Auditors aren't questioning the investment performance of the state's Venture Capital Authority, they're asking whether it's appropriate to have the governor's staff running the program.

A performance audit released Tuesday called a staff-sharing arrangement between the Venture Capital Authority and the Office of Economic Development and International Trade "problematic."

The state law creating the program bans executive- branch staff from "receiving compensation" from the authority. Auditors say the VCA's "ongoing and total reliance" on the staff "has exceeded the levels of assistance and cooperation intended by statute."

The economic-development staffers, as well as the volunteer VCA board members, are taken aback by the auditors' views.

During testimony on the 2004 bill creating the VCA, economic-development staff testified they'd be providing support. The legislature did not appropriate money for the VCA to hire its own employees.

Mike Imhoff, chairman of the VCA's board, told legislators Tuesday the program will "have its greatest chance of succeeding" with the economic-development staff running the program.

Alice Kotrlik, the economic-development staffer who oversees the program, said the law's language "was put in to keep us from going out and making our own living working for the program. . . . It wasn't intended to restrict us from assisting."

The legislature created the Venture Capital Authority in 2004 to replace the Certified Capital Company, or CAPCO, program. Regulators told the legislature that the CAPCO program was expensive and ineffective.

CAPCOs continue to use their first round of funding, investing a total of $45.1 million since 2002. The VCA, after selecting High Country Venture as its investment manager in June 2005, has invested $6.1 million in 18 months.

David Milstead is finance editor of the Rocky Mountain News. He can be reached at milstead@RockyMountainNews.com or 303-954-2648.