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DiNapoli Rips ESD Over Results Reporting, Transparency

New York State Comptroller Thomas DiNapoli New York State Comptroller Thomas DiNapoli

ALBANY—New York State Comptroller Thomas DiNapoli released an audit on Wednesday highly critical of New York State’s top economic development agency—Empire State Development Corp.—over its transparency and reporting of job creation results.

The audit, which covered the period from April 1, 2012 through Sept. 30, 2016, found that Empire State Development did not meet half of its reporting requirements for tax credit and job creation programs. Empire State Development came out swinging in response to the report, differing with many of the audit’s results and characterizing it through a spokesman as a “politically motivated”

“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.”

The State Comptroller reports the audit found that 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%, were not completed. In addition, 17 programs that required independently prepared evaluations were not evaluated and 93 of 152 program-specific reports, or 61%, were not completed.

“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,” the State Comptroller added.

The report stated that the audit identified 12 ESD financial assistance programs with appropriations totaling more than $500 million from 2012 through 2016 that were not reported on at all by ESD. Some of those 12 programs included ESD’s Division of Science, Technology and Innovation Technology Center Program that provides $52.6 million each year in funding to 50 technology centers at more than 50 technology centers, some of which are housed at state universities and colleges.

The audit also chided ESD for not filing timely reports, noting that the latest report issued, the 2015 START-UP NY annual report, was issued 91 days past its due date.

The State Comptroller’s office issued a number of recommendations to the ESD that all covered developing and adhering to procedures for meeting statutory outcome reporting requirements.

The audit report noted that ESD generally disagreed with the report’s findings. In fact, ESD issued a blistering and critical response to the audit. “This report is yet another example of a politically motivated ‘independent audit’ that cherry-picks information and profoundly misrepresents our efforts,” said ESD spokesman Jason Conwell in a prepared statement. “While this might be a convenient way to distract from what the Comptroller has not done to clean up his own house following a massive fraud within the $178-billion state pension system, we encourage OSC to be more objective in their review of our efforts.”

He adds that ESD holds itself to the highest standards and adheres to what he terms are “robust standards of transparency and disclosure.”

Included in the report was a six-page letter written by ESD Director of Compliance Benson V. Martin to the Office of the State Comptroller that disputed many of the audit’s findings. “Empire State Development disagrees with OSC’s findings in two key respects: first, ESD believes that the findings regarding ESD’s subsidiary reporting are contrary to previous OSC findings; and second, ESD disputes OSC’s suggestion that it was not fully transparent during the audit process. ESD complied with OSC’s requests for information regarding numerous ESD programs and did not refuse an interview with ESD staff,” Martin stated.

ESD spent nearly $2 billion on economic development grants during the four fiscal years ended March 31, 2016. For the year ended Dec. 31, 2015, ESD reported there were 217 active projects subject to employment stipulations funded with $234.8 million from various state investment sources. ESD reported that the 217 active projects created 18,466 net new jobs in New York since first receiving financial assistance.

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