HARTFORD, CT — Connecticut’s chief economic development official told three legislative committees Monday that she’s “embarrassed” by the mistakes her agency made in reporting information on tax credits and incentives to state auditors earlier this year.
Department of Economic and Community Development Commissioner Catherine Smith said her agency mistakenly overstated $12 million in state revenue on a base of $632 million when they first shared the 2017 information with the Auditors of Public Accounts.
She said they are working to improve on what she described as an “unacceptable level of errors,” but reminded lawmakers that the programs do work to create jobs in Connecticut.
Smith testified that the revised annual report found that 278 companies were assisted in 2017 and promised to create 3,521 jobs and retain 5,510 jobs. Those companies have leveraged $324 million in private sector funds and created 107 percent of the jobs they promised.
So far in 2018 the agency has assisted 109 companies with $209 million in assistance. In exchange the companies have promised to retain 22,912 jobs and add 9,530 new jobs.
She said all of the loans DECD has made that have not performed are in Connecticut’s Open Data portal, but that’s not included in the 2018 report.
Smith said she’d be happy to include the information if that’s what the legislature wants.
The Auditors of Public Accounts determined that there were errors and omissions by the agency when it first reported the information back in April.
When it came to the Small Business Express Program, DECD understated the amount of new jobs to be created by 195, in addition to understating the amount of jobs to be retained by 1,405.
As far as tax credits are concerned, the auditors found DECD understated the Urban and Industrial Site Reinvestment total tax credits awarded by $71 million or 12 percent of the total and overstated total credits earned by $14.9 million.
It also understated the total Film Production Infrastructure tax credits issued by $7.2 million and overstated the Film and Digital Media Production tax credits issued during the fiscal year that ended June 30, 2017, by $1 million.
The April audit also found DECD did not report on 297 projects that received $242 million in financial assistance under the Manufacturing Assistance Act because the companies have gone out of business, relocated, or the department’s contract with the company has expired.
Smith said her staff relied on spreadsheets that weren’t always tied to the direct loan information in the database used to make the loans and calculate forgiveness.
When it comes to job retention, the auditors concluded that “DECD likely overstated the number of jobs retained because certain companies received funding multiple times or under multiple programs. Companies that received funding multiple times may have had a requirement to retain the same jobs each time they received funding. DECD counted these jobs multiple times.”
Of the over 1,500 companies in the portfolio, 67 companies received funding via multiple programs or multiple contracts, the agency said.
“Further, when we analyze future economic benefits to the state, we do not include the retained employees. We look only to the incremental new jobs created by the company that will impact the state economy,” DECD stated in the revised report.
Smith reiterated that only new jobs are counted when it comes to the impact on the state’s economy.
The bottom line: “These programs do work and they are producing the jobs we expect, the revenue to the state we expect, and they are in fact helping us grow the economy here in the state,” Smith said.
The auditors, John Geragosian and Rob Kane, released their analysis of that second report last week and determined that DECD made some improvements in reporting more accurate data, but still fell short of including all the data the legislature has asked for it to report.
However, the auditors also said it’s not completely DECD’s fault. They explained that DECD sometimes doesn’t have all the data it needs because that information is housed in other state agencies like the Department of Labor.
“It appears that the data required to analyze the estimated economic effects on the state’s economy is currently not being collected,” the auditors wrote. “In addition, since DECD does not administer these programs, it may not be in the best position to recommend whether the programs should be continued, modified, or repealed.”
The Appropriations, Finance, and Commerce Committees didn’t vote on the recommendations Monday, but they listened and gathered information for future legislation.