State Auditor's Office - Texas Enterprise Fund

John Keel, CPA
State Auditor

An Audit Report on
The Texas Enterprise Fund at
the Office of the Governor
September 2014
Report No. 15-003

An Audit Report on
The Texas Enterprise Fund at the
Office of the Governor
SAO Report No. 15-003
September 2014
This audit was conducted in accordance with Acts 2013, 83rd Legislature, Regular Session, Chapter 1353, General and Special Laws of
Texas (Senate Bill 1390, 83rd Legislature, Regular Session).
For more information regarding this report, please contact John Young, Audit Manager, or John Keel, State Auditor, at (512) 936-9500.
Approval of Awards
While the Office of the Governor is responsible for
administering the Texas Enterprise Fund, the
Governor, the Lieutenant Governor, and the
Speaker of the House of Representatives must
approve awards. Specifically:
Texas Government Code, Section 481.078(e),
states that The governor may negotiate on
behalf of the state regarding awarding, by
grant, money appropriated from the fund.
The governor may award money appropriated
from the fund only with the prior approval of
the lieutenant governor and speaker of the
house of representativesan award of money
appropriated from the fund is considered
disapproved by the lieutenant governor or
speaker of the house of representatives if that
officer does not approve the proposal to
award the grant before the 91st day after the
date of receipt of the proposal from the
governor.
According to the Office of the Governors
Texas Enterprise Fund 2013 Legislative
Report, the Governor, the Lieutenant
Governor, and the Speaker of the House of
Representatives must unanimously agree for
an award to be granted.

Overall Conclusion
While there were control weaknesses in the
Office of the Governors (Office) administration
of the Texas Enterprise Fund from September
2003 through August 2013 (the scope of this
audit), the Office made all disbursements
auditors tested after the effective dates of the
associated Texas Enterprise Fund award
agreements. In addition, it safeguarded state
resources by ensuring that it disbursed funds
only to recipients with award agreements. The
Office also recovered $14,507,385 in funds
(referred to as clawback penalties) from Texas
Enterprise Fund award recipients when it
became aware of recipients noncompliance with
requirements in award agreements.
Recipients of Texas Enterprise Fund awards
reported that they had created 48,317 direct
jobs as of December 31, 2012. However, as a
result of the control weaknesses identified
during this audit, it was not always possible to
determine whether award decisions were
supported, or to determine the number of jobs
that recipients of awards from the Texas
Enterprise Fund have created.
The Office should strengthen its control structure
for its administration of the Texas Enterprise
Fund. The absence of an adequate control
structure impaired the Offices ability to
consistently administer the awarding, award
agreement establishment, monitoring and award
agreement termination, and reporting functions
for the Texas Enterprise Fund. The following units
within the Office administer the Texas Enterprise
Fund:
The Office of Economic Development and
Tourism accepts applications for awards,
conducts a due diligence review, and
prepares information packets for decision
Background Information
The 78th Legislature established the Texas
Enterprise Fund in 2003 as a dedicated account of
General Revenue to be used for economic
development, infrastructure development,
community development, job training programs,
and business incentives.
According to the Office of the Governor, the Texas
Enterprise Fund is a final incentive tool for
projects (1) that offer significant projected job
creation and capital investment and (2) for which a
Texas site is competing with another viable out-of-
state option.
Between September 2003 and August 2013, the
Texas Enterprise Fund made award agreements
totaling $506,838,696 for 115 projects. (See
Appendix 2 for a list of all Texas Enterprise Fund
awards made during that time period.)
As of June 30, 2014, the Texas Enterprise Fund had
a remaining balance of $204,591,523, and the
Office reported that it had committed
$149,477,000 of that amount to recipients that had
not yet qualified for disbursements. Based on that
information, the amount remaining in the Texas
Enterprise Fund that had not been committed to
projects was $55,114,523.

An Audit Report on
The Texas Enterprise Fund at the Office of the Governor

ii

makers (the Governor, the Lieutenant Governor, and the Speaker of the
House of Representatives).
The Office of the General Counsel develops award agreements and related
amendments.
The Compliance and Oversight Division monitors recipients compliance with
award agreements.
One requirement the Office established for receiving a Texas Enterprise Fund
award is that a recipients proposed Texas site must be in competition with
another viable out-of-state option. However, auditors were unable to verify
applicants assertions regarding competition outside of Texas because sufficient
information to perform that verification was not usually available.
Senate Bill 1390 (83rd Legislature, Regular Session) required the State Auditor's
Office to conduct this audit (see Appendix 5).
Auditors communicated other, less significant issues to the Office separately in
writing.
Summary of Managements Response
The Offices detailed managements response is presented in Chapter 8 of this
report, and the Office provided the following summary of its managements
response:
Although the Office of the Governor (OOG) agrees that there are certain
administrative areas where the Texas Enterprise Fund (TEF) may improve, many
of the key issues the State Auditors Office (SAO) identifies existed closer to
the inception of the TEF in 2004. The OOG has continued to improve the
administration of the TEF, including implementation of certain SAO
recommendations provided throughout the audit. The process and policies of
the TEF have evolved with time to implement a more standard operating
procedure.
The TEF is a key economic development tool utilized to assist in competitive
recruitment efforts on behalf of the state of Texas. To be responsive to the
dynamic global business climate and remain competitive with other states, it is
necessary for the program to remain flexible based upon the unique
characteristics of each project. This flexibility must include the ability to
negotiate with prospective awardees in order to obtain the most advantageous
agreement possible for the state.
Auditor Follow-up Comment
The State Auditors Office stands by its conclusions based on the evidence
presented and compiled during this audit.
An Audit Report on
The Texas Enterprise Fund at the Office of the Governor

iii

Summary of Information Technology Review
Auditors reviewed automated controls over access to the Offices Texas Enterprise
Fund shared drive and change management controls over key spreadsheets the
Office uses to administer the Texas Enterprise Fund. Auditors did not identify
significant issues regarding access to the Offices shared drive; however, auditors
communicated other, less significant issues in information technology to the Office
separately in writing.
Summary of Objectives, Scope, and Methodology
The objectives of this audit were to:
Determine whether the Office awards and amends grants from the Texas
Enterprise Fund in accordance with relevant state laws, rules, and Office
policies and procedures.
Determine whether the Office disburses money from the Texas Enterprise
Fund in accordance with Texas Government Code, Section 481.078, and
other relevant laws, rules, and standards.
Determine whether the Office monitors the persons or entities awarded
money from the Texas Enterprise Fund for compliance with the terms of any
applicable agreements and with the requirements of Texas Government
Code, Section 481.078, and other relevant laws, rules, and standards,
including any terms related to job creation and capital investment.
The scope of this audit covered (1) projects with Texas Enterprise Fund award
effective dates between September 1, 2003, and August 31, 2013, and (2) projects
that did not receive Texas Enterprise Fund awards, when documentation related to
those projects was available for review.
Because the Office did not consistently include signature dates on its Texas
Enterprise Fund award agreements, the audit scope covered the best available
information as of March 2014.
The audit methodology included reviewing all projects that received awards from
the inception of the Texas Enterprise Fund and that were effective between
September 1, 2003, and August 31, 2013. Auditors also reviewed documentation
for projects that did not receive Texas Enterprise Fund awards when that
information was available. Audit work included collecting information related to
the Offices Texas Enterprise Fund award process, reviewing award agreements,
reviewing the Offices monitoring information, and performing selected tests and
other procedures.

Contents

Summary and Recommendations
The Office Should Strengthen Its Administration of the
Texas Enterprise Fund ................................................ 1
Detailed Results
Chapter 1
The Office Should Strengthen Its Control Structure for
the Texas Enterprise Fund ........................................... 7
Chapter 2
The Office Did Not Consistently Provide Decision Makers
with Complete and Accurate Information Related to
Potential Texas Enterprise Fund Awards ......................... 10
Chapter 3
The Office Did Not Consistently Include Certain
Provisions in Award Agreements and Amendments to
Comply with Requirements for the Texas Enterprise
Fund and Protect the States Financial Interests ............... 18
Chapter 4
The Offices Monitoring of Texas Enterprise Fund Award
Recipients Was Not Always Adequate, and Its Award
Agreement Termination Processes Did Not Always
Comply with Requirements ........................................ 25
Chapter 5
The Office Disbursed Funds from Texas Enterprise Fund
Awards in Accordance with Requirements, But Certain
Weaknesses Exist .................................................... 32
Chapter 6
The Office Did Not Fully Comply with Statutory
Requirements for Its Reports on the Texas Enterprise
Fund ................................................................... 33
Chapter 7
Results from Site Visits at Six Texas Enterprise Fund
Award Recipients Demonstrated Inconsistencies in the
Offices Awarding Processes and Monitoring .................... 36
Chapter 8
Managements Response ............................................ 43

Appendices
Appendix 1
Objectives, Scope, and Methodology ............................. 59
Appendix 2
Projects That Received Texas Enterprise Fund Awards
Between September 1, 2003, and August 31, 2013 ............. 66
Appendix 3
Incentive Fund Best Practices ..................................... 91
Appendix 4
Excerpts from Texas Government Code, Chapter 481 ......... 92
Appendix 5
Requirement to Conduct This Audit .............................. 98

An Audit Report on the Texas Enterprise Fund at the Office of the Governor
September 2014
Page 1
Summary and Recommendations
The Office Should Strengthen Its Administration of the Texas
Enterprise Fund
The summary points below demonstrate that the Office of the Governor
(Office) should strengthen several critical aspects of its administration of the
Texas Enterprise Fund.
The Office should address weaknesses in its awarding process.
The Office did not consistently maintain key documentation of its Texas
Enterprise Fund awarding processes. As a result, it was not always possible to
determine how the Office made awarding decisions.
The Office also did not adopt rules related to the Texas Enterprise Fund
such as rules to define its application and evaluation processesin the Texas
Administrative Code.
The Offices awarding process does not incorporate the use of an objective
scoring tool to evaluate applications for awards and make specific
recommendations regarding which applicants should receive awards. The
Office also did not consistently provide decision makers with complete and
accurate information related to potential Texas Enterprise Fund awards.
During the 2004-2005 biennium, the Office did not require recipients to
submit applications and/or create direct jobs for 11 projects that received
Texas Enterprise Fund awards. Those 11 projects received awards totaling
$222,281,000 (44 percent of the $505,838,696 in Texas Enterprise Fund
awards the Office made between September 2003 and August 2013). For
example, a $40,000,000 award to Sematech, Inc. did not require the recipient
to create direct jobs; Sematech, Inc. also did not submit an application for that
award.
The Office did not consistently include certain provisions in Texas Enterprise
Fund award agreements, and it could not provide documentation that it
complied with statute regarding amendment notification.
For example, the Office did not define the term full-time for 107 (97
percent) of the 110 award agreements tested that required the recipients to
create full-time jobs. The Office also did not consistently include provisions
in award agreements enabling it to disburse funds only after recipients have
complied with job-creation requirements. Fifteen (13 percent) of 115 award
agreements tested included a provision to disburse all funds before recipients
had complied with job-creation requirements or other requirements.

September 2014
Page 2
In addition, the Office could not provide documentation that it consistently
notified the Lieutenant Governor and the Speaker of the House of
Representatives in advance of amending awards, as required by statute.
The Offices monitoring of Texas Enterprise Fund award recipients was not
always adequate, which affected its ability to impose clawback penalties for
recipients noncompliance with job-creation requirements.
The Offices compliance verification process focused primarily on self-
reported information that recipients submitted. For 40 projects that auditors
tested, the Offices compliance verification was not adequate because it did
not require recipients to provide detailed job-creation information to enable it
to perform that verification.
Compliance with job-creation requirements is the primary criterion for
determining whether recipients owe clawback penalties. The Office collected
103 clawback penalties that totaled $14,507,385 for recipients
noncompliance with job requirements for reporting periods that ended
between 2004 and 2012. However, weaknesses in the Offices compliance
verification process impair the Offices ability to consistently identify
recipients noncompliance with job-creation requirements.
The Office has not developed a process to report the results of its compliance
verification process to the Lieutenant Governor and the Speaker of the House
of Representatives.
Communicating the results of the Offices compliance verification process is
not specifically required. However, providing those results to the Lieutenant
Governor and the Speaker of the House of Representatives would enable them
to more effectively evaluate each Texas Enterprise Fund award and would
enhance accountability.
The Offices award termination processes did not always ensure that the Office
recovered all funds due back to the State.
The Office made errors in its calculation of award termination repayments.
As of March 2014, the Office had collected a total of $19,244,450 in
termination repayments associated with the 23 award agreements that it had
terminated or was in the process of terminating. Auditors estimated that the
Office should have collected an additional $3.8 million in termination
repayments.
The Office did not fully comply with statutory requirements for its reports on
the Texas Enterprise Fund.
The Office did not include certain information required by Texas Government
Code, Section 481.079, in its biennial reports on the Texas Enterprise Fund.
Other information it included in those reports was inaccurate. For example, in
its January 2013 biennial report, the Office reported the 66,094 jobs that
recipients were required to create, but it did not report the 48,317 jobs that

September 2014
Page 3
recipients reported they had created. It also did not report (1) the amount of
capital investment recipients committed to make and (2) the actual amount of
capital investment recipients expended or allocated per project in Texas.
The Offices January 2013 biennial report also did not include other
statutorily required information, such as the number of jobs recipients created
that provided health benefits to employees and the median wage of the jobs
that recipients created.
Recommendations
The report chapters that follow provide more detailed information on the
summary points outlined above. The chapters that follow also contain
detailed recommendations to strengthen the Offices administration of the
Texas Enterprise Fund. Those recommendations are also listed below.
Recommendations regarding the Offices control structure for the Texas
Enterprise Fund from Chapter 1 of this report.
The Office should strengthen its control structure to effectively administer the
Texas Enterprise Fund. Specifically, it should:
Maintain key documentation of its awarding and monitoring processes in
accordance with its records retention schedule.
Adopt rules in the Texas Administrative Code to guide its administration
of the Texas Enterprise Fund, including rules related to its application,
evaluation, award agreement formation, and monitoring processes.
Implement controls to help ensure that it complies with all statutory
requirements for the Texas Enterprise Fund.
Recommendations regarding providing decision makers with information
regarding potential awards from Chapter 2 of this report.
The Office should:
Develop and implement an objective scoring tool to consistently evaluate,
and make recommendations regarding, applications for Texas Enterprise
Fund awards.
Require applicants to submit all required components of its Texas
Enterprise Fund application prior to completing its due diligence process.
Modify its records retention schedule to retain all documentation related to
the Texas Enterprise Fund awarding process for eight years after award
agreement termination, and implement processes to help ensure
compliance with that requirement.

September 2014
Page 4
Implement and document a sufficient review process for the information
packets it provides to the Governor, the Lieutenant Governor, and the
Speaker of the House of Representatives to help ensure that it provides
accurate and complete information, including all elements required by
Office policy and procedures and Texas Government Code, Section
481.080.
Prepare and maintain a checklist to help ensure that, for each due diligence
review it conducts, it prepares and maintains all required items.
Consistently follow its due diligence process for evaluating applications
for Texas Enterprise Fund awards.
Ensure that all documents in the information packets the Office prepares
for consideration by the Governor, the Lieutenant Governor, and the
Speaker of the House of Representatives are complete and accurate,
including its project summary documents, business climate comparison,
economic impact analysis, and financial analysis.
Verify that applicants are eligible to receive Texas Enterprise Fund awards
prior to signing award agreements.
Establish a process to identify or evaluate conflicts of interest related to
applications for Texas Enterprise Fund awards, as recommended by the
State of Texas Contract Management Guide.
Obtain all information required by Texas Government Code, Section
481.080, from applicants.
Establish a specific process to consider Texas Enterprise Fund awards for
small businesses.
Recommendations regarding award agreement provisions and amendments from
Chapter 3 of this report.
The Office should:
Revise its Texas Enterprise Fund award agreement template to:
Define all key terms (such as full-time) in its award agreements.
Consistently specify in the award agreements the baseline number of
jobs in place at recipients at the time award agreements are signed.
Specify the types of costs that are allowable or unallowable.
Specify that the annual compliance verification reports recipients
submit must include detailed, employee-level data to support job
creation (including information that Texas Government Code, Section
481.079, requires the Office to report in its biennial reports).

September 2014
Page 5
Include relevant provisions recommended by the State of Texas
Contract Management Guide.
Include a provision regarding its ability to secure liens on projects that
require capital investment.
Include signature dates by all signing parties on Texas Enterprise Fund
award agreements.
Include provisions in Texas Enterprise Fund award agreements requiring
recipients to demonstrate that they have complied with key requirements
before the Office disburses the full award amount.
Consider amending existing Texas Enterprise Fund award agreements to
address the weaknesses discussed above.
Consistently provide notifications to the Lieutenant Governor and the
Speaker of the House of Representatives regarding amendments to award
agreements at least 14 days before it intends to make those amendments,
and maintain documentation of those notifications.
Include signature dates by all signing parties on award amendments and
assignments.
Amend awards only for recipients that the Office has determined to be in
compliance with the terms of their existing award agreements.
Develop procedures to document how it processes assignments of awards
to successor companies.
The Legislature should consider requiring the Office to obtain approval from
the Lieutenant Governor and the Speaker of the House of Representatives
prior to making amendments to award agreements.
Recommendations regarding award monitoring from Chapter 4 of this report.
The Office should:
Continue to conduct onsite visits at Texas Enterprise Fund recipients, and
verify recipients self-reported information by comparing it with payroll
information during those visits.
Develop and implement a process to access risk for recipients that are not
required to create direct jobs, and evaluate whether it should conduct
onsite visits at those recipients.
Require all Texas Enterprise Fund award recipients to provide detailed,
employee-level job-creation data, and consistently verify that data by
comparing it to a third-party source.

September 2014
Page 6
Verify recipient compliance with all key provisions in award agreements,
such as capital investment requirements and requirements to open or
expand facilities.
Follow its procedures for calculating Texas Enterprise Fund award
termination repayments to help ensure that it recovers all principal and
interest, as required by Texas Government Code, Section 481.078.
Develop and implement a process to review its Texas Enterprise Fund
termination repayment calculations to help ensure that those calculations
are accurate.
The Legislature should consider:
Requiring the Office to report the results of its compliance verification
process to the Lieutenant Governor and the Speaker of the House of
Representatives.
Requiring an independent verification, such as an audit by a third party, of
the number of jobs Texas Enterprise Fund recipients report they create in
situations that meet certain high-risk parameters that the Legislature
defines.
Recommendations regarding award disbursements from Chapter 5 of this
report.
The Office should:
Include signature dates on all Texas Enterprise Fund award agreements,
amendments, and assignments.
Complete compliance verifications prior to disbursing funds when
disbursements are contingent on recipients complying with Texas
Enterprise Fund award agreement requirements.
Recommendations regarding reporting from Chapter 6 of this report.
The Office should:
Collect and verify all information from recipients that it is required to
report under Texas Government Code, Section 481.079.
Revise its biennial report to include all statutorily required information,
including the number of jobs recipients have created and the actual and
committed capital investment amounts required by each award agreement.
Develop and implement a review process to help ensure that the
information in its biennial reports is accurate.

