Audit criticizes state's foreign trade agency

October 04, 1991|By David Conn JRB

A recently completed audit of Maryland's international trade agency portrays a state bureaucracy that until very recently lived a lush life, consistently overspending at home and on trips abroad, overstating its achievements and overlooking state laws and regulations.

The performance audit by the Department of Fiscal Services, to be discussed at a hearing before lawmakers Tuesday, shows that top officials of the Maryland International Division (MID):

* Exaggerated the number of jobs and amount of foreign investment generated by its costly trade missions;

* Spent extravagantly on meals and personal services while abroad and at home, sometimes ignoring state regulations; and

* Failed to keep track of what, if anything, its efforts accomplished for Maryland companies looking to do business internationally.

By far the harshest public criticism leveled at the division has been aimed at the six foreign missions it organized for Gov. William Donald Schaefer from June 1989 through June 1991. Partly because of those missions, which cost more than $700,000, a Senate committee requested the performance audit earlier this summer.

A month ago, MID Director Eric Feldmann resigned after several of his top trade advisers left the division. Kathleen Bond, who was director of marketing under Mr. Feldmann and is mentioned in the audit for improper use of state funds, was named acting director until a permanent director is hired. Ms. Bond failed to respond to a request for comment.

The Sun yesterday obtained a preliminary copy of the audit, one which does not reflect the preliminary response of the Department of Economic and Employment Development, of which MID is a part. Jane Howard, a DEED spokeswoman, said that the department is still working on its response and expects to present it to legislators at next week's hearing.

However, Ms. Howard said that "we realize we've had some management deficiencies in the Maryland International Division, and we have already begun to strengthen systems and put new systems in place to tighten management controls.

Referring to Mr. Feldmann's departure, Ms. Howard said, "We have made a change in the leadership. We're confident that with new leadership we will have improved management in the future, and these kinds of things will not continue."

The audit details three broad categories of problems: overstated achievements, misspent funds and a lack of quality control. Although observers agree that some of the problems at MID, a $4.5 million agency, disappeared when the leadership changed, the audit points out that without systems in place to measure its successes, even MID's best-run programs can't prove they are accomplishing anything.

The Maryland International Division, created in 1988 to help local companies do business abroad and to attract foreign investment, has hailed the successes of its foreign missions: 800 new jobs in Maryland, $140 million in new foreign investment and $100 million in sales by Maryland companies in foreign markets.

But the Fiscal Services audit shows that of several claims examined at random, most proved to be incorrect, based only on predictions of future activity.

In June 1989, for instance, a trip to France led MID to state that a West German company would build an aquaculture facility on the Eastern Shore that would produce 1 million pounds of fish a year. As of March the company hadn't done a thing in Maryland, the audit shows.

From that same trip to Europe came the news that the luggage manufacturer Delsey SA would expand its plant in Caroline County, investing $10 million and creating 250 new jobs over a five-year period. As of March, Delsey's employment had changed little, the audit states.

Ms. Howard of DEED said that the report's discussion of the Delsey claim is among a number of inaccuracies in the audit and that Delsey actually has more than doubled its employment since 1989, to about 88 workers. She said that the recession slowed the company down, but "the five-year period is not over, and they're still projecting" more jobs.

Ms. Howard said that MID still stands by its overall job and investment claims. "The numbers are solid," she said, noting that since a meeting with the auditors, the final report has been changed to reflect some of MID's responses.

The audit also questions MID's claims about the number of companies it has assisted. The division reported that in fiscal year 1990, its foreign offices assisted 6,002 companies and provided "out-of-office" counseling to 721 firms. But the Fiscal Services Department could find documentation to prove only that 683 companies were assisted and 149 counseling sessions were held. There was no documentation for the number of companies helped in Maryland.

The audit charges that MID officials often used their positions to cut their personal expenses or to spend state money frivolously. And it suggests that Mr. Feldmann reimburse the state for some expenses, including excess charges for mileage on his state-supplied car.

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