Purpose

To determine if Empire State Development (ESD) monitors the effectiveness of its international offices and manages payments to foreign representatives to ensure they are made only for authorized contract purposes. Our audit scope period was April 1, 2010 through October 17, 2012.

Background

ESD's International Division is responsible for promoting international trade and investment initiatives to improve global competitiveness for New York State companies. The International Division helps businesses increase exports and expand visibility of their business in the global marketplace; and develops and maintains a network of partners worldwide to attract foreign direct investment and create jobs for New Yorkers. This is accomplished through contracts with foreign representatives who assist businesses in these activities. Between April 1, 2010 and March 31, 2012 ESD paid its foreign representatives $2.7 million to manage ten international offices. ESD has recently scaled back its international presence and closed offices in Australia, Brazil, Chile, China, Mexico and Turkey. ESD still has foreign representatives operating in Canada, Israel, South Africa and the United Kingdom.

Key Findings

• ESD does not have an appropriate performance monitoring system in place to evaluate foreign representatives' activities against contract requirements. Instead, performance reporting and monitoring efforts appeared to be informal and ad-hoc at best throughout most of the audit period. Lack of more rigorous performance monitoring may have contributed to poor results from certain international offices. ESD has recently implemented a new system called the Client Resource Management System to assist in the monitoring of these contracts.
• ESD has made significant improvements in managing payments to foreign representatives and correcting deficiencies found in a 2011 OSC review of payments. These improvements include requiring adequate documentation, such as bank statements and vendor invoices, to support the expenses claimed by the foreign representatives.

Key Recommendations

• Monitor international office contracts to ensure that international offices are meeting contract requirements and are operating to benefit New York companies and New York State economy.
• Ensure that foreign representatives are only reimbursed for actual and necessary expenses incurred in the operation of international offices.

Other Related Audits/Reports of Interest

Empire State Development Corporation: Personal and Miscellaneous Services Contracts (2009-S-62)
Empire State Development Corporation: Funding Commitments for Economic Development Projects (2008-S-162)