September 2014
Page 7
Detailed Results
Chapter 1
The Office Should Strengthen Its Control Structure for the Texas
Enterprise Fund
The Office should strengthen its control structure for the administration of the
Texas Enterprise Fund. Having an adequate control structure is important to
helping ensure compliance with statute and effective administration of the
Texas Enterprise Fund. However, from September 2003 through August 2013
(the scope of this audit) the Office:
Did not consistently maintain key documentation of its awarding and
monitoring processes, as required by its records retention schedule. As a
result, it was not always possible to determine how the Office made
awarding and monitoring decisions.
Did not adopt rules related to the Texas Enterprise Fundsuch as rules to
define its application, evaluation, award agreement formation, and
monitoring processesin the Texas Administrative Code. Adopting rules
is important because it (1) provides an opportunity for public comment
related to proposed rules and (2) allows potential applicants and other
stakeholders to become informed about how a program operates. Texas
Government Code, Section 481.021, gives the Office the authority to
adopt and enforce rules. Texas Government Code, Section 481.075,
requires the Office to adopt rules to establish criteria for determining
which users may participate in its programs, including the Texas
Enterprise Fund.
Did not implement processes to help ensure that it complied with certain
statutory requirements, including requirements related to its biennial
reports on the Texas Enterprise Fund.
Without an adequate control structure for the Texas Enterprise Fund,
weaknesses existed in the Offices processes for making awards, establishing
award agreements, monitoring and terminating awards, and reporting.
The absence of an adequate control structure was particularly evident in the
Offices early administration of the Texas Enterprise Fund. During the 2004-
2005 biennium, the Office did not require recipients to submit an application
and/or did not require recipients to create direct jobs for award agreements
associated with 11 projects. The awards associated with those 11 projects
totaled $222,281,000, or 44 percent of the $505,838,696 in Texas Enterprise
Fund awards the Office made between September 2003 and August 2013 (see
Table 1 on the next page). All of the award agreements signed after the 2004-

September 2014
Page 8
2005 biennium had corresponding applications and requirements to create
direct jobs.
Table 1
Projects With No Formal Application and/or No Requirement to Create New, Direct Jobs
Recipient Award Amount
Projects That Did Not Submit a Formal Application
and
Were Not Required to Create New, Direct Jobs
Board of Regents of the University of Texas System (for the benefit of the University
of Texas at Dallas)
$ 50,000,000
Sematech, Inc. 40,000,000
Lonestar Education and Research Network (LEARN) 9,781,000
Texas Energy Center 3,600,000
Baylor College of Medicine 2,000,000
Subtotal $ 105,381,000
Projects That Did Not Submit a Formal Application
Triumph Aerostructures, LLC $ 35,000,000
Board of Regents of the University of Texas System (for the benefit of the University
of Texas Health Science Center and the University of Texas M.D. Anderson Cancer
Center)
25,000,000
Citgo Petroleum Corporation 5,000,000
Maxim Integrated Products (San Antonio) 1,500,000
Cabela's Retail TX, L.P. 400,000
Subtotal $ 66,900,000
Project That Did Not Create New, Direct Jobs
The Texas Institute for Genomic Medicine (TIGM) - Texas A&M University
System/Lexicon Genetics Incorporated
a b

$ 50,000,000
Total $222,281,000
a
One component of this project required a total of 125 direct jobs with Lexicon Genetics Incorporated by
December 31, 2012, and a total of 1,616 direct jobs by December 31, 2016. However, as a result of an
amendment to the original award agreement, Lexicon was not required to create any jobs between 2007 and
2011 (see Chapter 3-B for more information on that amendment). Lexicon originally reported that it had
created 30 new direct jobs in 2005 and 12 new direct jobs in 2006; however, as of December 31, 2012,
Lexicon reported that it had not created any direct jobs. Between 2007 and 2012, all jobs created were
indirect jobs that the Texas A&M University System had reported.
b
In addition to this award, in February 2009 the Office transferred $50,000,000 from the Texas Enterprise
Fund to the Emerging Technology Fund. In March 2009, the Emerging Technology Fund announced an award
of $50,000,000 to the Texas A&M University System for the National Center for Therapeutics Manufacturing.

Sources: Texas Enterprise Fund award agreements and Office documentation.

September 2014
Page 9
Recommendations
The Office should strengthen its control structure to effectively administer the
Texas Enterprise Fund. Specifically, it should:
Maintain key documentation of its awarding and monitoring processes in
accordance with its records retention schedule.
Adopt rules in the Texas Administrative Code to guide its administration
of the Texas Enterprise Fund, including rules related to its application,
evaluation, award agreement formation, and monitoring processes.
Implement controls to help ensure that it complies with all statutory
requirements for the Texas Enterprise Fund.

September 2014
Page 10
Chapter 2
The Office Did Not Consistently Provide Decision Makers with
Complete and Accurate Information Related to Potential Texas
Enterprise Fund Awards
The Office did not consistently provide decision makers with complete and
accurate information related to potential Texas Enterprise Fund awards.
Specifically, the information packets the Office created for consideration by
the Governor, the Lieutenant Governor, and the Speaker of the House of
Representatives frequently did not include key components or included
incorrect information. That occurred because of (1) weaknesses in the
Offices review of applications for Texas Enterprise Fund awards, (2) errors in
the Offices due diligence process, and (3) the omission of certain components
from that process.
It was not always possible to determine whether award decisions were
supported by information in the Offices records and in the information
packets the Office prepared for the Governor, the Lieutenant Governor, and
the Speaker of the House of Representatives.
The Offices process does not incorporate the use of an objective scoring tool
to evaluate applications for awards.
1
Although the Office analyzes and
prepares information packets for potential awards, those information packets
do not provide recommendations regarding whether to make awards. The
State of Texas Contract Management Guide recommends that grant
applications be scored using a scoring matrix and that recommendations for
grant funding be documented and based on the scoring results. Although the
Office is not required to comply with that guide, that guide includes best
practices related to contract and grant management that could be helpful to the
Office. Based on information from local governments that have incentive
funds, using an objective scoring tool could help the Office evaluate potential
awards in a consistent manner and maximize the benefits of the Texas
Enterprise Fund.
Figure 1 on the next page summarizes the Texas Enterprise Fund application
and award process.

1
For example, an objective scoring tool would serve as a comprehensive, overall evaluation of all of the individual analyses
within the Offices due diligence process and result in a specific recommendation based on that evaluation.

September 2014
Page 11

Figure 1
Texas Enterprise Fund Application and Award Process
Texas Enterprise Fund Analyst or
Business Development Project
Manager
Economic Development
and Tourism Division
Office of the Governor, the Lieutenant
Governor, and the Speaker of the House of
Representatives
Start
Receive application
and $1,000 application
fee from company,
consultant, or
community
a
Application
complete?
Scan
application
to shared
drive
Notify director of
business development,
manager of business
research, business
research staff, and
appropriate project
management staff
Conduct
due
diligence
Approved?
Negotiate award
agreement
Texas Enterprise
Fund program
trustees sign and
issue commitment
letter
End
Yes
No
Yes
No
Create packet
containing due
diligence and save
to shared drive
Packet approved by
executive director of
Economic Development and
Tourism Division?
Yes
No
Execute award
agreement
Economic
Development and
Tourism Division
discussion conducted
as needed
b
Announce award
any time after the
commitment letter
has been issued
Award agreement
revision?
Conduct
due
diligence
for revised
terms
No
Yes
Issue formal decline
letter

a
An application may be withdrawn at any time prior to a formal decline letter or the signing of an award agreement.
b
Participants in the discussion may include the business development director; the Texas Enterprise Fund analyst; the business
research manager; project management staff; the Office of General Counsel; the Office of Compliance; staff from other state
agencies, when appropriate; and staff of the Governor, the Lieutenant Governor, and the Speaker of the House of Representatives.
Source: Developed by the State Auditors Office based on information the Office provided.

September 2014
Page 12
The Offices
Due Diligence Process
After the Office receives an
application for a Texas Enterprise
Fund award, it performs a due
diligence process to evaluate the
potential award. It then incorporates
items from that process into an
information packet that it provides
to the Governor, the Lieutenant
Governor, and the Speaker of the
House of Representatives. Those
items include:
Cost-benefit analyses, which
consider state and local
incentives and revenue
estimates.
Project summary documents.
Business climate comparisons.
Assessments of applicants
economic impact reports.
Financial analyses of applicants.
Applicant background research.
(The content of those items is
discussed in more detail throughout
this chapter.)

Weaknesses in the Offices Review of Applications
For 49 (49 percent) of the 99 project evaluations tested, the Office could not
provide documentation that it consistently reviewed all required components
of applications for Texas Enterprise Fund awards. For example, the Office
could not provide documentation that it (1) reviewed three years of audited
financial statements for the applicant or (2) reviewed economic impact reports
that the applicants were required to submit. (Two of those 49 projects also did
not have applications submitted, as discussed previously in Chapter 1.)
Errors in the Due Diligence Process
The Office did not consistently follow its due diligence process to
evaluate potential projects for Texas Enterprise Fund awards (see
text box for a summary of the due diligence process). For all 99
project evaluations
2
tested, auditors identified errors in key elements
of the information packets the Office prepared, including
unsupported information, incorrect information, or incomplete
information. Those errors are discussed in more detail below.
Cost-benefit analyses. The Offices cost-benefit analyses yielded
inconsistent and, in some cases, inaccurate information. Those
analyses are important because they are included in the information
packet that the Governor, the Lieutenant Governor, and the Speaker
of the House of Representatives use to make final award decisions,
such as information regarding (1) the estimated amount of time until
the state sales tax revenue associated with an award will equal the
amount of the award (referred as the payback period) and (2) the
total estimated economic benefit to the entire state from the direct
jobs created over a 20-year period. Each cost-benefit analysis
includes a proposed award amount that the Office determines based
on the payback period it calculates.
For 88 (92 percent) of 96
3
cost-benefit analyses tested, auditors (1)
identified errors that affected the presentation of the information packets the
Office provided to the Governor, the Lieutenant Governor, and the Speaker of
the House of Representatives or (2) were not able to analyze the cost-benefit
analysis because the Office did not retain a copy of the information packet it
provided to those individuals. The Office did not retain information packets
for 11 (13 percent) of those 88 projects. For the remaining 77 projects,
auditors identified the following types of errors:

2
Applicants for 72 of those projects accepted award offers, applicants for 13 of those projects did not receive award offers, and
applicants for 14 of those projects declined award offers.
3
For 3 of the 99 project evaluations in auditors sample, the Office did not conduct cost-benefit analyses because it had
determined that the applicants would not receive awards prior to the point at which cost-benefit analyses would have been
necessary.

September 2014
Page 13
The Office did not consistently consider all state and local incentives or
tax revenues in its cost-benefit analyses. That information is important
because it could affect the proposed award amount that results from the
analysis.
For some projects, the Office manually changed the estimated sales tax
revenue rates associated with (1) new direct jobs to be created and (2)
wages paid for construction. Those changes shortened the estimated
payback period by one year or more for 23 projects.
The changes the Office made to the estimated sales tax revenue rates were
not apparent in the information packets the Office provided to the
Governor, the Lieutenant Governor, and the Speaker of the House of
Representatives.
4

As a result of the errors discussed above and other manual errors that the
Office made in its cost-benefit analyses, key items in the executive summary
of the cost-benefit analysesincluding the estimated benefits the State would
receive through future taxes collected and the payback periodwere not
always accurate. Specifically:
For 44 (57 percent) of the 77 cost-benefit analyses tested for which
auditors identified an error in the accuracy of the analysis, the Office
overstated or understated the total estimated direct benefit to the entire
state by at least 5 percent. The total estimated direct benefit is an estimate
of the tax revenues that all local and state taxing entities will receive from
an award recipient.
For 32 (42 percent) of the 77 cost-benefit analyses tested for which
auditors identified an error in the accuracy of the analysis, the Office
understated the estimated payback period by at least one year.
Project summary documents. For 61 (62 percent) of 99 project evaluations tested,
the project summary documents the Office prepared did not include
information required by Office policies and procedures or included
information that was inaccurate or unsupported by information in the Offices
documentation.
Business climate comparisons. For 14 (14 percent) of 98
5
project evaluations
tested that required a business climate comparison, the Office (1) could not

4
Those changes were not apparent because, in the information packets, the Office reduced the number of decimal places it
presented for the sales tax recovery rates, which made those rates appear unchanged. Changing the estimated sales tax revenue
resulted in inconsistent payback periods across proposed awards and was not in compliance with the Offices procedures for
estimating that sales tax revenue. Payback periods are a key factor in determining award amounts, and shortening the payback
periods could result in an award amount that was higher than it would have been using the correct estimated sales tax rates.
5
For 1 of the 99 project evaluations in auditors sample, the Office did not conduct a business climate comparison because it had
determined that the applicant would not receive an award prior to the point at which a business climate comparison would have
been necessary.

September 2014
Page 14
provide evidence that it performed that comparison, (2) included unsupported
competing locations in that comparison, or (3) did not include competing
locations listed in the application in that comparison.
Assessments of applicants economic impact reports. For 20 (21 percent) of 97
project evaluations tested that required an assessment of the applicants
economic impact report, the Office could not provide documentation that it
performed that assessment or could not provide support for documentation
that it included in that assessment.
Financial analyses of applicants. For 56 (58 percent) of 96
6
project evaluations
tested, the financial analysis summaries the Office prepared did not include
information required by Office policies and procedures or included
information that was inaccurate or unsupported by information in the Offices
documentation. For those 56 project evaluations, auditors identified the
following errors:
For 4 project evaluations, the Office did not include its financial analysis
summary in the information packets it provided to the Governor, the
Lieutenant Governor, and the Speaker of the House of Representatives.
For 11 project evaluations, the financial analysis summary the Office
prepared was not complete or contained other errors when compared to the
Offices records.
For 41 project evaluations, the Office did not maintain sufficient support
for the credit rating information it included in the financial analysis
summary; therefore, auditors were unable to determine whether that
information was presented accurately.
Of the 115 projects that became effective between September 1, 2003, and
August 31, 2013, the Office indicated that 2 awards were made to companies
(KLN Steel Products, LLC and Latex Foam Internal Holdings, Inc.) that had
entered into bankruptcy protection as of June 2014. Another recipient (Coll
Materials Exchange, LLC) was no longer in business. (For more information
on those three recipients, see Appendix 2.) Although the financial analysis
process cannot predict an applicants future financial condition with certainty,
it is still a valuable tool in assessing the applicants potential financial
condition.
Applicant background research. Auditors did not identify significant errors in the
background research that the Office performed on applicants, and its
background research generally identified significant risks and concerns that
the Office included in the information packets it provided to the Governor, the

6
For 3 of the 99 project evaluations in auditors sample, the Office did not complete its financial analysis because it had
determined that the applicants would not receive awards prior to the point at which a financial analysis would have been
necessary.

September 2014
Page 15
Texas Government Code,
Section 481.078(e)
Effective September 1, 2005, Texas
Government Code, Section
481.078(e), required that, for an
entity to be eligible to receive a
Texas Enterprise Fund award, the
entity must be (1) in good standing
under the laws of the state in which
the entity was formed or organized,
as evidenced by a certificate issued
by the secretary of state or the state
official having custody of the records
pertaining to entities or other
organizations formed under the laws
of that state, and (2) owe no
delinquent taxes to a taxing unit in
Texas.
Noncompliance with Certain Statutory Requirements
For 95 (99 percent) of the 96
7
projects tested, the Office did not include all
elements required by Texas Government Code, Section 481.080, in the
information packets or it did not maintain those packets. Specifically:
As discussed above, for 11 of those projects, the Office did not maintain
the information packets it asserted that it provided to the Governor, the
For 84 of those projects, the information packets that the Office provided
did not include statutorily required information on the median wage
associated with the jobs the applicants would create.
The Office also could not always provide documentation that the information
packets it provided included statutorily required information on all sources of
estimated tax revenues and incentives offered by all governmental entities of
the state.
In addition, the Office could not always provide documentation that it verified
whether applicants were eligible to receive Texas Enterprise Fund awards
prior to signing award agreements. Specifically:
For 13 (14 percent) of 92 award agreements
tested that were effective after September 1,
2005, the Office could not provide documentation
that it verified whether the applicant was in good
standing with the Office of the Comptroller of
Public Accounts and did not owe delinquent taxes
in Texas.
For 55 (71 percent) of 78 award agreements
tested that were effective after September 1,
2005, and for which the applicant was organized
outside of Texas, the Office could not provide
documentation that it confirmed that the applicant
was in good standing with the laws in the state in
which it was organized.

7
For 3 of the 99 project evaluations in auditors sample, the Office did not prepare an information packet because it had
determined that the applicants would not receive awards prior to the point at which the preparation of information packets
would have been necessary.

September 2014
Page 16
Statutory Definition of a
Small Business
Small Business means a legal
entity, including a corporation,
partnership, or sole
proprietorship, that:
(1) Is formed for the purposes of
making a profit;
(2) Is independently owned and
operated; and
(3) Has fewer than 100
employees.
Source: Texas Government Code,
Section 481.078(l).

The Offices procedures did not require it to obtain information from
applicants required by Texas Government Code, Section 481.080, including
the median wage of the jobs to be created and information related to the
applicants standing with the laws in the state in which they were organized.
Omission of Conflict of Interest Disclosure Requirements
The Office did not have a sufficient process to identify or evaluate conflicts of
interest related to applications for Texas Enterprise Fund awards. For
example, the Office did not require applicants to disclose whether any of their
employees were formerly employed by the offices of the Governor, the
Lieutenant Governor, and the Speaker of the House of Representatives. While
the Office is not subject to the State of Texas Contract Management Guide,
that guide recommends that agencies require potential contractors to disclose
actual or potential conflicts of interest.
No Specific Process for Consideration of Small Businesses
The Offices due diligence process did not include a specific process to
enable it to consider Texas Enterprise Fund awards for small
businesses (see text box). Texas Government Code, Section 481.078
(k), requires the Office to consider making awards to small businesses.
Although statute does not require a specific process, implementing
such a process would help the Office to ensure that it has considered
small businesses for awards.
The Office made awards to four small businesses between September
1, 2005, and August 31, 2013. Those small businesses were Trace
Engines, L.P.; Coll Materials Exchange, LLC; Green Star Products, Inc.; and
Ferris Mfg. Corp.
Recommendations
The Office should:
Develop and implement an objective scoring tool to consistently evaluate,
and make recommendations regarding, applications for Texas Enterprise
Fund awards.
Require applicants to submit all required components of its Texas
Enterprise Fund application prior to completing its due diligence process.
Modify its records retention schedule to retain all documentation related to
the Texas Enterprise Fund awarding process for eight years after award
agreement termination, and implement processes to help ensure
compliance with that requirement.

September 2014
Page 17
Implement and document a sufficient review process for the information
packets it provides to the Governor, the Lieutenant Governor, and the
Speaker of the House of Representatives to help ensure that it provides
accurate and complete information, including all elements required by
Office policy and procedures and Texas Government Code, Section
481.080.
Prepare and maintain a checklist to help ensure that, for each due diligence
review it conducts, it prepares and maintains all required items.
Consistently follow its due diligence process for evaluating applications
for Texas Enterprise Fund awards.
Ensure that all documents in the information packets the Office prepares
for consideration by the Governor, the Lieutenant Governor, and the
Speaker of the House of Representatives are complete and accurate,
including its project summary documents, business climate comparison,
economic impact analysis, and financial analysis.
Verify that applicants are eligible to receive Texas Enterprise Fund awards
prior to signing award agreements.
Establish a process to identify or evaluate conflicts of interest related to
applications for Texas Enterprise Fund awards, as recommended by the
State of Texas Contract Management Guide.
Obtain all information required by Texas Government Code, Section
481.080, from applicants.
Establish a specific process to consider Texas Enterprise Fund awards for
small businesses.

