligence checks to ensure there is no “quid pro quo,” but the audit said “no additional documentation was made available to demonstrate that any review or due diligence was conducted on the contributions.”
In total, the IEDF received around $6 million in donations from 2022-2024, with Indiana’s “big five” investor-owned utilities among the top donors (NIPSCO, Duke Energy, CenterPoint Energy, AES Indiana and Indiana Michigan Power).
The audit also found the IEDF’s role in organizing international travel to promote Indiana’s economic interests abroad was lacking in documentation. The audit also identified multiple instances of excessive spending and noted the IEDF lacks a formal budgeting and approval process for trips.
Braun has previously announced he intends to “wind down” the IEDF.
LEAP District
Investigators found the LEAP Research and Innovation District consumed the largest share of IEDC spending—34% in direct spending on the district—during the review period.
The project received $495 million over the two-year period, which included funding to purchase acreage as well as for outside consultants, contractors and attorneys needed to make those acquisitions.
Of the total direct spending on LEAP, Pure Development—the firm the state hired to be its “owner’s representative” in dealing with Boone County landowners—collected $77 million. Under the contract—and subsequent amended contracts—Pure also managed infrastructure development at the site, including hiring and managing all subcontractors.
The audit found the IEDC did not use a bidding process to select Pure Development.
IEDC policies do not preclude “sole sourced” contracts, the audit said. But the audit said the process means “the IEDC doesn’t have the ability to ensure that vendors providing services directly to the IEDC are held to the organization’s compliance and ethical standards.”
“The IEDC should consider implementing a competitive bidding process for all contracts over a certain dollar threshold,” the audit recommended.
The audit noted that Pure donated $25,000 to the Indiana Economic Development Foundation in 2023, a year after signing its initial contract with the IEDC for the LEAP project.
A Madison County Circuit Court judge in May ordered Pure Development to wind down its operations, the result of a legal fight between the company’s owners that began last year.
Elevate Ventures
Elevate Ventures, the nonprofit venture capital firm that invests in companies on behalf of the IEDC, was specifically called out in April when Gov. Braun and Commerce Secretary David Adams announced they were seeking an audit. At that time, Adams announced the state would freeze all funding related to Elevate—federal or otherwise. (The IEDC board at its most recent meeting voted to allow Elevate to resume investment activities.)
During the period covered by the audit, 94% of Elevate’s operational funding, or $16.5 million, came from the IEDC.
FTI said its review of Elevate Ventures identified 15 findings and observations related to things such as governance and board issues, conflict-of-interest policies and disclosures, and accounting and financial reporting.
For instance, one of FTI’s observations was that “coordination and communication between the IEDC and Elevate Ventures has been lacking.” FTI also said it found that Elevate has not historically adequately tracked investments by tranche of IEDC funding or returns generated by investment.
FTI also added that Elevate “has already taken significant steps to remediate several of the findings and observations described” in the audit, including a reconciliation project that aims to tie every investment return back to its original investment and IEDC funding tranche, all the way back to Elevate’s inception.
In a written statement Thursday, Elevate characterized the audit results as “affirming [Elevate’s] role as a high-performing partner in Indiana’s innovation economy.”
Applied Research Institute
The audit’s main findings regarding the IEDC’s relationship with the Bloomington-based Applied Research Institute—described as the state’s “innovation partner”—reveal the IEDC used vague language in contracts that made it hard to determine whether ARI was adequately performing the work it was contracted to do.
Further, the investigators found ARI had no formal system for decision-makers to file conflict of interest forms.
In fact, the nonprofit did not have a specific conflict-of-interest form to be filled out, and when disclosures were submitted, they were filed in “disparate locations.”
The audit specifically references Dave Roberts—the former chief innovation officer with the IEDC, who joined ARI as CEO in December 2022—as failing to proactively disclose multiple conflicts of interest he had while leading ARI.
Roberts, the audit says, did not report any conflicts of interest to ARI until September 2024, and even then, he told the organization he was involved with the Battery Innovation Center. Forensic consultants, however, found during that time, Roberts was affiliated with multiple other organizations that he did not disclose.
In total, the audit found, ARI gave $165,000 to two groups Roberts was associated with, and which he did not disclose, from 2022-2024. Those groups are SportsTechHQ and Indy Innovation Challenge.
ARI announced earlier this month that Andrew Kossack would replace Roberts as CEO. The organization declined to provide a reason for Roberts’ departure.
Roberts sent IBJ a statement that said hewas not involved in the contract drafting or the approval process for the contract between ARI and IEDC. And he said he submitted all conflict-of-interest forms that at the IEDC that had been required.
He said at no point did he receive compensation from SportsTechHQ and Indy Innovation Challenge.