Connecticut Innovations failed to verify that companies receiving more than $93 million in assistance retained or created the jobs promised in exchange for the taxpayer money, a state audit found.
“CI did not sufficiently monitor whether companies participating in business assistance and incentive programs complied with requirements in their Connecticut presence agreements,” auditors said.
The audit covered the fiscal years ending in 2023 and 2024.
In responses included with the audit, CI agreed with the findings, and promised to better track job creation and retention. A spokeswoman for the agency did not respond to a request for additional comment.
State Sens. Henri Martin, R-Bristol, and Stephen Harding, R-Brookfied, the Senate minority leader, expressed concern over the audit findings.
“A key measure of success for any taxpayer-funded government entity that is working to grow private-sector jobs is how many jobs did our tax dollars actually help create and retain in Connecticut,” the senators said in a joint statement. “We must have processes in place to gauge performance. Senate Republicans will continue to emphasize the importance of evaluating all of our government incentive programs to make sure taxpayers are getting the most bang for their buck.”
CI was established to issue grants and loans to stimulate research and development of new technologies, businesses and products, assist existing businesses and provide services to advance technology in the state.
Failed to verify jobs
Auditors noted recipients of financial assistance are required to maintain a presence in Connecticut and sign a Connecticut presence agreement setting forth the requirements. Some agreements specify the number of full-time employees in the state while others require the company to locate most of its U.S. based employees and subsidiaries in the state.
CI also is responsible for obtaining independent reports, such as Department of Labor filings, for companies reporting more than five full-time employees. For companies reporting five or less full-time employees, CI relies on self-reported data in its assistance application or annual job survey, auditors explained.
“CI did not use an independent source to validate the companies’ total employment outside of Connecticut, when their agreement required the companies to locate most of their U.S.-based employees and subsidiaries in Connecticut,” auditors said. “Further, CI’s annual job survey did not provide sufficient information to determine compliance.”
CI made 219 distributions of financial assistance totaling $93.4 million during the audited period and, as of June 30, 2024, reported creating 28,873 jobs, auditors said.
“CI has reduced assurance that companies participating in the business assistance and incentive programs comply with the job requirements in the Connecticut Presence agreement,” auditors said. “This appears to be the result of an oversight by management in the monitoring of the Connecticut Presence agreement.”
The finding had not been previously reported regarding CI. Similar criticism has been levied by auditors regarding the Connecticut Department of Community and Economic Development, the state’s lead agency for economic development efforts.
“Connecticut Innovations should strengthen its monitoring controls over the job data reported by companies participating in its business assistance and incentive programs,” auditors said.
“CI should use an independent source to validate the companies’ total employment, when the Connecticut presence agreement requires them to locate the majority of their U.S.-based employees and subsidiaries in Connecticut,” auditors said. “CI should also revise the annual job survey to include the necessary information.”
In a response included with the audit, Connecticut Innovations agreed with the finding.
“Connecticut Innovations uses an independent source to validate each company’s total employment within the state of Connecticut,” the agency said. “CI will now broaden this process and use an independent source to validate each portfolio company’s employees outside of Connecticut for those companies with such an agreement.”
Reports filed late
Auditors said a review of 15 reports CI is required to file with state officials found:
-
CI submitted the 2023 annual report six months and four days after the end of the year.
-
CI submitted the June 30, 2023 quarterly financial report 144 days after the end of the quarter. In addition, the report did not include the correct data; the report contained totals for the fiscal year instead of data for the quarter.
-
CI submitted the 2024 Angel Tax Credit report 151 days late.
-
CI submitted the 2023 economic cluster bond funds report nine days late.
-
CI submitted the 2023 Connecticut Bioscience Collaboration program operating and capital budget 13 days late.
-
CI submitted the 2024 Connecticut Bioscience Innovation Fund annual plan of operations and budget 74 days late.
-
CI submitted the 2023 business plan report 25 days late.
-
CI submitted the 2024 financial assistance report 32 days late.
“During the audited period, CI had 10 statutory reporting requirements, which mandated it to submit 40 individual reports,” auditors said. “Inaccurate and untimely reporting limits the state’s monitoring of quasi-public agencies. The inaccurate and untimely reporting appears to be the result of a lack of managerial oversight due to the number of required reports.”
The findings had been reported in audits covering fiscal years 2011 through 2022.
“Connecticut Innovations should promptly and accurately submit all reports required by the General Statutes,” auditors said.
In its response, CI agreed with the finding.
“CI did submit 100% of the required annual reports (50 in total). CI will strive to continually improve the timeliness of our reporting requirements,” the agency said.
Skipped board meetings
A review of CI’s board of directors’ attendance for calendar years 2023 and 2024 found one board member appointed by Gov. Ned Lamont missed three consecutive meetings and 80% of the meetings held in 2024.
“Failure to attend meetings may interfere with the board’s ability to effectively fulfill its responsibilities,” auditors said. “CI did not enforce attendance requirements. The CI board of directors did not update its bylaws to include attendance requirements.”
The finding had not been previously reported.
“Connecticut Innovations should ensure its board of directors complies with attendance requirements,” auditors said. “CI should also update its bylaws to include attendance requirements as set forth in the General Statutes.”
In its response, CI agreed with the finding.
“Connecticut Innovations will communicate to all board members the attendance requirements. CI will also seek an amendment to our bylaws to reflect these requirements,” the agency said.
This article originally published at $93 million in CT funds sent to businesses went unchecked, report finds.
