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Audit: $334 million USTAR effort inflated jobs, revenue

Published October 16, 2013 8:59 am

High-tech initiative • Report says the project over-reported jobs it created and revenues it brought in.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

USTAR, hailed as an engine for innovation, has exaggerated — by thousands — the number of jobs it has created and inflated — by millions — the amount of money it has brought in, a new audit says.

The $334 million Utah Science Technology and Research (USTAR) initiative is designed to create jobs and businesses by investing in and leveraging university research.

"It appears to me that USTAR has been more of just a glitzy way to fund University of Utah and Utah State University research," said Senate President Wayne Niederhauser, R-Sandy, at a Legislative Audit Subcommittee meeting Tuesday. "We could have done that without the glitzy title."

The problems stem from a "compete lack of management," said House Speaker Becky Lockhart, R-Provo.

USTAR was created in 2006 to recruit researchers, promote technology commercialization and build university research facilities with the aim of expanding the number of technology-based start-up companies and high-paying jobs.

It has played a key role in recruiting several prominent researchers to the state's universities, Niederhauser said.

In a January report, the organization said it had created 3,380 jobs, but about 60 percent of those no longer existed — they were construction gigs at already-completed research facilities. The number of research-based positions, meanwhile, was based on projections rather than actual jobs and auditors could confirm only a fraction of those had actually been created and filled.

The organization also claimed to bring in $463 million in contracts, sponsored research and private donations. But more than half that money, about $268 million, was either over-reported, hardly involved USTAR or represented contracts that hadn't yet paid out.

Legislators also hoped that USTAR would ramp up revenue from commercializing technologies created at Utah's universities, but aside from about $33,000 at USU, that hasn't happened, the report found.

Auditors couldn't independently confirm that USTAR has helped companies raise $56.7 million in external funding, meanwhile, because those numbers are self-reported by the businesses and there is no mechanism for validating them. In addition, the audit found the USTAR Governing Authority hasn't always followed the state's open-meetings laws for keeping minutes and recordings.

Executive Director Ted McAleer didn't dispute the findings Tuesday, instead pointing to a revolving door of financial managers in recent years for the bad data.

The auditors have "identified a number of issues we need to take very seriously and address," said McAleer, who previously worked in technology commercialization at the U. "I think the most critical piece of my responsibility as the executive director is I need to hold a finance manager, my assistant, accountable for working with me closely on these recommendations."

During the past seven years, the state has invested $134.2 million from the general fund, $33 million in federal stimulus money and construction bonds worth $116.5 million in the program. Legislators voted Tuesday to refer the audit to several committees in appropriations, business and higher education for action.

Auditors recommended the organization develop a better methodology for tracking and validating reported outcomes such as jobs created, companies formed and commercialization revenue.

"The main message of this audit is we need more structure," said deputy auditor general Rick Coleman. "There's been the funding, there's been a lot of good things done, but there needs to be better structure."

lwhitehurst@sltrib.com

Twitter: @lwhitehurst