Overview
The Massachusetts Office of Business Development (MOBD) did not have documented procedures outlining how to track diversity-related metrics regarding its program applicants. Because of this, it could not provide us with evidence that it met its goal to encourage businesses owned by people within minority groups, women, veterans, and people with disabilities to apply for its Economic Development Incentive Program (EDIP) and/or Massachusetts Vacant Storefront Program (MVSP) tax credits.
In addition, we reached out to the Supplier Diversity Office (SDO) to inquire about the certification status of the 39 unique businesses that applied for MOBD’s EDIP and MVSP tax credits during the audit period. SDO confirmed that none of MOBD’s applicants had a certification as a business owned by people within minority groups, women, veterans, and people with disabilities. While small businesses are not required to register their ownership status with SDO, SDO has a database of businesses that choose to make their certification type (e.g., a business owned by people within minority groups, women, veterans, or people with disabilities) public, which would help MOBD when it reviews applications to the EDIP and/or the MVSP.
If MOBD does not have documented procedures that outline how to track diversity-related metrics regarding its program applicants and therefore does not track diversity-related metrics, then it cannot monitor its progress in meeting its goal to encourage businesses owned by people within minority groups, women, veterans, and people with disabilities to apply for its EDIP and MVSP tax credits. This in turn means that these businesses may miss valuable opportunities to succeed in Massachusetts.
Authoritative Guidance
MOBD listed the following goal in the “Goals & Initiatives” section of its EDIP Fiscal Year 2020 Annual Report:
Encourage minority-owned, women-owned, veteran-owned, and disabled-owned businesses to seek tax credits in both EDIP and Vacant Storefront Program. Keep track of metrics and report to agency diversity officer.
MOBD listed the following goal in the “Goals & Initiatives” section of its EDIP Fiscal Year 2021 Annual Report:
Continue to encourage minority-owned, women-owned, veteran-owned, and disabled-owned businesses to seek tax credits in both EDIP and Vacant Storefront Program. Explore ways to enhance tracking of key metrics associated with program participants.
Reasons for Issue
MOBD officials told us that, while MOBD conducts general outreach presentations to municipalities, MOBD does not directly perform outreach to encourage businesses owned by people within minority groups, women, veterans, and people with disabilities to seek tax credits in the EDIP and/or MVSP. Instead, MOBD encourages its municipal contacts to seek out businesses owned by people within minority groups, women, veterans, and people with disabilities. MOBD did not provide procedures to municipalities to measure how they encouraged businesses owned by people within minority groups, women, veterans, and people with disabilities to seek tax credits through either the EDIP and/or the MVSP.
MOBD officials also told us that they are not authorized to collect diversity-related metrics from applicants unless MOBD received prior approval to do so from the Massachusetts Commission Against Discrimination, the Massachusetts Office on Disability, the Human Resources Division, or the Office of Diversity and Equal Opportunity. MOBD did not pursue this approval before establishing its goals, nor did it pursue this approval once it learned it was required to obtain such approval.
The Executive Office of Economic Development’s compliance and internal control officer informed us that MOBD’s legal counsel determined that MOBD was not authorized to collect any diversity-related metrics from applicants through any methods other than the option to self-identify, either during the application process or through other interactions between MOBD regional directors and the applicants. Regarding the collection of diversity-related information, MOBD was acting based on the determination from MOBD’s legal counsel. During the audit period, MOBD continued to explore whether it could collect diversity-related metrics from applicants on the basis that collecting this information will serve a legitimate program goal.
Recommendations
- MOBD should pursue approval from appropriate state agencies so that it can collect diversity-related metrics from applicants to its EDIP and MVSP.
- MOBD should develop, document, and implement procedures to measure the outreach performed regarding the EDIP and the MVSP to businesses and track diversity-related metrics to ensure that it meets its program goals.
- MOBD should work with SDO to identify businesses owned by people within minority groups, women, veterans, and people with disabilities that could benefit from the EDIP and the MVSP.
Auditee’s Response
MOBD is not required to track diversity-related metrics for EDIP applicants. MOBD’s 2020 and 2021 Annual Reports did state that MOBD would attempt to track diversity of program applicants, as part of an overall effort to promote a diverse, equitable and inclusive business environment.
During the audit period, MOBD considered how it could most appropriately promote EDIP to diverse businesses. MOBD continues to evaluate what types of information may be useful to collect from companies to improve and track program outcomes in line with its mission to help businesses make investments and create new jobs in Massachusetts and its goal of ensuring that EDIP benefits are equitably allocated. MOBD will work with the Executive Office of Economic Development (EOED) to identify and implement best practices regarding the collection of diversity-related metrics from grantees and applicants to the EDIP.
Auditor’s Reply
In its response, MOBD stated that it is “not required to track diversity-related metrics for EDIP applicants.” However, according to its response, MOBD intended to track these metrics to determine whether it performs effective outreach to “promote a diverse, equitable and inclusive business environment.”
There may not be a law, regulation, or policy requiring MOBD to track diversity-related metrics for either the EDIP and/or the MVSP. Nevertheless, MOBD felt strongly enough about the importance of this initiative—that is, encouraging businesses owned by people within minority groups, women, veterans, and people with disabilities to apply for tax credits through these programs—that it published goals related to this initiative in its publicly available EDIP Fiscal Year 2020 and 2021 Annual Reports. Plus, in its “Goals & Initiatives” section of its EDIP Fiscal Year 2021 Annual Report, MOBD stated that it intended to “explore ways to enhance tracking of key metrics associated with program participants.” We also consider it to be a best practice for agencies to track progress toward goals they have set, so they can support improvement in areas that are deemed important enough to establish goals to improve.
In its response, MOBD indicates that it is not required to meet the goals it sets for itself and publishes in its reports. We applaud MOBD for setting its goal to increase participation in the EDIP and MVSP by businesses owned by people within minority groups, women, veterans, and people with disabilities. However, we reiterate that MOBD should track its progress toward meeting this goal. Additionally, MOBD’s legal department notified the agency of the requirement to obtain approval to collect diversity‑related metrics from applicants, and MOBD did not provide us with any evidence confirming that it sought this approval in an attempt to measure whether it was meeting its goal.
We strongly encourage MOBD to implement our recommendations.
| Date published: | July 2, 2024 |
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