State auditors fault DECD’s handling of loans and grants

State auditors reported Wednesday that the state Department of Community and Economic Development ignored or misinterpreted state law in administering millions in grants and loans during the administration of Gov. Dannel P. Malloy.

The legislature’s bipartisan Auditors of Public Accounts highlighted grants to two unidentified companies: one that received $16 million, when it was eligible for $10 million; and another that was granted $20 million, when it qualified for $10 million.

The auditors faulted how the DECD interpreted the rules requiring job creation and the private share of investment in expansions partially underwritten by state grants and loans. It also challenged the appropriateness of $23 million in loans forgiven by the agency.

The report examined the 2015 and 2016 fiscal years, when the agency distributed $112 million in grants and $324.5 million in loans to 576 companies in a variety of programs intended to induce expansion in Connecticut by small businesses and major corporations.

The audit is the latest in a series the General Assembly mandated in 2017 to test the effectiveness of the DECD’s procedures and more broadly measure the benefits derived by the hundreds of millions of dollar in grants and loans it disburses. All have been critical.

It comes as the auditors have delayed assessing the DECD under Gov. Ned Lamont, an acknowledgement that the new administration is overhauling the incentives it offers companies to locate or expand in Connecticut.

“We’re trying to focus on rewarding companies for investing or creating jobs as opposed to providing the funds up front and getting into these contractural obligations,” said David Lehman, the new commissioner of economic development.