September 2014
Page 18
Chapter 3
The Office Did Not Consistently Include Certain Provisions in Award
Agreements and Amendments to Comply with Requirements for the
Texas Enterprise Fund and Protect the States Financial Interests
The Office did not consistently include key provisions in Texas Enterprise
Fund award agreements, which hindered its ability to effectively monitor
recipients compliance with the requirements in those agreements and protect
the States interests. It also made certain unique amendments to award
agreements that were not consistent with most of the other types of
amendments it made, and it did not always maintain documentation that it
complied with statutory requirements and its internal processes when it
amended award agreements.
Chapter 3-A
Provisions in Texas Enterprise Fund Award Agreements Did Not
Consistently Enable the Office to Perform Its Monitoring
Responsibilities and Protect the States Interests
The Office did not consistently include provisions in award agreements to help
it monitor recipients compliance with requirements.
A lack of clear and measurable provisions in some award agreements
prevented the Office from effectively monitoring recipients compliance with
requirements. Specifically:
The Office did not define the term full-time for 107 (97 percent) of the
110 award agreements tested that required the recipients to create full-time
jobs. (One additional award agreement allowed the recipient to treat full-
time jobs and part-time jobs equally in its reporting of the number of new
jobs it created.)
For 43 (37 percent) of the 115 award agreements tested, the Office either
(1) did not include a provision that specified that new jobs would only be
counted if they exceeded the total number of jobs at the recipients at the
time the award agreements were signed or (2) did not specify the baseline
for the number of jobs that existed at the recipients at the time the award
agreements were signed.
For 107 (93 percent) of the 115 award agreements tested, the Office did
not specify the types of costs that were allowable or unallowable under the
terms of the award agreement.
In addition, award agreements did not consistently specify the elements that
recipients were required to include in the annual compliance verification
reports they submit to the Office. Most award agreements required recipients
to submit compliance verification reports in a form that was reasonably
satisfactory to the Office, and some of those award agreements required

September 2014
Page 19
recipients to include appropriate back-up data for the employment position
numbers provided and for the threshold; however, those award agreements
did not specifically require recipients to provide employment details, such as
hire dates, in their reports.
The award agreements also did not require recipients to provide certain
information that the Office was statutorily required to report. For example,
Texas Government Code, Section 481.079, requires the Office to include in its
required biennial reports on the Texas Enterprise Fund the number of jobs
recipients created that provided health benefits to employees; however, the
Office did not ask recipients to provide that information (see Chapter 6 for
additional information on the Offices biennial reports).
The Office did not consistently include signature dates in award agreements,
and some award agreements became effective prior to the date on their
corresponding commitment letters.
The Office did not consistently include signature dates on award agreements.
(For the purposes of this report, the signature date of an award agreement is
the date on which the parties signed the award agreement. The effective date
of an award agreement is a date specified in the award agreement on which
the terms of the agreement begin.) For 80 (70 percent) of the 115 award
agreements tested, the award agreement did not contain a signature date by
either the Office or the recipient. As a result, auditors (1) could not always
determine award agreement signature dates and (2) could not evaluate the
appropriateness of the effective dates on those agreements. In addition, the
Office backdated the signature date of its award agreement with Ascend
Performance Materials by almost one year.
In addition, seven award agreements became effective prior to the dates on
which the commitment letters for those awards were signed by the Governor,
the Lieutenant Governor, and the Speaker of the House of Representatives.
Those seven awards became effective between February 2004 and January
2013. The Office asserted that it backdated the effective dates of multiple
award agreements to allow recipients to count jobs they created toward
fulfillment of their job-creation requirements while the Office was negotiating
their award agreements.
The Office did not consistently include recommended provisions in award
agreements.
Texas Enterprise Fund award agreements did not consistently include
provisions recommended by the State of Texas Contract Management Guide
that are necessary to protect the States financial interests. While the Office is
not subject to the State of Texas Contract Management Guide, that guide
recommends provisions that could be helpful to the Office. Specifically:
The State of Texas Contract Management Guide recommends that
agreements with non-state entities include certain provisions regarding

September 2014
Page 20
indemnification to protect the State and the recipients. However, the
Office did not include a provision to indemnify the State in 11 (10
percent) of the 111 award agreements with non-state entities.
Indemnity provisions are important because they hold the State harmless
for lawsuits and other losses related to the recipients actions.
The State of Texas Contract Management Guide recommends that
agreements with non-state entities include certain provisions regarding
public information. However, the Office did not include a provision to
notify the recipients of their obligation to provide information under the
Texas Public Information Act in 103 (93 percent) of the 111 award
agreements with non-state entities.
Provisions about the Texas Public Information Act notify the recipients of
potential disclosures of information they may be required to make.
For 17 (15 percent) of the 115 award agreements tested, the Office did not
include an adequate right to audit provision to help ensure that
recipients compliance with requirements could be audited.
For all 115 award agreements tested, the Office did not include a funding
out provision to specify what would happen if an unexpected loss of
funding to the Texas Enterprise Fund occurred.
The Office did not consistently include provisions in award agreements enabling
it to disburse funds only after recipients have complied with job-creation
requirements.
Fifteen (13 percent) of 115 award agreements tested included a provision to
disburse all funds before recipients had complied with job-creation
requirements or other requirements. Ninety (78 percent) of the 115 award
agreements tested provided for a partial disbursement of funds prior to the
recipients meeting job-creation requirements or other requirements. Some
state and local governments that auditors contacted indicated that they
included provisions in incentive fund award agreements to specify that
recipients would not receive funds until after they had demonstrated that they
had met key requirements.
The Office did not consistently include provisions in award agreements to help
enforce its ability to secure liens.
Effective September 1, 2005, Texas Government Code, Section 481.078,
permitted the Office to secure a lien on the capital improvements that
recipients make with Texas Enterprise Fund awards. However, for all three
award agreements signed after September 1, 2005, for which recipients
planned to make capital investments, the Office did not include provisions in
the award agreements regarding its ability to secure liens. (Eighty-nine other
award agreements signed after September 1, 2005, did not include specific

September 2014
Page 21
capital investment requirements.) Ensuring that the Office has the ability to
secure liens helps protect the States financial interests.
Recommendations
The Office should:
Revise its Texas Enterprise Fund award agreement template to:
Define all key terms (such as full-time) in its award agreements.
Consistently specify in the award agreements the baseline number of
jobs in place at recipients at the time award agreements are signed.
Specify the types of costs that are allowable or unallowable.
Specify that the annual compliance verification reports recipients
submit must include detailed, employee-level data to support job
creation (including information that Texas Government Code, Section
481.079, requires the Office to report in its biennial reports).
Include relevant provisions recommended by the State of Texas
Contract Management Guide.
Include a provision regarding its ability to secure liens on projects that
require capital investment.
Include signature dates by all signing parties on Texas Enterprise Fund
award agreements.
Include provisions in Texas Enterprise Fund award agreements requiring
recipients to demonstrate that they have complied with key requirements
before the Office disburses the full award amount.
Consider amending existing Texas Enterprise Fund award agreements to
address the weaknesses discussed above.

September 2014
Page 22
Chapter 3-B
The Office Amended Some Award Agreements for Texas Enterprise
Fund Recipients That Had Not Complied with Requirements, and It
Did Not Consistently Make Required Notifications About
Amendments in a Timely Manner
The Office made 36 amendments to 30 award agreements for awards that
were effective between September 1, 2003, and August 31, 2013. In most
cases, those amendments (1) reduced both the award amounts and the number
of jobs recipients were required to create, (2) extended job-creation schedules
to allow recipients additional time to create jobs, or (3) addressed situations in
which recipients needed to add subsidiary or affiliate companies to their
award agreements. However, as discussed below, certain weaknesses in the
Offices amendments process exist.
The Office could not provide documentation that it consistently notified the
Lieutenant Governor and the Speaker of the House of Representatives in
advance of amending awards.
For 3 (20 percent) of 15 amendments tested that the Office made after
September 1, 2011, the Office could not provide documentation that it notified
the Lieutenant Governor and the Speaker of the House of Representatives at
least 14 days prior to the effective date of the amendment. (Effective
September 1, 2011, Texas Government Code, Section 481.078, required that
notification 14 days in advance of the date the Office intends to make an
amendment.)
The Office also did not always include a signature date on amendments; as a
result, auditors were unable to determine how many days in advance of the
signature date the Office provided other required notifications.
The Office made certain unique amendments to award agreements that were
not consistent with most of the other types of amendments it made.
The Office made certain award amendments that included unique provisions
that resulted in reduced clawback penalties or the elimination of clawback
penalties. Specifically:
The Office amended its award agreement with Triumph Aerostructures, to
give job-creation credit for salaries that exceeded the salaries that the
award agreement required. Auditors estimated that amendment reduced
the clawback penalties the recipient owed. (See Chapter 7 for additional
information on auditors site visit to that recipient.)
The Office amended its agreement with the Texas Energy Center to (1)
give job-creation credit for salaries that exceeded the salaries that the
award agreement required and (2) remove a requirement that 100 initial
jobs be located at the Texas Energy Center. The Office also removed a
$20,000,000 investment requirement and a requirement that the recipient
spend award funds solely to provide tenant space to new energy industry

September 2014
Page 23
tenants. That amendment eliminated the clawback penalty that the
recipient could have owed due to noncompliance, and it removed an
option for the Office to terminate the award at key target points for
recipient noncompliance. Prior to that amendment, the award agreement
included a provision that allowed the Office to require the recipient to
repay all $3,600,000 awarded.
The Office amended its award agreements with Lexicon and the Texas
A&M University System for the Texas Institute for Genomic Medicine to
make the Texas A&M University System responsible for all job creation
for a longer time period prior to 2015. The original award agreements (1)
required Lexicon to create direct jobs and (2) allowed the Texas A&M
University System to report indirect jobs created as part of its required
jobs. However, under the amendment, the Office replaced the requirement
for Lexicon to create direct jobs with a requirement for the Texas A&M
University System to create indirect jobs. Without that amendment,
auditors estimated that Lexicon would have owed additional clawback
penalties.
The Office amended its award agreement with Huntsman Corporation to
reduce the total number of jobs required, to reduce the clawback penalty
that recipient was required to pay if it did not create required jobs, and to
extend the term of the award agreement by one year. However, that
amendment did not reduce the amount of the award. Without that
amendment, auditors estimated that the recipient would have owed
additional clawback penalties.
The Office should address other weaknesses related to amendments and
assignments.
For 31 (86 percent) of the 36 amendments the Office made, its procedures
required the Office to verify that the recipients were in compliance with their
award agreements prior to making the amendments. However, it did not
adequately perform that verification prior to making 4 (13 percent) of those 31
amendments.
The Office also did not have procedures to document how it processed
assignments, which are made when an award recipient fully transfers its
responsibilities under an award agreement to another company or companies.
Recommendations
The Office should:
Consistently provide notifications to the Lieutenant Governor and the
Speaker of the House of Representatives regarding amendments to award
agreements at least 14 days before it intends to make those amendments,
and maintain documentation of those notifications.

September 2014
Page 24
Include signature dates by all signing parties on award amendments and
assignments.
Amend awards only for recipients that the Office has determined to be in
compliance with the terms of their existing award agreements.
Develop procedures to document how it processes assignments of awards
to successor companies.
The Legislature should consider requiring the Office to obtain approval from
the Lieutenant Governor and the Speaker of the House of Representatives
prior to making amendments to award agreements.

September 2014
Page 25
The Offices
Annual Compliance Verification
Process
Texas Enterprise Fund award agreements
generally require recipients to submit annual
compliance verification reports to the Office.
Those reports contain information on
recipients job creation and information
regarding their compliance with other
requirements in their award agreements.
The Offices compliance verification policy
requires it to perform annual reviews to
verify job-creation information and other
information that recipients report. If the
Office determines that a recipient has not
met job-creation requirements, it can (1)
require the recipient to pay a clawback
penalty or (2) terminate the award and
require the recipient to make a termination
repayment.

Chapter 4
The Offices Monitoring of Texas Enterprise Fund Award Recipients
Was Not Always Adequate, and Its Award Agreement Termination
Processes Did Not Always Comply with Requirements
The Office has developed and implemented a compliance verification process
to monitor Texas Enterprise Fund recipients compliance with award
agreements and recover funds when recipients do not comply with the
requirements in those award agreements. However, that process was not
always adequate to (1) identify noncompliance with requirements in award
agreements and (2) help ensure that the Office recovered all funds when it
terminated award agreements with recipients.
Several factors impair the overall effectiveness of the Offices compliance
verification process. That process focused primarily on self-reported
information that recipients submitted, and the Office did not consistently
require recipients to submit detailed information regarding job creation such
as information on hire dates, annual compensation, location information, and
transfer information. The Office also did not incorporate an independent
assessment of the accuracy of job-creation information that higher risk
recipients submit. In addition, the Office did not consistently verify that
recipients complied with other requirements in their award agreements
regarding items such as capital investment and the opening of new facilities.
As a result of the weaknesses in the Offices monitoring, it was not possible to
determine the number of jobs that recipients of awards from the Texas
Enterprise Fund have created. Those weaknesses also affected the Offices
ability to impose clawback penalties on recipients for noncompliance with the
requirements in their award agreements.
The Office has improved its monitoring of recipients compliance
with requirements in award agreements over time; however, it
should make additional improvements.
The Office performed five site visits at recipients between 2005
and 2013. However, the procedures it performed during those site
visits were generally limited and did not always include comparing
the number of jobs recipients reported they had created to payroll
records.
Prior to 2008, the Office had not established a policy related to its
compliance monitoring. In 2008, the Office developed and
implemented an annual compliance verification process (see text
box for additional details).
During this audit, the Office implemented a risk assessment
process that it used to select recipients at which it conducted site
visits in 2014. Although the Office used that process to assess most recipients,

September 2014
Page 26
it excluded three projects
8
that were not required to create direct jobs from
that process (the award amounts for those three projects totaled $99,781,000).
The Office has not developed a process to report the results of its compliance
verification process to the Lieutenant Governor and the Speaker of the House
of Representatives.
Communicating the results of the Offices compliance verification process is
not specifically required. However, providing those results to the Lieutenant
Governor and the Speaker of the House of Representatives would enable them
to more effectively evaluate each Texas Enterprise Fund award and would
enhance accountability.
Although the Office improved its monitoring of recipients, it did not
consistently implement its procedures to monitor Texas Enterprise Fund award
recipients.
For 87 (99 percent) of the 88 projects tested
9
, the recipients submitted their
annual compliance verification reports for the year tested; in addition, when
the Office did not receive those reports by the due date, it followed up with
the recipients to ensure that it received the reports. The Office did not receive
a compliance verification report for 1 of the 88 projects auditors attempted to
test, and it terminated the award agreements associated with 2 of the 88
projects auditors attempted to test.
For the remaining 85 projects, auditors determined the following:
For 81 (95 percent) of those 85 projects, the Office assessed the recipients
compliance with requirements in award agreements using its compliance
verification worksheet.
For 3 (4 percent) of those 85 projects, auditors could not assess the
Offices compliance verification because the Office did not use its
verification worksheet. In those cases, the compliance verification reports
were for periods prior to December 31, 2006, which was before the Office
had implemented its compliance verification worksheet.
The Office also did not complete its compliance verification process for
the Texas Institute for Genomic Medicine (TIGM) project, for which the
Office entered into an award agreement for a total of $50,000,000 with the
Texas A&M University System and Lexicon Genetics, Incorporated.
Weaknesses in the provisions of that award agreement prevented the
Office from determining whether those two recipients had complied with

8
The recipients of those three projects were (1) Lonestar Education and Research Network (LEARN) and TIGRE Institutions -
Lonestar Education and Research Network (LEARN - TIGRE), with a total award amount of $9,781,000; (2) Sematech, Inc.,
with a total award amount of $40,000,000; and (3) the University of Texas System and Texas Instruments, with a total award
amount of $50,000,000.
9
For each of those 88 projects, which had award agreements that were effective between September 1, 2003, and August 31,
2013, auditors tested the Offices compliance verification process for one annual compliance verification report.

September 2014
Page 27
the requirements of the award agreement prior to December 31, 2015.
10

(The award agreement was effective on July 15, 2005; for more
information on the TIGM project, see Table 8 in Appendix 2.)
The Office did not consistently require recipients to provide detailed
information to verify the number of jobs they reported they had created, and it
did not always perform adequate verifications.
The Office relies on award recipients to report information on the number of
jobs they create. It reviews recipients self-reported information to determine
whether the recipients have met job-creation requirements in their award
agreements and, when necessary, to assess clawback penalties.
However, for 40 (49 percent) of the 81 projects tested for which the Office
completed a compliance verification, that verification was not adequate
because it did not require recipients to provide detailed job-creation
information to enable it to perform that verification. The Offices policy
requires it to obtain the following information from recipients: employee
identifiers, job functions or titles, hire dates, annual compensation, and
transfer information. However, the Office did not always require recipients to
submit that information and, in some cases, recipients submitted only a
summary of jobs they had created. The Office also did not always obtain
information related to job locations. Although that information is not required
by the Offices policy, it is necessary to determine whether the jobs met
requirements in the award agreements.
11

Not sufficiently verifying the number of jobs that recipients report they create
could prevent the Office from imposing clawback penalties. See Chapter 7 for
information related to the results of job-creation information verification that
auditors performed during site visits to six Texas Enterprise Fund award
recipients.
The Offices verification process did not consistently include an independent
verification for higher risk recipients.
The Offices compliance verification process did not consistently include an
independent verification of the number of jobs created by higher risk
recipients, such as recipients with multiple locations in Texas. In its
compliance verification worksheets, the Office frequently noted that the
number of jobs a recipient reported it had created at the location(s) specified
in its award agreement was not comparable with the total number of
employees in Texas that the recipient had reported to the Texas Workforce

10
For example, the award agreement allowed the Texas A&M University System and Lexicon Genetics, Incorporated to offset
clawback penalties if they received additional funding from other sources for the project by December 31, 2015. The award
agreement also allowed the Texas A&M University System to report indirect jobs in the biotechnology and pharmaceutical
industries. The Office has not yet developed a methodology to verify the creation of those indirect jobs, although it previously
identified concerns with the methodology used to identify indirect jobs.
11
Transfer and location information shows when employees transferred to the location of the project and where they transferred
from; that information determines whether those employees can be counted in the jobs that recipients report they created.

September 2014
Page 28
Clawback Penalties
Each time the Office enters into a Texas
Enterprise Fund award agreement that
requires job creation, it calculates a
clawback penalty amount for each job in
each year and includes that amount in the
award agreement.
If the Office later determines that a
recipient has not complied with job-
creation requirements, it calculates the
amount of the clawback penalty the
recipient must pay by multiplying the job
shortage for the year by the clawback
penalty specified in the award agreement.

Commission.
12
(For example, one compliance verification worksheet specified
that comparison cannot be used for verification purposes for this project.)
However, in those cases, the Office did not perform additional procedures to
address that risk. Seventy-one (62 percent) of 115 projects that were effective
between September 1, 2003, and August 31, 2013, had multiple locations in
Texas.
The Office did not always adequately verify recipients compliance with other
requirements.
The Office did not always adequately verify recipients compliance with
award agreement requirements, including (1) requirements related to capital
investment (when it required recipients to make those investments) and (2)
requirements related to facilities that recipients were required to open or
expand. In addition, it did not always ensure that recipients provided their
annual compliance verification reports to the Office of the Lieutenant
Governor and the Speaker of the House of Representatives, as required by
statute. The Office recovered funds from recipients when it determined they
did not create the number of jobs required by their award agreements.
Compliance with job-creation requirements is the primary criterion
for determining whether recipients owe clawback penalties. The
Office imposed clawback penalties as stipulated in award agreements
when it became aware that recipients did not meet job-creation
requirements (see text box for additional details). The Office
collected 103 clawback penalties that totaled $14,507,385 for
recipients noncompliance with job requirements for reporting
periods that ended between 2004 and 2012. However, as discussed
above and as described further in Chapter 7, weaknesses in the
Office compliance verification process impair the Offices ability to
consistently identify recipients noncompliance with job-creation
requirements.

12
The Office receives information from the Texas Workforce Commission at a statewide, summary level. That information is
not location-specific for companies that have multiple locations in Texas.

September 2014
Page 29
Termination Repayments
When a Texas Enterprise Fund award
recipient or the Office terminates an
award prior to the recipient meeting
the requirements in the award
agreement, the Office may require the
recipient to repay all or a portion of
the entire award, including interest.
According to the Offices policy, the
Office calculates termination
repayments by adjusting the amount of
funds it already disbursed by an
interest rate specified in the award
agreement (to recover interest the
State could have received on those
funds). It then reduces that amount by
(1) estimated sales tax collection and
(2) any clawback penalties that the
recipient paid.

Figure 2 shows the amount and number of clawback penalties the Office
charged recipients in each year from 2004 through 2012.
Figure 2
Clawback Penalties the Office Charged Texas Enterprise Fund Recipients
In Each Year from 2004 through 2012

Source: Prepared by auditors based on Office information.

