Audit: Commerce Department needs to track economic development money better
Posted July 29, 2013
Raleigh, N.C. — Recipients of certain state economic development grants have been operating on something of an honor system according to a state audit report released Monday.
Awards for Job Development Investment Grants are awarded based in part on the number of employees a company hires and the salaries of those employees. From 2003 through March 2012, the state had awarded 145 JDIG grants worth a total of $600 million, according to the State Auditor's Office. Grant recipients also promise to meet other benchmarks, typically involving how much money they invest in buildings or equipment.
Auditors found North Carolina paid $20 million in 2010 for 35 grants without verifying the companies had met their hiring or investment targets.
"The Department does not independently confirm that the positions are eligible for grant payments or that grant investment requirements were met," the audit reads. "Relying on a company that is receiving grant payments to confirm that the company is in compliance with the grant requirements does not meet the definition of an objective, independent process."
In her response to the audit, Commerce Secretary Sharon Decker said that companies are being held to a higher standard than just having to say they've met their targets.
"First, it is important for the taxpayers of North Carolina to know that we now require companies to formally attest to the veracity of the information they provide to us and ultimately to the NC Department of Revenue in order to meet either the eligible position or capital investment requirements," Decker wrote. "This is a legally binding affirmation and not one that companies take lightly."
That said, Decker acknowledged the need for better tracking methods and promised to develop those with the auditor's office by Nov. 15, 2013.
The audit also suggested that senior staff at the Commerce Department needed to provide members of the policy making committee that votes on grant awards with more information, particularly with regards to companies that are judged not to meet the criteria for JDIG.
In her response, Decker said that, going forward, the department would have a better way to keep the state Economic Investment Committee informed other other projects that aren't being considered for formal evaluation.