How Economic Development Incentives Are Lost
eceiving final application approval for economic development incentives can be an exciting time for a company, as it often accompanies a strategic growth plan for a new facility or expansion project. What is often over looked is the complex performance reporting period that follows, which can stretch over five, 10 or 15 years. In certain situations, reporting requirements can extend even further if post-performance reporting is mandated by governmental entities.
The Realities of Compliance Reporting
If a business is new to the incentive compliance reporting process, there can be a steep learning curve in understanding the detailed administrative requirements. As a result, the development and implementation of a plan for the reporting process is critical. The process can also create a considerable workload to keep up with quarterly, semi-annual and/or annual performance requirements. Companies will also need to have an ongoing, in-depth understanding of the terms and conditions of incentive agreements.
Without continuous focus, an increased chance of errors and reporting incorrect or inaccurate information can happen. These unfortunate missteps can put part, if not all, of the approved economic development incentives at risk. Often, these cash grants and other incentive awards were factored into the executive leadership’s determination of ROI and evaluation of the project’s viability. Without a proven compliance management system in place, organizations potentially risk losing some or all of the economic development incentives they were counting on and worked so hard to secure approval for in support of the project.
Why Do Companies Miss Out On Their Incentives?
There are many reasons why a project may ultimately fail to receive the approved economic incentives, and looking at the statistics should serve as a wakeup call for organizations that need to make this process a priority. The fact is, half of all economic development incentives approved in the United States are not drawn down simply because of paperwork not being filed properly or in a timeline manner. For businesses to ensure that they take advantage of the benefits negotiated and approved, they need to have a trusted partner like Ginovus to develop and oversee a comprehensive incentive compliance management process.
Typically, problems arise when communication are missed and/or changes in project ownership has occurred. In many situations, company personnel who participated in the incentive negotiation and application approval process are not part of the same team who will eventually administer the compliance-reporting portion of the incentive agreement. Regardless of size, companies often encounter internal challenges with oversight of the compliance management process. For larger organizations, it can be which corporate function should have ownership of the compliance management and reporting, such as Tax, Finance Human Resources, Real Estate, Legal and/or Governmental Affairs. For smaller to mid-size companies, it often resides within the C-suite where resources are already stretched thin and compliance reporting requirements may be missed.
Difficulties can also arise whenever a company goes through an organizational restructuring. For example, the acquisition or sale of a business unit, or any change to the business plan for the project or model can greatly affect project commitments embedded in incentives agreements as well as the subsequent project performance reporting. An organization may want or need to renegotiate their project commitments and related incentive agreements with the state or local governmental entities due to changes in economic conditions. During these times of change, it is crucial to have a partner who is dedicated to maximizing and retaining incentive opportunities.
Meeting Requirements—Year after Year
In order to realize incentive benefits approved by the state and local agencies, companies must have a sophisticated system for reporting their compliance. Without the proper training or a trusted outside partner managing incentive agreements, compliance reporting can easily get “lost in the shuffle” and then discovered too late in the process. A holistic approach to the incentive process can help ensure that nothing is missed. Timely filing of all paperwork and being able to track the company’s performance accurately is always of the utmost importance.
Our team at Ginovus is honored and proud to partner with organizations throughout the entire compliance management process. Not only can we negotiate benefits for our clients’ projects, but we also help our clients maximize and realize those incentives by providing expert compliance support. From beginning to end, we are there to keep all of the details in order. Our strategic partnership helps drive business growth. Please contact us anytime to learn more.