The Office did not always recover all required funds from recipients with which
it terminated award agreements.
As of February 26, 2014, the Office had terminated 20 award agreements that
became effective between September 1, 2003, and August 31, 2012. The
Office was in the process of terminating three additional award agreements,
and the recipients associated with those award agreements had not yet repaid
all funds they owed (two of those recipients were in bankruptcy). As
of March 2014, the Office had collected a total of $19,244,450 in
termination repayments associated with the 23 award agreements it
had terminated or was in the process of terminating (see text box for
additional information on termination repayments). Auditors
estimated that the Office should have collected an additional $3.8
million in termination repayments.
Most award agreements include an option to terminate the award
agreement when recipients do not comply with certain requirements,
including requirements to create jobs and, in some cases,
requirements to open a new facility. Recipients also can elect to
terminate award agreements.
However, the Office did not consistently calculate termination
repayments correctly. For 18 (90 percent) of the 20 terminated
0
20
40
60
80
100
120
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 Total for
2004-2012
Dollar Amount of Clawback Penalties Number of Clawback Penalties
Number
of
Clawback
Penalties
Dollar
Amount
of
Clawback
Penalties

September 2014
Page 30
award agreements tested, auditors identified errors in the Offices calculation
of the termination repayment. As a result, in some cases, the Office did not
recover all funds as required by Texas Government Code, Section 481.078.
For example:
The Offices calculation of the termination repayment amount that Bank
of America
13
owed did not include all funds due back to the State. The
Offices calculation of the termination repayment was not based on its
actual disbursement schedule and used an incorrect interest rate. The
Office was unable to explain the basis of its calculation. Auditors
estimated that Bank of America should have repaid approximately $11.8
million, but the Office required Bank of America to repay only $8.5
million upon termination.
Auditors estimated that the Office potentially undercharged 6 other award
recipients a total of $516,750 in termination repayments and potentially
overcharged 11 other award recipients a total of $123,310 in termination
repayments.
Recommendations
The Office should:
Continue to conduct onsite visits at Texas Enterprise Fund recipients, and
verify recipients self-reported information by comparing it with payroll
information during those visits.
Develop and implement a process to access risk for recipients that are not
required to create direct jobs, and evaluate whether it should conduct
onsite visits at those recipients.
Require all Texas Enterprise Fund award recipients to provide detailed,
employee-level job-creation data, and consistently verify that data by
comparing it to a third-party source.
Verify recipient compliance with all key provisions in award agreements,
such as capital investment requirements and requirements to open or
expand facilities.
Follow its procedures for calculating Texas Enterprise Fund award
termination repayments to help ensure that it recovers all principal and
interest, as required by Texas Government Code, Section 481.078.
Develop and implement a process to review its Texas Enterprise Fund
termination repayment calculations to help ensure that those calculations
are accurate.

13
The Office originally made that award to Countrywide Home Loans, Inc.

September 2014
Page 31
The Legislature should consider:
Requiring the Office to report the results of its compliance verification
process to the Lieutenant Governor and the Speaker of the House of
Representatives.
Requiring an independent verification, such as an audit by a third party, of
the number of jobs Texas Enterprise Fund recipients report they create in
situations that meet certain high-risk parameters that the Legislature
defines.

September 2014
Page 32
Chapter 5
The Office Disbursed Funds from Texas Enterprise Fund Awards in
Accordance with Requirements, But Certain Weaknesses Exist
For all 161 disbursements tested, the Office made the disbursements after the
effective dates of the corresponding Texas Enterprise Fund award agreements.
Due to the absence of signature dates on award agreements, auditors could not
always determine whether the Office made disbursements after the award
agreements were signed; however, auditors did not identify any disbursements
made prior to the effective dates of the award agreements tested.
In addition, the Office consistently ensured that it obtained required internal
approvals prior to disbursing funds from Texas Enterprise Fund awards. The
Office uses a disbursement approval form to document review and approval of
those disbursements. For 160 (99 percent) of the 161 disbursements tested, the
Office prepared and maintained disbursement approval forms. For the
remaining disbursement, which the Office made in March 2004, the Office
was unable to provide that form and asserted that it had not maintained that
form.
For 46 (96 percent) of 48 disbursements tested that were contingent on the
recipients complying with job-creation or other requirements, the Office
determined that the recipients complied with key requirements prior to making
the disbursements. For the remaining two disbursements, which totaled
$3,125,000, the Office could not provide documentation that it verified that
the recipients complied with key requirements prior to making the
disbursements.
Recommendations
The Office should:
Include signature dates on all Texas Enterprise Fund award agreements,
amendments, and assignments.
Complete compliance verifications prior to disbursing funds when
disbursements are contingent on recipients complying with Texas
Enterprise Fund award agreement requirements.

September 2014
Page 33
Texas Enterprise Fund
Biennial Report Requirements
Texas Government Code, Section
481.079, was effective on September 1,
2005, and requires the Office to report
the following information to the
Speaker of the House of
Representatives, the Lieutenant
Governor, and members of the
legislature prior to each regular session
of the legislature:
The number of direct jobs each
recipient committed to create in
Texas.
The number of direct jobs each
recipient created in Texas.
The median wage of the jobs each
recipient created in Texas.
The amount of capital investment
each recipient committed to
expend or allocate per project in
Texas.
The amount of capital investment
each recipient expended or
allocated per project in Texas.
The total amount of awards made
to each recipient.
The average amount of funds for
each job recipients created in
Texas.
The number of jobs created in
Texas by recipients in each sector
of the North American Industry
Classification System.
Of the number of direct jobs each
recipient created in Texas, the
number of positions that provide
health benefits to employees.

Chapter 6
The Office Did Not Fully Comply with Statutory Requirements for Its
Reports on the Texas Enterprise Fund
The Office submitted biennial reports on the Texas Enterprise Fund prior to
each regular legislative session, as required by Texas Government Code,
Section 481.079. In those reports, the Office consistently reported the total
amount of Texas Enterprise Fund awards.
However, the Office did not include certain
information required by Texas Government
Code, Section 481.079, in its reports. Other
information it included in those reports was
inaccurate. Without complete and accurate
information, it is difficult for decision makers to
assess the success of the Texas Enterprise Fund.
The biennial report the Office submitted in
January 2013 omitted statutorily required
information and contained errors.
For the most recent biennial report the Office
submitted in January 2013
14
, auditors identified
the following:
The Office is statutorily required to report the
number of direct jobs each recipient created
in Texas. However, in its report, the Office
did not distinguish between direct jobs
committed and direct jobs created.
Although the report included a column
labeled Direct Jobs, the Office reported the
66,094 jobs that recipients were required to
create, rather than the 48,317 jobs that
recipients reported they had created. In
addition, for some recipients, the Office
incorrectly reported indirect jobs that the
recipients were required to create or made
other errors in the Direct Jobs column.
The Office is statutorily required to report (1) the amount of capital
investment each recipient committed to make and (2) the actual amount of
capital investment each recipient expended or allocated per project in
Texas. However, the Office reported neither of those items in its report.
Although the report included a column labeled Capital Investment, most

14
The biennial report that the Office submitted in January 2013 covered the time period from the initiation of the Texas
Enterprise Fund through December 2012.

September 2014
Page 34
of the amounts in that column were amounts referred to in the background
information in award agreements that were neither committed amounts nor
actual amounts.
The Office did not report other statutorily required information, including:
The number of jobs recipients created that provided health benefits to
employees.
The median wage of the jobs recipients created.
The average amount of awarded funds for each job that recipients
created.
The Office underreported the amount of funds it disbursed to recipients
between 2010 and 2012. It also overreported the amount of funds it
awarded and underreported the amount of funds recipients paid back to the
Office for terminated awards; that occurred because the Office did not
include revisions to award amounts and repayments that it received in
December 2012.
Table 2 summarizes the inaccuracies in the 2013 biennial report.
Table 2
Summary of Errors in the Offices Texas Enterprise Fund 2013 Legislative Report
Item Reported
Number the Office
Reported in the 2013
Biennial Report
Information in the Offices
records as of
December 31, 2012
Overreported/
(Underreported)
Items Related to Job Creation
Total direct jobs required by all award agreements
(through the end date of all award agreements) 66,094 53,590 12,504
Total direct jobs required as of December 31, 2012
Not required to be reported
a

36,680 Not applicable
Total direct jobs created as of December 31, 2012 Not reported
48,317
b

Not applicable
Items Related to Funding
Total amount of awards $487,409,696 $485,059,696 $2,350,000
Total disbursements $384,242,196 $391,112,196 $(6,870,000)
Total recipient repayments on terminated award agreements $22,493,027 $22,863,978 $(370,951)
Total clawback penalties received when recipients did not
comply with award agreement terms $9,621,982 $9,621,982 $0
a
Although this information is not required by Texas Government Code, Section 481.079, it would enable a report reader to evaluate award recipients
progress in job creation.
b
This is the number of direct jobs that the Office accepted based on its 2012 compliance verification. See Chapters 4 and 7 for information related to
the reliability of the Offices compliance verification.
Sources: The Offices Texas Enterprise Fund 2013 Legislative Report and other Office information.

September 2014
Page 35
Biennial reports the Office submitted prior to January 2013 also omitted
statutorily required information.
Auditors did not evaluate the accuracy of all of the information in the biennial
reports the Office submitted prior to January 2013. However, auditors noted
that the biennial reports the Office submitted in 2011, 2009, and 2007
included some information related to the number of jobs recipients reported
they had created. However, those reports did not consistently include all of the
Recommendations
The Office should:
Collect and verify all information from recipients that it is required to
report under Texas Government Code, Section 481.079.
Revise its biennial report to include all statutorily required information,
including the number of jobs recipients have created and the actual and
committed capital investment amounts required by each award agreement.
Develop and implement a review process to help ensure that the
information in its biennial reports is accurate.

September 2014
Page 36
Background Information on the
Triumph Aerostructures Award
The award agreement, originally with Vought
Aircraft Industries, was effective on February 26,
2004, and awarded the recipient $35,000,000. It
required the recipient to create 3,000 new jobs by
December 31, 2009, and to maintain a total of
6,000 new and existing jobs through December 31,
2019. The award agreement also acknowledged
that the recipients expansion plans were
contingent on additional state and local support,
including the recipients ability to secure
favorable terms on agreements with other
governmental entities related to its occupancy of
its facility in Dallas, Texas. The recipient also was
required to pay an average annual wage of
$53,000. Triumph Aerostructures acquired Vought
Aircraft Industries in 2010.
The Office disbursed all $35,000,000 to the
recipient on April 9, 2004.
The Office made two amendments to the award
agreement. The first amendment, which did not
contain a signature date, was effective on
December 22, 2009, and gave Vought job-creation
credit for salaries that exceeded the salaries that
the original award agreement required. The
second amendment was dated July 6, 2010, and
was effective as of December 31, 2009. That
amendment reduced the total number of jobs the
recipient was required to create and maintain
from 6,000 to 5,968.
The award agreement is scheduled to end on
December 31, 2019.

Chapter 7
Results from Site Visits at Six Texas Enterprise Fund Award
Recipients Demonstrated Inconsistencies in the Offices Awarding
Processes and Monitoring
Auditors conducted site visits at six Texas Enterprise Fund award recipients
from February 2014 to March 2014 to (1) evaluate the sufficiency of
compliance monitoring that the Office performed on those recipients for the
year ending December 31, 2012, and (2) determine the accuracy of the
information those recipients had reported to the Office. During those visits,
the recipients provided auditors with access to their records. Auditors also
reviewed the process that the Office used to make awards to each of those six
recipients.
The results of the site visits demonstrated inconsistencies in the Offices
awarding processes and monitoring, which are discussed below. The results
also provide specific examples of some of the issues presented in more detail
in the preceding chapters of this report.
Triumph Aerostructures (original award to Vought Aircraft Industries),
$35.0 million awarded effective February 26, 2004
The recipient did not meet the job-creation requirement established in its
award agreement for the period that
ended on December 31, 2012.
The Office accepted job-creation
numbers in the recipients 2012
compliance verification report that
contained significant errors.
Specifically:
Auditors could not determine the
actual number of new jobs the
recipient created because of
weaknesses in the provisions of the
award agreement and in the
recipients process for identifying
and reporting jobs created.
However, based on the best
available information, auditors
estimated that the Office should
have disqualified 450 jobs that the
recipient reported it had created.
The Office erroneously accepted the
following as new jobs:

September 2014
Page 37
8 jobs in Everett, Washington.
144 jobs that were not filled for 12 consecutive months as required by
the award agreement.
110 jobs that were not full-time jobs.
174 contractor jobs that did not meet the terms of the award
agreement.
14 jobs that should not have been counted for other, unique reasons.
The Office charged the recipient a clawback penalty; however, as a result
of the deficiencies in counting jobs discussed above, auditors estimated
that the Office undercharged the recipient by approximately $993,000.
(That estimate was based on the $1,000 clawback penalty noted in the
award agreement, which is discussed in more detail below.)
The Office did not require the recipient to provide detailed job-creation
data to support the compliance verification report it submitted. As a result,
the Office did not identify the errors in the report.
The compliance verification reports the recipient submitted for other years
contained a level of detail that was similar to the 2012 compliance verification
report discussed above.
The Office made errors in the awarding and award agreement execution
processes for this award. Specifically:
Based on information the Office provided, the recipient did not submit an
application using the Offices formal application process. Additionally, the
Office could not provide documentation that it completed key elements of
its due diligence process prior to making the award.
The award agreement included provisions that were inconsistent with
other award agreements, and it did not include other key provisions to
protect state financial resources, such as provisions related to the
recipients obligations under the Texas Public Information Act and
provisions to indemnify the State against potential losses by the recipient
related to the agreement. In addition, the Office included in the award
agreement a provision for a clawback penalty amount of $1,000 per year
per job for each job the recipient did not create. However, that penalty was
understated because of errors in the Offices calculations. Based on
auditors calculation, that penalty should have been approximately $3,298
per year per job.
The Office amended the award agreement to reduce the recipients
required clawback penalties in a manner that was inconsistent with other

September 2014
Page 38
Scott & White Memorial Hospital Award
The award agreement was effective on
September 1, 2007, and awarded the recipient
$7,500,000. It required the recipient to build
the Cancer Research Institute in Bell County,
Texas; to create 1,485 new jobs at the Cancer
Research Institute and other Scott & White
facilities in Bell County by December 31, 2016;
and to maintain those jobs through December
31, 2022. As of December 31, 2012, the
recipient was required to pay an average
annual wage of $49,651.
The Office made three disbursements totaling
$7,500,000. It made the first disbursement of
$3,000,000 on November 7, 2007; it made the
second disbursement of $2,500,000 on March
30, 2009; and it made the final disbursement
of $2,000,000 on April 6, 2011.
The award agreement is scheduled to end on
January 31, 2023.

award agreements. (See Chapter 3-B for more information regarding that
amendment.)

Scott & White Memorial Hospital, $7.5 million awarded effective September 1,
2007
The recipient exceeded the job-creation requirements in its award agreement
for the period that ended December 31, 2012. However, there were errors in
the number of jobs that the Office allowed the recipient to count as new jobs
on its 2012 compliance verification
report. Those errors incorrectly inflated
the surplus job credit that the Office
allocated to the recipient in its verification
process. (Recipients can use surplus job
credits to end their award agreements
earlier than originally planned.)
Specifically:
The automated process the recipient
used to count jobs in Bell County
incorrectly included an estimated 554
jobs located outside of that county.
The recipient included 96 jobs that it
had incorrectly reported as a result of
a merger with another hospital.
Auditors identified inconsistencies in the Offices awarding process for this
award. Specifically:
The Offices due diligence review was based on incomplete information
and contained inaccuracies. For example, the Office did not include the
name of the consultant who worked with the recipient on the application,
the recipients annual revenue, or the average weekly wages for Bell
County in the information packet it prepared. In addition, the business
climate comparison the Office prepared (1) excluded two locations that the
recipient had listed on one version of its application as other locations it
was considering and (2) included one potential location that was not listed
on the application.
The Office did not maintain a copy of the packet it submitted to the
Governor, the Lieutenant Governor, and the Speaker of the House of
Representatives. Therefore, auditors were unable to determine the
accuracy of the cost-benefit analysis that the Office prepared for that
packet.

September 2014
Page 39
Tyson Fresh Meats, Inc. Award
April 11, 2005, and awarded the
recipient $7,000,000. It required the
recipient to create 1,600 new jobs at its
Sherman, Texas facility by December 31,
2009, and to maintain those jobs
through December 31, 2022. As of
December 31, 2012, the recipient was
required to pay an average annual wage
of $27,028.
The Office made two disbursements
totaling $7,000,000. It made the first
disbursement of $3,500,000 on May 2,
2005, and it made the second
disbursement of $3,500,000 on
December 12, 2006.
The award agreement is scheduled to
end on January 31, 2023.

The award agreement allowed the recipient to include all jobs it created in
Bell County, Texas as new jobs. The award agreement also required the
recipient to create a total of 1,485 jobs by December 31, 2016. As of
March 5, 2014, the Cancer Research Institute had a total of 9 employees,
and the recipient reported that it had 8,403 jobs in Bell County; it asserted
that 2,899 of those jobs qualified as new jobs under its award agreement.
The award agreement between the Office and the recipient did not contain
certain provisions to protect state resources, including provisions related to
the recipients obligations under the Texas Public Information Act.
One of the requirements in the award agreement between the Office and
Scott & White Memorial Hospital, which was signed on November 5,
2007, required Scott & White Memorial Hospital to build a Cancer
Research Institute. However, the recipients application indicated that it
had already established the Cancer Research Institute in 2005.
Although one version of the application listed some competitive locations,
there was no other documentation that the recipient considered locating
out of state.

Tyson Fresh Meats, Inc., $7 million awarded effective April 11, 2005
The recipient did not meet the job-creation requirements
established in its award agreement for the period that ended on
December 31, 2012. In addition, there were minor errors in the
number of jobs that the Office allowed the recipient to report as
new jobs for that period.
The Offices due diligence review for this award was based on
incomplete information and contained inaccuracies. For example,
the cost-benefit analysis that the Office prepared did not consider
all state and local incentives available to the recipient and tax
revenues. As a result, the Office (1) understated the total estimated
financial benefit to the State and (2) understated the length of time
for the State to recover the awarded funds. The cost-benefit
analysis also did not include the median wages of the jobs to be
created, as required by Texas Government Code, Section 481.080.
In addition, the award agreement did not contain certain
provisions necessary to protect state resources, including provisions related to
the recipients obligations under the Texas Public Information Act.

September 2014
Page 40
Comerica Incorporated Award
August 29, 2007, and awarded the
recipient $3,500,000. It required the
recipient to establish its corporate
headquarters in Dallas, Texas; to create
200 new jobs directly related to its
newly established headquarters by
December 31, 2010; and to maintain
those jobs through December 31, 2017.
As of December 31, 2012, the recipient
was required to pay an average annual
wage of $158,661.
The Office disbursed all $3,500,000 to
the recipient on September 24, 2007.
Effective December 28, 2012, an
amendment to the award agreement
clarified that 15 jobs that existed at the
time the original agreement was signed
were eligible to be counted as new jobs
created under the terms of the award
agreement.
The award agreement is scheduled to
end on January 31, 2018.

Comerica Incorporated, $3.5 million awarded effective August 29, 2007
The recipient exceeded the job-creation requirement in its award agreement.
The Office reviewed a detailed list of jobs that the recipient provided. The
recipient accurately reported the number of new jobs it created based on the
terms of the award agreement in its 2012 compliance verification report.
Auditors identified inconsistencies in the Offices awarding process for this
award. Specifically:
The Office conducted its due diligence review
based on an incomplete application. The
recipient submitted its application in late
February 2007, and the Office announced the
award and issued a commitment letter signed by
the Governor, the Lieutenant Governor, and the
Speaker of the House of Representatives on
March 6, 2007, the same date that the recipient
announced its relocation. However, the
recipient subsequently submitted two revised
applications, and it did not provide an
application that listed other competitive
locations until May 2007.
The Office could not provide documentation
that it prepared a financial data analysis to
evaluate the recipients financial position during
its due diligence review. In addition, the Office
did not maintain a copy of the packet it
submitted to the Governor, the Lieutenant
Governor, and the Speaker of the House of Representatives. Therefore,
auditors were unable to determine the accuracy of the cost-benefit analysis
that the Office prepared for that packet.
The award agreement did not contain certain provisions to protect state
resources, including provisions related to the recipients obligations under
the Texas Public Information Act.
The award agreement stated that jobs would only be counted as new
jobs if the number of jobs reported exceeded the number of jobs at the
time the award agreement was signed. However, in a separate 2007 letter,
the Office also allowed the recipient to count 32 jobs that relocated to
Texas prior to the effective date of the award agreement. Effective
December 28, 2012, the Office formally amended the award agreement to
allow the recipient to count only 15 of those 32 existing jobs as new jobs.

