A sample of 57 businesses’ records reviewed by the Vermont state auditor found that fewer than half showed financial losses big enough to justify grants they received from the state’s Covid-19 Emergency Economic Recovery Grant Program.
In a new report, Auditor Doug Hoffer argued that the state was wrong to use revenue loss as its measurement when the Agency of Commerce and Community Development distributed $117 million in federal funds to 2,278 businesses.
Although the state was acting within federal guidelines, the agency did not take into account the fact that businesses also saved on expenses, Hoffer said in the report.
Instead, the agency should have used net operating income, Hoffer said. He calculated that had the agency used that measure, it could have saved 90% of the funds it spent.
Decreased expenses during the pandemic-related shutdowns combined with an infusion of Emergency Economic Recovery grants meant that two-thirds of the 57 businesses sampled were more profitable in 2020 than in 2019, Hoffer said.
He argued that money spent on businesses that did relatively well in the pandemic deprived other businesses at risk of failure of needed support.
And he contended that since the $117 million was not used prudently, the federal government would be within its rights to ask Vermont taxpayers to pay back the money.
The report also found that the commerce agency did not screen business applications properly.
“As a result of these issues, we identified numerous instances where ineligible businesses received awards,” Hoffer’s report said.
For example, recipients had to have paid all taxes or have a payment plan in place for back taxes. But 49 out of 80 businesses sampled were not in good standing on their taxes in March 2021. These 49 businesses received $2.7 million in emergency grants.
The auditor also found that the agency did not calculate awards based on actual revenue losses, but rather as 10% of 2019 revenues.
In a letter responding to the report, Secretary of Commerce Lindsay Kurrle promised to look into the handling of individual grants, but defended her agency’s disbursement process.
“This program was administered under a State of Emergency and had to be swift in its delivery of funds to businesses to prevent and avoid massive closures,” Kurrle wrote.
In an interview with VTDigger, she insisted that her agency applied the correct methodology to disburse loans.
“We stand by the work we did during this once-in-a-century crisis,” Kurrle said. “This particular review [by Hoffer] was done through a lens that was different from the one we used to run the program.”
“If it appeared somebody didn’t qualify for what we thought they did originally, we reached out and made attempts to recover money and recovered money in some cases,” Kurrle said.
Hoffer said Kurrle’s agency “ignored the substance of our findings.”
“That was disappointing,” he said in an interview. “It’s almost as if they’re trying to create a separate narrative. No question, it was a crazy time.”
The agency was warned about some of the risks of misspending money in the first round of emergency response grants to 401 businesses last year, he said, and still has not addressed those concerns.
Kurrle said her office listens to the auditor and is considering adopting his suggestions in future emergency grants to businesses.
