The Indiana Economic Development Corporation released a lengthy forensic analysis after a legal review Thursday, part of an ongoing effort by Gov. Mike Braun to reform the embattled, quasi-public state agency to restore public trust.
In particular, the private company tasked with reviewing the entity flagged eye-popping spending by its nonprofit — which is funded by an opaque system of donors — on international trips.
“When questions are raised about how taxpayer dollars are being used, we take that seriously. That’s why we ordered a full forensic audit — no shortcuts, no politics,” said Braun in a statement. “The results are clear and this matter is resolved. We are now forward-focused on investing in, building and growing Indiana companies together.”
The final, 127-page report reviews past practices and provides recommendations for future action, emphasizing both transparency and identifying areas where governance and oversight must be strengthened.
“We have already begun this work,” said Secretary of Commerce David Adams, in a memo briefing Braun.
Adams said all votes must now occur before the IEDC’s full board of directors and not in small committees. Additionally, the nonprofit arm — the Indiana Economic Development Foundation — had spending frozen in April. That entity will now “wind-down.”
A formal investment policy will “ensure taxpayer dollars are directed toward Indiana businesses,” and “conflict-of-interest checks with board members are now part of standard procedure.”
“These steps are not merely corrective. They reflect a deliberate effort to protect taxpayer resources, restore confidence and position Indiana’s economic development funds as a model of best practice,” concluded Adams.
In addition to the IEDC and its foundation, the audit also focused on Elevate Ventures, the Applied Research Institute and the Limitless Exploration/Advanced Pace District — otherwise known as LEAP, which has become a controversial Boone County economic development project.
Braun promised an “audit” of the IEDC in April, after Indiana Legislative Insight reported allegations of self-dealing and more among IEDC and its partners. In May, Washington D.C.-based FTI Consulting began work. The contract is worth up to $800,000 and extended for a year.
In a preview last week, Braun’s office said there were no criminal findings within the audit. However, FTI flagged “concerns about the potential for favoritism and misuse of public funds.”
More from the audit
The Indiana Economic Development Foundation was set up in 2005 as a nonprofit organization to raise and manage private contributions and help fund the state’s economic development priorities.
Administrations in the past have refused to disclose who the major funders are for the entity, which largely paid for international travel for the governor and other economic development officials.
Former Gov. Eric Holcomb traveled extensively on the foundation’s dime, including 27 international trips during his eight-plus years in office.
The review ran from Jan. 1, 2022 to Dec. 31, 2024, and identified 107 entities that donated $6 million. Sixteen donors made up 78% of the total. They included NIPSCO, Duke Energy, CenterPoint Energy, AES Indiana, Indiana Michigan Power, Rolls-Royce, Hoosier Energy and Old National Bank.
But the identity of eight others is still shielded by a state law that prohibits public agencies from requiring nonprofits to share certain personal information. Public agencies are also prohibited from disclosing personal information.
Of the 107 entities that made donations to the foundation, 46 were identified as having received $238 million in either payments or tax credits from the IEDC during the review period.
“Discussions with IEDC personnel indicated that due diligence is conducted and ‘waivers’ are used to ensure there is no quid pro quo. As such, FTI requested supporting documentation (e.g., invoices, evidence of due diligence, etc.) for a sample of contributions. While invoice support was provided, no additional documentation was made available to demonstrate that any review or due diligence was conducted on the contributions, including consideration of potential conflicts of interest,” the audit read.
The review found the foundation spent $13.4 million, mostly on dozens of domestic and international trips.
FTI noted several expenses that appear to be excessive in nature. In 2022, the foundation paid over $86,000 for international car race tickets and events while incurring $70,000 in expenses for expedited VIP airport services and $700,000 in payments to hotels, including some high-end brands.
“Furthermore, travel accommodations were not limited to state employees and officials, as FTI also identified approximately $167,000 in international travel costs related to three family members of state officials,” the review found.
On one 2022 trip to Egypt for an international climate conference, the budget for the trip estimated $90,000 in airfare costs, but the credit card expenses suggest actual airfare costs incurred for the trip were at least $200,000.
