Industrial Development Agencies (IDAs) in Niagara, Tompkins and Wyoming counties failed to adequately monitor project approvals or results, according to audits issued today by New York State Comptroller Thomas P. DiNapoli.

“When taxpayers and communities are helping to incentivize and assist local economic development efforts, there must be proper accountability,” said DiNapoli. “IDAs are leveraging tax breaks in exchange for long-term jobs and future revenue for their communities, but without adequate safeguards in place the effectiveness of these efforts cannot be measured. While some IDAs around the state have begun to improve their oversight of projects, more needs to be done.”

The Comptroller’s audits, which focused on project approval and oversight, revealed:

Niagara County IDA

• IDA officials did not adequately monitor projects to determine whether the community is getting an appropriate return on its investment and whether the projects should continue to receive benefits. 
• Officials did not have an adequate process in place to track amounts billed and collected for Payments in Lieu of Taxes (PILOT). Auditors found three businesses were overbilled by more than $34,000 and four businesses were underbilled by more than $35,000. 
• Although businesses indicated intended capital investments on their applications, the IDA did not require them to submit periodic progress reports or any other documentation of their actual capital investments, and the IDA did not verify that such capital investments had been made. 

Tompkins County IDA

• Administrative and financial operations are performed by a not-for-profit development organization with oversight from the IDA board. However, the board failed to provide adequate oversight of the project approval process and could not verify that staff submitted all IDA projects for its approval. This failure raises the risk that projects could be given IDA benefits without board knowledge. 
• The IDA board was not sufficiently involved in monitoring various aspects of projects. As a result, two businesses were underbilled by more than $26,000. 
• The board received an annual report monitoring job creation and retention, but the information was based on unconfirmed reports from project owners, which is not considered a best practice. 

Wyoming County IDA

• IDA officials failed to adequately monitor their sponsored projects to ensure that they achieved, or made reasonable progress toward, targeted capital investment, employment projections or other goals stated in their applications. 
• Although businesses indicated on their project applications their intended capital investments, IDA officials did not request, nor did the businesses submit, periodic progress reports or any other documentation of actual capital investments. 
• Annual confirmation letters sent to businesses did not include requests for data needed to properly evaluate job performance. 

DiNapoli made several recommendations to each IDA. Generally, these include: 

• Establish procedures for verifying the employment information and other project performance data provided by businesses; 
• Ensure that all project agreements contain a recapture clause that would allow the IDA to recover the financial incentives provided if businesses fail to produce the intended benefits; and 
• Require project owners to annually provide information on capital investments, jobs and PILOTs. 

This year, the Comptroller’s IDA reform package was approved by both houses of the state Legislature and, if signed into law by the Governor, will address many of the concerns raised in audits over the years. The measures will increase scrutiny of IDA project applications and require project agreements to include the recapture of benefits if job creation goals are not met. Equally important, the new oversight and accountability measures will also help improve the efficiency and transparency of the operations of IDAs.

To read the Niagara County Industrial Development Agency report, visit: http://www.osc.state.ny.us/localgov/audits/ida/2015/niagaraco.pdf

To read the Tompkins County Industrial Development Agency report, visit: http://www.osc.state.ny.us/localgov/audits/ida/2015/tompkinsco.pdf

To read the Wyoming County Industrial Development Agency report, visit: http://www.osc.state.ny.us/localgov/audits/ida/2015/wyomingco.pdf

For access to state and local government spending, public authority financial data and information on 50,000 state contracts, visit Open Book New York. The easy-to-use website was created by DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.