Legislative audit is critical of Virginia’s tobacco commission

RICHMOND — A tobacco commission created to dole out hundreds of millions of dollars in Virginia’s most economically depressed areas spent too much money on projects that did not generate jobs or boost salaries, according to a critical legislative audit released Monday.

The long-awaited study by the Joint Legislative Audit and Review Commission said the tobacco commission is too large, does not meet frequently enough and fails to scrutinize projects paid for with $1 billion from a legal settlement with the nation’s largest tobacco companies.

The Tobacco Indemnification and Community Revitalization Commission needs to do a better job documenting the performance of its grants in Southside and Southwest Virginia, the audit concluded. Only 11 percent of its projects can even be measured for results.

In the past decade, 1,368 grants worth $756 million have been awarded for a variety of projects, including high-speed Internet access in rural areas, walking trails and improvements to the Martinsville Speedway. About $606 million is available for future grants.

“The focus of the commission is on revitalization, and if you look back on the transcripts of the discussions for economic impact, there is usually precious little,’’ study leader Walt Smiley told members of JLARC at a meeting Monday on Capitol Square.

The chairman of the tobacco commission, Del. Terry G. Kilgore (R-Scott), who initially had said a study was not needed, said that the group has started to address some of the findings and that others will be discussed at its September meeting.

“Staff has been focused in the most recent past on whether we have real economic outcomes, and that’s something we are going to continue to focus on,” Kilgore said.

The audit found “significant positive impact” from money spent on scholarships, job training and broadband. But the report noted critically that awards were given out in Southside Virginia based on past tobacco production instead of economic need. Some areas, including Martinsville, which has the state’s highest unemployment rate, received little of the money.

“It’s just not being run like a business,’’ House Minority Leader Ward L. Armstrong (D-Henry), whose district benefits from the settlement. “They are just handing out money. There are serious concerns. These are precious resources.”

Legislators have been clamoring for a study for years, but the calls became more pronounced last year after Virginia’s former secretary of finance was convicted of stealing $4 million from the commission.

John W. Forbes, who served under former governor James S. Gilmore III (R), used the funds for a new home, personal investments and to start a company. In November, he was sentenced to 10 years in prison in November.

Armstrong had requested a legislative audit in 2009 after he became concerned that commission members had approved several small pet projects in their districts that he dubbed earmarks. The Republican-controlled House killed the bill, but it was passed as part of a state budget compromise in the 2010 legislative session.

Fifty-two states and territories, including Virginia, are to divide $206 billion that is expected to come from the nation’s four largest cigarette manufacturers over 25 years. So far, Virginia has received nearly $1.25 billion.

State legislators agreed to split the money: 50 percent to revitalize Southside and Southwest Virginia, which includes annual payments to tobacco farmers to make up for lost revenue; 40 percent to help pay for the state’s smoking-related Medicaid costs; and 10 percent to discourage smoking. Last year, legislators also agreed to direct a portion to fight childhood obesity.

A 31-member commission approves grants to 41 cities and counties and issues 45,000 checks to farmers each year. Nearly $300 million has been given to farmers.

The report says the tobacco commission needs to hire more staff, research projects more thoroughly and not accept last-minute grant proposals or allow commission members to push through pet projects.

Neal E. Noyes, the tobacco commission’s executive director, said the group has not approved last-minute grant proposals in several years. “It simply doesn’t happen,” he said.

The JLARC’s findings mirror those of former governor Gerald L. Baliles (D), who led a 2008 study group that recommended a slew of changes pertaining to financial safeguards and overall performance, including finding a better way to track the commission’s results. But only some of the panel’s 22 recommendations were adopted.

“There’s been some really great successes. They’ve put some money into some things that really did some great things and developed some jobs,’’ Del. David B. Albo (R-Fairfax), a JLARC member, said. “And they put money into some things that didn’t work out.”

By Anita Kumar

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