September 2014
Page 41
Rackspace Award
The award agreement was effective on August 1,
required the recipient to establish a facility in
Windcrest, Texas; to create 4,000 new jobs directly
related to its newly established headquarters by
December 31, 2012; and to maintain those jobs
through December 31, 2018. As of December 31,
2012, the recipient was required to pay an average
annual wage of $57,120.
The Office has disbursed $14,000,000 to the
recipient. It made the first disbursement of
$5,000,000 on August 29, 2007; it made the second
disbursement of $3,500,000 on March 9, 2012; and it
made the third disbursement of $5,500,000 on March
13, 2014. The recipient has not yet qualified for the
remaining funds.
Effective July 24, 2009, an amendment to the award
agreement (1) provided several funding options to
the recipient depending on the number of jobs it
created and (2) extended the job-creation schedule
to allow the recipient additional time to create the
required jobs. That amendment also extended the
award agreement termination date three years.
The award agreement is scheduled to end on January
31, 2022.

Samsung Austin Semiconductor, LLC Award
The award agreement was effective on October 1,
required the recipient to establish its new fabrication
facility in Austin, Texas and to create a total of 900
new jobs directly related to its newly established
headquarters by December 31, 2009. Of those 900
jobs, 600 were required to be direct jobs and 300
could be contractor jobs. The recipient was also
required to maintain 1,895 jobs from 2010 through
2019. As of December 31, 2012, the recipient was
required to pay an average annual wage of $72,337
for its direct jobs.
The Office made two disbursements totaling
$10,800,000. It made the first disbursement of
$8,000,000 on May 22, 2006, and it made the second
disbursement of $2,800,000 on October 26, 2007.
The award agreement is scheduled to end on January
31, 2020.

Rackspace US, Inc., $22 million awarded effective August 1, 2007
The recipient exceeded the job-creation requirement in its
award agreement. However, auditors identified minor errors
related to part-time and temporary jobs that the Office
permitted the recipient to count as new jobs in its 2012
compliance verification report.
The Offices due diligence review for this award was based
on incomplete information. For example, the Office could
not provide documentation that it reviewed the recipients
financial statements. The Office also did not maintain a copy
of the packet it submitted to the Governor, the Lieutenant
Governor, and the Speaker of the House of Representatives.
Therefore, auditors were unable to determine the accuracy of
the cost-benefit analysis that the Office prepared for that
packet.
In addition, the award agreement did not contain certain
provisions necessary to protect state resources, including
provisions related to the recipients obligations under the
Texas Public Information Act.

Samsung Austin Semiconductor, LLC, $10.8 million awarded effective
October 1, 2005
The recipient exceeded the job-creation requirement in its
award agreement. The Office reviewed a detailed list of jobs
that the recipient provided. In its 2012 compliance
verification report, the recipient accurately reported the
number of new jobs it created based on the terms of its
award agreement.
The Offices due diligence review for this award was based
on incomplete information and contained inaccuracies. For
example, the Office could not provide documentation that it
performed a financial data analysis. In addition, the cost-
benefit analysis the Office performed (1) did not include a
local incentive available to the recipient, (2) understated the
total estimated financial benefit to the State, and (3)
understated the estimated length of time for the State to
recover the awarded funds. The cost-benefit analysis also
did not include the median wages of the jobs to be created in
the state, as required by Texas Government Code, Chapter 481.080.

September 2014
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In addition, the award agreement did not contain certain provisions necessary
to protect state resources, including provisions related to the recipients
obligations under the Texas Public Information Act.

September 2014
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Chapter 8
Managements Response

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Appendices
Appendix 1
Objectives, Scope, and Methodology
Objectives
The objectives of this audit were to:
Determine whether the Office of the Governor (Office) awards and
amends grants from the Texas Enterprise Fund in accordance with relevant
state laws, rules, and Office policies and procedures.
Determine whether the Office disburses money from the Texas Enterprise
Fund in accordance with Texas Government Code, Section 481.078, and
other relevant laws, rules and standards.
Determine whether the Office monitors the persons or entities awarded
money from the Texas Enterprise Fund for compliance with the terms of
any applicable agreements and with the requirements of Texas
Government Code, Section 481.078, and other relevant laws, rules, and
standards, including any terms related to job creation and capital
investment.
Scope
The scope of this audit covered (1) projects with Texas Enterprise Fund award
effective dates between September 1, 2003, and August 31, 2013, and (2)
projects that did not receive Texas Enterprise Fund awards, when
documentation related to those projects was available for review. As
established in the Offices records retention schedule, the Office maintains
documentation of projects for which it does not make award agreements for
only one year after the Governor, the Lieutenant Governor, and the Speaker of
the House of Representatives decide not to offer awards or companies decline
to accept award offers.
Because the Office did not consistently include signature dates on its signed
Texas Enterprise Fund award agreements, the audit scope covered the best
available information that the Office provided.
Methodology
The audit methodology included reviewing all projects that received awards
from the inception of the Texas Enterprise Fund and that were effective
between September 1, 2003, and August 31, 2013. Auditors also reviewed
documentation for projects that did not receive Texas Enterprise Fund awards
when that information was available (as discussed above, the Office maintains

September 2014
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that documentation for only one year). Audit work included collecting
information related to the Offices Texas Enterprise Fund award process,
reviewing award agreements, reviewing the Offices monitoring information,
and performing selected tests and other procedures. Auditors also reviewed
available statutes, Office of the Comptroller of Public Accounts procurement
recommendations, and Office policies and procedures. Auditors gathered
incentive fund best practices information from 10 other states and 4 local
governments in Texas; auditors selected the 10 states using professional
judgment and selected the 4 local governments based on the number of Texas
Enterprise Fund awards made to recipients in those local areas and
professional judgment.
Sampling
To test the Offices Texas Enterprise Fund awarding process, auditors used
professional judgment to select and review:
All projects that did not receive awards for which the Office maintained
documentation, and all projects that received awards during the 2010-2011
and 2012-2013 bienniums.
Non-statistical samples of projects that received awards during the 2004-
2005, 2006-2007, and 2008-2009 bienniums. Auditors selected those
samples primarily through random selection designed to be representative
of the population. In those cases, results may be extrapolated to the
population, but the accuracy of the extrapolation cannot be measured.
Six additional projects that received Texas Enterprise Fund awards.
Auditors selected those projects for on-site visits based on professional
judgment. (The results of audit testing from on-site visits were generally
consistent with the information reported in Chapter 2 of this report and,
when appropriate, those results were included in Chapter 7 of this report.)
To test the Offices process for developing and making award agreements,
auditors tested Texas Enterprise Fund award agreements that became effective
between September 1, 2003, and August 31, 2013. Auditors did not test
backdated projects that became effective between September 1, 2003, and
August 31, 2013, but were signed after August 31, 2013, including at least one
project (with an award to Ascend Performance Materials) discussed in
Chapter 3 of this report.
To test the Offices monitoring process, auditors reviewed all Texas
Enterprise Fund award agreements to identify award agreements with
reporting requirements that were effective for the period ending December 31,
2012. Auditors selected a non-statistical, random sample of one compliance
verification report that each recipient was required to submit as of December
31, 2012, for a total of 88 compliance verification reports. The results for that

September 2014
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sample may be extrapolated to the population, but the accuracy of the
extrapolation cannot be measured.
Auditors also tested 41 compliance reports submitted by the six recipients at
which auditors conducted site visits and 1 additional compliance verification
report that auditors selected using professional judgment. (The results of that
testing were generally consistent with the information reported in Chapter 4 of
this report and, when appropriate, those results were included in Chapter 7 of
this report.)
To test the Offices award agreement amendment and termination processes,
auditors tested all Texas Enterprise Fund amendments and terminations that
the Office asserted it had executed as of March 2014. Auditors also tested the
accuracy of all clawback penalties the Office charged to Texas Enterprise
Fund recipients based on the results of the Offices compliance verification
process. (However, auditors could not evaluate whether those clawback
penalties accurately reflected the total amount the recipients should have paid
because of weakness in the Offices verification process discussed in Chapter
4 of this report.)
Data Reliability
To assess the reliability of data used to select a sample of projects to test,
auditors compared all projects to which the Office asserted that it had made
Texas Enterprise Fund awards to disbursement and deposit dates in the
Uniform Statewide Accounting System (USAS). Based on that comparison,
auditors determined that the population of projects was sufficiently reliable for
purposes of selecting projects to test for all phases of awarding and project
administration. Auditors also compared deposit and disbursement dates in the
Offices internal accounting data system (Micro Information Products, or
MIP) to USAS and determined that data was sufficiently reliable for the
purposes of testing those transactions, including tests of disbursements from
the Texas Enterprise Fund, clawback penalties charged to Texas Enterprise
Fund recipients, and termination repayments charged to Texas Enterprise
Fund recipients.
While the list of projects was sufficiently reliable for the purposes of testing
and analysis, the Office frequently did not include signature dates on Texas
Enterprise Fund award agreements. The Office also backdated the effective
dates of some award agreements as discussed in Chapter 3 of this report. As a
result, audit testing reflected the best information available for projects that
were effective between September 1, 2003, and August 31, 2013; however, it
may not have included all award agreements during that period if the Office
backdated the effective dates of award agreements that it signed after August
31, 2013. As discussed above, auditors identified at least one project (Ascend
Performance Materials) with an award agreement for which the effective date
was backdated after August 31, 2013.

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Information collected and reviewed included the following:
The Offices Texas Enterprise Fund shared drive, including information
related to each award and information for projects that did not receive
awards, when available.
The Offices Texas Enterprise Fund application.
The Offices policies and procedures.
MIP deposit and disbursement information for the Texas Enterprise Fund.
The Offices annual financial reports and encumbrance reports.
USAS deposits and disbursements for the Texas Enterprise Fund (Fund
5107).
The Offices Texas Enterprise Fund user access lists and roles.
The Offices employee conflict of interest statements.
Job-creation information submitted by the six Texas Enterprise Fund
recipients at which auditors performed site visits.
Legislative reports on the Texas Enterprise Fund that the Office issued in
2007, 2009, 2011, and 2013.
Procedures and tests conducted included the following:
Interviewed Office staff regarding all phases of Texas Enterprise Fund
administration.
Tested the Offices Texas Enterprise Fund application information to
determine (1) whether recipients of awards and applicants that did not
receive awards had submitted applications and (2) whether those entities
and the Office completed key components of the application process.
Tested the Offices Texas Enterprise Fund due diligence process to
determine whether the Office (1) performed and documented each step in
its due diligence process and (2) completed key steps accurately.
Tested the Offices Texas Enterprise Fund project approval process to
determine whether the Office obtained required internal and external
approvals prior to making awards.
Reviewed Texas Enterprise Fund award agreements to determine whether
they (1) included defined and enforceable provisions and (2) included
provisions necessary to protect state financial resources as recommended
by the State of Texas Contract Management Guide.

September 2014
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Analyzed and summarized information related to each Texas Enterprise
Fund award agreement tested.
Reviewed the Offices authority to charge a Texas Enterprise Fund
application fee.
Reviewed Texas Enterprise Fund award amendments to determine
whether the Office (1) provided required notifications to the Lieutenant
Governor and the Speaker of the House of Representatives for awards
signed after September 1, 2011, and (2) determined the recipients
compliance status prior to signing each amendment.
Reviewed disbursements from the Texas Enterprise Fund to determine (1)
whether the Office had signed an award agreement prior to disbursement
and (2) when required, whether the Office determined that the recipients
had complied with the requirements of their award agreements prior to
making disbursements.
Tested key controls related to Texas Enterprise Fund disbursement
approvals and compliance verifications to determine whether the Office
obtained required approvals when necessary.
Tested the Offices Texas Enterprise Fund compliance verifications to
determine whether the Office adequately verified each recipients
compliance with requirements in award agreements.
Tested the Offices Texas Enterprise Fund compliance verifications during
site visits at six recipients, including testing key controls over the
compliance verification reports those recipients had submitted and
verifying the accuracy of the jobs reported by each of those recipients and
verified by the Office.
Reviewed documentation of five site visits the Office conducted at Texas
Enterprise Fund recipients.
Reviewed the Offices 2013 risk assessment process for the Texas
Enterprise Fund.
Tested the Offices termination payment calculations for terminated and
inactive Texas Enterprise Fund award agreements.
Tested the Offices Texas Enterprise Fund clawback calculations and
penalty recovery.
Analyzed Texas Enterprise Fund clawback penalties the Office received
for periods ending between 2004 and 2012.

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Reviewed the Offices 2007, 2009, 2011, and 2013 legislative reports on
the Texas Enterprise Fund to determine whether those reports included
Compared the Office Texas Enterprise Fund 2013 Legislative Report with
Office records to determine whether key elements of that report were
accurate.
Interviewed individuals from ten other states and reviewed available
information for ten additional states to gather information on best practices
for administering incentive funds.
Interviewed individuals from four local governments in Texas to gather
information on best practices for administering incentive funds.
Reviewed the State of Texas Contract Management Guide and Uniform
Grant Management Standards to identify best practices.
Tested the Texas Enterprise Fund shared drive user access list to
determine whether the Office appropriately restricted access to
information to current employees with a business need for that access.
Tested change management controls over the Offices Texas Enterprise
Fund cost-benefit analysis electronic spreadsheet and its clawback penalty
calculation spreadsheet.
Reviewed the Offices conflict of interest process to determine whether
the Office developed a sufficient process to evaluate and monitor potential
conflicts of interest related to the Texas Enterprise Fund.
Criteria used included the following:
Texas Government Code, Chapter 481.
Texas Government Code, Chapter 489.
State of Texas Contract Management Guide, versions 1.1 through 1.11.
Uniform Grant Management Standards.
Texas Enterprise Fund award agreements and amendments.
The Offices policies and procedures related to Texas Enterprise Fund due
diligence and project analysis, project approval, records and reporting, and
amendments.
The Offices policies and procedures related to preparing and routing new
Texas Enterprise Fund agreements, compliance verification,
disbursements, and risk assessment and monitoring.

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Best practice information gathered from other states and local
governments.
Title 1, Texas Administrative Code, Chapter 202.
Project Information
Audit fieldwork was conducted from January 2014 through July 2014. We
conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.
The Lieutenant Governor and the Speaker of the House of Representatives are
required to approve Texas Enterprise Fund awards before the Office enters
into award agreements. The Lieutenant Governor and the Speaker of the
House of Representatives are the joint chairs of the Legislative Audit
Committee, which oversees the State Auditors Office. Our audit work did not
include procedures at the offices of the Lieutenant Governor and the Speaker
of the House of Representatives because the Texas Enterprise Fund is
administered by the Office of the Governor.
The following members of the State Auditors staff performed the audit:
Audrey ONeill, CIA, CGAP (Project Manager)
Rebecca Franklin, CISA, CFE, CGAP, CICA (Assistant Project Manager)
Kelsey Arnold
Robert H. (Rob) Bollinger, CPA, CFE
Jeffrey D. Criminger
Norman G. Holz II
Lucien Hughes
Scott Labbe
Amadou Ngaide, MBA, CFE, CIDA, CICA
Valentine A. Reddic, MBA
Michael C. Apperley, CPA (Quality Control Reviewer)
John Young, MPAff (Audit Manager)

September 2014
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Appendix 2
Projects That Received Texas Enterprise Fund Awards Between
September 1, 2003, and August 31, 2013
Between September 1, 2003, and August 31, 2013, the Office of the Governor
(Office) made Texas Enterprise Fund awards that totaled $506,838,696 to 115
projects. Auditors categorized the status of those projects as of
August 31, 2013, as follows:
Terminated and inactive projects. Twenty-three projects with $53,891,000 in
awards had award agreements that (1) had been terminated by the Office
or by the recipients or (2) were inactive because they were in the process
of being terminated by the Office. Fourteen of those 23 projects had also
been charged clawback penalties totaling $2,088,285 for not meeting the
jobs requirements in the award agreements.
Completed projects. Twelve projects with $31,351,000 in awards were
completed. Of those projects, 2 did not include jobs requirements, 3 were
completed early due to surplus job credits that the Office reported the
recipients had earned, and 7 were completed when the projects reached the
termination dates in the award agreements. Of the 7 projects completed
when they reached the termination dates in the award agreements, 3 were
charged clawback penalties totaling $390,751 for not meeting the jobs
requirements in the award agreements.
Active projects. Eighty projects with $421,596,696 in awards were active.
Of those projects:
Twenty-four projects with $141,084,196 in awards had award
agreements that had been amended. Fifteen of those 24 projects had
also been charged clawback penalties totaling $8,960,214 for not
meeting the jobs requirements in the award agreements.
Sixteen projects with $45,650,500 in awards had no amendments to
their award agreements; however, the Office had charged those
projects a total of $3,349,732 in clawback penalties for not meeting the
jobs requirements in the award agreements.
Forty projects with $234,862,000 in awards had no amendments to
their award agreements and had not been charged clawback penalties.
Nineteen of the recipients associated with those 40 projects were not
yet required to have created new jobs as of December 31, 2012 (the
date of the Offices most recent compliance verification).

September 2014
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Table 3 summarizes all terminated and inactive projects that received Texas
Enterprise Fund awards between September 1, 2003, and August 31, 2013.
Table 4 lists each terminated and inactive project that received Texas
Enterprise Fund awards between September 1, 2003, and August 31, 2013.
Table 3
SUMMARY OF TERMINATED AND INACTIVE PROJECTS
That Received Texas Enterprise Fund Awards
Between September 1, 2003, and August 31, 2013
Total Number of
Projects Total Amount Awarded
Total Disbursements
as of
December 31, 2013
Total
Number of
New Direct
Jobs
and
Other Jobs
Required
Average Cost
per
New Direct
Job or Other
Job
Job Creation Status as of the
Office of the Governors
December 31, 2012,
Compliance Verification or the
Award Termination Date
Number of
New Jobs
Required
Number of New
Jobs the Office
Counted
23 $53,891,000 $36,975,000 14,221
direct jobs
and 200
other jobs
$3,737
a

7,360 4,556
a
Auditors calculated the average cost per new direct job or other job by dividing the total amount awarded by the sum of the direct jobs and
other jobs.
Source: Texas Enterprise Fund award agreements and Office documentation.

Table 4
TERMINATED AND INACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
Job Creation Status (unless
otherwise noted, this is as of
the Office of the Governors
December 31, 2012,
Compliance Verification)
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Bank of America Corporation $20,000,000 December 31,
2009
Terminated 7,500
direct jobs
and 0
other jobs
$2,667 5,500 as of
December 31,
2008
3,876 as of
December 31,
2008
$20,000,000
January 1, 2005
Note: The original recipient was Countrywide Home Loans, Inc., which Bank of America Corporation acquired in 2008. 2008 was the last year
for which the Office performed a compliance verification for Bank of America Corporation. Bank of America Corporation repaid the Office
$8,450,351 prior to terminating its agreement.
Hewlett-Packard Company $3,000,000 February 12,
2008
Terminated 420 direct
jobs and 0
other jobs
$11,905 Not applicable Not applicable
$5,000,000
October 10, 2006
Note: The award agreement was terminated before the jobs requirement became effective. Hewlett-Packard Company repaid the Office
$3,210,847 on February 29, 2008, after terminating its agreement.

