By Michael Bielawski
The state auditor’s office reports that public funds used for grant programs may not have received proper scrutiny beyond the word of the applicants.
The Vermont State Auditor (SOA) commented on the Department of Economic Development’s (DED) oversight – or alleged lack thereof – of money distributed via the Capital Investment Program (CIP) and the Community Recovery and Revitalization Program (CRRP).
“DED largely relied on awardees’ assertions about need for the grants rather than design processes to corroborate funding gaps via a thorough review of each applicant’s financial position and inquiry about alternate means of funding the projects such as bank loans,” the SOA’s final report states.
The Legislature set $50,580,000 aside for the two grant programs and they authorized the DED to design them.
The DED has responded to the SOA report, it can be read in this SOA letter.
The SOA report suggests that funds may have been distributed where it was not truly needed.
“The Legislature’s Economist pointed out that to ensure that these grants of government funds truly make a difference, there must be evidence that the projects would not occur without the grants,” it states. “Spending public funds for private projects that would occur without them is unnecessary and wasteful.”
The report claims that at least three applicants outright indicated that their programs would still happen without state funds.
“By ignoring evidence that awards weren’t necessary, and failing to thoroughly review applicants’ financial position, DED awarded funding for projects that could have been completed without an award,” it states.
Another section notes a lack of documentation regarding the applicant vetting process.
“DED made awards that were within statutory limits; however, DED did not clearly document how the amounts awarded were related to information presented in the CIP applications, the numerical scores calculated under the CRRP program, and the factors required to be considered in the award decision.”
It concludes, “Given the flaws we noted, DED undermined its ability to be an effective steward of the CIP and CRRP program resources and increased the risk that the Legislature’s desired results for these programs will not be achieved.”
Department of Economic Development responds
The DED responded to the allegations by the SOA. some of it can be read here. It states, “DED finds that the [SOA] report omits important facts regarding the Federal and State intention for these programs, which was to efficiently distribute COVID recovery funds to prevent business closures and job losses while fostering long-term growth and sustainability for impacted entities.”
They argue that due diligence was followed.
“When determining award amounts, DED considered several factors like geographic diversity, size of project, amount of need, and other intricacies that are not easily captured by a purely numerical approach. DED capped most CIP awards at the lesser of $500,000 or the applicant’s Net Fiscal Impact (NFI) to the State. The intention was to distribute funds more broadly, despite a statutory cap of $1.5 million per project.”
SOA noted the absence of a “state fiscal impact” (NFI) analysis for the initiatives. DED notes that this requirement was removed by lawmakers.
“The NFI requirement was ultimately removed by the Legislature in statute for CRRP. It did not accurately reflect the benefits of essential projects like childcare and affordable housing. While the SAO criticized this decision, the NFI model was inadequate for assessing true social impact and economic recovery goals,” they wrote.
The author is a writer for the Vermont Daily Chronicle