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Utah's Fund of Funds — a quasi-public entity that has invested more than $100 million in business startups — has overstated the returns on its investments, downplayed the costs of doing business and is lacking in transparency, according to an audit of the agency.

"The primary concern here is that the lack of metrics ultimately results in the UFOF's inability to show relevance in the market," according to a report by the Utah legislative auditor's office.

Managers of the Fund of Funds agreed the reporting has been inconsistent and committed to doing a better job tracking the state money and its impact in the future, including hiring a third party to handle those duties.

Auditors reported that, over an eight year span, the three employees at the Fund of Funds were paid a total of $330,000 in bonuses and severance pay without any established criteria to support the payments. The bonuses were not tied to the performance of the fund. New management at the fund is currently developing criteria for the payouts.

The fund was established in 2003 to provide taxpayer-backed support to start-up businesses in hopes of bolstering economic growth around the state. Currently, it has more than $103 million invested in 28 venture capital and private equity firms.

Those firms pool the state's cash with other money and, in turn, invest in businesses. So far, a total of more than $13 billion has been invested in various business start-ups. Of that, $750 million had been invested in Utah companies.

However, based on that same ratio, the vast majority of the $103 million the Fund of Funds dollars — a total of 85 percent or more than $82 million — had actually been invested in companies outside of Utah.

Auditors also questioned the job-creation numbers the Fund of Funds claimed credit for fueling. Administrators said it had helped create 2,700 jobs, plus another 1,500 created through an indirect ripple effect.

However, the report by legislative auditors said it would be misleading for the fund to claim full credit for all of those jobs, since they were based on the total amount invested by the venture capital and equity firms, while state dollars only made up a small portion of those funds.

The fund also reported that the jobs created through its investments had generated some $37 million in income-tax revenue to the state. This, too, appeared to be inflated, according to auditors, and the fund lacked adequate data to back up its claim.

Managers said 70 Utah companies had received investments from the fund, but a dozen of those were counted even though they had gone out of business.

Without clear, reliable metrics, the auditors wrote, it is impossible to determine what effect the Fund of Funds has had on venture-capital investment in the state.

The auditors also said that all of the returns on the state's investments —┬ámore than $46 million — were more than eaten up by financing costs and administration and the fund has spent $1.6 million more than it has received from its investments.

During the last legislative session, lawmakers approved a bill to require more thorough, uniform reporting of the costs and returns on the Fund of Funds investments.

The audit also revealed that two-thirds of the Fund of Funds investment were so-called "buyout capital," meaning the money was used to restructure struggling businesses, rather than build new ones.

Twitter: @RobertGehrke