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1 <br /> SUMMARY I <br /> 4 Construction Fund Loan Program Performance Audit-September 1998 <br /> I <br /> project feasibility study was completed after or during the same month that the project itself was <br /> completed. In these cases the Board disbursed construction funds,even though there may have been <br /> incomplete information on the project sponsor's financial situation. <br /> Some projects which lack a completed feasibility study when they are approved are later <br /> deauthorized, meaning that the project funds are never used. Specifically, 14 of the 16 loans <br /> (88 percent) that were deauthorized during Fiscal Years 1996 to 1998 did not have a completed <br /> feasibility study when they were approved. These loans totaled almost $8.8 million. The Water <br /> Conservation Board should improve its methods for ensuring project feasibility prior to loan <br /> approval. This should include requiring projects to have a completed feasibility study before <br /> a funding request is considered. In those cases where this is impractical, the Board should I <br /> grant conditional approval pending completion of a feasibility study by a certain date. In all <br /> cases the Board should ensure the study is completed before funds are disbursed. <br /> Significant Deficiencies Exist in Accounting Operations <br /> We observed significant problems in the Board's accounting operations. These problems were <br /> apparent in nearly every functional area,including disbursing construction funds,billing borrowers, <br /> collecting loan payments, and recordkeeping. The problems we noted were generally attributable <br /> to one or more of the following causes: <br /> • Inadequate supervision or monitoring processes. <br /> • Lack of adherence to established policies and procedures. <br /> • Weak or absent internal controls. <br /> • Ineffective internal and external communication processes. I <br /> Good accounting practices are integral to the effective and efficient operation of a lending program. <br /> The weaknesses we observed may have serious ramifications for all Board operations. For example, 1 <br /> weak internal controls or inadequate supervision may increase the risk of theft,fraud,or other types <br /> of inappropriate activities. We also noted that the Board does not currently employ any staff that <br /> have accounting expertise, even though accounting operations are an integral part of many of the <br /> Board's activities. <br /> The Water Conservation Board, working with the Department of Natural Resources' t <br /> Accounting Section, should perform a comprehensive review of its accounting functions to <br /> identify and correct deficiencies. Methods for addressing deficiencies should include,but not <br /> be limited to,outsourcing,moving all accounting responsibilities to the departmental level,and <br /> allocating FTE to the Board. <br /> 1 <br /> I <br /> t <br />