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Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Maxim Integrated Products,
Inc. (Irving)
$2,000,000 June 4, 2008 Terminated 1,000
direct jobs
and 0
other jobs
$5,000,000
May 2, 2007
Note: The award agreement was terminated before the jobs requirement became effective. Maxim Integrated Products, Inc. repaid the Office
$2,107,149 on July 1, 2008, after terminating its agreement.
Lockheed Martin Corporation
(amended)
$4,000,000 December 19,
2013
jobs and
200 other
jobs
$7,273 550 305
$4,000,000
April 15, 2007
Note: An amendment to the original award agreement, which was effective on December 1, 2008, reduced the required jobs from 800 to 550.
The amendment provided a basic funding amount of $4,000,000 and allowed Lockheed Martin the option of receiving an additional $1,480,000
if it created a total of 800 new jobs. The original award agreement allowed for 300 of the required jobs to be with other businesses that
directly related to a NASA contract. The amendment to the award agreement allowed for 200 of the required jobs to be with other businesses
that directly related to a NASA contract.
Lockheed Martin Corporation paid one clawback penalty of $354,456, and it repaid an additional $416,069 upon terminating its agreement.
Sino Swearingen Aircraft
Corporation
$0 August 14,
2007
Terminated 1,131
direct jobs
and 0
other jobs
$2,500,000
June 28, 2006
Note: No funds were disbursed or requested for this award agreement prior to its termination. The Office did not complete a compliance
verification worksheet for this award.
Nationwide Mutual Insurance
Company
$1,200,000 January 27,
2011
jobs and 0
other jobs
$2,500,000
January 22, 2010
Note: The Office did not complete a compliance verification worksheet for this award because the award agreement was terminated.
Nationwide Mutual Insurance Company repaid the Office $1,209,219 upon termination of the award agreement.
SunPower Corporation $1,000,000 February 10,
2012
jobs and 0
other jobs
$2,500,000
November 19, 2010
SunPower Corporation repaid the Office $1,035,698 upon termination of the award agreement.

September 2014
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Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
VCE Company, LLC $1,000,000 December 14,
2012
jobs and 0
other jobs
$5,645 334 130
$2,450,000
October 1, 2010
Note: The final compliance report that VCE Company, LLC submitted and the final compliance verification worksheet the Office completed
were for the period ending December 31, 2011. VCE Company LLC paid one clawback penalty of $436,926, and it repaid an additional $208,558
upon termination of its award agreement.
Lorimer, LLC $750,000 April 25, 2012 Terminated 400 direct
jobs and 0
other jobs
$3,750 170 28
$1,500,000
May 1, 2010
Note: The final compliance report that Lorimer, LLC submitted and the final compliance verification worksheet the Office completed were for
the period ending December 31, 2011. Lorimer, LLC paid a clawback penalty of $40,757 and it repaid an additional $720,902 upon termination
of its award agreement.
Latex Foam International
Holdings, Inc.
$350,000 January 31,
2022
Inactive 190 direct
jobs and 0
other jobs
$5,579 30 1
$1,060,000
October 1, 2010
Note: Latex Foam International Holdings, Inc. no longer reports jobs created to the Office and is in the process of terminating its award
agreement. The numbers of jobs required and created are from 2010, when Latex Foam International Holdings, Inc. stopped reporting jobs
that it created and when the Office performed its last compliance verification for this award agreement. As of January 27, 2014, the Office
had collected $212,000 in repayments from Latex Foam International Holdings, Inc. Latex Foam International Holdings, Inc. notified the Office
that it had filed for bankruptcy in June 2014.
HelioVolt Corporation
(amended)
$500,000 June 18, 2013 Terminated 158 direct
jobs and 0
other jobs
$6,329 158 51
$1,000,000
March 21, 2008
Note: Two amendments were made to the award agreement prior to its termination. The first amendment was effective on December 1, 2008,
and decreased the amount of clawback penalties that HelioVolt was required to pay if it did not meet job-creation requirements from $1,396
per job to $1,340 per job. The second amendment was effective on December 30, 2009, and increased the clawback penalties from $1,340 per
job to $1,353 per job; it also changed the job-creation schedule to allow HelioVolt Corporation additional time to create the required jobs, and
it required HelioVolt Corporation to maintain those jobs for a longer time period. HelioVolt Corporation paid the Office $294,512 in clawback
penalties for not meeting job-creation requirements between 2008 and 2012, and it paid the Office an additional $60,253 upon termination of
the award agreement.
McLane Advanced
Technologies, LLC
$500,000 February 28,
2011
jobs and 0
other jobs
$1,000,000
November 2, 2009
Note: The Office did not complete a compliance verification worksheet that included a verification of jobs because this award agreement was
terminated before the job requirements became effective. McLane Advanced Technologies, LLC repaid the Office $522,374 upon termination
of the award agreement.

September 2014
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Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Martifer-Hirschfeld Energy
Systems LLC
(amended)
$500,000 February 26,
2014
jobs and 0
other jobs
$3,756 184 48
$845,000
September 9, 2008
Note: The original recipient of this award was Martifer Energy Systems, LLC, which merged with Martifer-Hirschfeld Energy Systems LLC in
2009. An amendment to the award agreement, effective January 31, 2009, allowed Martifer Energy Systems LLC to postpone its initial job-
creation requirement. A second amendment, effective December 11, 2009, reduced the original award amount from $945,000 to $845,000 and
changed the job-creation schedule to allow the recipient additional time to create the required jobs. As of the reporting period that ended on
December 31, 2012, Martifer-Hirschfeld Energy Systems LLC had paid 5 clawback penalties totaling $264,180. It also paid the Office $182,875 in
clawback penalties associated with its job requirements for 2013 and an additional $26,187 upon termination of the award agreement.
Gulfstream Aerospace
Services Corporation
$375,000 December 18,
2009
jobs and 0
other jobs
$750,000
February 22, 2008
Gulfstream Aerospace Services Corporation repaid the Office $379,949 upon termination of the award agreement.
FlightSafety International,
Inc.
$0 February 1,
2011
jobs and 0
other jobs
$5,760 25 0
$720,000
April 16, 2009
Note: No funds were disbursed or requested for this award agreement prior to its termination. The job numbers reported above reflect the
final report FlightSafety International, Inc. submitted and the final compliance verification the Office performed for the period ending
December 31, 2009.
Coll Materials Exchange, LLC $200,000 January 31,
2022
Inactive 111 direct
jobs and 0
other jobs
$4,955 95 0
$550,000
April 5, 2011
Note: The Office asserted that it had referred this award to the Office of the Attorney General and is waiting on the final award agreement
termination payment from Coll Materials Exchange, LLC. As of the reporting period ending December 31, 2011, Coll Materials Exchange, LLC
had paid clawback penalties of $22,950.
Trace Engines, LP $250,000 December 6,
2012
jobs and 0
other jobs
$4,000 74 24
$456,000
August 8, 2006
Note: The final compliance report Trace Engines, LP submitted and the final compliance verification worksheet the Office completed were for
the period ending December 31, 2011. Trace Engines, LP paid clawback penalties of $245,641 for not meeting job-creation requirements in the
award agreement between 2008 and 2011. The Office determined that Trace Engines, LP did not owe an additional amount at the termination
of the award agreement.

September 2014
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Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
KLN Steel Products Company,
LLC
(amended)
$450,000 January 31,
2017
Inactive 156 direct
jobs and 0
other jobs
$2,885 81 0
$450,000
August 4, 2008
Note: An amendment to this award was effective on November 1, 2010, and reduced the original award amount from $900,000 to $450,000 and
reduced the total jobs required from 300 to 156. The final compliance report KLN Steel Products Company, LLC submitted and the final
compliance verification worksheet the Office completed were for the period ending December 31, 2011. KLN Steel Products Company, LLC paid
clawback penalties of $47,744 for not meeting job-creation requirements for 2009. The Office determined that KLN Steel Products Company,
LLC owed additional clawback penalties for 2011, and that it owed additional funds for terminating the agreement. KLN Steel Products
Company, LLC filed for bankruptcy in November 2011, and in 2012, the Office referred a total claim of $377,547 to the Office of the Attorney
General for collection.
Zarges Aluminum Systems,
LLC
$200,000 December 14,
2012
jobs and 0
other jobs
$4,000 47 9
$400,000
November 17, 2009
Note: The final compliance report Zarges Aluminum Systems, LLC submitted and the final compliance verification worksheet the Office
completed were for the period ending December 31, 2011. Zarges Aluminum Systems, LLC paid clawback penalties of $36,518 for not meeting
job-creation requirements in the award agreement for 2011, and it repaid an additional $162,375 upon termination of the award agreement.
idX San Antonio, LLC $125,000 February 26,
2014
jobs and 0
other jobs
$2,880 40 28
$360,000
February 28, 2011
Note: The original recipient of this award was idX Corporation, which assigned its rights and responsibilities under the agreement to idX San
Antonio, LLC in 2012. idX San Antonio, LLC paid $8,076 in clawback penalties to the Office for not meeting job-creation requirements in the
award agreement for 2012, and it repaid an additional $108,591 upon termination of the award agreement.
Green Star Products, Inc. $175,000 March 8, 2012 Terminated 118 direct
jobs and 0
other jobs
$2,966 20 0
$350,000
June 1, 2010
Note: The final compliance report Green Star Products, LLC submitted and the final compliance verification worksheet the Office completed
were for the period ending December 31, 2010. Green Star, LLC paid clawback penalties of $15,180 for not meeting job-creation requirements
in the award agreement for 2010, and it repaid an additional $169,271 upon termination of the award agreement.

September 2014
Page 72
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Albany Engineered
Composites, Inc.
(amended)
$300,000 April 12, 2011 Terminated 137 direct
jobs and 0
other jobs
$2,190 0 0
$300,000
January 24, 2008
Note: An amendment to this award was effective on December 30, 2009, and reduced the award amount from $1,000,000 to $300,000. It also
reduced the total jobs required from 337 jobs to 137 jobs. The final compliance report Albany Engineered Composites, Inc. submitted and the
final compliance verification worksheet the Office completed were for the period ending December 31, 2009. Albany Engineered Composites,
Inc. paid clawback penalties of $29,716 for the period ending December 31, 2008, and it repaid an additional $200,841 upon termination of the
award agreement.
Alloy Polymers, Inc. $100,000 July 9, 2010 Terminated 52 direct
jobs and 0
other jobs
$3,846 52 56
$200,000
October 12, 2006
Note: The final compliance verification worksheet the Office completed was for the period ending December 31, 2009. Alloy Polymers, Inc.
paid clawback penalties of $10,032 for the period ending December 31, 2007, and it repaid an additional $43,816 upon termination of the
award agreement.

September 2014
Page 73
Table 5 summarizes all completed projects that received Texas Enterprise
Fund awards between September 1, 2003, and August 31, 2013. Table 6 lists
each completed project that received Texas Enterprise Fund awards between
September 1, 2003, and August 31, 2013.
Table 5
SUMMARY OF COMPLETED PROJECTS
Total Number of
Total Disbursements
as of
December 31, 2013
Total
Number of
New Direct
Jobs
and
Other Jobs
Required
Average Cost
per
New Direct
Job or Other
Job
December 31, 2012, Compliance
Verification or the Award
Termination Date
Number of
New Jobs
Required
Number of New
Jobs the Office
Counted
12 $31,351,000 $31,046,000 4,820
direct jobs
and 1,515
other jobs
$4,949
a

5,935 7,388
a
other jobs.

Table 6
COMPLETED PROJECTS
That Received Texas Enterprise Fund Awards the Office Made to Projects
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
The Home Depot, Inc. $8,500,000 November 6,
2013
Completed
early due
to surplus
jobs
created
843 direct
jobs and 0
other jobs
$10,083 843 901
$8,500,000
July 31, 2004
The following project had two components:
Lonestar Education and
Research Network (LEARN)
$7,281,000 December 6,
2013
Completed Not
applicable
Not
applicable
Not applicable Not applicable
$7,281,000
February 28, 2005
Note: The award agreement did not have a jobs requirement. Instead, the agreement required LEARN to design, develop, and deploy the LEARN
optical network to specific city pairings in Texas as listed in its agreement.

September 2014
Page 74
COMPLETED PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
TIGRE Institutions - Lonestar
Education and Research
Network (LEARN - TIGRE)
$2,500,000 December 17,
2007
Completed Not
applicable
Not
applicable
$2,500,000
March 21, 2005
Note: The award agreement did not have a jobs requirement. In addition, three of the five higher education institutions that were recipients of
funds from the award returned $275,610.36 they had not spent.
Texas Energy Center (TxEC)
(amended)
$3,600,000 August 14,
2013
Completed
early due
to surplus
jobs
created
0 direct
jobs and
1,500
other jobs
$2,400 1,100 1,894
$3,600,000
February 1, 2004
Note: The award agreement required the recipient to be significantly responsible for creating 1,500 jobs with other companies that provide an
"Opportunity Certificate" describing the proposed TxEC-related project expected to create jobs, the estimated date of the job creation, the
number of jobs expected to be created, the number of jobs expected to qualify as jobs under the agreement, and the manner in which TxEC
could be deemed significantly responsible for creating such jobs. Of the 1,500 required jobs, 100 were required to be located at TxEC prior to
August 31, 2005. All 1,500 required jobs were indirect jobs. In addition, an amendment that was effective on December 1, 2005, gave TxEC
job-creation credit for salaries that exceeded the salaries that the award agreement required. The numbers of jobs required and created
presented above are from the final compliance verification the Office performed during 2013 for the reporting period ending January 1, 2013.
T-Mobile USA, Inc. $2,150,000 January 30,
2012
Completed
early due
to surplus
jobs
created
855 direct
jobs and 0
other jobs
$2,515 855 803
$2,150,000
November 8, 2005
Note: T-Mobile USA, Inc. used surplus job credits that it received between 2006 and 2010 to fulfill its job-creation requirements and terminate
its award agreement early. The numbers of jobs required and created presented above are from the final compliance verification the Office
performed during 2012 for the reporting period ending December 31, 2011.
Baylor College of Medicine $2,000,000 October 30,
2009
Completed Not
applicable
Not
applicable
$2,000,000
March 1, 2004
Note: The award agreement did not have a jobs requirement; however, it required the Baylor College of Medicine to lead the research on a
project related to genome sequencing.
Maxim Integrated Products
(San Antonio)
$1,500,000 January 31,
2012
Completed 500 direct
jobs and 0
other jobs
$3,000 500 470
$1,500,000
December 22, 2004
Note: The final compliance report Maxim Integrated Products submitted and the final compliance verification worksheet the Office completed
were for the period ending December 31, 2011. The information presented above reflects that reporting period. Maxim Integrated Products
used surplus job credits to fulfill its job-creation requirements for 2011 and, as a result, it did not owe a clawback penalty.

September 2014
Page 75
COMPLETED PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Raytheon Company $1,000,000 January 31,
2012
jobs and 0
other jobs
$5,000 200 106
$1,000,000
August 31, 2005
Note: The final compliance report Raytheon Company submitted and the final compliance verification worksheet the Office completed were for
the period ending December 31, 2011. The information presented above reflects that reporting period. Raytheon Company used surplus job
credits to fulfill its job-creation requirements for 2011 and, as a result, it did not owe a clawback penalty.
INEOS USA, LLC $750,000 January 31,
2010
jobs and 0
other jobs
$5,000 150 150
$750,000
April 30, 2005
Note: The original recipient was O&D USA LLC, a stand-alone entity established by BP America, Inc. The award agreement expired in 2010, and
the numbers of jobs required and created are from the final compliance verification the Office performed for 2009.
United States Bowling
Congress, Inc.
$305,000 January 31,
2014
jobs and
15 other
jobs
$3,486 160 direct and
15 other
120 direct and
33 other
$610,000
May 28, 2009
Note: The award agreement specified that the required 15 other jobs must be with the Bowling Proprietors' Association of America, Inc. and
with the International Bowling Museum and Hall of Fame, Inc. As of the reporting period ending December 31, 2012, the United States Bowling
Congress, Inc. had paid four clawback penalties totaling $131,572.
Nationstar Mortgage, LLC $560,000 January 31,
2014
jobs and 0
other jobs
$1,400 400 1,558
$560,000
July 1, 2010
Sanderson Farms, Inc.

$500,000 January 31,
2010
Completed 1,312
direct jobs
and 0
other jobs
$381 1,312 1,112
$500,000
March 10, 2006
Note: The award agreement required 102 direct salaried positions and 1,210 direct non-salaried positions for a total of 1,312 jobs. The award
agreement expired in 2010, and the numbers of jobs required and created presented above are from the final compliance verification the
Office performed for the period ending December 31, 2009. As of that reporting, Sanderson Farms, Inc. had paid two clawback penalties
totaling $81,891.
Cabela's Retail TX, L.P. $400,000 March 1, 2009 Completed 400 direct
jobs and 0
other jobs
$1,000 400 241
$400,000
November 10, 2004
Note: The award agreement expired in 2009, and the numbers of jobs required and created presented above are from the final compliance
report Cabelas Retail TX, L.P. submitted for the period ending December 31, 2008. As of that reporting period, Cabelas Retail TX, L.P. had
paid four clawback penalties totaling $177,288.

September 2014
Page 76
Table 7 summarizes all active projects that received Texas Enterprise Fund
awards between September 1, 2003, and August 31, 2013. Table 8 lists each
active project that received Texas Enterprise Fund awards between September
1, 2003, and August 31, 2013.
Table 7
SUMMARY OF ACTIVE PROJECTS
Total Number of
Total Disbursements
as of
December 31, 2013
Total
Number of
New Direct
Jobs
and
Other Jobs
Required
Average Cost
per
New Direct
Job or Other
Job
December 31, 2012,
Compliance Verification or the
Award Termination Date
Number of
New Jobs
Required
Number of New
Jobs the Office
Counted
80 $421,596,696 $338,319,696 47,009
direct jobs
and 9,370
other jobs
a

$7,478
b

30,408 40,985
a
Based on the terms of the award agreements, 9,169 of the 47,009 direct jobs also could have been indirect jobs or other jobs.
b
other jobs.

Table 8
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Board of Regents of the
University of Texas System
(for the benefit of the
University of Texas at Dallas)
$50,000,000 Not specified Active Not
applicable
Not
applicable
$50,000,000
March 1, 2004
Note: The award agreement does not have a termination date or a jobs requirement; however, it required the University of Texas System and
the University of Texas at Dallas to use their best efforts to achieve a top 50 ranking for the Erik Jonsson School of Engineering and Computer
Science by March 1, 2009. It also required the University of Texas System to substantially complete a new research building by December 31,
2006. In addition, this project had a related award agreement with Texas Instruments dated March 1, 2004. The award agreement with Texas
Instruments did not have a jobs requirement and did not provide funds to Texas Instruments Incorporated; instead, it acknowledged that Texas
Instruments would invest approximately $300,000,000 in a research, development, and manufacturing facility and that the University of Texas
at Dallas would receive $50,000,000.

September 2014
Page 77
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Sematech, Inc. $40,000,000 May 31, 2015 Active 0 direct
jobs and
4,000
other jobs
$10,000 0 0
$40,000,000
January 1, 2004
Note: The award agreement requires the recipient to remain in Texas for seven years from the effective date of the agreement and to
maintain an average of at least 400 jobs at Sematech or the Texas Advanced Materials Research Center (AMRC), Sematech and ARMC
subsidiaries, or non-member affiliates for that period. It also requires the creation of 4,000 new indirect employment positions within Texas at
high technology employers other than Sematech, which Sematech was significantly responsible for creating, by December 31, 2014.
The Texas Institute for Genomic Medicine (TIGM) project had two components:
Lexicon Genetics
Incorporated
(amended)
$35,000,000 January 31,
2028
Active 1,616
direct jobs
and 0
other jobs
$21,658 125 0
$35,000,000
July 15, 2005
Note: Direct jobs presented above include jobs at businesses in which Lexicon Genetics Incorporated has a 50 percent ownership interest.
Prior to an amendment to the award agreement (drafted by Lexicon Pharmaceuticals and signed by the Office on April 30, 2008), Lexicon
Genetics Incorporated was responsible for a larger portion of the total job-creation requirement between 2007 and 2015. Lexicon Genetics
Incorporated paid one clawback penalty of $16,905 associated with its job-creation requirement for 2006.
Texas A&M University System
(amended)
$15,000,000 January 31,
2028
Active 0 direct
jobs and
3,384
other jobs
$4,433 1,676 0
$15,000,000
July 15, 2005
Note: Other jobs include jobs with TIGM and TIGM members, jobs with employers in the biotechnology or pharmaceutical industries, and jobs
that TIGM or TIGM members are significantly responsible for creating through efforts specifically targeted at attracting or creating
biotechnology and pharmaceutical industry-related jobs in Texas. Prior to an amendment to the award agreement (drafted by Lexicon
Pharmaceuticals and signed by the Office on April 30, 2008), the Texas A&M University System was responsible for a smaller portion of the
total job-creation requirements between 2007 and 2015. As of the reporting period ending on December 31, 2012, Texas A&M University
System reported a net decrease of 288 in jobs created in the industry sectors it uses to calculate indirect job growth, reported as 0 above.
Triumph Aerostructures, LLC
(amended)
$35,000,000 December 31,
2019
Active 3,000
direct or
other jobs
$11,667 3,000 367
$35,000,000
February 26, 2004
Note: The original recipient was Vought Aircraft Industries, Inc., which Triumph Aerostructures, LLC acquired in 2010. New jobs created can be
either direct or contract-labor positions. An amendment to the award agreement, effective on December 22, 2009, gave Vought Aircraft
Industries, Inc. credit for salaries that exceeded the salaries that the award agreement required. Another amendment, effective on December
31, 2009 and was signed on July 6, 2010, reduced the total jobs required to be maintained from 6,000 to 5,958.
As of the reporting period ending on December 31, 2012, Triumph Aerostructures had paid four clawback penalties totaling $6,935,000.

