Report of State Auditor 1999

• Year: 1999
• Title: Report of the State Auditor
• CWCB Section: Finance
• Description: Evalation of Actions Taken on the 1998 Colorado Water Conservation Board Construction Fund Loan Program as of December 1999
• Publications - Doc Type: Tech Report

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Report of The Colorado State Auditor 17
The Board should prioritize the loans pending final review and, if appropriate, initiate the
repayment process as soon as possible.
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Quantify and Weigh Creditworthiness and Financial Need of
Potential Loan Recipients
Statutes specify that the Board participate in only those projects where the sponsor can repay its
investment. Grants are not allowed unless specifically authorized by the General Assembly. As a
result, before authorizing a loan the Board has a duty to find a way to systematically balance a
potential borrower's financing needs and options with its creditworthiness. During the audit we
found that the Board's lending policy focused primarily upon determining the borrower's need and
its ability to access other forms of funding instead of rating creditworthiness or other measures of
loan risk. We concluded that the Board needed to implement a systematic methodology for
assessing risk to help reduce the possibility of delinquent and/or defaulted loans.
Recommendation No. 8 (September 1998):
The Water Conservation Board should develop and implement a systematic method for quantifying
and weighing the relative creditworthiness and financial need of potential loan recipients. This
should include identifying relative measures of a borrower's creditworthiness and then using them
to set various components of a loan agreement.
Water Conservation Board's Report Response
(September 1998):
Agree. The CWCB staff will evaluate several options and present them for consideration by
the Board and interested constituencies before presenting recommendations to the General
Assembly. However, these options should be reviewed carefully with the appropriate
constituencies,including the Colorado Municipal League,the Special Districts Association,
the Colorado Water Congress,and Colorado Counties,Inc. The review of these options and
development of recommendations for consideration by the Governor and General Assembly
will be completed by January 1, 2000.
Implementation Date: January 2000.
Water Conservation Board's Update (October 1999):
Implemented. The CWCB Board adopted a policy titled Construction Fund and Severance
Tax Perpetual Base Account Borrower Creditworthiness and Financial Need Determinations
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