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I <br /> IReport of The Colorado State Auditor 21 <br /> I <br /> Recommendation No. 3: <br /> IThe Water Conservation Board should require applicants to provide evidence that <br /> I they have explored other means of financing before approving the use of <br /> Construction Fund monies for a project. <br /> Water Conservation Board Response: <br /> Agree. The CWCB staff will insist upon evidence that applicants have <br /> j explored other sources of funding in every loan application considered by the. <br /> Board beginning immediately. The use of this information is expected to <br /> raise implementation issues that deserve further consideration by the Board <br /> Iand interested constituencies (e.g., what is the right balance between a <br /> borrower's need for state assistance and the assurance of timely repayment?). <br /> There is no statutory requirement that the CWCB be a lender of last resort, <br /> although the statutes do provide that all other means of financing shall be <br /> thoroughly explored before use is made of fund moneys [37-60-121(b) (V), <br /> IC.R.S.]. In order to protect the long-term integrity of the Construction Fund, <br /> the Board tries to maintain a balance between the more risky loans for <br /> I borrowers that would not otherwise be able to borrow enough money to <br /> develop an adequate water supply, and investments in the more financially <br /> sound borrowers. In setting priorities, the Board's policy has been to give <br /> I preference to projects that include other funding sources. Requiring the Fund <br /> to function only as a"lender of last resort" could undermine its integrity. <br /> Water Projects May Not Be Consistent <br /> I With Statutory Requirements <br /> 1 We found that projects have been funded that may not be consistent with statutes <br /> governing the use of the Fund. The statutory spending priorities are: <br /> I • The first priority goes to projects which will increase the beneficial <br /> consumptive use of Colorado's undeveloped compact-entitled waters. This <br /> is water that falls under one of the interstate river compact agreements. <br /> IThese agreements allocate water among Colorado and other downstream <br /> I <br /> I <br />