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State tax credits improperly awarded

State House Bureau

June 10. 2014 9:39PM

CONCORD — More than half of the state tax credits issued for creating jobs in economic revitalization zones — $875,750 in all — were awarded erroneously or lacked proper documentation, an audit found.

In 2011 and 2012, $1.8 million was earmarked for the Economic Revitalization Zones and Coos County Job Creation Tax Credit programs.

“In many cases, tax incentives and training grants were awarded with limited documentation that businesses met the requirements of each program, and little follow-up to ensure businesses achieved the intended purposes of the programs,” the legislative budget assistant’s performance audit of the Division of Economic Development in the Department of Resources and Economic Development said (click here to view the report).

The division told auditors that it lacks the resources to properly do the job, with many key positions eliminated or left vacant in the last budget.

“As the report mentions, the position of the finance administrator, who provided support for the tax incentive programs, was eliminated in the previous budget cycle,” according to the division. “This had a significant impact on the management of the program, particularly given the vacancies in two other upper-level management positions, including the director’s position.”

The agency said it has assigned a management-level person to oversee the programs and develop consistent procedures to evaluate applications.

Greg Moore, state director for Americans For Prosperity, said the audit comes on the heels of reports outlining financial control problems at the Liquor Commission and the Fish and Game Department.

“This latest audit is just one more example of an executive branch that has been led by governors in recent times who were more committed to an Ahab-like quest to grow government and who have forgotten that making sure there is accountability for the use of taxpayer dollars must be a priority,” said Moore. “The lack of financial controls across state government is stunning ... New Hampshire taxpayers deserve better.”

The auditors found that the lack of supervisory review and control put the economic revitalization and job credit programs at risk of abuse. There is also no mechanism in the laws that created the programs to recover any money due the state as a result of the erroneously issued tax credits.

The audit said the Division of Economic Development did not enter into contracts with the businesses spelling out the terms or the duration of the credits, and said the state “appeared to have no contractual authority to recover tax credits if a business eliminated jobs or moved immediately after receiving the ERZ tax credit.”

Auditors found that three businesses were awarded $305,100 in credits although there was inadequate wage documentation to determine the proper award.

In another case, one company missed the application deadline but was awarded $188,200 in credits in the subsequent tax year, which the auditors said does not appear to be permissible under the law.

Also, three companies were incorrectly limited to $200,000 in tax credits when the law allows up to $240,000.

The auditors noted that companies should have received $121,000 in business tax credits that were not awarded during the two-year period.

“By awarding a business more than it qualified for, the division effectively prevented another business from receiving the proper amount of tax credits,” the auditors wrote.

Auditors found the Division of Economic Development needs to establish a new economic development plan and create a way to evaluate the effectiveness of its activities.

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