Report of State Auditor 1998 - Laserfiche WebLink

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i Report of The Colorado State Auditor 17 We also found that the Board has not established a formal marketing plan for the Construction Fund Loan Program. One of the Board's staff members performs some marketing functions,mostly consisting of soliciting potential borrowers on a one-on- one basis. However, the Board has not formally identified a pool of qualified, potential loan applicants as a precursor to developing a waiting list for funding. As ' a result, we could not assess whether the Board's current marketing activities are sufficient and effective or whether a more formal approach is needed. ' The Board Has Recently Begun Conducting Forecasting Activities The large cash balance in the Fund has resulted in the Board's recognizing the need to estimate cash balances and project its receipts and disbursements over the next ten ' years. On the basis of these estimates, staff projected the cash balance in the Fund to be about$8 million in Fiscal Year 2006. However, staff have used assumptions to produce this estimate that do not accurately reflect the recent experience of the Program,producing a forecast that projects an unrealistically low cash balance. By changing three of the Board's assumptions for estimating receipts and disbursements to more accurately reflect prior experience, we estimate the Board will have about $148 million instead of the $8 million originally forecasted. Specifically, we modified the following assumptions: ' .• Staff did not include severance tax receipts in their forecast. These receipts should be included because they are available for water project loans. From Fiscal Years 1997 to 2006,severance tax receipts are projected to be over$55 ' million. • Staff calculated interest receipts on the basis of a 3.5 percent return rate when the actual return rate averaged about 6 percent between Fiscal Years 1994 and 1997. By applying this higher interest rate to the actual cash balance as of ' June 30, 1997, and to the projected cash balance for all subsequent years, interest receipts increase by about $58 million over Fiscal Years 1997 to 2006. • Staff-estimated disbursements were based on plug figures (i.e. about $42 million) and other project costs that could not be substantiated. Using these figures resulted in a 28 percent increase($5 million)in the Program's average annual disbursements. However, as discussed previously, we found no evidence that indicated that Board disbursements will increase at all in the future. Therefore,to estimate program disbursements,beginning with Fiscal Year 1997 we increased disbursements by 6 percent annually to allow for growth of the Program. ' The Board's estimates and ours are shown in the table on the following page. •