Iowa lawmakers questioned leaders Wednesday about an Iowa Fund of Funds restructuring agreement that puts taxpayers on the hook for about $26 million in tax credits over six years to pay the program’s obligations, The Des Moines Register reported.

Lawmakers’ questions ranged from how they can sunset the program without increasing the cost to taxpayers to recoup some of the fees paid to a management company that oversees Iowa Fund of Funds investments. They also questioned the effectiveness of the program in creating Iowa jobs.

The fund was required to invest in other venture capital funds across the country, which in turn were required to have a presence in Iowa and to consider investing in Iowa companies.

Regions Bank and Bank of Oklahoma sued the state in April after the Iowa Fund of Funds defaulted on a loan it had used for financing the program. The fund owed about $33 million on a $40 million line of credit backed by $57 million in tax credits as collateral, the Register reported.

Indications as far back as 2006 indicated there could be future financial problems for the program. Iowa Fund of Funds’ model was based on an approach used in Oklahoma, and an audit report by that state in 2006 concluded that the program would generate as much as $56 million in losses because it was not generating sufficient revenue to repay its loans. Iowa Fund of Funds officials said at the time the Iowa program was operating as intended.

Click here to read another Business Record story about the formation of the fund.