Audit of the Massachusetts Growth Capital Corporation (August 28, 2024)
August 28, 2024 · Massachusetts Growth Capital Corporation · Read the full official report on mass.gov ↗
Published August 28, 2024 Audit covers March 1, 2020 – June 30, 2022 Under Diana DiZoglio · 2023–present
source
“MGCC distributed grants in excess of allowable contract amounts.”
Read the plain-English breakdown
This is a state performance audit of the Massachusetts Growth Capital Corporation, focused on how it handled COVID-19 small business relief grants from March 1, 2020 through June 30, 2022.
“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of the Massachusetts Growth Capital Corporation (MGCC) for the period March 1, 2020 through June 30, 2022.”
Auditors wanted to check whether MGCC gave grant money only to eligible businesses, followed priority rules, tracked the money correctly, reported on time, and trained staff who handled the funds.
“The purpose of our audit was to determine whether MGCC did the following:”
The program involved hundreds of millions of public dollars meant to help small businesses during the pandemic, so weak controls could mean money was misused or did not go where it was supposed to go.
“The purpose of the COVID-19 SBRGP was to help small businesses endure loss of revenue from COVID-19 and to preserve jobs by providing grants of up to $75,000 for specific expenses such as payroll, employee benefits, rent, utilities, and interest on debt obligations.”
If you are a Massachusetts taxpayer or small business owner, this report matters because it checks whether relief money was handled fairly, transparently, and according to the rules.
“A total number of 324 towns and cities, many of which were gateway cities, received grants.”
The auditor concluded MGCC did not meet all tested requirements for eligibility, grant amounts, priority scoring, reporting, staff training, and reconciliation.
“MGCC provided COVID-19 SBRGP grants to ineligible entities.”
The report recommends that MGCC tighten its grant rules, document approvals, apply priority scoring consistently, train employees, improve reporting, and reconcile all grant funds.
“MGCC should reconcile all grant funds.”
The biggest concern is that mistakes in grant amounts, eligibility checks, and accounting could reduce trust in government relief programs and waste taxpayer money.
“Funding some small business grants in excess of amounts allowed by the contract with EOED could result in MGCC and the Commonwealth having less funding available for other state programs and misuse of taxpayer funds.”
MGCC is the Massachusetts Growth Capital Corporation; SBRGP means the COVID-19 Small Business Relief Grant Program; EOED is the Executive Office of Economic Development, which contracted with MGCC for the grants.
“In response to the COVID-19 pandemic, MGCC signed two contracts with EOED to administer approximately $667,500,000 in grants through the COVID-19 Small Business Relief Grant Program (SBRGP).”
5 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Did MGCC administer the COVID-19 Small Business Relief Grant Program (SBRGP) in accordance with Section III of Amendment to Attachment A of the Small Business Relief Grant Program—Part II to ensure that funds were distributed to eligible businesses within eligible industries and that priority was given to underserved demographic groups?
- Did not comply Did MGCC account for COVID-19 SBRGP funds received from the Executive Office of Economic Development (EOED) in accordance with its Grant Receipts & Control Procedures to ensure that the grant funds MGCC received matched the grant request amounts and were properly recorded to MGCC’s accounting records?
- Did not comply Did MGCC disburse the COVID-19 SBRGP funds to eligible businesses in accordance with Section III of Amendment to Attachment A of the Small Business Relief Grant Program—Part II to ensure that maximum amounts as stipulated in the contract were distributed to grant recipients and that these funds were used for allowable expenses?
- Did not comply Did MGCC provide information security training to its employees responsible for the management, approval, and accounting of COVID-19 SBRGP funds when initially hired and on an ongoing basis as required by MGCC’s Written Information Security Policy (WISP)?
What the Auditor found
Why it matters: Excess grant payments could reduce funding available for other state programs and misuse taxpayer funds.
Standard: Section III of Amendment to Attachment A of the Small Business Relief Grant Program—Part II limited grants to up to $75,000 and not more than three months of operating expenses. ( Section III of Amendment to Attachment A of the Small Business Relief Grant Program—Part II contract between MGCC and EOED )
3 recommendations
- MGCC should award grants in amounts established by contracts and program guidelines.agency: agreed
- MGCC should request written approval from the awarding entity for adjusting grants based on qualifying economic circumstances and should include these provisions in its grant application policies and procedures.agency: agreed
- MGCC should apply any program changes uniformly to all applicants and awardees.agency: agreed
Agency response & Auditor reply
Agency: "MGCC agrees with the finding and all of the above recommendations and further notes:"
Auditor: "Undocumented methodologies for grant distribution could result in the inappropriate and inequitable distribution of taxpayer-funded grants."
