The Empire State Development Corp. needs to set clear performance standards to determine if its remaining four foreign offices are fulfilling their missions and bolstering New York's economy through overseas business and investment, according to an audit released today by state Comptroller Thomas P. DiNapoli.
ESDC contracts with representatives who operate offices in foreign countries to provide services that help New York state businesses develop or expand export sales and attract foreign investments. Between April 1, 2010, and March 31, 2012, ESDC paid $2.7 million to seven foreign representatives for costs associated with operating 10 international offices. Due to budget constraints, ESDC recently closed its international offices in Mexico, Turkey and China, along with three offices in Australia, Brazil and Chile operated through the Council of Great Lakes Governors. ESDC currently has foreign representatives in the United Kingdom, Canada, Israel and South Africa.
"New York can profit from expanding business opportunities in foreign countries, but when budgets are tight, every dollar spent on these efforts has to pack an economic punch," DiNapoli said. "Improvements and greater consistency in monitoring how taxpayers' dollars are spent is needed. You can't measure improvement if you don't track how you're doing. Having significantly downsized its international presence, ESDC should now be able to focus its resources on more effectively overseeing and monitoring efforts to generate economic benefits with these offices."
DiNapoli's auditors found that performance reporting and monitoring efforts by ESDC were informal and ad-hoc. Although ESDC provided auditors with some information about specific international trade and investment successes, the information only spanned the most recent year. Furthermore, the information included data on performance results not mentioned in the contract requirements and appeared to have been created solely in response to auditor's requests.
Auditors found that some offices did not meet expected results, while others had few results recorded at all. For example, the Toronto office had projected export sales of $1.2 million, but only reported $175,000 in actual export sales. The Turkey office reported no export sales whatsoever.
ESDC officials told auditors that internal management reports created to document monitoring efforts were discontinued in late 2007 at the request of a deputy commissioner. Additionally, a document supplied to auditors outlining the International Division's 2011 accomplishments appeared to have been created specifically for auditors and included major successes for only a one-year period.
Following up on a 2011 review by DiNapoli's office, auditors found that ESDC has made significant improvements in managing payments to foreign representatives and correcting the deficiencies found a few years ago. The improvements include requiring adequate documentation, such as bank statements and vendor invoices, to support the expenses claimed by the foreign representatives.
DiNapoli recommended ESDC:
•Monitor the performance of foreign representatives to ensure that international offices are meeting contract requirements and are operating in ways that benefit New York companies and the state's economy.
•Ensure that foreign representatives are only reimbursed for actual and necessary expenses incurred in the operation of international offices.
ESDC officials generally agreed with the audit's findings and have begun implementing a new system designed to assist in data collection and reporting on international trade and investment attraction activities. Their response is included in the audit.