New Jersey has made “substantial progress” toward improving oversight of its often lucrative economic-development tax-incentive programs several years after an audit released by a state fiscal watchdog raised significant red flags.

A follow-up report issued on Wednesday by that same watchdog, the office of the state comptroller, said many — but not all — of the recommendations that were included in its original audit have been fully implemented by the agency that operates the incentive programs.

The tax breaks are used to lure companies to move to New Jersey or to expand their operations here, among other policy goals. They are supposed to deliver a “net benefit” to taxpayers when properly administered, a responsibility that largely falls on the Trenton-based Economic Development Authority, or EDA.

A major audit issued by the comptroller in 2019 said under policies that were in place at the time, the EDA could not provide “sufficiently detailed data to confirm whether jobs were actually created or retained.” Those shortcomings “led to overstated and overpaid incentive awards,” the audit said.

Nearly two dozen recommendations were also included in the original audit. The new report said the EDA has either fully or partially implemented 18 of those recommendations. But among the continued shortcomings outlined in the new report was noncompliance with recommendations related to transparency and reporting policies.

“In order to fulfill its stated mission of growing the State’s economy and increasing equitable access to opportunity in the most fiscally responsible way, and with due regard to its fiduciary responsibility to taxpayers, EDA should fully comply with OSC’s recommendations,” the new report said.

In response, the EDA issued a statement highlighting ways the agency has been reformed in the wake of the initial audit. They include establishing a new compliance division, creating a chief compliance officer position and improving data-sharing with other state agencies to ensure companies are living up to commitments they make before being awarded a tax break.

In all, some $350 million has been saved through improved oversight, said EDA chief Tim Sullivan.

“While we continue to make improvements and adapt to the changing economic environment, we are proud of what we have accomplished during Gov. Murphy’s administration,” Sullivan said.

For over two decades, New Jersey has been offering companies some form of tax breaks to encourage job creation and economic growth. Incentive awards can lead to billions in foregone tax revenue that is supposed to be more than offset by a project’s overall net benefit to the state.

Business-lobbying groups have long praised the tax-break programs for helping to offset New Jersey’s reputation for its high cost of doing business. But progressive activists have long been critical of the incentives, faulting their oversight and overall effectiveness.

Last year, Gov. Phil Murphy and fellow Democrats who control the Legislature enacted a new generation of tax-incentive programs that targeted specific policy goals, such as fostering startup companies and encouraging historic-site preservation.

Those new policies replaced a prior generation of incentives that were put in place during the tenure of former Republican Gov. Chris Christie at a time when the state economy was still struggling to recover from the 2007-2009 Great Recession.

Among the questions raised in the 2019 audit were concerns about whether companies had been able to profit from the state’s tax breaks without fully living up to the job-creation or investment standards that were set in state law.

The audit specifically questioned the documentation submitted by companies for nearly 3,000 jobs that were reported to have been created or retained in exchange for tax breaks going back over a decade.

In the wake of the audit’s release, Murphy convened a task force to investigate whether any wrongdoing had occurred, and the panel said it issued at least one criminal referral.

According to Wednesday’s follow-up report, a total of 11 policy recommendations have been fully implemented by the EDA since the first audit was released in 2019.

They include policies related to internal processes used by the agency to verify employment requirements are being satisfied by companies that have been awarded tax incentives, according to the new report.

There are another seven recommendations that were included in the 2019 audit that have been partially implemented by the EDA, according to the new report. They include efforts to prevent the agency from “double-counting” filled positions when assessing compliance, the report said.

But the EDA has only partially implemented a recommendation that called on the agency to rely on annual performance data to determine continued eligibility for receiving awarded tax breaks, the report said.

The EDA was also faulted for not taking more “corrective action” to ensure recovery of “over-certifications and overpayments identified in the 2019 audit involving more than $200 million in awards,” the report said. The EDA has “now indicated it will make more proactive efforts in this area as well,” the new report said.

Meanwhile, recommendations related to program assessments, evaluations and the annual reporting of incentive-program activities remain unfulfilled, the new report said.

Acting State Comptroller Kevin Walsh said his agency is “encouraged to see that positive reforms have taken place.” But he also urged further compliance with all of the 2019 recommendations.

“When billions of dollars of public funds are at stake, it’s essential that EDA transparently and regularly report on what has occurred,” Walsh said.

In his statement, Sullivan, the EDA chief, pointed to transparency provisions and other policy changes that were made when the new generation of tax incentives were enacted by Murphy last year.

“Since the OSC’s initial report, the NJEDA has worked hard to resolve the issues raised in the report and has reinforced its commitment to being a best-in-class steward of taxpayers resources to ensure the programs we administer benefit New Jerseyans and our communities,” Sullivan said.

A spokesman for the governor’s office declined comment.