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OPEGA REVIEW FINAL FINAL Economic Development Economic Development REPORT REPORT Programs in Maine Programs in Maine a repor a report by by the Office of Program Evaluation & Government Accountability November 2006 2006 About
a repor a report by by
the Office of Program Evaluation & Government Accountability
FINAL FINAL REPORT REPORT
November
OPEGA REVIEW
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1) Are sufficient program controls in place to assure that Economic Development programs are cost-beneficial and effective? 2) Which economic development programs should be considered for a more in-depth review? OPEGA Sought to Answer the Questions … OPEGA Sought to Answer the Questions …
OPEGA also assessed the degree of transparency and accountability provided by the overall framework of the State’s economic development programs.
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related to economic development programs as well as national trends in monitoring their effectiveness;
MRSA §§13070-J,K &O for the 13 programs of specific interest to AFA;
definition; and
information provided by the managing agencies.
To answer these questions, OPEGA ……. To answer these questions, OPEGA …….
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Activities which distribute, impact or risk State funds, where the primary purpose is to stimulate the economy, expand or maintain employment
and growth of commerce and industry.
Since there is no one generally accepted definition of Economic Development Programs, OPEGA created the definition below with the help of representatives from the primary State agencies involved in the review.
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Federal Agencies Federal Agencies State & Quasi-State Agencies State & Quasi-State Agencies Regional COGs & DCs Regional COGs & DCs Comm Community Agencies unity Agencies
High-level Funding Flow for Economic Development Programs High-level Funding Flow for Economic Development Programs
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State resources distributed or revenue forgone for the State resources distributed or revenue forgone for the programs revi programs reviewed as p ewed as per r the administering agencies the administering agencies
Additional administrative costs reported for 21 of the 46 Additional administrative costs reported for 21 of the 46 programs programs
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xx xx
Perc rcent o
Avg A Annua nnual Funds Funds Dis Distribut ributed d 2 12 12 8 3 6 15 15
Percent of Funds & Number of Programs by Type of Funding Percent of Funds & Number of Programs by Type of Funding
Number of Number of programs reviewed programs reviewed
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0.1% 43% 43% 7% 0% 3% 2% 2%
Agriculture/Aquaculture Technologies Shipbuilders Other Misc Business Stage or Size All or Many Businesses Manufacturing
x
Percent of Avg Annual Funds Distributed
11 11 1
1
7 5 15 15 6
Percent of Funds & Number of Programs by Market Segment Percent of Funds & Number of Programs by Market Segment
Number of Number of programs reviewed programs reviewed
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Primary State and quasi-state agencies managing Primary State and quasi-state agencies managing the programs reviewed the programs reviewed
6 programs
2 programs
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Current relevant statutes Current relevant statutes
program
responsibilities of DECD)
reporting requirements for a few specific programs)
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committee.
single topic, larger multi-purpose, or biennial budget bills.
different joint standing committees, or may not be formally presented to any committee.
Creation and Oversight of Programs Creation and Oversight of Programs
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2006 2006 2001 2001 1999 1999 1997 1997 1987 1987 1985 1985
AFA Committee requests OPEGA revi AFA Committee requests OPEGA review of economic development ew of economic development programs programs EDIC releases final report and sunsets soon after EDIC releases final report and sunsets soon after 5 MRS 5 MRSA §13070-O req §13070-O requires evalu ires evaluation of ne ion of new economic w economic development proposals development proposals 5 MRS 5 MRSA §13070-J creates the EDIC a §13070-J creates the EDIC and reporting requ d reporting requirements irements for some programs for some programs Joint Select Committee on Econom Joint Select Committee on Economic ic Development releases report Development releases report and DECD is created and DECD is created Joint Standing Committee on Stat Joint Standing Committee on State Government releases report e Government releases report
Timeline of Key Legislative Activity on Economic Development Timeline of Key Legislative Activity on Economic Development
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Evaluation & Monitoring Of Economic Development Programs
Purpose - what problem is the program meant to address? hat problem is the program meant to address?
Clear & measurable goals directly supporting the purpose
Relevant, meaningful and auditable measures
Collection of accurate and reliable data
Independent audits
OPEGA studied reports from many private, non-profit and government
successful evaluation and monitoring of economic development
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Evaluation & Monitoring Of Economic Development Programs (continued)
Well defined applicant eligibility criteria
A fair and objective application process
Reports on the measures that are: Standardized, clear & understandable Standardized, clear & understandable Readily & publicly available Readily & publicly available Used to judge the program's performance relative to Used to judge the program's performance relative to strategic goals strategic goals
Review of potential overlap with other programs
Regular review of program costs, benefits, funding & purpose purpose
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Economic Development Program Management - the Portfolio Model
Understand what we are trying to achieve, both long & short term, Select individual investments based on historical risk/return, Understand standardized reports of financial performance, Obtain data and reports subject to audit & verification, Weigh the mix of investment choices for a balance of risk/return, Do a periodic review of the entire portfolio to decide whether we need to invest more/less, or change your investment mix, and Make decisions on individual investments: decide what to keep in the portfolio & what to change. Application of the investment Application of the investment portfolio management model helps portfolio management model helps us: s:
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Project-centric Enterprise & Strategic Focus
Create investment awareness
Ad hoc, unstructured, and unpredictable investment
failure of individual projects.
Build the investment foundation
Selection by project based criteria; benefit , risk, and
a project-by-project basis.
Develop a complete investment portfolio
The organization has a well-defined investment portfolio; sound selection criteria and mature, evolving, and integrated selection, control, and evaluation processes.
Improve the investment process
The organization is focused on evaluation techniques to improve its investment processes and portfolio, while maintaining mature selection and control techniques.
