Vermont allocated more than $50 million in federal Covid-19 stimulus money without properly conducting due diligence on the businesses and nonprofits who received that funding, the state auditor said in a new report.
The 83-page report, dated Sept. 27, raised concerns about two federally funded grants administered by Vermont’s Department of Economic Development. The state’s process for selecting projects to fund was poorly documented and opaque, the auditor found, and may have awarded money to entities that did not need it — or were ineligible.
“The Legislature intended that the program be created and provide assistance to businesses who met all the eligibility requirements. That’s fine,” state auditor Doug Hoffer said in an interview. “Just do it — but do it with some accountability, transparency and so forth. And that’s not what we found.”
The Vermont Department of Economic Development disputed much of the report, saying that the complexity of the projects funded by the programs made it difficult to apply a single assessment formula across the board.
Thanks to the grant money, “150 capital projects were done throughout the state of Vermont, all 14 counties,” said Joan Goldstein, the commissioner of the Department of Economic Development. “More than half were not-for-profit entities — you know, child care, housing, mental health facilities, theaters, agricultural facilities, mixed use facilities. There’s an awful lot of work that went into it, and we’re proud of the work that we did.”
The report focuses on two Department of Economic Development state grant programs: the Capital Investment Program and the Community Recovery and Revitalization Program. Both initiatives were funded by a total of nearly $50.6 million in pandemic aid from the 2021 American Rescue Plan Act.
The goal of the programs was to speed Vermont’s recovery from the Covid-19 pandemic and to spur economic development across the state, especially in areas with declining tax bases. For-profit and nonprofit enterprises were eligible to apply for funding for specific projects.
All of that money has been allocated, according to Goldstein, but not all has been spent. The list of selected projects includes construction, renovation and building upgrades for entities across the state: farms, housing developers, arts nonprofits, private schools and more.
But the auditor’s report said that state officials conducted minimal vetting to determine whether applicants actually needed the money — or how much they needed. Instead, the Department of Economic Development relied on the applicants themselves for that information.
Multiple grant recipients appeared to have plenty of money already, the report said. One unnamed nonprofit recipient had cash and investments worth 300 times the cost of the project, while another had money on hand that was 101 times the grant amount and 20 times the total cost of the project, according to the report.
The auditor also found that the economic development department had few records showing how it actually decided which applicants would receive money, and in what amounts. Three grant recipients told state officials that their projects would have been completed even without the awards, Hoffer said.
“The only thing we’re questioning is, are you using taxpayer money effectively and efficiently?” Hoffer said. “And if you’re giving money to entities that would have done what they’re promising to do anyway, without your money — without our money — then you have not met your obligation.”
The auditor’s report made note of two other concerns about the grant process. When funding child care or affordable housing programs, the state did not require those programs to remain affordable beyond the expiration of the grants — mandates that could have helped future Vermonters access those scarce resources.
And the auditor questioned whether one specific grant recipient — the Northeast Kingdom Development Corporation, which received $1 million to build the soon-to-be-completed Yellow Barn in Hardwick — was in fact legally eligible for the money.
According to the report, a consultant for the state, Guidehouse, told officials the project did not clearly fit into an eligible industry, such as agriculture. Federal grant requirements say that “large capital projects intended for general economic development or to aid impacted industries” are ineligible, Guidehouse said.
In an interview and a Sept. 18 letter responding to the report, Goldstein, of the Department of Economic Development, denied breaking any rules.
She said the question about affordable housing and child care was valid and that the department would seek to implement such restrictions past the expiration of the grant. However, she denied that the department’s vetting process was only superficial.
State officials looked at applicants’ fiscal information, Goldstein said in an interview, but made their determinations based on their financial assessment of the specific project in question — not the organization as a whole.
“The (Vermont) Foodbank was expanding, and we helped the food bank,” she said. “Now, they may have gotten significant contributions from elsewhere, but we did not take that into consideration. We’re talking about a specific expansion project.”
She added: “This is not as if we’re giving money to people who don’t need it.”
Read the story on VTDigger here: Auditor raises alarm about Covid-era economic development programs.