September 2014
Page 78
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Board of Regents of the
University of Texas System
(for the benefit of University
of Texas Health Science
Center and the University of
Texas M.D. Anderson Cancer
Center)
$25,000,000 July 29, 2025 Active 2,252
direct jobs
and 0
other jobs
$11,101 2,252 3,644
$25,000,000
July 29, 2005
Rackspace US, Inc.
(amended)
$8,500,000 January 31,
2022
Active 4,000
direct jobs
and 0
other jobs
$5,500 1,225 2,041
$22,000,000
August 1, 2007
Note: Effective on July 24, 2009, an amendment to the award agreement (1) provided several funding options to Rackspace depending on the
number of jobs it created and (2) extended the job-creation schedule to allow Rackspace additional time to create the required jobs. That
amendment also extended the termination date three years. The numbers presented above are the highest numbers specified in amended
award agreement. An additional $5,500,000 disbursement for this award was made on March 13, 2014, and is not reflected in the total amount
disbursed presented above.
Apple Inc. $5,250,000 January 31,
2028
Active 3,635
direct or
other jobs
$5,777 Not yet
required
Not yet
required
$21,000,000
March 5, 2012
Note: The jobs requirement in the award agreement becomes effective on December 31, 2016. New jobs can be either direct or contract-labor
jobs at Apples new facility in Texas.
JPMorgan Chase Bank & Co. $15,000,000 January 31,
2016
Active 4,200
direct jobs
and 0
other jobs
$3,571 4,200 14,393
$15,000,000
August 31, 2005
Note: The original recipient was Washington Mutual Bank, which JPMorgan Chase Bank & Co. acquired in 2008.
Chevron U.S.A., Inc. $3,000,000 January 31,
2023
Active 1,752
direct jobs
and 0
other jobs
$6,849 Not yet
required
Not yet
required
$12,000,000
June 25, 2013
Note: The jobs requirement in the award agreement became effective on December 31, 2013.

September 2014
Page 79
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Samsung Austin
Semiconductor, LLC
$10,800,000 January 31,
2020
Active 600 direct
jobs and
300 other
jobs
$12,000 1,895 2,358
$10,800,000
October 1, 2005
Note: Three hundred of the required other jobs can be can be full-time contract jobs in Texas with Samsung Austin Semiconductor, LLC. The
award agreement required Samsung Austin Semiconductor LLC to maintain a total of 1,895 jobs at its facilities in Austin, Texas as of December
31, 2012, including 900 positions that it was required to create prior to December 31, 2009. The jobs the Office counted that are presented
above include both the maintained and new positions.
Caterpillar, Inc. (Seguin) $2,250,000 January 31,
2023
Active 1,714
direct or
other jobs
$4,959 1,579 1,135
$8,500,000
August 18, 2009
Note: New jobs can be either direct or contract-labor jobs in Texas directly or indirectly supporting a new engine manufacturing facility in
Seguin. As of the reporting period ending on December 31, 2012, Caterpillar, Inc. had paid two clawback penalties totaling $398,991.
Visa U.S.A., Inc. $1,975,000 March 31,
2023
Active 794 direct
jobs and 0
other jobs
$9,950 Not yet
required
Not yet
required
$7,900,000
January 1, 2013
Hilmar Cheese Company $7,500,000 January 31,
2021
Active 376 direct
jobs and
1,586
other jobs
$3,823 1,407 979
$7,500,000
November 30, 2005
Note: The award agreement allows 1,586 of the required jobs to be with other businesses and cooperatives that supply milk to Hilmar Cheese
Company. As of the reporting period that ended on December 31, 2012, Hilmar Cheese Company had paid seven clawback penalties totaling
$1,778,140.
Scott & White Memorial
Hospital
$7,500,000 January 31,
2023
Active 1,485
direct jobs
and 0
other jobs
$5,051 662 2,899
$7,500,000
September 1, 2007
Tyson Fresh Meats, Inc. $7,000,000 January 31,
2023
Active 1,600
direct jobs
and 0
other jobs
$4,375 1,600 1,451
$7,000,000
April 11, 2005
Note: As of the reporting period ending on December 31, 2012, Tyson Fresh Meats, Inc. had paid four clawback penalties totaling $434,746.

September 2014
Page 80
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
MiniMed Distribution Corp. $6,000,000 May 31, 2029 Active 1,384
direct jobs
and 0
other jobs
$4,335 1,106 815
$6,000,000
June 1, 2009
Note: MiniMed Distribution Corp. is required to submit its annual compliance report on April 30 each year from May 2010 until May 2029. The
information reported above reflects MiniMed Distribution Corp.s new job requirements and compliance report for the year ending April 30,
2013. As of the reporting period ending on April 30, 2012, MiniMed Distribution Corp. had paid one clawback penalty of $45,448.
Maverick Tube Corporation $0 January 31,
2026
Active 600 direct
jobs and 0
other jobs
$10,000 Not yet
required
Not yet
required
$6,000,000
February 14, 2013
Note: The jobs requirement in the award agreement becomes effective on December 31, 2015.
Citgo Petroleum Corporation $5,000,000 February 28,
2015
Active 820 direct
or other
jobs
$6,098 700 803
$5,000,000
December 6, 2004
Note: New jobs can be either direct or contract-labor jobs. Of those jobs, 700 must be at Citgo Petroleum Corporations new headquarters in
Houston, Texas and 120 must be at its expanded refinery in Corpus Christi, Texas. (The requirement to create 120 jobs in Corpus Christi, Texas
became effective on December 31, 2013.)
Fidelity Global Brokerage
Group, Inc.
(amended)
$8,500,000 January 31,
2018
Active 850 direct
jobs and 0
other jobs
$5,294 400 1,205
$4,500,000
February 5, 2007
Note: Fidelity Global Brokerage Group, Inc. repaid $4,000,000 when an amendment to the award agreement, which was effective on December
31, 2009, decreased the award amount from $8,500,000 to $4,500,000, and reduced the required jobs from 1,535 direct jobs to 850 direct
jobs. As of the reporting period ending on December 31, 2012, Fidelity Global Brokerage Group, Inc. had paid one clawback penalty of
$484,068.
Comerica Incorporated
(amended)
$3,500,000 January 31,
2018
Active 200 direct
jobs and 0
other jobs
$17,500 200 254
$3,500,000
August 29, 2007
Note: An amendment to the award agreement that was effective December 28, 2012, clarified that certain jobs that relocated from outside of
Texas to Comerica Incorporateds new headquarters in Dallas prior to August 29, 2007, were eligible to count as employment positions under
the terms of the award agreement.
PETCO Animal Supplies, Inc. $1,050,000 January 31,
2022
Active 400 direct
jobs and 0
other jobs
$7,750 300 255
$3,100,000
November 1, 2010
Note: As of the reporting period ending December 31, 2012, PETCO Animal Supplies, Inc. had paid one clawback penalty of $35,148. An
additional $1,050,000 disbursement for this award was made on January 6, 2014, and is not included in the total amount disbursed above.

September 2014
Page 81
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
ADP, Inc. $3,000,000 January 31,
2015
Active 1,028
direct jobs
and 0
other jobs
$2,918 1,028 1,111
$3,000,000
May 31, 2006
G-Con, LLC $3,000,000 January 31,
2025
Active 408 direct
jobs and 0
other jobs
$7,353 88 29
$3,000,000
May 1, 2010
Note: As of the reporting period ending December 31, 2012, G-Con, LLC had paid two clawback penalties totaling $146,064.
eBay Inc. $1,400,000 March 31,
2019
Active 1,050
direct jobs
and 0
other jobs
$2,667 250 247
$2,800,000
March 30, 2011
Note: As of the reporting period ending December 31, 2012, eBay, Inc. had paid one clawback penalty of $3,078.
Zah Group, Inc.
(amended)
$1,000,000 January 31,
2024
Active 585 direct
jobs and 0
other jobs
$4,786 150 164
$2,800,000
October 1, 2010
Note: This award agreement was amended effective December 30, 2013, to allow Zah Group, Inc. additional time to create the required jobs.
Huntsman Corporation
(amended)
$2,750,000 January 31,
2017
Active 285 direct
jobs and 0
other jobs
$9,649 285 401
$2,750,000
August 8, 2005
Note: This award agreement was amended effective November 1, 2010, to reduce the number of jobs required from 326 to 285, to reduce the
clawback amount per job, and to extend the award period by one year. As of the reporting period ending December 31, 2012, Huntsman
Corporation had paid one clawback penalty of $106,811.
ADP, Inc. $0 January 31,
2024
Active 585 direct
jobs and 0
other jobs
$4,103 Not yet
required
Not yet
required
$2,400,000
December 10, 2012
CH2M Hill, Inc. $1,150,000 January 31,
2021
Active 285 direct
jobs and 0
other jobs
$8,070 100 94
$2,300,000
January 2, 2012
Note: As of the reporting period ending December 31, 2012, CH2M Hill, Inc. had paid one clawback penalty of $9,330.

September 2014
Page 82
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
General Electric Company
(amended)
$1,300,000 January 31,
2023
Active 330 direct
jobs and 0
other jobs
$6,364 280 260
$2,100,000
May 12, 2011
Note: The original award agreement was amended effective December 28, 2012, to reduce the award amount from $4,200,000 to $2,100,000
and to decrease the total new jobs required from 775 to 330. A prior amendment, effective December 16, 2011, also clarified that new jobs
required must be with GE Transportation and GE Engine Services, LLC at the redeveloped locomotive manufacturing facility in Fort Worth,
Texas. As of the reporting period ending on December 31, 2012, General Electric Company had paid two clawback penalties totaling $82,231.
GGNSC Holdings, LLC (Golden
Living)
(amended)
$1,400,000 January 31,
2023
Active 100 direct
jobs and 0
other jobs
$21,000 75 97
$2,100,000
February 16, 2011
Note: An amendment to the award agreement that was effective November 28, 2012, allowed Golden Living to include jobs with its subsidiary
and affiliate companies in its count of jobs created. As of the reporting period ending on December 31, 2012, Golden Living had paid one
clawback penalty of $3,522.
Motiva Enterprises, LLC
(amended)
$2,000,000 January 31,
2016
Active 200 direct
jobs and
100 other
jobs
$6,667 300 524
$2,000,000
May 25, 2006
Note: An amendment to the award agreement, effective on December 1, 2009, allowed Motiva Enterprises, LLC to report up to 100 indirect
positions as required jobs and changed the job-creation schedule to allow Motiva Enterprises, LLC additional time to create the required jobs.
The original award agreement allowed Motiva Enterprises, LLC to report up to 50 indirect positions. A second amendment, effective on
December 1, 2013, clarified that indirect positions were positions at Motivas Port Arthur, Texas refinery that were with Motivas contractors
or subcontractors.
Torchmark Corporation $2,000,000 January 31,
2016
Active 500 direct
jobs and 0
other jobs
$4,000 500 521
$2,000,000
March 10, 2006
HID Global Corporation $500,000 January 31,
2025
Active 239 direct
jobs and 0
other jobs
$7,950 Not yet
required
Not yet
required
$1,900,000
August 31, 2012

September 2014
Page 83
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
CGI Technologies and
Solutions, Inc.
(amended)
$1,200,000 January 31,
2023
Active 350 direct
jobs and 0
other jobs
$5,143 125 125
$1,800,000
October 10, 2011
Note: An amendment to the award agreement was effective on November 30, 2012, and allowed CGI Technologies and Solutions Inc. to include
jobs created at three subsidiary and affiliate companies within the number of jobs it created.
The James Skinner Co. $0 January 31,
2023
Active 393 direct
jobs and 0
other jobs
$4,580 Not yet
required
Not yet
required
$1,800,000
December 19, 2012
Santana Textiles, LLC
(amended)
$800,000 January 31,
2019
Active 800 direct
jobs and 0
other jobs
$2,063 359 38
$1,650,000
August 4, 2008
Note: An amendment to the award agreement, effective June 15, 2010, postponed the second disbursement of funds to Santana Textiles, LLC,
and changed the job-creation schedule to allow Santana Textiles, LLC additional time to create the required jobs. As of the reporting period
ending December 31, 2012, Santana Textiles, LLC had paid four clawback penalties totaling $280,370.
Borusan Mannesmann Pipe
U.S., Inc.
$0 January 31,
2023
Active 250 direct
jobs and 0
other jobs
$6,500 Not yet
required
Not yet
required
$1,625,000
March 11, 2013
Health Management Systems,
Inc.
(amended)
$1,600,000 January 31,
2019
Active 350 direct
jobs and 0
other jobs
$4,571 200 465
$1,600,000
August 1, 2010
Note: An amendment to the award agreement, effective on December 31, 2010, and dated on September 15, 2011, allowed Health
Management Systems, Inc. to include jobs created at one subsidiary company within the jobs it had created.
Becton, Dickinson & Company $750,000 January 22,
2022
Active 296
direct jobs
and 0
other jobs
$5,270 224 226
$1,560,000
August 12, 2010
Note: An additional $375,000 disbursement was made on March 13, 2014, and is not reflected in the total amount disbursed above.

September 2014
Page 84
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Ruiz Food Products, Inc. $1,500,000 January 31,
2018
Active 423 direct
jobs and 0
other jobs
$3,546 423 679
$1,500,000
May 13, 2005
Hanger, Inc. $1,500,000 March 31,
2018
Active 236 direct
jobs and 0
other jobs
$6,356 176 261
$1,500,000
January 8, 2010
The Dow Chemical Company
(Project 2)
$500,000 January 31,
2023
Active 96 direct
jobs and 0
other jobs
$15,625 Not yet
required
Not yet
required
$1,500,000
July 19, 2013
Facebook, Inc. $1,000,000 January 31,
2022
Active 200 direct
jobs and 0
other jobs
$7,000 140 183
$1,400,000
February 24, 2010
Centene Corporation $460,500 March 31,
2023
Active 307 direct
jobs and 0
other jobs
$4,500 42 13
$1,381,500
May 2, 2012
Note: As of the reporting period ending on December 31, 2012, Centene Corporation had paid one clawback penalty of $23,751.
Layne Christensen Company $450,000 January 31,
2019
Active 210 direct
jobs and 0
other jobs
$6,190 Not yet
required
Not yet
required
$1,300,000
December 5, 2012
Consolidated Electrical
Distributors, Inc.
(amended)
$1,000,000 January 31,
2023
Active 120 direct
jobs and 0
other jobs
$10,000 80 85
$1,200,000
October 1, 2010
Note: An amendment to the award agreement, effective on May 1, 2013, allowed Consolidated Electrical Distributors, Inc. to include jobs
created at one affiliate company within jobs it had created.

September 2014
Page 85
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
TD Ameritrade Holding
Corporation
$600,000 January 31,
2017
Active 490 direct
jobs and 0
other jobs
$2,449 250 40
$1,200,000
March 31, 2011
Note: As of the reporting period ending December 31, 2012, TD Ameritrade Holding Corporation had paid two clawback penalties totaling
$210,405.
Continental Automotive
Systems, Inc.
(amended)
$0 January 31,
2027
Active 300 direct
jobs and 0
other jobs
$4,000 45 0
$1,200,000
January 27, 2012
Note: An amendment to the award agreement, effective on December 31, 2013, changed the job-creation schedule to allow Continental
Automotive Systems, Inc. additional time to create the required jobs. That amendment also extended the term of the award agreement by
three years. (That amendment also removed the requirement to create 45 jobs by December 31, 2012, and postponed future job-creation
requirements until December 31, 2015. The job-creation numbers reported above are based on the Offices compliance verification for the
period ending December 31, 2012.)
Caterpillar, Inc. (Victoria)
(amended)
$1,175,000 March 1, 2022 Active 238 direct
jobs and 0
other jobs
$4,937 177 315
$1,175,000
February 5, 2011
Note: An amendment to the award agreement, effective on December 28, 2012, allowed Caterpillar, Inc. to include jobs created at specified
affiliate companies within jobs it had created.
Frito-Lay North America, Inc. $1,125,000 January 31,
2016
Active 125 direct
jobs and 0
other jobs
$9,000 125 156
$1,125,000
December 1, 2009
Allstate Insurance Company
(amended)
$550,000 January 31,
2020
Active 200 direct
jobs and 0
other jobs
$5,500 200 191
$1,100,000
February 1, 2010
Note: An amendment to the award agreement, effective on December 30, 2013, allowed Allstate Insurance Company to include jobs created at
one subsidiary company within jobs it had created. As of the reporting period ending December 31, 2012, Allstate Insurance Company had paid
two clawback penalties totaling $67,550.
TEKsystems Global Services,
LLC
$400,000 January 31,
2021
Active 500 direct
jobs and 0
other jobs
$2,200 Not yet
required
Not yet
required
$1,100,000
December 13, 2012

September 2014
Page 86
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Authentix, Inc.
(amended)
$750,000 January 31,
2018
Active 120 direct
jobs and 0
other jobs
$8,333 103 36
$1,000,000
October 25, 2007
Note: An amendment to the award agreement, effective December 18, 2009, postponed the second disbursement of funds to Authentix, Inc.,
and changed the job-creation schedule to allow Authentix, Inc. additional time to create the required jobs. As of the reporting period ending
on December 31, 2012, Authentix, Inc. had paid five clawback penalties totaling $416,206.
LegalZoom.com Texas, LLC
(amended)
$500,000 January 31,
2018
Active 465 direct
jobs and 0
other jobs
$2,151 192 207
$1,000,000
February 1, 2010
Note: An amendment to the award agreement, effective on October 29, 2013, allowed LegalZoom.com Texas, LLC to include jobs created at
one affiliate company. As of the reporting period that ended on December 31, 2012, LegalZoom.com Texas, LLC had paid two clawback
penalties totaling $48,545.
An additional $500,000 disbursement for this award was made on March 18, 2014, and is not reflected in the total amount disbursed above.
The Dow Chemical Company
(Project 1)
$500,000 January 31,
2024
Active 150 direct
jobs and 0
other jobs
$6,667 Not yet
required
Not yet
required
$1,000,000
April 30, 2012
Emerson Process Management
Valve Automation, Inc.
$400,000 January 31,
2023
Active 126 direct
jobs and 0
other jobs
$7,937 Not yet
required
Not yet
required
$1,000,000
January 1, 2013
Ascend Performance Materials
Texas, Inc.
$0 January 31,
2021
Active 100 direct
jobs and 0
other jobs
$10,000 Not yet
required
Not yet
required
$1,000,000
February 22, 2013
Note: The jobs requirement becomes effective December 31, 2014. The award agreement was signed in February 2014, but the Office
backdated the effective date of the award agreement to February 2013. An initial $350,000 disbursement for this award was made on March
11, 2014, and is not reflected in the amount disbursed above.
Kuraray America, Inc. $320,000 January 31,
2022
Active 107 direct
jobs and 0
other jobs
$9,019 10 14
$965,000
May 24, 2012

