Sloppy practices at the Maryland Department of Business and Economic Development led to companies walking away with taxpayer dollars or qualifying for tax breaks without living up to their end of investment agreements, an audit has revealed.

The department awarded $34 million in tax credits to eight companies without collecting any documentation of the project and startup costs on which the credits were based, according to the audit. DBED officials also decided not to enforce an investment agreement with an international technology company, which received $250,000 to keep its headquarters in Maryland for five years, but left after just one.

The Office of Legislative Audits report, released publicly this week, also revealed that DBED collected no regular reports from two groups that received $17.4 million in grants from fiscal 2007 to fiscal ’09.

“Obviously all of these things are of concern,” said Sen. James C. Rosapepe (D-Dist. 21) of College Park, co-chairman of the legislature’s Joint Audit Committee. “The department agreed with the auditors that they were sloppy and needed to tighten things up.”

Del. Guy Guzzone (D-Dist. 13) of Columbia, the other co-chairman, said he is paying close attention to the report, though he couldn’t say whether a more thorough investigation would be launched.

An audit of 10 applicants to the One Maryland Tax Credit program found that eight companies were approved to receive the $34 million in tax credits without providing documentation of their investments or job creation numbers. The program requires companies receiving the credit to create at least 25 jobs within two years.

The state’s comptroller told auditors that four of the companies that provided no documentation for the credit received a combined $11.7 million in tax breaks from 2006 to 2009.

In a response included in the audit report, Secretary Christian S. Johansson said DBED has taken steps to fix the shortcomings.

Spokeswoman Karen Glenn Hood said the department has always collected applications that are signed under penalty of perjury before companies qualify for a tax credit. Requiring additional paperwork from applicants is a new recommendation from the auditors and the department already has changed the application process to comply.

Hood also said the state already was working with the tech firm, ClassifEye, to recover the state’s investment before the audit, but wrote the demand letter at the auditors’ request.

DBED told auditors that no demand letter was sent earlier because ClassifEye’s website still listed Montgomery County as its address and because the company president said he wanted to return to the state when the economy improved.

“If they didn’t make the investment, they need to give the money back,” Rosapepe said.

The state is asking for $325,000 back to cover the initial investment, plus interest. No payment had been received as of Thursday.

Guzzone said the failure to require regular grant reporting was particularly troubling because it was also cited in a 2008 audit of DBED.

“It’s always disappointing when there are repeat findings,” Guzzone said. “This is why we’ve got our auditors. They’re going to make sure there’s a higher level of accountability.”

Hood said DBED has been working to unify reporting requirements for all of its individual grant programs, but needs more time.

dgaines@gazette.net