The Maryland Technology Development Corp. did not properly verify that $11.2 million in state stem cell research grant funds were spent as intended, according to a new legislative audit, but Tedco officials dispute the finding.

The report from the Office of Legislative Audits, released Monday, said Tedco lacked adequate monitoring procedures and controls on the grants. A similar finding was listed in the agency’s 2009 audit report. In addition, grant recipients that should have repaid money to the state under their agreements had failed to do so.

Tedco officials agreed with the latter finding and said more needs to be done to ensure repayments by recipients, but they disagreed with the finding about flawed monitoring procedures.

With state legislators vowing to crack down on agency audits that have repeat findings of problems, Tedco officials pushed back against the auditors.

In an appendix to the report with Tedco’s response, Robert A. Rosenbaum, the agency’s president and executive director, said Tedco officials think its current monitoring processes, which require documentation and verification from third parties at the recipients instead of the principal research investigators, ensures the grant funds are used for their approved purposes.

Although the monitoring process was not the same as recommended three years ago by the auditors, Tedco officials think the monitoring process it implemented met the auditors’ objectives, John Wasilisin, Tedco’s COO, said Monday.

“We believed that in good faith we were doing what [the auditors] asked us to do and that we went above and beyond what they asked us to do,” he said.

The latest finding should not be considered a repeat finding of problems because the auditors were asking for more than they had in their previous audit, Wasilisin said.

”Sometimes it’s a subjective opinion if it’s a repeat finding or not,” Rosenbaum said in an interview. “We thought we addressed it. But when you put in the repeat word, we’ve got to dispute that.”

There has never been a finding that money was improperly spent, Rosenbaum said.

Thomas J. Barnickel III, acting legislative auditor, said in a telephone interview that Tedco officials had agreed to make changes after the 2009 audit to ensure more detailed reports from the grant recipients on how the money was spent.

“They told us last time this is what they were going to do. They decided to take another option which in our opinion does not sufficiently verify the expenditures and that’s why we have a repeat finding,” Barnickel said.

In addition, the audit found that grant recipients did not report revenues as required so that profitable new technologies developed with assistance from the grant funds could be repaid, according to the audit. In a test of 10 technology development grants totaling $775,000 that were subject to repayment, nine of the grant recipients had not submitted all of the required revenue reports.

“The state should get a cut of the action, but without getting these reports we’re not sure what is the state’s due,” Barnickel said.

cford@gazette.net