BOSTON — Today, State Auditor Diana DiZoglio’s Office released an audit of the Massachusetts Growth Capital Corporation (MGCC), which reviewed the period from March 1, 2020 to June 30, 2022.
Since its inception within the state’s Executive Office of Economic Development (EOED) in 2010, MGCC’s mission has been to support small businesses through financing and managerial assistance to create economic opportunities for all.
MGCC works with local banks and lending institutions, community development corporations, and other nonprofit organizations to finance projects that produce jobs in economically distressed communities across Massachusetts. It also provides loans to organizations that, for a variety of reasons, cannot obtain financing from traditional sources. MGCC manages a grant program for community development organizations that provide training and technical assistance to small businesses, including small contractors.
This audit examined whether MGCC properly administered the COVID-19 Small Business Relief Grant Program (SBRGP) to ensure that funds were distributed to eligible businesses within eligible industries and that priority was given to businesses serving gateway cities and owned by traditionally underserved groups such as people of color, women, and veterans.
The audit revealed that, during this audit period, MGCC distributed grants in excess of amounts allowed by their contract with EOED. This could result in misuse of taxpayer dollars and/or less funding available for other programs. Additionally, MGCC did not consistently apply priority scoring for Sector Specific applicants.
By not consistently applying priority scoring from businesses that, for example, serve gateway cities and businesses owned by people of color, women, and veterans, applicants that might be entitled to receive grants earlier under the terms of a contract might not receive priority. If the funds are insufficient, some applicants might not receive a grant at all.
Moreover, the audit found MGCC provided grants to ineligible entities, which may result in misuse of taxpayer funds and less funding for permissible state programs. MGCC also did not provide information security training to its employees responsible for managing and accounting for COVID-19 SBRGP funds; did not file COVID-19 SBRGP reports by required dates; and did not properly reconcile all COVID-19 SBRGP funds that it received. If MGCC does not reconcile all of its funding, then there is a higher-than-acceptable risk that MGCC cannot identify any potential misappropriation of funds.
“The Massachusetts Growth Capital Corporation is an important resource for our small businesses, including those that are BIPOC-owned, women-owned, veteran-owned, and Gateway City-based,” said Auditor DiZoglio. “These findings reveal a need for this administration to right the wrongs that occurred under the previous administration to better serve our communities and protect taxpayer dollars. MGCC has indicated that it will work to improve upon the areas recommended by our audit team and we look forward to our post-audit review in roughly six months to track progress.”