Maryland awarded $34 million in tax credits to eight companies without verifying whether the companies qualified for the money, according to an independent audit of the state’s Department of Business and Economic Development.
The economic development agency awarded the tax credits based on how much the companies spent on project or startup costs — expenses associated with expanding or building new facilities in the state.
But the agency did not require all applicants to provide documentation of those costs, the audit by the state’s Office of Legislative Audits found.
The audit also found that the economic development agency failed to recover a $250,000 investment it made in a technology company that closed its Rockville office and moved out of the state less than a year after collecting the money.
Prompted by the audit, the agency sent ClassifEye management a letter “to let them know we want to recoup those funds,” which now add up to $325,000 with interest, said Karen Glenn Hood, spokeswoman for the agency.
The tax credit program, called the One Maryland Tax Credit, was approved by the General Assembly in 1999. The Department of Business and Economic Development awarded a total of $65.8 million in One Maryland tax credits to 17 companies between fiscal 2008 and fiscal 2010. The auditors reviewed 10 of those companies and determined that only two had provided documentation on their project and startup costs.
Department of Business and Economic Development officials said they saw no problem with trusting that applicants were self-reporting their expenses accurately.
“We have always requested that businesses certify, by signing the application, that under penalty of perjury [they] affirm that this information is correct,” Hood said.
Auditors have reviewed the program many times and “they never had any concerns about it until this most recent audit,” she said.
Auditors are now asking the agency to tighten its regulations and require applicants to detail their project and startup costs with documentation, which Hood says they have done.
