In its latest annual report, the Department of Economic and Community Development likely overstated by “thousands” the number of jobs its incentive and loan programs helped retain, state auditors said Tuesday.
In addition, the agency understated a variety of figures related to loans and grants, as well as tax credits earned and issued, the Auditors of Public Accounts wrote in the report, which was required by a law passed by the legislature last year. Both Republicans and Comptroller Kevin Lembo have pushed for additional reporting on DECD programs.
The findings cast doubt on how accurately DECD is measuring the success and impact of its economic incentives. The agency pushed back at some of the findings, and said that while there were some errors in its annual report detailing economic impacts, its internal records are accurate.
DECD attributed errors and omissions in some cases to a lack of data, as well as certain record-keeping procedures, noting it has been working on improving the latter by recently launching a new customer relationship management (CRM) system.
Some of the largest errors spotted by auditors included DECD understating by $71 million, or 12 percent, the amount of Urban and Industrial Site Reinvestment tax credits awarded, because it failed to include 80 projects. The agency also understated the value of its Manufacturing Assistance Act portfolio by $73.8 million, or 9 percent, because it did not include 14 projects, auditors said.
The audit said some companies that received DECD funding were awarded money under more than one program, which likely led to an overstatement of jobs retained by those companies, since DECD counted the retained jobs multiple times.
DECD said only 4 percent of its more than 1,500 portfolio companies use more than one program, noting the overlap would be small. It also said that only new jobs, not retained ones, are included in its calculations of economic impact.
However, auditors pushed back, saying even a small overlap would result in an overstatement of “thousands” of retained jobs.
“DECD uses the amount of retained jobs as a statistic to demonstrate the success of its business assistance and incentive programs,” auditors wrote. “Therefore, it is important that DECD reports accurate job retention amounts. In addiction, DECD uses these amounts to determine the dollar cost per job that businesses created or retained. If DECD overstates the amount of retained jobs, therefore, it would understate the cost per job.”
In a statement, DECD Commissioner Catherine Smith promised improvement.
“At DECD, we set a high bar for the quality of our work,” Smith said. “Unquestionably, this report highlights areas where we did not meet that bar and we are committed to taking meaningful and necessary steps to maintain the integrity of our reporting mechanisms. We can–and will–make the necessary adjustments to ensure accuracy so that the Annual Report properly reflects the overall effectiveness of our programs.”
Lembo said the new audit will help lawmakers make informed decisions about economic programs.
“Connecticut can only realize its great economic potential if it adopts best practices – beginning with an accurate analysis of the success and failures of its economic development programs,” Lembo said.
Senate Republican President Pro Tempore Len Fasano (R-North Haven) issued a statement on the audit, criticizing DECD’s data keeping as “significantly flawed and inaccurate.”
“For all the money Gov. Malloy gives out to large companies, his administration’s systems to monitor the effectiveness of these dollars are alarmingly deficient,” Fasano said. “The errors uncovered are beyond unacceptable.”
Asked for response to Fasano’s criticism, Malloy spokesperson Kelly Donnelly issued the following statement Wednesday: “Right on cue, Sen Fasano unleashes heated rhetoric that offers nothing constructive to the issue at hand.”
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