What follows are the main conclusions and recommendations of the auditor’s report, which was released yesterday. All text comes from the report. I have not altered anything. My comments are in italics. * The Emerging Technology Fund (ETF) should make significant improvements to promote greater transparency and accountability. * Issues in a number of areas impair the ability to administer the ETF in the best interests of the State. It is important to hold recipients of funds accountable. Auditors identified the following weaknesses: * Decision making related to the ETF and recipients of funds is not open to the public. * The ETF conducts limited monitoring of recipients’ performance and expenditures of funds. * The Office of the Governor does not report the value of the State’s investments through the ETF on its financial statements. * The ETF does not administer its contracts with the seven Regional Centers for Innovation and Commercialization (RCICs) and the Texas Life Science Center for Innovation and Commercialization (Texas Life Science Center) in a consistent manner. Both the RCICs and the Texas Life Science Center evaluate and make recommendations to the ETF’s Advisory Committee regarding applications for funds. The Advisory Committee then makes its recommendations to the ETF’s trustees. Trustees make the final approvals on ETF grants and awards. * The Office of the Governor, which administers the ETF, was cooperative and provided all of the information the State Auditor’s Office requested during this audit. * The Office of the Governor did not agree with certain conclusions and recommendations in this report, and its detailed management’s response is presented in Chapter 6 beginning on page 40. The State Auditor’s Office reviewed the information in management’s response but did not modify the conclusions or recommendations in this report as a result of that review. Key Points –The RCICs and the Texas Life Science Center do not have consistent processes, and their board members were not required to sign conflict of interest disclosure statements until 2010. –The RCICs and the Texas Life Science Center do not consistently record board meeting minutes, votes, and recusals. –Board members for RCICs and the Texas Life Science Center were not required to sign conflict of interest disclosure statements until 2010. Members of application review committees are not required to sign conflict of interest disclosure statements; those members are the first individuals to review a commercialization award application to determine its viability. –Advisory Committee meetings, subcommittee application review meetings, and teleconferences are not open to the public. –Meetings of the ETF’s Advisory Committee are not open to the public. Although the ETF is required to follow the Texas Public Information Act, under Texas Government Code, Section 490.057, ETF application information is treated as confidential while an application is considered for an award or a grant. Ten other states with similar programs that auditors surveyed allowed significantly more public access to meetings and documents related to the award of public funds. –The Advisory Committee does not record meeting minutes, member votes on applications, members’ recusals, or milestones that applicants must achieve. –Because the Advisory Committee does not maintain minutes of its meetings, it is not possible to evaluate how the Advisory Committee addresses disclosures of conflicts of interest. For example, one Advisory Committee member had consulting contracts with two recipients of ETF awards at the time that those recipients received additional disbursements of funds approved by the Advisory Committee. It is unclear whether the Advisory Committee member who had the consulting contracts voted to approve those additional disbursements of funds because the Advisory Committee does not maintain meeting minutes or record member votes. * * * * It’s stunning that a government body with the responsibility for disbursing hundreds of millions of dollars was allowed to operate behind a veil of secrecy and without controls–so much so that it did not maintain minutes or record votes. This kind of slipshod oversight opens the door to all sorts of hanky-panky and cover-ups. Speaking of hanky-panky, here’s an example. The governor’s office wasn’t at fault, exactly, except that its slipshod management of the fund made it easy for those bent on wrongdoing to take advantage of the lack of oversight and ethics policies: Readers may have seen a Morning News story documenting the lack of oversight regarding the Emerging Technology Fund. I’m going to summarize it here. The story relates how a Colorado man, Alan Kirchhoff, had two bankruptcies in his past and a job repairing cracked windshields in a Colorado parking lot when he moved to Texas for a fresh start. In due course, Kirchoff rose to become director of the Economic Development Fund despite a lacklustre resume. As director, he struck up a cozy relationship with a member of the fund’s advisory committee, one William E. Morrow. Without going into all the details, Kirchhoff received fees and stock dividends from Morrow worth $118,000 in fees and stock dividends, plus stock in Morrow’s company, the value of which is not clear. The governor’s office stonewalled the Morning News‘ inquiries about how Kirchhoff’s private business dealings went undetected for more than four years. The point here–mine, not the auditor’s–is that if the governor’s office had exercised better oversight and control of the ETF, the Kirchhoff fiasco might have been detected.