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Audit says Colorado film office paid $1.9 million taxpayer dollars to ineligible production companies

DENVER - An audit released by the state auditor found the Colorado Office of Film, Television and Media paid $1.9 million to production companies that didn't qualify for the tax incentives.

The Office of Film, Television and Media offers tax incentives to production companies to entice them into filming in Colorado. The production companies must employ a certain number of Coloradans during the production or spend a certain amount of money in the state while filming.

The Colorado Office of the State Auditor conducted an audit of the Film Office, and sampled nine projects. Of the projects sampled, it found none of them met all the state requirements, but the production companies still received incentives. The audit also found the Film Office paid incentives for productions without having contracts in place before the projects began. In several instances, productions were paid out, even though contracts were never signed.

The audit also found the Film Office lacked a uniform criteria to determine if a project met state's criteria. The audit also said the Film Office lacked complete and accurate information to assess the effectiveness of these incentives and what they contributed to Colorado's economy.

"The audit found some serious concerns," said Tracy Kraft-Tharp, Legislative Audit Committee Chair.

"I think there are tremendous issues and tremendous problems with management of the program," said Tim Neville, Legislative Audit Committee Vice Chair.

Donald Zuckerman, the state's film commissioner, said there's more to this then what's shown in the report.

Zuckerman said contracts associated with the "Fast and the Furious 7" and two Discovery Channel shows were not signed. In the state's contract with production companies, there was a clause that if production companies did not uphold their end of the deal, the state would then own the rights to their work and the copy rights. Zuckerman said big production companies refused to sign on to that, however, they still came to Colorado and upheld their end of the deal. After, the state paid them the incentives. Since this issue came to light, that clause has been removed from state contracts.

Zuckerman said prior to this audit, his office was not required to audit the auditors that review the production company's information. An accountant does the review, the production company signs off on it, then hands it over to the Film Office. Zuckerman said the Film Office trusted the CPA to do a good job, but said this state audit found the CPA made major mistakes.

Liz Cahill, a spokesperson for the Film Office, said the office has been working closely with the state auditor to make changes and move forward.

"We agreed with the report and the recommendations and quite honestly they agreed with the recommendations we already imposed on ourselves," said Cahill.

She said a year from now, the Film Office will be different.

"It'll be tighter. We will definitely have more procedures in place. But the ultimate vision of the office won't change - how do we promote Colorado as a place for film crews, TV crews to come in and do production?" said Cahill.

The State Auditor audited the Film Office, created in 2012, because under state statute, it's required to do an audit within the first several years.

The Film Office will present it strategic plan to the legislature in September.