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Some of the Performance and Outcome Information That Massachusetts Growth Capital Corporation Reported Was Inaccurate.

The audit found these inaccuracies could harm the quasi-public agency’s credibility and could discourage local businesses from using its services.

Table of Contents

Overview

Certain performance and outcome information that Massachusetts Growth Capital Corporation (MGCC) is required to report to the Executive Office of Housing and Economic Development (EOHED), as well as information in MGCC publications and in information the agency reports on its public website, was inaccurate. Specifically, we found the following:

  • MGCC overstated the number of “jobs created and saved” on its website by 2,978. Our audit test indicated that 19,204 jobs had been created and saved from the agency’s inception through June 30, 2018, but the MGCC website stated that 22,182 jobs had been created and saved.
  • During fiscal year 2018, MGCC stated on its website that the number of companies that either received a loan or were awarded a grant totaled 8,889 from the programs’ inception through June 30, 2017; however, our audit test found the correct figure to be 7,413, indicating an overstatement by MGCC of 1,476 companies.
  • In the annual report MGCC filed with EOHED for fiscal year 2018, MGCC understated the number of “jobs created and saved” for the grant program by 700. The annual report filed with EOHED listed the number of jobs created and saved as 2,257; however, our audit test revealed that 2,957 jobs were created and saved.
  • MGCC reported inaccurate dollar amounts in the grant program’s marketing brochures for “loans facilitated”7 during fiscal years 2017 and 2018. For fiscal year 2017, MGCC’s marketing brochure indicated that it had facilitated $27,257,602 in loans; however, our audit test revealed that it had facilitated $27,058,602 in loans, indicating an overstatement of $199,000 in MGCC’s brochure. For fiscal year 2018, MGCC’s brochure reported $32,850,132 in facilitated loans; however, our audit test revealed that $32,901,132 in loans had been facilitated, indicating an understatement of $51,000 in MGCC’s brochure.

By not ensuring that the information it disclosed about these activities was accurate, MGCC did not allow those who accessed the information to accurately assess the organization’s performance. Presenting inaccurate data may also harm the organization’s credibility, which could discourage some people from using its services.

Authoritative Guidance

Standards for Internal Control in the Federal Government, issued by the US Government Accountability Office and dated September 2014, contains 17 principles that must be present in an effective system of internal control. Subsection 13.05 of the section titled “Principle 13—Use Quality Information” states,

Management processes the obtained data into quality information that supports the internal control system. This involves processing data into information and then evaluating the processed information so that it is quality information. Quality information meets the identified information requirements when relevant data from reliable sources are used. Quality information is . . . accurate . . . and provided on a timely basis.

Although MGCC is not required to adhere to this standard, the Office of the State Auditor believes that it represents a best practice that MGCC should follow.

Reasons for Issue

MGCC did not have a validation or review process in place to verify the quality of the information before it was publicly disclosed. Further, MGCC lacked written policies and procedures to provide guidance for the administration of the performance and outcome data. According to MGCC management, having written procedures for gathering and reporting performance and outcome information was not considered a priority because of limited staffing.

Recommendation

MGCC should develop written policies and procedures as well as monitoring controls to ensure that its performance and outcome data are accurate.

Auditee’s Response

We agree that there were inadvertent inaccuracies that were primarily reported in MGCC marketing materials. To this end we have established a policy that all historical numbers associated with our lending and grant programs will be checked by our controller prior to being published or used.

Auditor’s Reply

The integrity of performance and outcome data is critical to evaluating the success of MGCC’s lending programs. We believe that the steps initiated by MGCC management to address our concerns will enhance the accuracy of the information MGCC reports on its website and in its marketing brochures.

7.    “Loans facilitated” represents the value of loans obtained by small businesses that received assistance from the grant recipients, such as community development corporations and other nonprofit organizations.

Date published: June 26, 2019
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