Massachusetts Growth Capital Corporation

This is a Massachusetts State Auditor performance audit of the Massachusetts Growth Capital Corporation, covering July 1, 2011 through September 30, 2013.

“This report details the audit objectives, scope, methodology, findings, and recommendations for the audit period, July 1, 2011 through September 30, 2013.”

The audit checked whether MGCC was handling loans and grants properly, tracking job creation, and spending administrative money appropriately.

“The objectives of our audit were to review and examine various aspects of MGCC’s operations to determine whether (1) MGCC was properly administering loans and grants; (2) MGCC was appropriately tracking job creation by its grant and loan recipients; and (3) MGCC’s administrative expenses were reasonable and applicable to its operations.”

MGCC uses public resources to support small businesses and job creation, so weak loan rules or asset controls can increase risk and reduce public confidence.

“By not adhering to existing policy or recording tangible assets, MGCC risks loss, theft, or misuse of its assets.”

For residents, this matters because MGCC is meant to help create and preserve jobs, especially in underserved communities and for small, women-owned, and minority-owned businesses.

“According to its website, MGCC’s mission is “to create and preserve jobs at small businesses, women and minority owned businesses, and to promote economic development in underserved, gateway municipalities and low and moderate income communities.””

The auditor did not find problems with job tracking or administrative expenses, but did find weaknesses in loan evaluation, equipment controls, and risk assessment.

“Based on our audit, we have concluded that, except as discussed in the Detailed Audit Results and Findings section of this report, during the audit period, MGCC was appropriately tracking job creation by its grant and loan recipients and its administrative expenses were reasonable and applicable to its operations.”

The report recommends that MGCC update or follow its loan policy, inventory and tag equipment, reconsider how it tracks assets, and complete detailed risk assessments.

“MGCC should, in combination with its process of documenting internal controls through its policies and procedures, perform detailed assessments of risks and related controls in effect to mitigate risks.”

The report is significant because it points to governance and control gaps at an agency that makes higher-risk loans with a public economic-development mission.

“The absence of a detailed departmental risk assessment could hinder or prevent MGCC from ensuring the integrity and effectiveness of its internal control system.”

“Nontraditional loans” means loans that may carry more risk than standard loans, often because borrowers cannot get ordinary bank financing.

“Nontraditional loans are loans that exhibit characteristics that may result in higher risk than typical loan products.”