Leverage for strategic results
Selection, control, and valuation processes mastered. Organization now benchmarks its investment processes relative to other "best-in-class" organizations.
1 2 3 5 5 4
Five Step Investment Management Maturity Mod Five Step Investment Management Maturity Model
Shortened from GAO original version
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Can we determine if programs meet Can we determine if programs meet Leg Legislative Purpose? ative Purpose? How much funding is at risk if the How much funding is at risk if the program is not performing to purpose? program is not performing to purpose? Is it Acceptable? Is it Acceptable? What risks are there that could What risks are there that could reduce accountability & transparency? reduce accountability & transparency? Are reports available? Is the program Are reports available? Is the program reviewed regularly & accounts audited? reviewed regularly & accounts audited?
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program controls necessary for performance evaluation (such as: adequate purpose, goals and
coordinate all programs at a state level; and
information is inadequate at both the program and portfolio level.
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Of the programs reviewed:
not easily & readily accessible.
encouraged to give estimates.
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Of the programs reviewed:
audits.
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Econ
Developmen ent P t Prog
Risk A Assess ssment
Base sed o
agency cy-reported su surv rvey re resu sults f s from 4 46 P Program rams
0% 0% 20% 20% 40% 40% 60% 60% 80% 80% 100% 100% P u r p G
l s M e a s u r e s R p t s O v r L a p A d m i n $ $ R e v i e w A u d i t A p p l i c M
i t
C
p l e x A g e $ D i s t Lo Low Ri Risk Me Med r risk Hi High R Risk
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Le Levels ls o
Overall R ll Risk b by T Type o
Program
0% 0% 20% 20% 40% 40% 60% 60% 80% 80% 100% 100%
T T a x a x i i n c n c e n e n t t i v i v e e s s G G r a r a n n t s t s L L
n n S u S u p p p
r t t C C
b m b i n i n a t a t i i
L
a n n s s B B u s u s . . A s A s s i s i s t s t a n a n c c e e T r T r a a i i n n i i n n g g O O t t h e h e r r A l A l l l P P r r
r r a a m m s s
Low Risk Medium Risk High Risk
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Maine citizens make substantial investments in economic development programs each year development programs each year
Accurate and reliable information about EDPs is needed to is needed to facilitate transparency and accountability facilitate transparency and accountability
Past attempts to improve accountability and coordination have produced limited results have produced limited results
Critical elements necessary for performance evaluation are still lacking still lacking
Weaknesses exist within individual programs and State’s dual programs and State’s
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Lack of clarity and consistency ck of clarity and consistency in the legislative foundation in the legislative foundation Fragmented overall structure Fragmented overall structure for ma for managi naging & m ng & moni
toring ng EDP EDPs Insufficient data Insufficient data collection & reporting collection & reporting Weak evaluat Weak evaluation
and accountability and accountability Clear and consistent definitions, roles, r and consistent definitions, roles, responsibilities, mandates and pro responsibilities, mandates and processes esses Well-defi Well-defined structure for ned structure for managi managing & moni ng & monitori toring EDP port ng EDP portfolio folio Sufficient high-quality Sufficient high-quality data data co colle llected & reported cted & reported Strong evaluation Strong evaluation and accountability and accountability
Next Next Steps Steps
Current State Current State Desired State esired State
Key Elements for Sufficient Per Key Elements for Sufficient Performance Evaluation and Accountability
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The risk assessment was primarily designed to determine which economic development programs should be considered for a more in-depth review.
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Finding Finding
Existing economic development programs may be ineffective or inefficient. OPEGA’s risk assessment revealed multiple indicators
Recommendations Recommendations
highest risk programs.
identify opportunities for reducing costs or # of programs.
new programs.
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Programs recommen Programs recommended for more in-dep ded for more in-depth review: h review:
individually or as a group
Program (SMART and SMART-E)
Revolving Program
Source Development Program
Fund Program
Partnership
Program
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Findings 2-6 deal with overall oversight and management of the State’s economic development portfolio.
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Finding Finding
Maine does not have a sufficient definition
economic development program.
Recommendations Recommendations
EDIs with the new definition. Incorporate new definition in statute as needed to clarify roles & responsibilities.
assistance programs” in 5 MRSA 13070-J.3.B.
Management Action Management Action
DECD will draft a definition by 6/15/07 for the Legislature’s consideration.
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Finding Finding
There is no meaningful statewide coordination that facilitates understanding or effective management of the State’s entire portfolio of economic development programs.
Recommendations Recommendations
Consider seeking similar proposals from other existing non-State
Management Action Management Action
DECD will prepare a proposal for expanding it’s role to include coordination of the State’s EDPs.
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Finding Finding
Processes for assuring program controls are established for all EDPs are not effective.
Recommendations Recommendations
program control requirements.
assess their programs against the criteria in 5 MRSA 13070-J.3.B.
new EDP proposals.
Management Action Management Action
proposals as required in statute.
against the criteria in 5 MRSA 13070-O as required by statute.
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Finding Finding
EDP performance data currently being collected does not provide a clear or complete picture of program results.
Recommendations Recommendations
Consider giving data collectors the authority needed to compel businesses to provide data.
Management Action Management Action
recommend additional data to be collected.
eliminate, or make transparent, double- counting in data.
adequate data collection for all EDPs.
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Finding Finding
Current EDP reporting does not:
accountability;
comparison; and,
State’s entire portfolio of programs.
Recommendations Recommendations
Consider modifying statute to require DECD Commissioner’s report to be written.
Management Action Management Action
template for all agencies to use.
satisfying reporting requirements in 5 MRSA 13058-5 by providing written reports.
data more accessible.
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