DBED audit highlights need for tax credit accountability

A legislative audit has found serious problems with programs managed by the Maryland Department of Business and Economic Development (DBED).  The audit found that:

• DBED did not require eight companies applying for the One Maryland tax credit to document costs that serve as the basis for the amount of credit awarded.  Total tax credits awarded equaled $34 million.
• DBED investment agreements contain provisions to force repayment plus interest if companies leave Maryland within five years of the state investment.  Yet DBED failed to follow up when the recipient of a $250,000 investment in 2008 left the state one year later.  The audit estimated that the amount owed the state now totals $325,000.  After the legislative audit raised the issue DBED sent the company a letter demanding repayment.
• Internal users of DBEDs financing programs tracking systems were not adequately restricted.  Some DBED employees had access to many actions, such as bill initiation and payment processing, which were outside the scope of their responsibilities.  Disturbingly some former employees still had access up to 20 months after they left DBED.  The department corrected security permissions once they were brought to its attention.
• DBED did not collect required expenditure and performance reports from all grantees.  Consequently, the state does not know if the funds were used for their intended purposes.  Grantees may well be in compliance with the terms of their grants, but DBED has no way of knowing in many cases.

Encouragingly, DBED’s response to the audit (included as an appendix to the report) was generally positive.  They agreed with the auditors findings and, as noted above, took immediate action in several cases. 

MBTPI supports the Tax Credit Evaluation Act (SB 739/HB 764), because Marylanders deserve to know what they are getting for their tax dollars.  Unfortunately, this audit highlights the need for continued oversight to make sure that existing and new regulations are properly followed.