Audit of the Massachusetts Growth Capital Corporation Overview of Audited Entity

This section describes the makeup and responsibilities of the Massachusetts Growth Capital Corporation.

Overview

The Massachusetts Growth Capital Corporation (MGCC) was created within the Executive Office of Economic Development (EOED) on October 1, 2010, under Chapter 40W of the Massachusetts General Laws through the merger of the Massachusetts Community Development Finance Corporation and the Economic Stabilization Trust Fund.

According to its website, MGCC’s mission is to “[empower] Small Business through financing and managerial assistance to create economic opportunities for all. MGCC provides and supports inclusive business resources to organizations across the Commonwealth.”

To accomplish its mission, MGCC works with local banks and lending institutions, community development corporations, and other nonprofit organizations to finance projects that produce jobs in economically distressed communities throughout the Commonwealth. It also provides loans to organizations that, for various reasons, cannot obtain financing from traditional sources. Finally, MGCC manages a grant program for community development organizations that provide training and technical assistance to small businesses, including small contractors.

MGCC is overseen by a 12-member board that is chaired by the Secretary of Economic Development and has a designated seat for the Secretary of Administration and Finance or their designee. The Governor appoints the other 10 board members. This board meets to vote on debt financings, loan portfolio reviews, grant approvals, and MGCC expenditure decisions. The board is governed by Section 2 of Chapter 40W of the General Laws.

MGCC is located at 529 Main Street in Charlestown. As of June 30, 2022, MGCC had 18 full-time employees. Employees are responsible for underwriting proposed loans, administering grant programs, marketing loan and grant programs, managing and approving lines of credit, and performing other accounting activities.

Pandemic Relief Contracts

During fiscal year 2021, because of the urgent need to help thousands of small businesses in Massachusetts during the COVID-19 pandemic, MGCC was awarded approximately $752,100,000 through eight federally funded contracts with various Massachusetts agencies. As of June 30, 2022, MGCC had received $751,856,500 from those contracts and distributed $702,754,582 in total to approximately 15,000 small businesses throughout the Commonwealth.

COVID-19 Small Business Relief Grant Program

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). The larger contract, which included two amendments, comprised a total of $650,000,000 in federal funds and was signed on December 31, 2020, with the final amendment executed on February 2, 2021. The smaller contract for $17,500,000 in state funds was executed on January 4, 2021. 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.

Under the COVID-19 SBRGP, funding was to be assigned by scoring applications and adding points for businesses that could be characterized in the following ways: businesses serving Massachusetts gateway cities;¹ businesses owned by people of color, women, and veterans; businesses that had not received aid related to COVID-19; and businesses from Sector Specific industries² adversely impacted by COVID-19. Eligibility requirements for grant funds included the following:

• The business must be located in Massachusetts and be part of an eligible industry.
• The business must be able to document a loss of income because of the COVID-19 pandemic that is equal to or greater than the requested grant funding.
• The business must currently be in operation and have been established before June 30, 2019.
• The business must be in good standing with the state and municipality, be current on taxes through March 1, 2020, and be in possession of valid state licenses/registrations, if applicable.

MGCC received 19,070 applications for the COVID-19 SBRGP and awarded grants to 14,066 applicants. These 14,066 applicants who were awarded grants belonged to one of the following five categories:

• businesses with five or fewer employees;
• businesses with 50 or fewer employees;
• businesses from Sector Specific industries impacted by COVID-19;
• businesses that were part of MGCC’s small business recovery loan forgiveness program; or
• businesses from Sector Specific industries that resubmitted grant applications.

MGCC accepted applications for the program from October 2020 through June 2021, and the last payments were disbursed in July 2021. Small business owners submitted applications online through MGCC’s web portal, which were then reviewed by a team of MGCC employees and contractors using a grant application system. MGCC staff members designated applications as eligible, not eligible, or incomplete. They also worked with applicants to correct mistakes or gather missing documents for the application using the grant application system’s message function. Completed, eligible applications went through this system in stages (Eligibility, Application, and Approval); MGCC staff members reviewed applications at each stage. Applicants attached required documents (e.g., tax returns, Internal Revenue Service Forms W-9, state Certificates of Good Standing, and/or municipal business certificates) to the application and MGCC employees verified applicants’ declarations against their tax returns. The MGCC financial analyst reviewed completed applications in LexisNexis³ for possible criminal history, fraudulent Social Security numbers, and addresses. MGCC grouped applications as they approved them and periodically sent these groups of applications to EOED for final approval throughout the duration of the program.

The COVID-19 SBRGP grants were distributed to various businesses in different towns and cities across Massachusetts. A total number of 324 towns and cities, many of which were gateway cities, received grants. A breakdown of the top grant recipients is in the Appendix.

Grant Receipts and Control Process

Once EOED gave its final approval of COVID-19 SBRGP applications, the MGCC controller produced an invoice for each group of approved applications and sent this invoice along with a request for funding to the EOED grants manager. The EOED grants manager sent the requested funds through a wire transfer to MGCC. Once MGCC received these funds, the MGCC controller recorded the receipts in the MGCC accounting system. MGCC used this accounting system to post grant receipts and disbursements. The MGCC controller recorded the COVID-19 SBRGP grant funds on this accounting system using a code to identify them. The MGCC controller also updated the accounting system as receipts for awarded grant funds were posted.

COVID-19 SBRGP Reporting

As part of the COVID-19 SBRGP contract requirements, MGCC was required to submit both initial and final financial and program reports to EOED. MGCC was required to include certain program information in these reports. This information could include, but was not limited to, the following: the number of businesses awarded grants, along with award amounts; business industries represented by grant recipients; the types and number of priority groups, such as people of color, women, and veterans, that were awarded grants; and the number of businesses in gateway cities that were awarded grants. MGCC was also required to include outcomes (e.g., job creation and local economic impact) in these reports.

MGCC Information Security Training

MGCC has a Written Information Security Policy (WISP). According to this WISP, its purpose is to ensure that information security training is provided to all employees. The WISP states that it, and the procedures outlined within it, will be supported by training and awareness programs and that training will be provided on an ongoing basis beginning with new employee and user orientation. The senior management group reviews the WISP annually or when business, technical, or legal circumstances dictate. All MGCC employees are required to provide their signature, confirming that they have read MGCC’s WISP.

1.   Section 3A of Chapter 23A of the General Laws defines a gateway city as “a municipality with a population greater than 35,000 and less than 250,000 with a median household income below the commonwealth’s average and a rate of educational attainment of a bachelor’s degree or above that is below the commonwealth’s average.” There are (26) gateway cities in Massachusetts, which are Attleboro, Barnstable, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Revere, Salem, Springfield, Taunton, Westfield, and Worcester.

2.    Sector Specific industries included bars, restaurants, retail stores, hair salons, and barbershops.

3.    LexisNexis is a global information and analytics company that provides decision tools and analytics products. 

Date published:	August 28, 2024