HOUSTON — An audit conducted by the city controller has raised questions about the oversight of a $55 million economic development program. The audit noted problems with documentation surrounding the program, reimbursements being paid out without proof of conditions being met, and waivers granted without clear explanation.
“There’s no real active monitoring over this program,” said Max Moll, spokesman for Houston Controller Chris Brown. “The statute is silent on monitoring. From our perspective, if we’re trying to be effective watchdogs over taxpayer dollars, monitoring should be a key component.”
The program is administered by the Mayor’s Office of Economic Development.
Essentially, the program allows for businesses with ideas geared toward spurring growth in Houston to apply — with an eye toward specific projects such as a technology idea, or even a new grocery story in an underserved area.
The audit found:
- Four of the five companies selected and examined by auditors did not meet their agreed conditions or commitments either partially or fully, prior to receiving reimbursements from the city. In one instance, the company sent documentation to support compliance, “however, further review revealed the documents sent for compliance did not meet the conditions outlined in the agreement. One of those conditions was ‘Job Creation,’ which is a crucial component to economic development and the terms agreed upon for reimbursement,” according to the audit.
- One of the ten projects reviewed did not have documentation in the project files of the initial applicants’ application for assistance. Eight of 10 had only partial documentation. Six of the 10 projects did not have documentation showing the applicant paid the required application fee or that the Economic Development Director waived the fee.
- Inconsistencies and in some instances a lack of documentation to determine eligibility, as well as Insufficient documentation contained in the project files reviewed. “For example, some projects only had handwritten notes as documentation, which at times were illegible,” the audit notes.
“The documentation does seem to be a bit loose, which, as the taxpayer watchdog is certainly concerning for us,” Moll said. “Reimbursements being paid out before there was clear proof of conditions or commitments met is certainly concerning from our perspective because, again, we are the financial watchdog. We shouldn’t be reimbursing folks without clear proof that the agreements were satisfied and the conditions were met.”
In general, officials with the Office of Economic Development agreed with the findings and outlined some plans to shore up the process of this economic development program known as the 380 program.
“The Mayor’s Office is in the process of reviewing the controller’s Chapter 380 performance and compliance audit,” a statement from City Hall reads in part. “The engagement scope for the 27 in-progress and completed project agreements began from the inception of the ordinance in July 1999 through December 31, 2015, before Mayor Turner took office. Since taking office, Mayor Turner has made a number of improvements to ensure a more efficient operation of city departments and programs.”
“We look forward to the continued review of the recommended best practices and agree there may be additional opportunities to enhance documentation and internal controls.”
It’s called the 380 Program because the state legislature passed Chapter 380 of the Texas Local Government Code in 1989, which authorizes municipalities to establish economic development programs.
Trent Seibert can be reached at [email protected] or at 832-258-6119.