The audit included 19 findings and observations indicating that the foundation lacks dedicated policies and processes, including a framework to evaluate donations against potential conflicts of interest arising from IEDC funding. Additionally, the foundation has “inadequate” financial management practices, such as insufficient budgeting and approval processes for travel and entertainment, poor documentation of contributions and expenditures, and a lack of expense controls.
Its governance structure is also intertwined with the IEDC, blurring the lines between the two entities, the report said.
During the review period, one-third of overall IEDC expenses went to the LEAP Project, or $495 million.
As of August, Indiana has bought 6,345 acres of land through IIP LLC, purchasing at just under $75,000 an acre for a total of more than $475 million.
An Indiana Capital Chronicle report put overall costs closer to $1 billion because it included spending from other state agencies.
FTI requested and received accounting documentation reflecting payments made by the IEDC to third-party vendors in connection with the LEAP project. In total, the IEDC and the Indiana State Budget Committee allocated and paid $191 million to outside vendors in connection with the LEAP project, including costs associated with infrastructure and site development, legal fees, taxes and utilities.
Of the $191 million, $77 million went to Pure Development — which kept about $18 million for its work and passed the rest to subcontractors.
The Pure contract was “sole sourced,” meaning no competitive bids were taken. The audit said the IEDC should consider implementing a competitive bidding process for all contracts over a certain dollar threshold.
Looking at potential self dealing
One particular focus was a review of conflicts of interest, which comes after an Indianapolis Star story last month detailed how entities controlled by three men benefited handsomely from taxpayer-funded grants and no-bid professional services contracts: The IEDC under Holcomb doled out more than $180 million over less than six years in awards to entities controlled, either in whole or in part, by at least one — and sometimes all — of the three men.
One of those entities was Applied Research Institute, which is included in the audit findings.
Applied Research Institute, which FTI describes as “a partner in advancing research, technology and defense-related initiatives that drive Indiana’s innovation economy,” deals with sensitive, high-value projects.
The former IEDC’s chief innovation officer moved on to the Applied Research Institute in December 2022. But the potential conflict wasn’t discussed nor was it disclosed to the Indiana State Ethics Commission when the IEDC awarded the entity a $17.5-million contract.
That former executive also didn’t obtain a required post-employment waiver. The FTI review “suggests that approximately 82%” of that person’s salary at ARI “is directly related to this specific IEDC contract, indicating a potential violation of post-employment restrictions.”
FTI identified 30 entities in which an IEDC board member or employee had a potential conflict of interest — but found that just four were discussed in board or committee meetings and only one was disclosed to the appropriate oversight agency.
Future action could include adding third-party oversight and beefing up accountability in the conflict-of-interest process, FTI’s authors wrote. Some recommendations, such as travel and donation policies, have already been updated.
Elevate Ventures, which FTI describes as a “state-supported venture capital firm,” was allowed to resume investment operations last week. During the two years analyzed, it made 336 individual investments in 227 unique companies for more than $55 million.
Of those, FTI identified five entities receiving public funds through Elevate Ventures that “presented a conflict with one or more EV employees.” Four of those were disclosed and approved by board members.
“At a high level, FTI found that the IEDC’s limited communication with and governance of EV, along with a lack of transparency into EV investment- level details, contributed to an environment that increased the risk that state and federal funds were being used in a manner that was inconsistent with their stated purpose,” concluded FTI.
But FTI also reported that Elevate Ventures had “already taken significant steps to remediate” identified problems, which includes improving their customer resource management.
In a joint release with Braun, Elevate Ventures emphasized that no illegal activity was identified, touting its accomplishments with the state.
“We appreciate the thoroughness of this review and welcome its conclusions. Our team has remained focused on building Indiana’s innovation economy, and we’re proud of the impact we’ve made. We look forward to continuing our work with entrepreneurs and communities across the state,” said CEO Christopher Day.
Additionally, EV has hired an outside firm to validate investment returns with bank records.