Why it matters: Eligible priority applicants could receive grants later or not at all if funds were insufficient.
Standard: The SBRGP contract required priority for businesses serving gateway cities and businesses owned by people of color, women, and veterans. ( Section III of Amendment to Attachment A of the Small Business Relief Grant Program–Part II contract between MGCC and EOED )
1 recommendation
- MGCC should consistently apply priority scoring in accordance with its contractual obligations to ensure appropriate documentation regarding sector specific grant requirements including, but not limited to, those regarding gateway cities and businesses owned by people of color, women, and veterans.
Agency response & Auditor reply
Agency: "When making grant awards under the COVID-19 SBRGP MGCC did prioritize the sectors identified as priority sectors in the contract with EOHED."
Auditor: "During the audit, we determined that MGCC did not apply priority scoring to all Sector Specific COVID-19 SBRGP applicants, which leaves room for potential challenges and inconsistencies regarding the equitable application of grant distribution."
Why it matters: Taxpayer funds were spent in impermissible ways and less funding may have been available for permissible programs.
Standard: The contract and MGCC program eligibility forms designated chains and franchises as ineligible for grants. ( Section III of Amendment to Attachment A of the Small Business Relief Grant Program—Part II between MGCC and EOED )
1 recommendation
- MGCC should ensure that it only provides grants to eligible applicants.agency: agreed
Agency response & Auditor reply
Agency: "MGCC agrees with the recommendation that it should provide grants only to eligible applicants."
Auditor: "As noted above, MGCC relied on self-attestation from program applicants when assessing an applicant’s eligibility."
Why it matters: Lack of training could cause user error or compromise the integrity and security of MGCC information systems used to administer approximately $650 million.
Standard: MGCC's Written Information Security Policy required information security training for all employees on an ongoing basis beginning with orientation. ( MGCC’s Written Information Security Policy )
2 recommendations
- MGCC should provide information security training to its newly hired employees during orientation and on an ongoing basis for all employees.agency: already implemented
- MGCC should develop and implement monitoring controls to ensure that it provides information security training to all employees.
Agency response & Auditor reply
Agency: "MGCC acknowledges that it did not provide information security training to its newly hired and temporary employees during orientation during the COVID19 pandemic."
Auditor: "Based on its response, MGCC has taken measures to provide information security training to its current employees."
Why it matters: Stakeholders and the public could not timely measure program impacts or assess whether the program met its intended purpose.
Standard: Section VII of Amendment to Attachment A required initial and final financial and program reports with quantifiable information and outcomes by specified dates. ( Section VII of Amendment to Attachment A of the Small Business Relief Grant Program—Part II )
1 recommendation
- MGCC should develop reporting processes and procedures to ensure that required reports are submitted to appropriate entities by required dates and that these reports contain requested information.
Agency response & Auditor reply
Agency: "MGCC acknowledges that certain COVID-19 SBRGP reports were submitted to EOHED after the reporting deadline stated in the contract with EOHED."
Auditor: "Based on its response, MGCC is taking measures to address our concerns on this matter."
Why it matters: Unreconciled funding increases the risk that MGCC cannot identify potential misappropriation of funds.
Standard: MGCC's Grant Receipts & Control Procedure required matching grant receipts with grant request amounts and updating the grant receipts schedule. ( MGCC’s Grant Receipts & Control Procedure )
2 recommendations
- MGCC should reconcile all grant funds.agency: agreed
- MGCC should determine whether it needs a new accounting system that has the ability to track all grant receipts and disbursements.
Agency response & Auditor reply
Agency: "MGCC agrees that it should reconcile all grant funds after a program has concluded, and in fact did perform such a reconciliation for the COVID-19 SBRGP."
Auditor: "Our review found a variance of $54,324 for which MGCC could not provide any detailed information on what accounted for the discrepancy in the list of grant recipients."
More audits of this entity
Other Office of the State Auditor reports on Massachusetts Growth Capital Corporation .
- Audit of the Massachusetts Growth Capital CorporationOther · June 26, 2019
- Massachusetts Growth Capital CorporationOther · February 6, 2015