September 2014
Page 87
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Pactiv, LLC $0 January 31,
2023
Active 200 direct
jobs and 0
other jobs
$4,650 Not yet
required
Not yet
required
$930,000
October 1, 2012
Jyoti Americas, LLC $865,000 January 31,
2023
Active 157 direct
jobs and 0
other jobs
$5,510 157 160
$865,000
October 28, 2010
Note: Jyoti Americas, LLC was required to create 157 jobs by March 31, 2012. It reported that it had met that requirement in the compliance
report it submitted for the period ending December 31, 2012.
Kohl's Department Stores, Inc.
(Dallas)
$288,000 January 31,
2023
Active 144 direct
jobs and 0
other jobs
$6,000 Not yet
required
Not yet
required
$864,000
June 11, 2013
Rockwell Collins, Inc.
(amended)
$839,196 February 28,
2017
Active 105 direct
jobs and 0
other jobs
$7,992 105 0
$839,196
November 13, 2007
Note: An amendment to the award agreement, effective on March 17, 2008, reduced the threshold of jobs that existed at the time that the
original agreement was signed. Another amendment, effective on December 1, 2008, reduced the original award amount from $1,678,392 to
$839,136 and reduced the total jobs required in the agreement from 334 to 105. As of the reporting period ending December 31, 2012,
Rockwell Collins, Inc. had paid two clawback penalties totaling $283,176.
Forum Energy Services, Inc.
(amended)
$800,000 January 31,
2018
Active 200 direct
jobs and 0
other jobs
$4,000 200 139
$800,000
October 29, 2007
Note: The original recipient of this award was Allied Production Solutions, LP, which merged into Forum US, Inc. in 2011 and subsequently
assigned its rights and responsibilities under the agreement to Forum Energy Services. An amendment to the award agreement, effective on
August 18, 2009, changed the job-creation schedule to allow the recipient additional time to create the required jobs. As of the reporting
period ending on December 31, 2012, Forum Energy Services, Inc. had paid three clawback penalties totaling $94,520.
Fritz Industries, Inc. $0 January 31,
2020
Active 250 direct
jobs and 0
other jobs
$3,200 Not yet
required
Not yet
required
$800,000
January 1, 2013

September 2014
Page 88
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Kohl's Department Stores, Inc.
(San Antonio)
$750,000 January 31,
2020
Active 150 direct
jobs and 0
other jobs
$5,000 150 204
$750,000
April 9, 2010
Vendor Resource
Management, Inc.
$750,000 January 31,
2018
Active 275 direct
jobs and 0
other jobs
$2,727 275 121
$750,000
September 24, 2009
Note: As of the reporting period ending December 31, 2012, Vendor Resource Management, Inc. had paid two clawback penalties totaling
$151,188.
Tapco International, Inc. $325,000 January 31,
2022
Active 100 direct
jobs and 0
other jobs
$6,750 10 10
$675,000
July 5, 2010
Flexsteel Pipeline
Technologies, Inc.
$650,000 January 31,
2019
Active 130 direct
jobs and 0
other jobs
$5,000 83 133
$650,000
August 1, 2011
Note: As of the reporting period ending on December 31, 2012, Flexsteel Pipeline Technologies, Inc. had paid one clawback penalty of $2,420.
Cardiovascular Systems, Inc. $400,000 January 31,
2021
Active 100 direct
jobs and 0
other jobs
$6,000 55 28
$600,000
June 3, 2010
Note: As of the reporting period ending December 31, 2012, Cardiovascular System, Inc. had paid two clawback penalties totaling $60,648.
Associated Hygienic Products,
LLC
$520,000 January 31,
2019
Active 115 direct
jobs and 0
other jobs
$4,522 115 232
$520,000
December 10, 2008
The Advisory Board Company $500,000 January 31,
2017
Active 239 direct
jobs and 0
other jobs
$2,092 109 109
$500,000
August 5, 2011
Newly Weds Foods, Inc. $450,000 January 31,
2018
Active 115 direct
jobs and 0
other jobs
$3,913 115 123
$450,000
March 10, 2006

September 2014
Page 89
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
CK Technologies, LLC $150,000 January 31,
2022
Active 121 direct
jobs and 0
other jobs
$3,512 92 39
$425,000
October 18, 2010
Note: As of the reporting period ending December 31, 2012, CK Technologies, LLC had paid one clawback penalty of $28,752.
Ferris Mfg. Corp.
(amended)
$250,000 January 31,
2022
Active 80 direct
jobs and 0
other jobs
$5,250 62 50
$420,000
October 18, 2011
Note: An amendment to the award agreement, effective on November 15, 2013, reduced the original award amount from $450,000 to $420,000
and reduced the total jobs required in the agreement from 100 to 80. As of the reporting period ending December 31, 2012, Ferris Mfg. Corp.
had paid one clawback penalty of $12,480.
Koyo Steering Systems of
North America, Inc.
$333,000 January 31,
2016
Active 200 direct
jobs and 0
other jobs
$1,665 200 220
$333,000
February 14, 2005
Note: The job-creation information presented above is for the period ending October 31, 2012, as established in the job requirements in the
award agreement.
Lee Container Corporation
(amended)
$300,000 January 31,
2025
Active 105 direct
jobs and 0
other jobs
$2,857 75 45
$300,000
April 4, 2005
Note: An amendment to the award agreement, effective on December 30, 2009, changed the job-creation schedule to allow Lee Container
Corporation additional time to create the required jobs. As of the reporting period ending December 31, 2012, Lee Container Corporation had
paid five clawback penalties totaling $55,048.
Office Depot, Inc. $150,000 January 31,
2016
Active 203 direct
jobs and 0
other jobs
$1,478 161 148
$300,000
July 27, 2011
Note: Office Depot, Inc. used surplus job credits to fulfill its job-creation requirements for 2012 and, as a result, it did not owe a clawback
penalty.
Superior Essex
Communication L.P.
$250,000 January 31,
2020
Active 50 direct
jobs and 0
other jobs
$5,000 50 25
$250,000
June 28, 2005
Note: As of the reporting period ending December 31, 2012, Superior Essex Communication L.P. had paid three clawback penalties totaling
$14,231; however, the Office refunded that $14,231 to Superior Essex Communication L.P. in August 2013.

September 2014
Page 90
ACTIVE PROJECTS
Recipient
Award Amount
Award Start Date
Amount
Disbursed as
of December
31, 2013
Expected
Award End
Date
or
Actual Award
Terminated
Date
Award
Status
Total
Number
of New
Direct
Jobs and
Other
Jobs
Required
Average
Cost per
New Direct
Job or
Other Job
December 31, 2012,
Number of
New Jobs
Required
Number
of New Jobs
the Office
Counted
Grifols, Inc.
(amended)
$250,000 January 31,
2017
Active 90 direct
jobs and 0
other jobs
$2,778 90 69
$250,000
October 15, 2009
Note: An amendment to the award agreement, effective December 28, 2012, reduced the award amount from $500,000 to $250,000, and
reduced the total jobs required from 190 to 90. As of the reporting period ending December 31, 2012, Grifols, Inc. had paid three clawback
penalties totaling $73,782.
3M Company $94,000 January 31,
2018
Active 55 direct
jobs and 0
other jobs
$3,527 50 49
$194,000
May 1, 2010
Note: As of the reporting period ending December 31, 2012, 3M Company had paid two clawback penalties totaling $7,392.

September 2014
Page 91
Appendix 3
Incentive Fund Best Practices
Auditors identified best practices that may be applicable to the Texas
Enterprise Fund based on information from 10 other states, 4 local
governments in Texas
15
, the State of Texas Contract Management Guide, and
other best practice publications. Selected best practices are summarized
below.
Best Practices Related to Awarding Processes
Require applicants to disclose potential conflicts of interest in signed
statements when they submit applications.
Use a formal, repeatable process, such as a scoring matrix, to evaluate
whether awards should be offered to applicants.
Implement guidelines for determining award amounts, such as a maximum
amount per job created, and apply those guidelines to all awards.
Enhance transparency in the evaluation process by making decisions to
grant awards by a vote made in a public forum, and provide an opportunity
for public comment prior to that vote.
Best Practices Related to Developing Award Agreements
Specify allowable costs, unallowable costs, or both in award agreements.
Structure award agreements so that funds are disbursed to recipients only
after verifying that recipients have met award agreement requirements.
Define full-time jobs and part-time jobs in award agreements.
Best Practices Related to Monitoring Recipients Compliance with Award
Agreements
Develop and implement a standard template on which recipients are
required to report annual job-creation information.
Conduct annual site visits or conduct site visits on a rotating schedule at
award recipients. As part of the testing during those site visits, verify
recipients job-creation information through examination of payroll stubs
and employment files.

15
All four of those local governments had provided local incentives to recipients that had also received Texas Enterprise Fund
awards.

September 2014
Page 92
Appendix 4
Excerpts from Texas Government Code, Chapter 481
The 78th Legislature established the Texas Enterprise Fund in 2003 as a
dedicated account of General Revenue to be used for economic development,
infrastructure development, community development, job training programs,
and business incentives.
The legislation for the Texas Enterprise Fund was codified in Texas
Government Code, Chapter 481, which was subsequently amended in 2005,
2009, and 2011. Below are excerpts from Texas Government Code, Chapter
481, as of September 1, 2013, that are directly relevant to the Texas Enterprise
Fund.
Sec. 481.078. TEXAS ENTERPRISE FUND. (a) The Texas
Enterprise Fund is a dedicated account in the general revenue fund.
(b) The following amounts shall be deposited in the fund:
(1) any amounts appropriated by the legislature for the fund
for purposes described by this section;
(2) interest earned on the investment of money in the fund;
and
(3) gifts, grants, and other donations received for the fund.
(c) Except as provided by Subsections (d) and (d-1), the fund may be
used only for economic development, infrastructure development, community
development, job training programs, and business incentives.
(d) The fund may be temporarily used by the comptroller for cash
management purposes.
(d-1) The fund may be used for the Texas homeless housing and
services program administered by the Texas Department of Housing and
Community Affairs under Section 2306.2585. The governor may transfer
appropriations from the fund to the Texas Department of Housing and
Community Affairs to fund the Texas homeless housing and services
program. Subsections (e-1), (f), (f-1), (f-2), (g), (h), (h-1), (i), and (j) and
Section 481.080 do not apply to a grant awarded for a purpose specified by
this subsection.
(e) The administration of the fund is considered to be a trusteed
program within the office of the governor. The governor may negotiate on
behalf of the state regarding awarding, by grant, money appropriated from the
fund. The governor may award money appropriated from the fund only with

September 2014
Page 93
the prior approval of the lieutenant governor and speaker of the house of
representatives. For purposes of this subsection, an award of money
appropriated from the fund is considered disapproved by the lieutenant
governor or speaker of the house of representatives if that officer does not
approve the proposal to award the grant before the 91st day after the date of
receipt of the proposal from the governor. The lieutenant governor or the
speaker of the house of representatives may extend the review deadline
applicable to that officer for an additional 14 days by submitting a written
notice to that effect to the governor before the expiration of the initial review
period.
(e-1) To be eligible to receive a grant under this section, the entity
must:
(1) be in good standing under the laws of the state in which
the entity was formed or organized, as evidenced by a certificate issued by the
secretary of state or the state official having custody of the records pertaining
to entities or other organizations formed under the laws of that state; and
(2) owe no delinquent taxes to a taxing unit of this state.
(f) Before awarding a grant under this section, the governor shall
enter into a written agreement with the entity to be awarded the grant money
specifying that:
(1) if the governor finds that the grant recipient has not met
each of the performance targets specified in the agreement as of a date certain
provided in the agreement:
(A) the recipient shall repay the grant and any related
interest to the state at the agreed rate and on the agreed terms;
(B) the governor will not distribute to the recipient
any grant money that remains to be awarded under the agreement; and
(C) the governor may assess specified penalties for
noncompliance against the recipient;
(2) if all or any portion of the amount of the grant is used to
build a capital improvement, the state may:
(A) retain a lien or other interest in the capital
improvement in proportion to the percentage of the grant amount used to pay
for the capital improvement; and
(B) require the recipient of the grant, if the capital
improvement is sold, to:

September 2014
Page 94
(i) repay to the state the grant money used to
pay for the capital improvement, with interest at the rate and according to the
other terms provided by the agreement; and
(ii) share with the state a proportionate amount
of any profit realized from the sale; and
(3) if, as of a date certain provided in the agreement, the
grant recipient has not used grant money awarded under this section for the
purposes for which the grant was intended, the recipient shall repay that
amount and any related interest to the state at the agreed rate and on the
agreed terms.
(f-1) A grant agreement must contain a provision:
(1) requiring the creation of a minimum number of jobs in
this state; and
(2) specifying the date by which the recipient intends to
create those jobs.
(f-2) A grant agreement must contain a provision providing that if
the recipient does not meet job creation performance targets as of the dates
specified in the agreement, the recipient shall repay the grant in accordance
with Subsection (j).
(g) The grant agreement may include a provision providing that a
reasonable percentage of the total amount of the grant will be withheld until
specified performance targets are met by the entity as of the date described by
Subsection (f)(1).
(h) The governor, after consultation with the speaker of the house of
representatives and the lieutenant governor, shall determine:
(1) the performance targets and date required to be contained
in the grant agreement as provided by Subsection (f)(1); and
(2) if the grant agreement includes the provision authorized
by Subsection (g), the percentage of grant money required to be withheld.
(h-1) At least 14 days before the date the governor intends to amend
a grant agreement, the governor shall notify and provide a copy of the
proposed amendment to the speaker of the house of representatives and the
lieutenant governor.
(i) An entity entering into a grant agreement under this section shall
submit to the governor, lieutenant governor, and speaker of the house of
representatives an annual progress report containing the information compiled

September 2014
Page 95
during the previous calendar year regarding the attainment of each of the
performance targets specified in the agreement.
(j) Repayment of a grant under Subsection (f)(1)(A) shall be prorated
to reflect a partial attainment of job creation performance targets, and may be
prorated for a partial attainment of other performance targets.
(k) To encourage the development and location of small businesses
in this state, the governor shall consider making grants from the fund:
(1) to recipients that are small businesses in this state that
commit to using the grants to create additional jobs;
(2) to recipients that are small businesses from outside the
state that commit to relocate to this state; or
(3) for individual projects that create 100 or fewer additional
jobs.
(l) For purposes of Subsection (k), "small business" means a legal
entity, including a corporation, partnership, or sole proprietorship, that:
(1) is formed for the purpose of making a profit;
(2) is independently owned and operated; and
(3) has fewer than 100 employees.
(m) Expired.

Sec. 481.079. REPORT ON USE OF MONEY IN TEXAS
ENTERPRISE FUND. (a) Before the beginning of each regular session of
the legislature, the governor shall submit to the lieutenant governor, the
speaker of the house of representatives, and each other member of the
legislature a report on grants made under Section 481.078 that states:
(1) the number of direct jobs each recipient committed to
create in this state;
(2) the number of direct jobs each recipient created in this
state;
(3) the median wage of the jobs each recipient created in this
state;
(4) the amount of capital investment each recipient
committed to expend or allocate per project in this state;
(5) the amount of capital investment each recipient expended
or allocated per project in this state;

September 2014
Page 96
(6) the total amount of grants made to each recipient;
(7) the average amount of money granted in this state for
each job created in this state by grant recipients;
(8) the number of jobs created in this state by grant recipients
in each sector of the North American Industry Classification System
(NAICS); and
(9) of the number of direct jobs each recipient created in this
state, the number of positions created that provide health benefits for
employees.
(a-1) For grants awarded for a purpose specified by Section
481.078(d-1), the report must include only the amount and purpose of each
grant.
(b) The report may not include information that is made confidential
by law.
(c) The governor may require a recipient of a grant under Section
481.078 to submit, on a form the governor provides, information required to
complete the report.

Sec. 481.080. ECONOMIC AND FISCAL IMPACT
STATEMENT FOR CERTAIN GRANT PROPOSALS. (a) Before the
governor awards a grant under Section 481.078 to an entity for a proposed
initiative, the office shall prepare a statement that, specifically and in detail,
assesses the direct economic impact that approval of the grant will have on the
residents of this state.
(b) The statement must include:
(1) for the period covered by the grant:
(A) the estimated number of jobs to be created in this
state by the potential recipient each biennium; and
(B) the estimated median wage of the jobs to be
created in this state by the potential recipient each biennium;
(2) the additional amount of ad valorem taxes, sales and use
taxes, and fee revenues projected to be generated each year by governmental
entities of this state;

September 2014
Page 97
(3) the total amount of tax credits, local incentives, and other
money or credits estimated to be distributed to the proposed grant recipient by
governmental entities of this state; and
(4) any other information the office considers necessary to
include in the statement.

September 2014
Page 98
Appendix 5
Requirement to Conduct This Audit
Senate Bill 1390 (83rd Legislature, Regular Session) required the State
Auditors Office to conduct this audit. That bill is presented below.

AN ACT
relating to an audit by the state auditor of the Texas Enterprise Fund.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
TEXAS:
SECTION 1. (a) The state auditor shall conduct an audit of the Texas
Enterprise Fund established under Section 481.078, Government Code. The
state auditor may establish the scope of the audit and objectives for the audit
that are consistent with generally accepted government auditing standards and
with other audits conducted by the state auditor under Chapter 321,
Government Code.
(b) The audit may determine whether money from the fund is:
(1) disbursed in compliance with the requirements of Section
481.078, Government Code, and other relevant laws or standards; and
(2) monitored to determine whether the persons or entities
awarded money from the fund comply with the terms of any applicable
agreements and with the requirements of Section 481.078, Government Code,
and other relevant laws or standards.
(c) Consistent with generally accepted government auditing standards
and with other audits conducted by the state auditor under Chapter 321,

September 2014
Page 99
Government Code, the state auditor may assess the efficiency and
effectiveness of the Texas Enterprise Fund.
(d) The state auditor shall prepare a report of the audit conducted
under this section. Not later than January 1, 2015, the state auditor shall file
the report with the lieutenant governor, the speaker of the house of
representatives, and the presiding officer of each standing committee of the
senate and house of representatives having primary jurisdiction over fiscal
matters. The report may include:
(1) details on the grant approval process;
(2) details on the compliance of past and present grant
recipients with the terms of applicable agreements and with the requirements
of the Government Code and other relevant laws or standards;
(3) a synopsis of grant agreements that have been amended to
reduce the job creation goals established in the original agreement or to extend
the time allotted to achieve job creation goals; and
(4) an itemization of grant money returned to this state,
including a summary of the reasons the money was returned.
SECTION 2. This Act expires September 1, 2015.
SECTION 3. This Act takes effect September 1, 2013.

Copies of this report have been distributed to the following:
Legislative Audit Committee
The Honorable David Dewhurst, Lieutenant Governor, Joint Chair
The Honorable Joe Straus III, Speaker of the House, Joint Chair
The Honorable Jane Nelson, Senate Finance Committee
The Honorable Robert Nichols, Member, Texas Senate
The Honorable Jim Pitts, House Appropriations Committee
The Honorable Harvey Hilderbran, House Ways and Means Committee
The Honorable Rick Perry, Governor

This document is not copyrighted. Readers may make additional copies of this report as
needed. In addition, most State Auditors Office reports may be downloaded from our Web
site: www.sao.state.tx.us.

In compliance with the Americans with Disabilities Act, this document may also be requested
in alternative formats. To do so, contact our report request line at (512) 936-9500 (Voice),
(512) 936-9400 (FAX), 1-800-RELAY-TX (TDD), or visit the Robert E. Johnson Building, 1501
North Congress Avenue, Suite 4.224, Austin, Texas 78701.

The State Auditors Office is an equal opportunity employer and does not discriminate on the
basis of race, color, religion, sex, national origin, age, or disability in employment or in the
provision of services, programs, or activities.

To report waste, fraud, or abuse in state government call the SAO Hotline: 1-800-TX-AUDIT.

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