NON-PROFIT ORGANIZATIONS; MUNICIPALITIES; ECONOMIC DEVELOPMENT DEPARTMENT; ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT; BUSINESS (GENERAL);

ECONOMIC DEVELOPMENT;

You wanted to know how the Department of Economic and Community Development (DECD) assigns staff to monitor the businesses and municipal and nonprofit organizations it funds.

SUMMARY

DECD assigns monitoring duties mainly to the managers who daily review and oversee projects. These managers are located in two divisions responsible for projects implemented by businesses and municipal and nonprofit organizations, respectively. These divisions have approximately 34 staff that who are currently working on about 100 funding applications and managing 182 approved projects.

The managers use project plans, budgets, and contracts to determine if funds were properly spent, projects are being completed on schedule, and, where appropriate, the required number of jobs have been created. They also rely on a private portfolio manager to advise them as to whether the organizations implementing the projects have incurred any legal or financial liabilities that could jeopardize them.

The managers must conduct at least one field visit during the life of each project and assess it using a standard assessment tool. They rely on staff from other divisions to conduct more specialized monitoring,

such as reviewing audit reports or tracking the progress of construction projects. After a project is completed, DECD continues to monitoring the organization until it repays the state assistance, meets its job creation goals, and fulfills its other contractual obligations.

DECD’S MONITORING APPROACH

DECD provides different types of financing to businesses, municipalities, and nonprofit agencies mainly for physical development and job training projects. In doing so, it integrates monitoring, oversight, and compliance tasks in its process for reviewing, approving, and funding these projects, Deputy Commissioner Rita Zangari explained. Most of these tasks are performed by project managers in its Business and Economic Development (BED) and Infrastructure and Real Estate (IRE) divisions. These managers prepare and revise annual monitoring plans for each project in addition to reviewing project applications, plans, budgets, and assistance agreements.

DECD’s guidelines specify three principal monitoring tasks, which stress fiscal oversight:

• determine if recipients are complying with laws, regulations, contractual terms, and project financing plans and budgets;

• ensure that they use sound fiscal and project management practices as they implement their projects; and

• determine if recipients are properly managing DECD funds and spending them for their intended purposes (Economic Development and Manufacturing Assistance Act and Urban Action Grant Monitoring Guidelines, DECD (undated), p. 1; Attachment 1).

The guidelines also recognize two distinct phases: project planning and implementation (first phase) and post project compliance (second phase). During the first phase, DECD monitors the way recipients plan the project and spend funds to complete it. During the second, it monitors recipients to insure that they repay the loans, meet applicable job creation goals, continue operations at the project site for at least 10 years, and meet other contractual terms and conditions.

STAFFING PATTERN AND WORKLOAD

The project managers and other staff in BED (24) and IRE (10) are primarily responsible for monitoring projects while they are being implemented. But they rely on staff in other divisions to conduct more specialized monitoring, such as reviewing audit reports or assessing the progress made on construction projects. BED primarily makes loans, loan guarantees, and other types of financing to businesses mainly for acquiring land and preparing land, constructing or expanding facilities, purchasing machinery and equipment, or training employees. It also manages nonreal estate projects funded under the Urban Act and Small Town Economic Assistance Programs. IRE grants or lends funds to municipalities or nonprofit agencies for developing business property or cultural, entertainment, or tourist attractions.

The Asset and Audit Management (AAMD) and Finance and Administration (FAD) divisions do most of the monitoring after a project is completed, using computer data bases that alert staff when financial reports, loan payments and monitoring visits are due. In doing so, they shift the focus from the project to the organization that received the funds to implement them. They ensure that the organization repays the state assistance and meets applicable job creation goals.

The divisions are currently processing about 100 applications and actively monitoring about 182 projects representing about $ 247 million in state and private investments.

TYPES OF MONITORING

DECD assigns each approved project to a manager, who must prepare a plan to monitor it while it is being implemented. The plan must show how the manager will (1) track the way the implementing organization spends the DECD funds, (2) determine if it has incurred any debts or liabilities that could jeopardize the project, and (3) verify whether the organization used the funds for the intended purposes. The manager must annually review the plan and revise it if necessary.

Monitoring Financial Expenditures

DECD uses several procedures to monitor the way recipients spend funds. Municipal and nonprofit organizations must submit semiannual expenditure reports to AAMD, which forwards them to the appropriate project manager for review and analysis. The managers also receive invoices that exceed 10% of a project’s costs.

Businesses recipients must complete a “close-out audit” within 90 days after the date they said they would spend the funds. In doing so, they must follow the AAMD audit guide. AAMD reviews the audits and notifies the project’s manager about any outstanding issues he must resolve. Municipal and nonprofit organizations must include their projects in the statutorily required single audit.

Recipient’s Financial Condition

DECD also monitors whether a business recipient has incurred any debts or liabilities that could jeopardize the project and the recipient’s ability to repay the state funds. It hired an independent portfolio advisor (Bennington Partners) to conduct this monitoring.

A business’ failure to repay loans or met job creation goals triggers a workout process, during which the managers and DECD’s financial experts conduct a full financial review of the project. Depending on the causes of the problem, DECD and the business might change the payment terms, reduce the job creation goals, or adjust the schedule for accomplishing those goals. Or, DECD might penalize the business for failing to comply with the assistance agreement’s terms and conditions.

The single audits submitted by municipal and nonprofit organizations give AADM enough information to spot similar problems and concerns. AADM notifies the project managers about any problems, and they work with the organizations to resolve them.

Project Monitoring

Project managers must verify that the recipients are using the funds for the purposes specified in the project financing plans and budgets. They must visit each project site at least once during the project’s life and conduct field visits using the “Financial and Compliance Monitoring Guide Checklist. ” The managers arrange for IRE staff to monitor construction projects since this division has more expertise with respect to these types of projects.

Close-Out and Completion

Organizations notify DECD when they complete their projects, and managers must that verify they actually did. Managers cannot issue the required Certificate of Project Completion until they have verified how the organizations spent the funds, assessed their financial condition, and determined if they met any applicable job creation goals.

DECD’s oversight does not end after a project is completed. The time period for repaying loans and creating jobs often extends beyond the completion date, and AAMD continues to monitors the organizations for these purposes. The organizations are also statutorily bound to remain in the state for at least 10 years after receiving assistance or pay a penalty. The Finance and Administration Division (FAD) collects and monitors loan payments.

DECD’s oversight officially ends when it releases an organization from all financial agreements and contractual arrangements. It does this after:

1. the project manager issues a certificate of completion;

2. FAD recommends releasing the recipient from all liens and mortgages;

3. AAMD states that there are no outstanding compliance issues; and

4. DECD’s attorneys review and approve the release document, which prepared by AAMD.

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