Empire State Development (ESD), New York state's chief economic development agency, failed to meet more than half of the reporting requirements for tax credit and job creation programs, diminishing transparency and accountability according to an audit released today by State Comptroller Thomas P. DiNapoli.
"Too often Empire State Development Corporation is either late or not reporting on the results of economic development programs," DiNapoli said. "We need better reporting to ensure transparency in economic development spending and to promote an informed analysis on the return of the investments state taxpayers make in these programs."
Under various state laws and regulations, ESD is mandated to report on the outcomes of many of the programs it supervises. Reporting requirements for specific programs vary and some of the requirements are specified in the legislation that established each program.
- ESD failed to produce many of the statutorily-required performance and outcome reports that were due between April 2012 and September 2016. Auditors found 27 of 57 of general outcome reports, or 47 percent, were not finished (see Exhibit A in the report);
- 17 programs requiring independently prepared evaluations were not evaluated; and
- 93 of 152 program-specific reports, or 61 percent, were not completed (see Exhibit C in the report).
In most cases, auditors were not provided an explanation by ESD officials for why they had not completed required reports. Auditors also had difficulty obtaining information and feedback from ESD during fieldwork.
While the outcome reports ESD prepared for its subsidiary corporations contained all the required data elements, the required general summary reports, which are supposed to account for all programs, actually accounted for less than half of the programs that provide financial assistance to participants. For example, 12 programs with appropriations during the period totaling over $500 million were not reported on at all.
For the reports ESD prepared, auditors often could not determine whether they were done on time because there was no evidence when they were published. For 27 reports with evidence of when they were completed, auditors found that generally ESD submitted them late, although the majority were submitted within two weeks of their due dates. The latest report issued, the 2015 START-UP NY annual report, was issued 91 days past its due date.
DiNapoli recommended ESD:
- Develop and adhere to procedures for meeting statutory outcome reporting requirements;
- Review information contained in summary outcome reports to ensure all active programs are included;
- Ensure that all existing subsidiary corporations meet Public Authority Law reporting requirements; and
- Ensure required reports are issued in a timely manner to provide decision makers with relevant information to evaluate the various economic development programs.
ESD officials generally disagreed with the audit's findings and conclusions. However, officials indicated that they were implementing new internal controls to ensure compliance with all reporting requirements. Their full response is included in the full audit.
ESD administered 66 programs intended to spur economic activity, stimulate job creation and encourage business investment in the state. ESD spent almost $2 billion on economic development grants during the four fiscal years ended March 31, 2016. Besides economic development grants, ESD administers the allocation of hundreds of millions of dollars in loans, tax credits and other incentives to private companies, nonprofit organizations and other entities throughout New York.
For the year ending Dec. 31, 2015, ESD reported there were 217 active projects subject to employment stipulations and funded with $234.8 million from various state investment sources. ESD reported that the 217 active projects have created 18,466 net new jobs in New York since first receiving financial assistance.
Read the report, or go to: http://osc.state.ny.us/audits/allaudits/093017/16s40.pdf
For access to state and local government spending, public authority financial data and information on 130,000 state contracts, visit Open Book New York. The easy-to-use website was created to promote transparency in government and provide taxpayers with better access to financial data.