State auditors say CT Innovations fails to verify jobs created via incentives

HBJ PHOTO | STEVE LASCHEVER Connecticut Innovations CEO Matt McCooe.

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Connecticut Innovations (CI), the state’s quais-public venture capital investment agency, does not validate the number of jobs created and retained through the business assistance and incentive programs it administers.

That is one of the findings of a new audit report released this week by John C. Geragosian and Craig A. Miner, the state Auditors of Public Accounts.

The audit reviewed the fiscal years ended June 30, 2021, and June 30, 2022 for both CI and its now-defunct subsidiary, CTNext, which invested in and boosted startups. The resulting 18-page report found that, in addition to not adequately validating the number of jobs created and retained by companies that receive funding through state incentive programs, CI also did not:

Promptly submit five statutorily required financial reports, while CTNext filed a quarterly financial report in March 2022 with “data from the incorrect period” and never submitted the proper data, and
Establish the “Connecticut New Opportunities Fund” as required by a bill passed in the state General Assembly nearly 20 years ago.

According to the audit, CI reported 31,950 jobs created and retained as of June 30, 2021, and 27,936 jobs as of June 30, 2022, but never validated those numbers.

“There is reduced assurance of the accuracy of reported job data,” the audit report states. “The lack of reliable job data limits the General Assembly’s ability to determine the impact of CI-administered programs.”

Both state auditors are former members of the General Assembly.

CI’s response is included in the report and states that it agrees with this finding in part.

“CI does survey all portfolio companies where they must verify their employment levels,” the agency said. “CI also receives financial statements and has site visits to most of our companies. This provides an extra layer of comfort that the companies are in existence and do provide some level of employment.”

The agency said it will work to improve in this area, and “may seek Department of Labor assistance or other validation techniques to validate the employment totals.”

The agency also agreed with the finding that it had failed to provide timely and accurate financial reports, something it also had been cited for “in the last six audit reports,” the auditors state.

The agency said in its response that it did submit “100% of the required annual reports (62 in total)” and blamed the delays on “reduced administrative staffing levels and the legislative requirement where some reports must be approved by their oversight board” before being submitted.

CI added that it “will strive to continually improve on the timeliness of our reporting requirements.”

As for the Connecticut New Opportunities Fund, which was established by a law that became effective on July 1, 2005, CI explained that “it drafted guarantee language” and provided it to the Office of Policy and Management, the state comptroller and the state treasurer. It said it planned to have the guarantee signed before it began raising money for the fund and distributing it.

“No one signed the guarantee or provided funds to pay out the guarantee,” the agency said, adding that it will “seek legislation to eliminate this language.”